PROSPECTUS
6,296,251 Shares
Superior Energy Services, Inc.
Common Stock
This Prospectus relates to 6,296,251 shares of common stock,
$0.001 par value per share (the "Common Stock"), of Superior
Energy Services, Inc. ("Superior" or the "Company"), which may be
offered from time to time by the Company exclusively to the
holders, and upon the exercise, of certain warrants previously
issued by the Company (the "Offering").
In July 1992, the Company issued 1,121,251 Class A
Redeemable Common Stock Purchase Warrants ("Class A Warrants") to
purchase Common Stock entitling the holder to purchase one share
of Common Stock for $6.00 until July 6, 1997. In December 1995,
the Company issued 5,175,000 Class B Redeemable Common Stock
Purchase Warrants ("Class B Warrants") entitling the holder to
purchase one share of Common Stock for $3.60 during the four-year
period commencing December 8, 1996. All of the shares of Common
Stock offered hereby are being offered by the Company exclusively
to the holders of the Class A Warrants and Class B Warrants.
The Common Stock is currently traded on the Nasdaq National
Market under the symbol "SESI." On January 10, 1997, the last
reported sales price of the Common Stock as reported by the
Nasdaq National Market was $3-9/16.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OR THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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================================================================================================
Price to Underwriting Discounts Proceeds to Company(2)
Public and Commissions(1)
________________________________________________________________________________________________
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Per share, upon exercise of:
Class A Warrant $6.00 $ - $6.00
Class B Warrant $3.60 $ - $3.60
________________________________________________________________________________________________
Total $ 6,727,506 $ - $ 6,727,506
$18,630,000 $ - $18,630,000
=================================================================================================
(1) No commissions, bonuses, or other fees will be paid to any person in
connection with the offer and sale of the Common Stock.
(2) Before deducting expenses estimated at $30,000.
</TABLE>
January 10, 1997
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Common Stock being offered pursuant to this
Prospectus. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained herein concerning the provisions of any documents are not
necessarily complete and, in each instance, reference is made to the copy
of such document filed or incorporated by reference as an exhibit to the
Registration Statement.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Commission. The Registration Statement, as well as such reports,
proxy statements and other information filed with the Commission by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission at the following locations: New York Regional Office, 7 World
Trade Center, 13th Floor, New York, New York 10048 and Chicago Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511.
Copies of such material may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, DC 20549, at
prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission (http://www.sec.gov).
The Company's Common Stock is traded on the Nasdaq National Market.
Reports, proxy statements and other information may also be inspected at
the offices of the National Association of Securities Dealers, Inc. at 1735
K Street, N.W., Washington, D.C. 20006.
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and other information
appearing elsewhere in this Prospectus.
THE COMPANY
Superior Energy Services, Inc. ("Superior" or the "Company"), through
its subsidiaries, provides specialized oil field services in the Gulf of
Mexico. The Company's services include plugging and abandoning oil and gas
wells and providing wireline services, the manufacture, sale and rental of
specialized oil well equipment and fishing tools, the development,
manufacture, sale and rental of oil and gas drilling instrumentation and
computerized rig data acquisition systems, and the development, manufacture
and sale of oil spill containment booms and ancillary equipment.
Recent Developments
On September 16, 1996, Superior acquired Dimensional Oil Field Services,
Inc. ("Dimensional") through the merger of Dimensional with and into a
wholly-owned subsidiary of the Company (the "Dimensional Acquisition").
Shareholders of Dimensional received an aggregate of 1,000,000 shares of
Common Stock, $1.5 million cash and $1 million principal amount of
promissory notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements included
herein.
The Company's executive offices are located at 1503 Engineers Road,
Belle Chase, Louisiana and its telephone number at such address is (504)
393-7774.
The Offering
Common Stock offered 6,296,251 shares
Nasdaq National Market symbol SESI
Use of proceeds(1) The Company intends to use the
net proceeds of this Offering, if
any, for general corporate
purposes. See "Use of Proceeds."
Risk factors The Common Stock offered hereby
involves a high degree of risk.
See "Risk Factors."
_________________
(1) There can be no assurance that any of the Class A Warrants or Class B
Warrants will be exercised before they expire and, as a result, that the
Company will receive any proceeds from this Offering. Even if exercised,
the Company cannot predict when the Class A Warrants or Class B Warrants
will be exercised and the proceeds received.
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Summary Consolidated Financial Data
(in thousands, except per share data)
At or for the At or for the
six months ended year ended
June 30, December 31,
__________________________________ ________________________________
Pro forma Pro forma
combined combined
as adjusted as adjusted
1996 1996 1995 1995 1995 1994
____________ _________ _________ ____________ ________ __________
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Statement of Operations Data:
Revenues $ 12,798 $ 9,330 $ 6,147 $ 25,870 $ 12,338 $ 11,088
Income (loss) from operations 2,344 2,138 897 (3,339) (2,708) 1,730
Other income (expense) 94 132 8 (172) (7) 74
Income (loss) before income
taxes 2,438 2,270 905 (3,511) (2,715) 1,804
Net income (loss) 1,596 1,589 570(1) (4,498)(1) (3,355)(1) 1,137(1)
Net income (loss) per common
share $ .09 $ .09 $ .06 $ (.43) $ (.38) $ .14
Weighted average common shares
outstanding 18,629,763 17,079,763 8,400,000 10,397,946 8,847,946 8,400,000
Balance Sheet Data:
Working capital $ 1,002 $ 2,796 $ 1,262 -- $ 976 $ 1,274
Total assets 26,882 20,145 5,300 -- 22,984 4,422
Long-term debt 515 -- 29 -- -- --
Stockholders' equity 18,006 14,718 2,487 -- 13,094 2,273
(1)Prior to the Reorganization on December 13, 1995, the Superior
Companies, with the exception of Superior Tubular Services, Inc., were
sub-chapter S corporations for income tax reporting purposes. Net income
(loss) reflects pro forma income tax expense as if Superior had been a
taxable entity for the entire periods presented.
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RISK FACTORS
Prospective investors should carefully consider the following factors, in
addition to other information contained in this Prospectus, regarding an
investment in the Common Stock offered hereby.
Industry Volatility. The demand for oil field services has traditionally
been cyclical. Demand for the Company's services is significantly affected
by the number and age of producing wells and the drilling and completion of
new oil and gas wells. These factors are affected in turn by the
willingness of oil and gas operators to make capital expenditures for the
exploration, development and production of oil and natural gas. The levels
of such capital expenditures are influenced by oil and gas prices, the cost
of exploring for, producing and delivering oil and gas, the sale and
expiration dates of leases in the United States and overseas, the discovery
rate of new oil and gas reserves, local and international political and
economic conditions and the ability of oil and gas companies to generate
capital. Although the production sector of the oil and gas industry is
less immediately affected by changing prices, and, therefore, less volatile
than the exploration sector, producers would likely react to declining oil
and gas prices by reducing expenditures, which could adversely affect the
business of the Company. No assurance can be given as to the future price
of oil and natural gas or the level of oil and gas industry activity.
Seasonality. The businesses conducted by the Company are subject
to seasonal fluctuation. The nature of the offshore oil and gas industry
in the Gulf of Mexico is seasonal and depends in part on weather
conditions. Purchases of the Company's products and services are also to a
substantial extent, deferrable in the event oil and gas companies reduce
capital expenditures as a result of conditions existing in the oil and gas
industry or general economic downturns. Fluctuations in the Company's
revenues and costs may have a material adverse effect on the Company's
business and operations. Accordingly, the Company's operating results may
vary from quarter to quarter, depending upon factors outside of its
control.
Dependence on Oil and Gas Industry; Dependence Upon Significant
Customers. The Company's business depends in large part on the conditions
of the oil and gas industry, and specifically on the capital expenditures
of the Company's customers. Purchases of the Company's products and
services are also, to a substantial extent, deferrable in the event oil and
gas companies reduce capital expenditures as a result of conditions
existing in the oil and gas industry or general economic downturns. The
Company derives a significant amount of its revenues from a small number
independent and major oil and gas companies. The inability of the Company
to continue to perform services for a number of its large existing
customers, if not offset by sales to new or existing customers, could have
a material adverse effect on the Company's business and operations.
Technology Risks. Sales of certain of the Company's products are
based primarily on its proprietary technology. The Company's success in
the sales of these products depends to a significant extent on the
development and implementation of new product designs and technologies.
Many of the Company's competitors and potential competitors have more
significant resources than the Company. While the Company has patents on
certain of its technologies and products, there is no assurance that any
patents secured by the Company will not be successfully challenged by
others or will protect them from the development of similar products by
others.
Intense Competition. The Company competes in highly competitive
areas of the oil field business. The volatility of oil and gas prices has
led to a consolidation of the number of companies providing services
similar to the Company. This reduced number of companies competes
intensely for available projects. Many of the competitors of the Company
are larger and have greater financial and other resources than the Company.
Although the Company believes that it competes on the basis of technical
expertise and reputation of service, there can be no assurance that the
Company will be able to maintain its competitive position.
Potential Liability and Insurance. The operations of the Company
involve the use of heavy equipment and exposure to inherent risks,
including blowouts, explosions and fire, with attendant significant risks
of liability for personal injury and property damage, pollution or other
environmental hazards or loss of production. The equipment that the
Company sells and rents to customers are also used to combat oil spills.
Failure of this equipment could result in property damage, personal injury,
environmental pollution and resulting damage. Litigation arising from a
catastrophic occurrence at a location where the Company's equipment and
services are used may in the future result in large claims. The frequency
and severity of such incidents affect the Company's operating costs,
insurability and relationships with customers, employees and regulators.
Any increase in the frequency or severity of such incidents, or the general
level of compensation awards with respect thereto, could affect the ability
of the Company to obtain projects from oil and gas operators or insurance
and could have a material adverse effect on the Company. In addition, no
assurance can be given that the Company will be able to maintain adequate
insurance in the future at rates it considers reasonable.
Laws and Regulations. The Company's business is significantly
affected by laws and other regulations relating to the oil and gas
industry, by changes in such laws and by changing administrative
regulations. The Company cannot predict how existing laws and regulations
may be interpreted by enforcement agencies or court rulings, whether
additional laws and regulations will be adopted, or the effect such changes
may have on it, its businesses or financial condition. Federal and state
laws require owners of non-producing wells to plug the well and remove all
exposed piping and rigging before the well is abandoned. A decrease in the
level of enforcement of such laws and regulations in the future would
adversely affect the demand for the Company's services and products.
Numerous state and federal laws and regulations affect the level of
purchasing activity of oil containment boom and consequently the Company's
business. There can be no assurance that a decrease in the level of
enforcement of laws and regulations in the future would not adversely
affect the demand for the Company's products.
Environmental Regulation. The Company believes that its present
operations substantially comply with applicable federal and state pollution
control, and environmental protection laws and regulations and that
compliance with such laws has had no material adverse effect upon its
operations to date. No assurance can be given that environmental laws will
not, in the future, materially adversely affect the Company's operations
and financial condition.
Shares Eligible for Future Sale. As of the date of this
Prospectus, the Company had 18,597,045 shares of Common Stock outstanding,
of which 6,174,419 have been registered under the Securities Act and
generally are freely transferable, (other than shares acquired by
"affiliates" of the Company as such term is defined by Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act")). None of the
12,422,626 remaining shares of Common Stock issued by the Company were
acquired in transactions registered under the Securities Act and,
accordingly, such shares may not be sold except in transactions registered
under the Securities Act or pursuant to an exemption from registration.
Approximately 520,000 shares of Common Stock are eligible for sale in
reliance upon exemptions from registration. The Company is unable to
estimate the number of shares that will be sold since this will depend on
the market price for the Common Stock, the personal circumstances of the
sellers and other factors. Any future sale of substantial amounts of
Common Stock in the open market may adversely effect the market price of
the Common Stock offered hereby.
Concentration of Common Stock Ownership. The Company's directors
and executive officers and certain of their affiliates beneficially own
55.5% of the outstanding shares of Common Stock. Accordingly, these
shareholders will have the ability to control the election of the Company's
directors and the outcome of most other matters submitted to a vote of the
Company's shareholders.
Possible Volatility of Securities Prices. The market price of the
Common Stock has in the past been, and may in the future continue to be,
volatile. A variety of events, including quarter to quarter variations in
operating results, news announcements or the introduction of new products
by the Company or its competitors, as well as market conditions in the oil
and gas industry, or changes in earnings estimates by securities analysts
may cause the market price of the Common Stock to fluctuate significantly.
In addition, the stock market in recent years has experienced significant
price and volume fluctuations which have particularly affected the market
prices of equity securities of many companies that service the oil land gas
industry and which often have been unrelated to the operating performance
of such companies. These market fluctuations may adversely affect the
price of the Common Stock.
No Dividends.The Company's Board of Directors has not paid any
dividends on its Common Stock. The Company does not expect to declare or
pay any dividends in the foreseeable future.
Potential Adverse Effect of Issuance of Preferred Stock Without
Stockholder Approval. The Company's Certificate of Incorporation
authorizes the issuance of 5,000,000 shares of preferred stock, $.01 par
value per share, with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the
Board of Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of the
holders of the Common Stock and, in certain circumstances, depress the
market price of the Common Stock. In the event of issuance, the preferred
stock could be utilized under certain circumstances as a method of
discouraging, delaying or preventing a change in control of the Company.
There can be no assurance that the Company will not issue shares of
preferred stock in the future. See "Description of Securities."
Key Personnel. The Company depends to a large extent on the
abilities and continued participation of the its executive officers and key
employees. The loss of the services of any of these persons would have a
material adverse effect on the Company's business and operations.
Forward-Looking Statements
This Prospectus contains certain forward-looking statements
concerning the Company's operations, economic performance and financial
condition, including in particular, the integration of the Company's recent
and pending acquisitions into the Company's existing operations. Such
statements are subject to various risks and uncertainties. Actual results
could differ materially from those currently anticipated due to a number of
factors, including those identified under "Risk Factors" and elsewhere in
this Prospectus.
USE OF PROCEEDS
The net proceeds to the Company, if any, from the Offering will be up
to $25.4 million. The Company will use the net proceeds of the Offering,
if any, for working capital and other general corporate purposes. There
can be no assurance that any of the Class A or Class B Warrants will be
exercised before such Warrants expire and, as a result, that the Company
will receive any proceeds from this Offering. Even if exercised, the
Company cannot predict when the Class A or Class B Warrants will be
exercised and the proceeds received.
DIVIDENDS AND PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the
symbol "SESI." The following table sets forth the high and low closing bid
prices per share of the Common Stock as reported by the Nasdaq National
Market for each fiscal quarter during the past three calendar years.
Quotes represent "inter-dealer" prices without adjustments for mark-ups,
mark-downs or commissions and may not represent actual transactions.
Common Stock
Period High Low
1994
First Quarter 6-1/4 4-1/8
Second Quarter 4-5/8 4
Third Quarter 5-1/4 4-1/4
Fourth Quarter 5-1/4 3-1/2
1995
First Quarter 3-3/4 2-1/2
Second Quarter 3-1/8 2
Third Quarter 3 1-3/4
Fourth Quarter 2-11/16 1-1/2
1996
First Quarter 1-13/16 1-3/4
Second Quarter 3-1/8 1-15/16
Third Quarter 3 1-13/16
Fourth Quarter 3-5/8 2-5/8
On January 10, 1997, the last reported sales price of the Common
Stock on the Nasdaq National Market was $3-9/16 per share. At January 10,
1997, there were 67 record holders of the Common Stock.
The Company has never declared or paid any cash dividends on the
Common Stock and does not presently intend to pay cash dividends on the
Common Stock in the foreseeable future. The Company intends to retain
future earnings for reinvestment in its business. In addition, the
Company's ability to declare or pay cash dividends is affected by the
ability of the Company's present and future subsidiaries to declare and pay
dividends or otherwise transfer funds to the Company since the Company
conducts its operations entirely through its subsidiaries. Future loan
facilities, if any, obtained by the Company or its subsidiaries may
prohibit or restrict the payment of dividends or other distributions by the
Company to its stockholders and the payment of dividends or other
distributions by the Company's subsidiaries to the Company. Subject to
such limitations, the payment of cash dividends on the Common Stock will be
within the discretion of the Company's Board of Directors and will depend
upon the earnings of the Company, the Company's capital requirements,
applicable requirements of the applicable loan and other factors that are
considered relevant by the Company's Board of Directors.
CAPITALIZATION
The following table sets forth the consolidated unaudited
capitalization of the Company on June 30, 1996 and on a pro forma basis to
give effect to the Dimensional and Baytron Acquisitions and pro forma as
adjusted to give effect to the exercise of the Class A and Class B
Warrants. This table should be read in conjunction with the financial
statements of the Company and Dimensional appearing elsewhere in this
Prospectus. See "Index to Financial Statements."
At June 30, 1996
_______________________
Pro Forma Combined
Actual Combined, as adjusted,
________ __________ ____________
(In thousands)
Long-term debt,
including current maturities $ 1,490 $ 3,318 $ 3,318
Stockholders' equity:
Preferred Stock, $.01 par
value per share,
5,000,000 shares
authorized; no shares
outstanding $ -- $ -- $ --
Common Stock, $.001 par
value per share, 40,000,000 shares
authorized; 18,597,045
shares issued and
outstanding as adjusted for the
Dimensional and Baytron
acquisitions $ 17 $ 19 $ 25
Additional paid-in capital 16,265 19,551 44,902
Accumulated deficit (1,564) (1,564) (1,564)
Total stockholders'equity $14,718 $18,006 $43,363
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reorganization
For purposes of this discussion, the term "Small's" refers to the
Company as of dates and periods prior to the Reorganization and the term
"Company" refers to the combined operations of Small's, Oil Stop and
Superior after the consummation of the Reorganization.
On December 13, 1995, the Company consummated a share exchange (the
"Reorganization") whereby it (i) acquired all of the outstanding capital
stock of Superior Well Service, Inc., Connection Technology, Ltd. and
Superior Tubular Services, Inc. (collectively "Superior") in exchange for
8,400,000 shares of Common Stock and (ii) acquired all of the outstanding
capital stock of Oil Stop, Inc. ("Oil Stop") in exchange for 1,800,000
Common Stock and $2.0 million cash payable January 2, 1996.
Due to the controlling interest the Superior shareholders have in the
Company as a result of the Reorganization, among other things, the
Reorganization has been accounted for as a reverse (i.e., a purchase of
Small's by Superior) under the "purchase" method of accounting. As such,
the Company's financial statements and other financial information now
reflect the historical operations of Superior for periods and dates prior
to the Reorganization. The net assets of Small's and Oil Stop have been
reflected at their estimated fair value pursuant to purchase accounting at
the date of the Reorganization. The net assets of Superior are reflected
at their historical book values.
Comparison of the Results of Operations for the Six Months ended June 30,
1996 and 1995
Revenues increased 52% for the six months ended June 30, 1996 as
compared to the six months ended June 30, 1995. Of this increase, 30% is a
result of increased levels of activity and 70% is the result of the
acquisitions mentioned above.
Cost of services for the six months ended June 30, 1996 increased 19%
over the six months ended June 30, 1995. Of this increase, 26% is as a
result of increased levels of activity and 74% is the result of the
acquisitions. Depreciation increased $502,000 in the six months ended June
30, 1996 as compared to the six months ended June 30, 1995. The increase
is primarily the result of the acquisitions made by the Company during
1996. General and administrative expenses increased 51% for the six months
ended June 30, 1996 over the same period in 1995. Of this increase, 64% is
the result of the acquisitions and 36% is the result of increased levels of
activity.
For the year ended August 31, 1995, Small's incurred a loss of
$1,586,000 followed by a loss of $378,000 for the quarter ended November
30, 1995. The Company, in an effort to eliminate these continued losses,
entered into a joint venture for its West Texas rental tool and fishing
operations on January 15, 1996. As a result of the joint venture, the
Company will have no liability for any operating losses that may be
incurred by the joint venture. The Company's share of distributions will
be $110,000 a month for the first 24 months and $80,000 a month for the
remaining 36 months of the term of the joint venture.
Comparison of the Results of Operations for the Years Ended December 31,
1995 and December 31, 1994
Revenues increased 6.0%, exclusive of Small's and Oil Stop since the
consummation of the Reorganization, for the year ended December 31, 1995
primarily due to increased activity levels during the fourth quarter of
1995. Fourth quarter service revenues were 25.8% of the total year in
1995, as compared to 20.5% in 1994 and 18.7% in 1993.
In 1995, cost of services, exclusive of Small's and Oil Stop,
increased 7.8%. This increase is primarily due to the cost of support
services required to maintain and support the Company's major customers
primarily with engineering services. In 1995 and 1994, selling, general
and administrative expenses, exclusive of Small's and Oil Stop, increased
19.6% and 23.6%, respectively. In 1995, 75% of the increase is the result
of including a full year of Ace Rental and in 1994, 47% of the increase is
a result of including Ace Rental for the six-month period ended December
31, 1994. The remaining increases are related primarily to increases in
employee, travel and insurance expenses. Depreciation expense, exclusive
of Small's and Oil Stop, increased 43.6% in 1995 and 40.0% in 1994. These
increases were a result of additional equipment being placed in service.
For the year ended August 31, 1995, Small's incurred a loss of
$1,586,000 followed by a loss of $378,000 for the quarter ended November
30, 1995. The Company, in an effort to eliminate these continued losses
entered into a joint venture for its West Texas rental tool and fishing
operations subsequent to December 31, 1995. As a result of the joint
venture, the Company will have no liability for any operating losses that
may be incurred in the joint venture. The Company's share of distributions
will be $110,000 a month for the first 24 months and $80,000 a month for
the remaining 36 months of the term of the joint venture.
At December 31, 1995, the Company elected the early adoption of
Statement of Financial Accounting Standards (FAS) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. The undiscounted net cash flows from the joint venture were
less than the carrying value of the associated fixed assets and associated
goodwill indicating that an impairment had taken place. This resulted in
the Company recognizing a non-cash charge for the impairment of long-lived
assets of $4,042,000, consisting of a write-off of goodwill of $3,520,000
associated with the acquisition of Small's and a write off of $522,000 of
property, plant and equipment.
On December 13, 1995, simultaneous with the consummation of the
Reorganization, the Company completed a public offering of 1,500,000 Units
("Units"), with each Unit consisting of three shares of the Company's
common stock and three Class B redeemable Common Stock Purchase Warrants.
On December 27, 1995, the Company sold an additional 225,000 Units. The
offering, after the underwriting discount, non-accountable expenses and all
other offering related expenses, provided the Company with approximately
$9.3 million. The Company used the net proceeds provided by the offerings
to repay a majority of Small's existing bank debt, fund the cash portion of
the purchase price of Oil Stop and provide additional working capital for
operations.
Capital Resources and Liquidity
Net cash provided by operating activities was $415,000 for the six
months ended June 30, 1996. This is a decrease of $261,000 as compared to
the six months ended June 30, 1995. This is primarily the result of a $1.6
million reduction in the Company's accounts payable. Of the $1.6 million,
$1.2 million is a result of a permanent reduction of Small's remaining
obligations.
The Company's working capital position improved to $2,796,000 at June
30, 1996 as compared to $976,000 at December 31, 1995. This was primarily
the result of a $2,000,000 final payment made in connection with the
acquisition of all the capital stock of Oil Stop as well as a reduction of
debt of approximately $1.2 million. The Company's current ratio also
improved from 1.10 at December 31, 1995 to 1.56 at June 30, 1996.
The Company, in connection with the joint venture for its West Texas
fishing and rental tool operations, sold land for $300,000. During the
first six months of 1996 it also sold various equipment for approximately
$57,000. Both these sales resulted in no gain or loss. In the first six
months of 1996, the Company purchased approximately $572,000 of machinery
and equipment. These purchases were funded primarily from cash generated
from operations.
On July 31, 1996, the company consummated its purchase of Baytron,
Inc. for $1,100,000 of cash and 550,000 Common Stock. The cash portion of
the purchase was made with available funds.
On September 16, 1996, Superior acquired Dimensional through the
merger of Dimensional with and into a wholly-owned subsidiary of the
Company. Shareholders of Dimensional received an aggregate of 1,000,000
shares of Common Stock, $1.5 million cash and $1 million principal amount
of promissory notes.
The Company maintains a revolving credit facility which was increased
in June 1996 from $1.4 million to $4.0 million. As of June 30, 1996, there
were no amounts outstanding under this facility. The Company believes that
its available funds, together with cash generated from operations and
available borrowing capacity should be sufficient to support the Company's
strategic and capital spending initiatives.
Prior to the consummation of the Reorganization, Superior was a
privately-held company that distributed substantially all of its earnings
to its shareholders. As part of the Reorganization, Small's agreed that
all sub-chapter S earnings prior to January 1, 1995, not previously
distributed would be distributed to Superior shareholders in the form of a
note. Accordingly, during 1995 $1,091,000 was distributed to the Superior
shareholders and the Superior shareholders also received notes having an
aggregate principal amount of $1,374,000 at the closing of the
Reorganization. As a result of Superior's transition to public ownership
as part of the Reorganization, these payments and distributions will not
occur in future reporting periods.
Inflation has not had a significant effect on the Company's financial
conditions or operations in recent years.
Accounting Standard Issued but not Adopted
In October 1995, Statement of Financial Accounting Standards (FAS)
No. 123, Accounting for Stock-Based Compensation, was issued. FAS No. 123
encourages a fair value based method of accounting for the compensation
costs associated with employee stock option and similar plans. However, it
also permits the continued use of the intrinsic value based method
prescribed by the Accounting Principles Board's Opinion No. 25 (Opinion No.
25), Accounting for Stock Issued to Employees. If the accounting
prescribed by Opinion No. 25 is continued, then pro forma disclosure of net
income and earnings per share must be presented as if the method of
accounting defined in FAS No. 123 had been applied in both 1995 and 1996.
FAS No. 123 is effective for the Company's 1996 fiscal year, though it may
be adopted earlier.
The Company has elected to continue to apply the provisions of
Opinion No. 25 and will calculate compensation cost prescribed by FAS No.
123 and present pro forma disclosures in 1996. Until such calculations are
completed, the Company cannot estimate the impact such will have on the pro
forma disclosures.
<PAGE>
BUSINESS
General
Superior Energy Services, Inc. (the "Company"), through its
subsidiaries, provides an integrated range of specialized oilfield services
in the Gulf of Mexico including oil and gas well plug and abandonment,
wireline and workover services, the manufacture, sale and rental of
specialized oil well equipment and fishing tools, the development,
manufacture, sale and rental of oil and gas drilling instrumentation and
computerized rig data acquisition systems, and the development, manufacture
and sale of oil spill containment booms and ancillary equipment.
On December 13, 1995, the Company consummated a share exchange (the
"Reorganization") whereby it: (i) acquired all of the outstanding capital
stock of Superior Well Service, Inc., Connection Technology, Ltd., Superior
Tubular Services, Inc. and Ace Rental Tools, Inc. (collectively,
"Superior") in exchange for 8,400,000 shares of Common Stock and (ii)
acquired all of the outstanding capital stock of Oil Stop, Inc. ("Oil
Stop") in exchange for 1,800,000 shares of Common Stock and $2.0 million
cash payable on January 2, 1996.
As a result of the controlling interest the Superior shareholders
have in the Company as a result of the Reorganization, the Reorganization
has been accounted for as a reverse acquisition (i.e., a purchase of the
Company by Superior) under the "purchase" method of accounting.
Accordingly, the Company's financial statements and other financial
information reflect the historical operations of Superior for periods and
dates prior to the Reorganization. The Company's and Oil Stop's net assets
at the time of the Reorganization have been reflected at their estimated
fair value pursuant to purchase accounting at the date of the
Reorganization. The net assets of Superior are reflected at their
historical book values.
Business
The Company provides plugging and abandonment and wireline services
to oil and gas companies operating primarily in the Gulf of Mexico. When a
well ceases producing oil and gas the owner is required by state and/or
federal law to plug the well and remove all exposed piping and rigging. In
order to plug the well, concrete is pumped into the well to form plugs that
prevent debris, gas, oil or other material from escaping and contaminating
the surrounding environment.
Superior provides services and specialized equipment for plugging and
abandonment jobs, as well as for non-plugging and abandonment jobs such as
logging and pipe recovery. Wireline service personnel are cross-trained to
work (i) plugging and abandonment jobs and (ii) perform wireline services
in connection with remedial activities.
The Company designs, manufactures and sells worldwide specialized
computerized electronic torque and pressure control equipment used in
connection with drilling and workover operations, as well as the
manufacture of oil field tubular goods. The torque control equipment
monitors the relationship between size, weight, grade, rate of makeup,
torque and penetration of tubular goods to ensure a leak-free connection
within the pipe manufacturer's specification. The electronic pressure
control equipment monitors and documents internal and external pressure
testing of tubular goods connections. The Company's patented thread
protectors are used during drilling and workover operations to protect the
pin end of tubular goods while being transported from the pipe rack to the
drill floor.
The Company manufactures, through third-party manufacturers, and
sells oil spill containment inflatable boom and ancillary
storage/deployment/retrieval equipment. The Company's inflatable boom
utilizes continuous single-point inflation technology with air feeder
sleeves in combination with mechanical check valves to permit continuous
inflation of the boom material. The Company sells, rents and licenses oil
spill containment technology to domestic and foreign oil companies, oil
spill response companies and cooperatives, the United States Coast Guard
and to foreign governments and their agencies.
The Company rents specialized equipment onshore and offshore in oil
and gas well drilling and other specialized rental equipment and fishing
tools used in well work-over, completion and production activities. In
connection with the rental of certain specialized equipment, such as
fishing tools, the Company generally provides to the customer an operator
who supervises the operations of the rental equipment on the well site.
The Company's rental items include, in addition to the above, bits, gauges,
hoses, pumps, spools and tubing which are supplied as equipment only. In
January 1996, the Company entered into a joint venture with G&L Tool
Company in which it contributed assets in West Texas to the joint venture.
Potential Liability and Insurance
The Company's operations involve a high degree of operational risk,
particularly of personal injuries and damage to equipment. The Company
maintains insurance against risks that are consistent with industry
standards and required by its customers. Although management believes that
the Company's insurance protection is adequate, and that the Company has
not experienced a loss in excess of policy limits, there can be no
assurance that the Company will be able to maintain adequate insurance at
rates which management considers commercially reasonable, nor can there be
any assurance such coverage will be adequate to cover all claims that may
arise.
Laws, Regulations and Environmental Matters
The Company's operations are affected by governmental regulations in
the form of federal and state laws and regulations, as well as private
industry organizations. In addition, the Company depends on the demand for
its services from the oil and gas industry and, therefore, is affected by
changing taxes and other laws and regulations relating to the oil and gas
industry generally.
The exploration and development of oil and gas properties located on
the outer continental shelf of the United States is regulate primarily by
the Minerals Management Service of the United States Department of the
Interior (the "MMS"). The MMS has promulgated federal regulations
governing the plugging and abandonment of wells located offshore and the
removal of all production facilities. The Company believes that its
operations are in material compliance with these and all other regulations
affecting the conduct of its business on the outer continental shelf of the
United States.
The Company's operations are also affected by numerous federal, state
and local environmental protection laws and regulations. The technical
requirements of these laws and regulations are becoming increasingly
expensive, complex and stringent. These laws may provide for strict
liability for damages to natural resources or threats to public health and
safety. Sanctions for noncompliance may include revocation of permits,
corrective action orders, administrative or civil penalties and criminal
prosecution. Certain environmental laws provide for joint and several
strict liabilities for remediation of spills and releases of hazardous
substances. In addition, companies may be subject to claims alleging
personal injury or property damage as a result of alleged exposure to
hazardous substances. The Company's compliance with these laws and
regulations has entailed certain additional expenses and changes in
operating procedures. The Company believes the compliance with these laws
and regulations will not have a material adverse effect on the Company's
business or financial condition.
Competition and Customers
The Company operates in highly competitive markets and, as a result,
its revenue and earnings can be affected by competitive action such as
price changes, new product developments, or improved availability and
delivery. Competition in both services and products is based on a
combination of price, service (including the ability to deliver services
and products on a "as needed, where needed" basis), product quality and
technical proficiency. The Company's competition includes small, single
location companies, large companies with multiple operating locations and
extensive inventories and subsidiaries of large companies having
significant financial resources. The Company believes it competes based
upon its technical capabilities, experience and personnel. Customers which
accounted for 10% or more of the Company's revenue for the years ended
December 31, 1995 and 1994 were as follows:
1995 1994
Chevron USA 23.7% 16.8%
Conoco, Inc. 16.4% 18.8%
Employees
As of October 31, 1996, the Company had approximately 188 employees.
None of the Company's employees is represented by a union or covered by a
collective bargaining agreement. The Company believes that its relations
with its employees is good.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information as of October 31,
1996 with respect to the directors and executive officers of Superior.
Name Age Position
Terence E. Hall 51 Chairman of the Board, Chief
Executive Officer,
President and Director
Ernest J. Yancey, Jr. 47 Vice President and Director
James E. Ravannack 35 Vice President and Director
Robert S. Taylor 42 Chief Financial Officer
Richard J. Lazes 48 President of Oil Stop and
Director
Kenneth C. Boothe 51 Director and President of
Superior Fishing
Bradford Small 32 Director
Justin L. Sullivan 56 Director
Terence E. Hall has served as the Chairman of the Board, Chief
Executive Officer, President and a Director of the Company since the
consummation of the Reorganization. Since 1989, he has served as President
and Chief Executive Officer of each of Superior Well Service, Inc.,
Connection Technology, Ltd. and Superior Tubular Services, Inc.
Ernest J. Yancey, Jr. has served as a Vice President and Director of
the Company since the consummation of the Reorganization. Since 1989, he
has served as Vice President - Operations of Superior Well Service, Inc.
James E. Ravannack has served as a Vice President and Director of the
Company since the consummation of the Reorganization. Since, 1989, he has
served as Vice President - Sales of Superior Well Service, Inc.
Richard J. Lazes has served as a Director of the Company since the
consummation of the Reorganization. Mr. Lazes founded Oil Stop in May 1990
and has served as its President since then.
Robert S. Taylor has served as Chief Financial Officer since March
1996. From May 1994 to January 1996, he served as Chief Financial Officer
of Kenneth Gordon (New Orleans), Ltd. From November of 1989 to May 1994 he
served as Chief Financial Officer of Plywood Panels, Inc., a manufacturer
and distributor of plywood paneling and related wood products. Prior
thereto, Mr. Taylor served as Controller for Plywood Panels, Inc. and
Corporate Accounting Manager of D. H. Holmes Company, Ltd.
Kenneth C. Boothe has served as a director since 1991. Mr. Boothe
served as Chief Executive Officer and President of the Company from October
1993 until consummation of the Reorganization and as President of the
Company's operating subsidiary, Small's Fishing & Rental, Inc. until May
1996. Mr. Boothe is now the senior partner with Boothe, Vassar, Fox & Fox,
certified public accountants, Big Spring, Texas.
Bradford Small has served as a Director of the Company since December
1993. From 1989 to January 1991, Mr. Small served as a minister of the
Southern Hills Church of Christ in Abilene, Texas. From January 1991 until
May 1995 he served as minister of Western Hills Church of Christ in
Amarillo, Texas. From May 1995 to May 1996 he served as minister of
Highlands Church of Christ in Lakeland, Florida. From May 1996 to the
present, Mr. Small's has been the minister of Amarillo South Church of
Christ in Amarillo, Texas.
Justin L. Sullivan has served as a Director of the Company since
consummation of the Reorganization. Mr. Sullivan has been a business
consultant to various companies since May 1993. From October 1992 to May
1993, Mr. Sullivan served as President of Plywood Panels, Inc., a
manufacturer and distributor of plywood paneling and related wood products.
From 1967 to September 1992, he served as Vice-President, Treasurer and
Director of Plywood Panels, Inc. and its predecessor entities.
Summary Executive Officer Compensation
The following summary compensation table sets forth information for
each of the three fiscal years in the period ended December 31, 1995,
concerning compensation for services in all capacities awarded to, earned
by or paid to the most highly compensated executive officers of the Company
whose aggregate cash compensation exceeded $100,000 (collectively, the
"Named Executives").
Summary Compensation Table
Name and Principal
Position
_____________________
Annual Compensation Long Term Compensation
_____________________ ______________________
Year Ended Other Annual Securities
Name and Principal December Salary$ Compensation($) Underlying Options(#)
___________________ ___________ _________ ______________ ____________________
T. Hall, President,
CEO(1) 1995 12,500 None 44,000
K. Boothe, President
CEO(2) 1995 120,000 None None
President, CEO, CFO 1994 120,000 None None
Secretary, Treasurer(3)1993 75,000 None None
(1) Terence Hall became Chairman of the Board, CEO and President on
December 13, 1995 upon consummation of the Reorganization.
(2) Kenneth Boothe served as President and CEO until consummation of the
Reorganization on December 13, 1995.
(3) Became President and CEO in October 1993.
In connection with the Reorganization, the Company entered into
employment agreements with each of Terence E. Hall, Kenneth C. Boothe,
Ernest J. Yancey, Jr., James E. Ravannack, Kenneth Blanchard and Richard J.
Lazes (the "Executives"), providing for minimum annual salaries of
$300,000, $120,000, $120,000, $120,000, $120,000 and $162,500 respectively,
with 5% increases over and above the preceding year's salary during the
term of the agreement. Under the employment agreements, Messrs. Hall,
Yancey, Ravannack and Blanchard were granted ten-year options to purchase
44,000, 44,000, 44,000 and 18,000 shares of Common Stock, respectively, at
$2.53 per share. Under the agreements, the Executives will also be
provided with benefits under any employee benefit plan maintained by the
Company for its employees generally, or for its executives and key
management employees in particular, on the same terms as are applicable to
other senior executives of the Company. Mr. Boothe's employment agreement
was terminated May 1996.
In addition to annual compensation and benefits, each of Messrs.
Hall, Yancey, Ravannack and Blanchard will receive an annual bonus
calculate as a percentage of the Company's year-end pre-tax, pre-bonus
annual income ("Company's Income"), Mr. Boothe will receive an annual bonus
calculated as a percentage of Superior Fishing's year-end pre-tax, pre-
bonus annual income ("Superior Fishing Income") and Mr. Lazes will receive
an annual bonus calculated as a percentage of Oil Stop's year-end pre-tax,
pre-bonus annual income ("Oil Stop Income"). Mr. Hall's bonus will be in
an amount equal to 1% of the Company's Income if the Company's Income is
greater than $1.8 million but less than or equal to $2.0 million, 2% of the
Company's Income if the Company's Income is greater than $2.0 million but
less than or equal to $2.25 million, or 3% of the Company's Income if the
Company's Income is greater than $2.25 million. The bonus for each of
Messrs. Yancey, Ravannack and Blanchard will be in an amount equal to .443%
of the Company's Income if the Company's Income is greater than $1.8
million but less than or equal to $2.0 million, .886% of the Company's
Income if the Company's Income is greater than $2.0 million but less than
or equal to $2.25 million, or 1.33% of the Company's Income if the
Company's Income is greater than $2.25 million. Mr. Boothe's bonus will be
in an amount equal to 5% of Superior Fishing Income if Superior Fishing
Income is greater than $250,000 and less than or equal to $500,000; and 7%
of Superior Fishing Income that is greater than $500,000. Mr. Lazes' bonus
will be in an amount equal to 5% of Oil Stop's Income that is greater than
$1.0 million but less than or equal to $1.5 million, 7.25% of Oil Stop's
Income that is greater than $1.5 million but less than or equal to $2.0
million, and 10% of Oil Stop's Income that is greater than $2.0 million.
The term of the employment agreements, except for Mr. Hall's
agreement, will continue until December 13, 1998 unless earlier terminated
as described below. The term of Mr. Hall's employment agreement will
continue until December 13, 2000 unless earlier terminated as described
below. The term of Mr. Hall's agreement will automatically be extended for
one additional year unless the Company gives at least 90 days' prior notice
that it does not wish to extend the term.
Each employment agreement provides for the termination of the
Executive's employment: (i) upon the Executive's death; (ii) by the
Company or the Executive upon the Executive's disability; (iii) by the
Company for cause, which includes willful and continued failure
substantially to perform the Executive's duties, or willful engaging in
misconduct that is materially injurious to the Company, provided, however,
that prior to termination, the Board of Directors must find that the
Executive was guilty of such conduct; or (iv) by the Executive for good
reason, which includes a failure by the Company to comply with any material
provision of the agreement that has not been cured after ten days' notice.
For a period of two years after any termination, the Executive will be
prohibited from competing with the Company.
Upon termination due to death or disability, the Company will pay the
Executive all compensation owing through the date of termination and a
benefit in an amount equal to nine-month's salary. Upon termination by the
Company for cause or for termination by the Executive for other than good
reason, the Executive will be entitled to all compensation owing through
the date of termination. Upon termination by the Executive for good
reason, the Executive will be entitled to all compensation owing through
the date of termination plus his current compensation and the highest
annual amount payable to Executive under the Company's compensation plans
multiplied by the greater of two or the number of years remaining in the
term of the Executive's employment under the agreement. In addition, if
the termination arises out of a breach by the Company, the Company will pay
all other damages to which the Executive may be entitled as a result of
such breach.
The following table sets forth information with respect to options
granted to each of the Named Executives during the year ended December 31,
1995.
<TABLE>
<CAPTION> Individual Grants
Number of Securities % of Total Options/SARs
Underlying options/SARs Granted to Employee Exercise or Base Expiration
Name Granted Employees Fiscal Year Price ($/SH) Date
______________________________________________________________________________________________
<S> <C> <C> <C> <C>
Terence E. Hall 44,000 29% $2.53 December 13, 2005
Kenneth C. Boothe - - - -
</TABLE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of October 31, 1996 certain
information regarding beneficial ownership of the Common Stock by (i) each
stockholder known by Superior to be the beneficial owner of more than 5% of
the outstanding Common Stock after giving effect to the Offering, (ii) each
director of Superior, (iii) each executive officer of Superior listed in
the Summary Compensation Table set forth elsewhere herein, and (iv) all of
Superior's directors and executive officers as a group. Unless otherwise
indicated, Superior believes that the stockholders listed below have sole
investment and voting power with respect to their shares based on
information furnished to Superior by such owners.
Number of Shares
Name and Address Percentage Beneficially
of beneficial owner(1) Percentage Owned (2)
_______________________ _________________ ___________________
Terence E. Hall 19.2% 3,584,000(3)
Ernest J. Yancey, Jr. 13.0% 2,416,000(3)
James E. Ravannack 13.0% 2,424,000(3)
Richard J. Lazes 9.7% 1,800,000
Justin L. Sullivan - -
Kenneth C. Boothe * 165,944(4)
Bradford Small * 25,000(5)
All Directors and Executive 55.5% 10,414,944
Officers as a group
________________
* Less than 1%.
(1) The address of Messrs. Hall, Yancey and Ravannack is 1503 Engineers
Road, Belle Chasse, Louisiana 70037.
Mr. Sullivan's address is 100 Napoleon Avenue, New Orleans, Louisiana
70115.
Mr. Boothe's address is 1001 East FM 700, Big Spring, Texas 79720.
Mr. Small's address is 4101 W. 45th, #2004, Amarillo, Texas 79109.
(2) Beneficial ownership has been determined in accordance with Rule 13d-
3 under the Securities Exchange Act of 1934.
(3) Includes 44,000 shares subject to issuance upon the exercise of
options granted under the Incentive Plan.
(4) Represents 42,000 Common Stock owned outright, 41,926 Common Stock
held in a trust, of which Kenneth Boothe is the sole voting trustee,
57,018 Common Stock held in a corporation for the benefit of Darnell
Small, Kenneth Boothe and Bradford Small with respect to which
Kenneth Boothe has the sole voting discretion and 25,000 Common Stock
subject to issuance upon the exercise of options.
(5) Represents 25,000 Common Stock that may be acquired upon the exercise
of warrants and represents less than one percent.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Superior consists of 40 million
shares of common stock, $.001 par value per share (the "Common Stock"), and
5 million shares of preferred stock, $.01 par value per share, issuable in
series (the "Preferred Stock"). As of October 31, 1996, 18,597,045 shares
of Common Stock were outstanding and held of record by approximately 65
persons, and no shares of Preferred Stock were outstanding. The following
description of the capital stock and other security of Superior is
qualified in its entirety by reference to Superior's Certificate of
Incorporation (the "Certificate"), Bylaws and other documents evidencing
the warrants, copies of which are filed as exhibits to the registration
statement of which this Prospectus forms a part.
Common Stock
Each holder of Common Stock is entitled to one vote for each share of
Common Stock held of record on all matters on which stockholders are
entitled to vote; stockholders may not cumulate votes for the election of
directors. Subject to the preferences accorded to the holders of the
Preferred Stock, if and when issued by the Board of Directors, holders of
Common Stock are entitled to dividends at such times and in such amounts as
the Board of Directors may determine. Superior has never paid cash
dividends on its Common Stock and does not intend to pay dividends for the
foreseeable future. See "Risk Factors - Dividend Policy." Upon the
dissolution, liquidation or winding up of Superior, after payment of debts
and expenses and payment of the liquidation preference plus any accrued
dividends on any outstanding shares of Preferred Stock, the holders of
Common Stock will be entitled to receive all remaining assets of Superior
ratably in proportion to the number of shares held by them. Holders of
shares of Common Stock have no preemptive, subscription, conversion or
redemption rights and are not subject to further calls or assessments, or
rights of redemption by Superior. The outstanding shares of Common Stock
are, and the shares of Common Stock being sold in the Offering will be,
validly issued, fully paid and nonassessable.
Preferred Stock
Superior's Board of Directors has the authority, without approval of
the stockholders, to issue shares of Preferred Stock in one or more series
and to fix the number of shares and rights, preferences and limitations of
each series. Among the specific matters that may be determined by the
Board of Directors are the dividend rights, the redemption price, if any,
the terms of a sinking fund, if any, the amount payable in the event of any
voluntary liquidation, dissolution or winding up of the affairs of
Superior, conversion rights, if any, and voting powers, if any.
One of the effects of the existence of authorized but unissued Common
Stock and undesignated Preferred Stock may be to enable the Board of
Directors to make more difficult or to discourage an attempt to obtain
control of Superior by means of a merger, tender offer, proxy contest or
otherwise, and thereby to protect the continuity of Superior's management.
If, in the exercise of its fiduciary obligations, the Board of Directors
were to determine that a takeover proposal was not in Superior's best
interest, such shares could be issued by the Board of Directors without
stockholder approval in one or more transactions that might prevent or make
more difficult or costly the completion of the takeover transaction by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional
or other hands that might undertake to support the position of the
incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise. In this regard,
Superior's Certificate grants the Board of Directors broad power to
establish the rights and preferences of the authorized and unissued
Preferred Stock, one or more series of which could be issued entitling
holders (i) to vote separately as a class on any proposed merger or
consolidation, (ii) to cast a proportionately larger vote together with the
Common Stock on any such transaction or for all purposes, (iii) to elect
directors having terms of office or voting rights greater than those of
other directors, (iv) to convert Preferred Stock into a greater number of
shares of Common Stock or other securities, (v) to demand redemption at a
specified price under prescribed circumstances related to a change of
control or (vi) to exercise other rights designated to impede a takeover.
The issuance of shares of Preferred Stock pursuant to the Board of
Directors' authority described above may adversely effect the rights of
holders of the Common Stock.
In addition, certain other charter provisions that are described
below may have the effect of either alone, in combination with each other
or with the existence of authorized but unissued capital stock of making
more difficult or discouraging an acquisition of Superior deemed
undesirable by the Board of Directors.
Class B Warrants
The Class B Warrants entitle the holder thereof to purchase one share
of Common Stock for $3.60, subject to adjustments in certain circumstances,
during the four-year period commencing December 8, 1996. The Company may
call the Class B Warrants for redemption, in whole and not in part, at a
price of $.01 per Class B Warrant at any time after they become exercisable
on not less than 30 days' prior written notice to the Class B Warrant
holders if the last sales price of the Common Stock has been at least 150%
(initially $5.40) of the then current exercise price of the Class B
Warrants per Common Stock for the 20 consecutive days ending on the third
day prior to the date on which notice of redemption is given. The holders
will have the right to exercise the Class B Warrants until the close of
business on the date fixed for redemption.
The Class B Warrants are issued in registered form under a warrant
agreement, between the Company and American Stock Transfer & Trust Company,
as Warrant Agent ("Warrant Agreement"). Reference is made to the Warrant
Agreement (which has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part) for a complete description of the terms
and conditions applicable to the Class B Warrants (the description herein
contained being qualified in its entirety by reference to such Warrant
Agreement).
The exercise price, number of Common Stock issuable on exercise of
the Class B Warrants and the redemption price are subject to adjustment in
certain circumstances, including a stock dividend, recapitalization,
reorganization, merger or consolidation of the Company. However, the Class
B Warrants are not subject to adjustment for issuance of Common Stock at a
price below the exercise price of the Class B Warrants.
The Class B Warrants will be exercisable commencing December 8, 1996
if at the time of exercise there is a current prospectus covering the
Common Stock issuable upon exercise of such Class B Warrants under an
effective registration statement filed with the Securities and Exchange
Commission and such Common Stock have been qualified for sale or are exempt
from qualification or the registration requirements under the securities
laws of the state of residence of the holder of such Class B Warrants.
Although the Company has committed to have all Common Stock so qualified
for sale in those states and to maintain a current prospectus thereto until
the expiration of the Class B Warrants, subject to the terms of the Warrant
Agreement, there can be no assurance that it will be able to do so.
The Class B Warrants may be exercised upon the surrender of the Class
B Warrant certificate on or prior to the expiration date at the offices of
the warrant agent, with the exercise form on the reverse side of the Class
B Warrant certificate completed and executed as indicated, accompanied by
full payment of the exercise price for the number of Class B Warrants. The
holders do not have the rights or privileges of holders of Common Stock
prior to the exercise of the Class B Warrants.
No fractional Common Stock will be issued upon exercise of the Class
B Warrants. However, if a warrant holder exercises all Class B Warrants
then owned of record by him, the Company will pay to such warrantholder, in
lieu of the issuance of any fractional Common Stock which is otherwise
issuable to such warrantholder, an amount based on the market value of the
Common Stock on the last trading day prior to the date of exercise.
Class A Warrants
Each Class A Warrant entitles the registered holder thereof to
purchase one share of Common Share at an exercise price of $6.00 per share,
subject to adjustment, until July 6, 1997. The Class A Warrants were
issued in registered form pursuant to the terms of a warrant agreement (the
"Class A Warrant Agreement"). Reference is made to the Class A Warrant
Agreement (which has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part) for a complete description of the terms
and conditions applicable to the Class A Warrants (the description herein
contained being qualified in its entirety by reference to the Class A
Warrant Agreement).
The Company may call the Class A Warrants for redemption, in whole or
in part, at a price of $.01 per warrant, at any time with the consent of
Gaines, Berland Inc., upon not less 30 days' prior written notice to the
holders, if the last sale price of the Common Stock has been at least $9.00
per share (150% of the then effective exercise price) for the 20
consecutive trading days ending on the third day prior to the date on which
the notice of redemption is given. The holders will have the right to
exercise the Class A Warrants until the close of business on the date fixed
for redemption.
The exercise price, number of Common Stock issuable on exercise of
the Class A Warrants and redemption price are subject to adjustment in
certain circumstances, including in the event of a stock dividend,
recapitalization, reorganization, merger or consolidation of the Company.
However, the Class A Warrants are not subject to adjustment for issuances
of Common Stock at prices below their exercise price.
Limitation of Liability and Indemnification Matters
The Company's Certificate of Incorporation provides that directors of
the Company shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the directors' duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law ("DGCL") relating to prohibited dividends or distributions
or the repurchase or redemption of stock, or (iv) for any transaction from
which the director derives an improper personal benefit. The provision
does not apply to claims against directors for violations of certain laws,
including federal securities laws. If the DGCL is amended to authorize
further elimination or limitation of directors' liability, then the
liability of directors of the Company shall automatically be limited to the
fullest extent provided by law. The Certificate of Incorporation and the
Bylaws of the Company also contain provisions to indemnify the directors,
officers, employees or other agents to the fullest extent permitted by the
DGCL. These provisions may have the practical effect in certain cases of
eliminating the ability of stockholders to collect monetary damages from
directors. The Company believes that these provisions in the Certificate
of Incorporation and Bylaws of the Company are necessary to attract and
retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted
to directors, officers and controlling persons of the Company pursuant to
the foregoing provisions, or otherwise, the Company has been advised that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.
Certain Charter and Bylaw Provisions
Size of the Board of Directors; Removal of Directors; Filling of
Vacancies on the Board of Directors. The Company's Bylaws provide that the
number of directors shall be fixed by the Board of Directors but shall not
be less than three nor more than eleven. The Company's Bylaws also provide
that a newly created directorship resulting from an increase in the number
of directors and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause may be filled by the affirmative
of the majority of the remaining directors then in office, although less
than a quorum, or by a sole remaining director. In addition, these
provisions specify that directors elected to fill a vacancy or a newly
created directorship on the Board of Directors will serve until the next
annual meeting of stockholders and until their successors are elected and
qualified, or until their earlier resignation or removal.
Stockholder Action by Written Consent. Under Delaware law and under
the Company's Bylaws, unless the certificate of incorporation specifies
otherwise, any action that could be taken by stockholders at an annual or
special meeting may be taken, instead, without a meeting and without notice
to or a vote of other stockholders if a consent in writing is signed by
holders of outstanding stock having voting power that would be sufficient
to take such action at a meeting at which all outstanding shares were
present and voted. As a result, stockholders may act upon any matter by a
duly called meeting or by written consent.
Amendment of the Bylaws. Under Delaware law, the power to adopt,
amend or repeal bylaws is conferred upon the stockholders; however, a
corporation may in its certificate of incorporation also confer upon the
board of directors the power to adopt, amend or repeal its bylaws. The
Company's Certificate and Bylaws grant the Board of Directors the power to
adopt, amend and repeal the Bylaws.
Special Meetings of the Stockholders. The Company's Bylaws permit
the directors to call special meeting of the stockholders. The Bylaws do
not permit stockholders to call special meetings.
Delaware Anti-Takeover Statute
The Company is subject to Section 203 of the Delaware General
Corporation Law, which prohibits Delaware corporations from engaging in a
wide range of specified transactions with any interested stockholder,
defined to include, among others, any person other than such corporation
and any of its majority-owned subsidiaries who own 15% or more of any class
or series of stock entitled to vote generally in the election of directors,
unless, among other exceptions, the transaction is approved by (i) the
Board of Directors prior to the date the interested stockholder obtained
such status, or (ii) the holders of two-thirds of the outstanding shares of
each class or series of stock entitled to vote generally in the election of
directors, not including those shares owned by the interested stockholder.
The provisions described above may tend to deter any potential
unfriendly offers or other efforts to obtain control of the Company that
are not approved by the Board of Directors and thereby deprive the
stockholders of opportunities to sell shares of Common Stock at prices
higher than the prevailing market price. On the other hand, these
provisions will tend to assure continuity of management and corporate
policies and to induce any person seeking control of the Company or a
business combination with the Company to negotiate or terms acceptable to
the then elected Board of Directors.
Transfer Agent, Warrant Agent and Exchange Agent
The transfer and warrant agent and registrar for the Company's Common
Stock is American Stock Transfer & Trust Company, 40 Wall Street, 46th
Floor, New York, New York 10005.
PLAN OF DISTRIBUTION
The Common Stock offered hereby is being offered by the Company
exclusively to the holders of the Company's Class A and Class B Warrants.
The Company does not have any agreement with any underwriter or other party
for the distribution of the Common Stock offered hereby. The Common Stock
is being offered by the Company through the Prospectus, and no commissions
or other remunerations will be paid to any person for soliciting the
exercise of the Class A and Class B Warrants and the sale of the Common
Stock.
Certain persons who acquire Common Stock upon exercise of the Class A
and Class B Warrants may be deemed to be "issuers@ under the Securities Act
of 1933, as amended (the "Securities Act") because of their relationship
with the Company ("Affiliates") and, therefore, may be required to deliver
a copy of this Prospectus, including a Prospectus Supplement, to any person
who purchases shares of Common Stock acquired by such Affiliate through
exercise of the Class A and/or Class B Warrants ("Restricted Shares"). In
addition, any broker or dealer participating in any distribution of the
Restricted Shares may be deemed to be an "underwriter" within the meaning
of the Securities Act and, therefore, may be required to deliver a copy of
this Prospectus, including a Prospectus Supplement, to any person who
purchases any Restricted Shares from or through such broker or dealer.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for Superior by Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., New Orleans, Louisiana.
EXPERTS
The consolidated financial statements of Superior as of and for the
two years ended December 31, 1995 included in this Prospectus and elsewhere
in the Registration Statement have been audited by KMPG Peat Marwick LLP,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of
such firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LPP covering Superior's consolidated financial statements refers
to the adoption in 1995 of the methods of accounting for the impairment of
long-lived assets and for long-lived assets to be disposed of prescribed by
Statement of Financial Accounting Standards No. 121.
The financial statements of Dimensional as of and for the year ended
December 31, 1995 included in this Prospectus and elsewhere in the
Registration Statement have been audited by KMPG Peat Marwick LLP,
independent certified public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of
such firm as experts in accounting and auditing.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Superior Energy Services, Inc.
Independent Auditors Report F-1
Consolidated Balance Sheets at December 31, 1995 and 1994 F-2
Consolidated Statements of Operations for the years ended December 31,
1995 and 1994 F-3
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1995 and 1994 F-4
Consolidated Statements of Cash Flows for the years ended December 31,
1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6
Condensed Consolidated Balance Sheets as of June 30, 1996 (unaudited)
and December 31, 1995 F-19
Condensed Consolidated Statements of Operations for the Three and Six
Months ended June 30, 1996 and 1995 (unaudited) F-20
Condensed Consolidated Statements of Cash Flows for the Six Months ended
June 30, 1996 and 1995 (unaudited) F-21
Notes to Condensed Consolidated Financial Statements F-22
Dimensional Oil Field Services, Inc.
Independent Auditors Report F-25
Balance Sheet at December 31, 1995 F-26
Statement of Operations and Retained Earnings for the year ended
December 31, 1995 F-27
Statement of Cash Flows for the year ended December 31, 1995 F-28
Notes to Financial Statements F-29
Balance Sheet at June 30, 1996 (unaudited) F-33
Statements of Operations and Retained Earnings for the Six Months ended
June 30, 1996 and 1995 (unaudited) F-34
Statements of Cash Flows for the Six Months ended June 30, 1996 and 1995
(unaudited) F-35
Notes to Unaudited Financial Statements F-36
Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Condensed Balance Sheet as of June 30, 1996 F-37
Unaudited Pro Forma Condensed Statement of Earnings for the six months
ended June 30, 1996 F-39
Unaudited Pro Forma Condensed Statement of Earnings for the year ended
December 31, 1995 F-40
Notes to Unaudited Pro Forma Condensed Financial Information F-42
<PAGE>
Independent Auditors' Report
The Boards of Directors and Shareholders
Superior Energy Services, Inc.:
We have audited the consolidated balance sheets of Superior Energy
Services, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of operations, changes in
stockholdersO equity and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the
CompanyOs management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Superior Energy Services, Inc. and subsidiaries as of
DecemberE31, 1995 and 1994, and the results of their operations and
their cash flows for each of the years then ended in conformity with
generally accepted accounting principles.
As discussed in note 9 to the consolidated financial statements, in
1995 the Company adopted the methods of accounting for the impairment
of long-lived assets and assets to be disposed of prescribed by
Statement of Financial Accounting Standards No. 121.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
March 15, 1996
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(in thousands)
Assets 1995 1994
______ _____ _____
Current assets:
Cash and cash equivalents $ 5,068 $ 207
Accounts receivable - net of allowance
for doubtful accounts of $204,000 in
1995 and none in 1994 3,759 2,072
Notes receivable:
Employees - 108
Other - 120
Inventories 968 242
Deferred income taxes 256 -
Due from shareholders - 267
Other 227 213
________ ________
Total current assets 10,278 3,229
Property, plant and equipment - net 6,904 1,193
Goodwill - net 4,576 -
Patent - net 1,226 -
________ ________
$ 22,984 $ 4,422
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 1,249 $ 750
Accounts payable 2,345 826
Due to shareholders 3,422 179
Unearned income 1,085 -
Accrued expenses 456 -
Income taxes payable 545 -
Other 200 200
________ ________
Total current liabilities 9,302 1,955
________ ________
Deferred income taxes 408 -
Other 180 194
StockholdersO equity:
Preferred stock of $.01 par value.
Authorized - 5,000,000 shares;
none issued - -
Common stock of $.001 par value.
Authorized - 25,000,000 shares;
issued - 17,032,916 17 248
Additional paid-in capital 16,230 -
Retained earnings (deficit) (3,153) 2,025
________ ________
Total stockholders' equity 13,094 2,273
________ ________
$ 22,984 $ 4,422
======== =========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995 and 1994
(in thousands, except
per share data)
1995 1994
______ _______
Revenues $ 12,338 $ 11,088
Costs and expenses:
Costs of services 7,487 6,785
Depreciation and amortization 259 149
Impairment of long-lived assets 4,042 -
General and administrative 3,258 2,424
________ ________
Total costs and expenses 15,046 9,358
________ ________
Income (loss) from operations (2,708) 1,730
Other income (expense):
Interest (86) (40)
Other 79 114
________ ________
Income (loss) before income taxes (2,715) 1,804
Provision for income taxes 131 -
________ ________
Net income (loss) $ (2,846) $ 1,804
======== ========
Net income (loss) as adjusted for pro forma
income taxes (unaudited):
Income (loss) before income taxes as
per above $ (2,715) $ 1,804
Pro forma income taxes 640 667
___________ _________
Net income (loss) as adjusted for
pro forma income taxes $ (3,355) $ 1,137
=========== =========
Net income (loss) per common share and common
share equivalent $ (.38) $ .14
=========== ==========
Weighted average shares outstanding 8,847,946 8,400,000
=========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
December 31, 1995 and 1994
(in thousands, except share data)
Common Additional Retained
stock Common paid-in earnings
shares stock capital (deficit) Total
________ ________ ________ __________ _________
Balance, December 31, 1993 3,550 $ 248 $ - $ 1,689 $ 1,937
Net income - - - 1,804 1,804
Shareholder
distributions - - - (1,468) (1,468)
________ _________ _________ _________ _________
Balance, December 31, 1994 3,550 248 - 2,025 2,273
Net loss - - - (2,846) (2,846)
Shareholder
distributions - - - (2,465) (2,465)
Acquisition of Oil
Stop, Inc. 1,800,000 2 3,598 - 3,600
Share exchange for the
Superior Companies 10,037,700 (238) 3,350 133 3,245
Sale of common stock 5,175,000 5 9,265 - 9,270
Exercise of private
warrants 16,666 - 17 - 17
__________ __________ __________ __________ _________
Balance, December
31, 1995 17,032,916 $ 17 $ 16,230 $(3,153) $ 13,094
=========== ========== ========== ========== =========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995 and 1994
(in thousands)
1995 1994
_____ _____
Cash flows from operating activities:
Net income (loss) $(2,846) $ 1,804
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 259 149
Unearned income 1,085 -
Impairment of long-lived assets 4,042 -
Gain on sale of property and equipment - (98)
Deferred income taxes (444) -
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (384) 162
Notes receivable 120 -
Inventories 61 (223)
Other, net 141 8
Accounts payable (332) (170)
Due to shareholders 1,243 -
Accrued expenses 58 -
Income taxes payable 613 -
_________ __________
Net cash provided by operating activities 3,616 1,632
_________ _________
Cash flows from investing activities:
Proceeds from sale of property and equipment - 118
Payments for purchases of property and equipment (610) (550)
_________ _________
Net cash used in investing activities (610) (432)
_________ _________
Cash flows from financing activities:
Notes payable (5,264) 206
Due from (to) shareholders 297 (48)
Shareholder distributions (2,465) (1,468)
Advances on notes receivable - (120)
Proceeds from sale of common stock 9,287 -
_________ _________
Net cash provided by (used in)
financing activities 1,855 (1,430)
_________ _________
Net increase (decrease) in cash 4,861 (230)
Cash and cash equivalents at beginning of year 207 437
_________ _________
Cash and cash equivalents at end of year $ 5,068 $ 207
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Reorganization
On December 13, 1995, the Company consummated a share exchange
(the "Reorganization") whereby it (i) acquired all of the
outstanding capital of Superior Well Service, Inc., Connection
Technology, Ltd. and Superior Tubular Services, Inc.
(collectively, "Superior") in exchange for 8,400,000 Common
Shares and (ii) acquired all of the outstanding capital stock of
Oil Stop, Inc. ("Oil Stop") in exchange for 1,800,000 Common
Shares and $2.0 million cash payable on JanuaryE2, 1996.
As used in the consolidated financial statements for Superior
Energy Services, Inc., the term "Smalls" refers to the Company
as of dates and periods prior to the Reorganization and the term
"Company" refers to the combined operations of Small's, Oil Stop
and Superior after the consummation of the Reorganization.
Prior to the Reorganization, Small's was a holding company, the
only operating subsidiary of which was Small Fishing and Rental,
Inc. which has changed its name to Superior Fishing & Rental,
Inc. ("Superior Fishing").
As a result of the controlling interest the Superior
shareholders have in the Company as a result of the
Reorganization, among other factors, the Reorganization has been
accounted for as a reverse acquisition (i.e., a purchase of
Small's by Superior) under the "purchase" method of accounting.
As such, the Company's consolidated financial statements and
other financial information reflect the historical operations of
Superior for periods and dates prior to the Reorganization. The
net assets of Small's and Oil Stop, at the time of the
Reorganization, have been reflected at their estimated fair
value pursuant to purchase accounting at the date of the
Reorganization. The net assets of Superior have been reflected
at their historical book values.
On December 13, 1995, simultaneous with the consummation of the
Reorganization, the Company completed a public offering of
1,500,000 Units ("Units"), with each Unit consisting of three
shares of the Company's common stock and three Class B
redeemable Common Stock Purchase Warrants. On December 27,
1995, the Company sold an additional 225,000 Units. The
offerings after the underwriting discount, non-accountable
expenses and all other offering related expenses provided the
Company with approximately $9.3 million. Expenses associated
with the offering were greater than anticipated as a result of
professional costs.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of
Superior for the two years presented and those of Small's and
Oil Stop from the date of the Reorganization. All
significant intercompany accounts and transactions are
eliminated in consolidation. The Company's fiscal year ends
on December 31. Certain previously reported amounts have been
reclassified to conform to the 1995 presentation.
(b) Business
The Company is engaged in the business of providing offshore
plugging and abandonment and wireline services, the
development, manufacture and sale of electronic torque and
pressure control equipment and thread protectors which are
used in connection with oil and gas exploration, the
development, manufacture and sale of oil spill containment
boom and ancillary equipment and the rental of specialized oil
well equipment and fishing tools. A majority of the Company's
business is conducted with major oil and gas exploration
companies. The Company continually evaluates the financial
strength of their customers but does not require collateral to
support the customer receivables. The Company operated as one
segment in 1995 and 1994.
Customers which accounted for 10 percent or more of revenue
for the years ended December 31, 1995 and 1994, were as
follows:
1995 1994
Chevron USA 23.7% 16.8%
Conoco Inc. 16.4% 18.8%
(c) Use of 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.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated
useful lives of the related lives as follows:
Buildings 30 years
Machinery and equipment 5 to 15 years
Automobiles, trucks, tractors and trailers 2 to 5 years
Furniture and equipment 5 to 7 years
Effective in the fourth quarter of 1995, the Company began
assessing the impairment of capitalized costs of long-lived
assets in accordance with Statement of Financial Accounting
Standards (FAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Under this method, the Company assesses its capitalized costs
utilizing its current estimate of future revenues and
operating expenses. In the event net undiscounted cash flow
is less than capitalized costs, an impairment loss is recorded
based on estimated fair value, which would consider discounted
future net cash flows.
(e) Goodwill
The Company amortizes costs in excess of fair value of net
assets of businesses acquired using the straight-line method
over a period of 20 years. Recoverability will be reviewed
periodically by comparing the undiscounted fair value of cash
flows of the assets to which the goodwill applies to the net
book value, including goodwill, of assets.
(f) Inventories
Inventories are stated at the lower of average cost or market.
The cost of booms and parts are determined principally on the
first-in, first-out method.
(g) Cash Equivalents
The Company considers all short-term deposits with a maturity
of ninety days or less to be cash equivalents.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(h) Revenue Recognition
The Company recognizes revenues when services are provided and
upon the completion of job orders from its customers. Rental
income is recognized on a straight-line basis. Unearned income
is recorded for lease payments in excess of rental income
recognized.
(i) Income Taxes
The Company provides for income taxes in accordance with
Statement of Financial Accounting Standards (FAS) No. 109,
Accounting for Income Taxes. FAS No. 109 requires an asset and
liability approach for financial accounting and reporting for
income taxes. Deferred income taxes reflect the impact of
temporary differences between amounts of assets for financial
reporting purposes and such amounts as measured by tax laws.
(j) Patents
Patents are amortized using the straight-line method over the
term of each patent.
(k) Pro Forma Income Taxes and Earnings per Share
Pro forma income tax expense and net income (loss) as adjusted for
income taxes is presented on the Statement of Operations in
order to reflect the impact on income taxes as if Superior had
been a taxable entity for the entire two years presented. In
computing weighted average share outstanding, 8,400,000 shares
issued in exchange for Superior's capital stock is assumed to
be outstanding as of January 1, 1994. All other common shares
issued or sold are included in the weighted average shares
outstanding calculation from the date of issuance or sale.
(l) Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable and notes
payable. The carrying amount of these financial instruments
approximates their fair value.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Business Combinations
On December 13, 1995, Small's acquired all of the capital stock
of Superior for 8,400,000 Common Shares. Because of the
controlling interest that Superior shareholders have in the
combined entity, among other factors, the transaction has been
accounted as a reverse acquisition which has resulted in the
adjustment of the net assets of Small's to its estimated fair
value as required by the rules of purchase accounting. The net
assets of Superior are reflected at its historical book values.
The valuation of Small's net assets is based upon the 1,641,250
Common Shares outstanding prior to the Reorganization at the
approximate trading price of $2.00 at the time of the
renegotiation of the Reorganization on August 25, 1995. The
purchase price allocated to net assets was $3,283,000. The
revaluation resulted in a substantial reduction in the carrying
value of Small's property and equipment. The revaluation
reflected excess purchase price of $3,520,000 over the fair
value of tangible assets which was recorded as goodwill. At
December 31, 1995, in applying the rules of FAS No. 121 (see
Note 9), this goodwill was written off and the property and
equipment was written down an additional $522,000.
On December 13, 1995, the Company also acquired Oil Stop for the
sum of $2.0 million in cash and 1.8 million Common Shares at the
approximate trading price of $2.00 at the time of the
renegotiation of the Reorganization on August 25, 1995 for a
total purchase price of $5,600,000. The book values of Oil
Stop's assets and liabilities approximated their fair values
under the rules of purchase accounting. The excess purchase
price over the fair value of the net assets of Oil Stop at
December 13, 1995 of $4,585,000 was allocated to goodwill to be
amortized over 20 years.
Amortization expense was $10,000 in 1995 and none in 1994.
Accumulated amortization expense at December 31, 1995 and 1994
was $10,000 and none, respectively.
The following unaudited pro forma information presents a summary
of consolidated results of operations of Superior, Small's and
Oil Stop as if the Reorganization had occurred on January 1,
1994, with pro forma adjustments to give effect to amortization
of goodwill, depreciation and certain other adjustments together
with related income tax effects (in thousands except per share
amounts):
1995 1994
_______ _______
Net sales $ 19,747 $ 22,041
=========== ==========
Net earnings (loss) $ (3,880) $ 808
=========== ==========
Earnings (loss) per share $ (0.23) $ 0.05
=========== ===========
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The above pro forma financial information is not necessarily
indicative of the results of operations as they would have been
had the Reorganization been effected on the assumed date.
(4) Leased Equipment
In April 1993, Oil Stop, Inc. entered into an agreement to
lease equipment (boom) to National Response Corporation for the
period June 1993 through December 31, 1997. The lease is an
operating lease. Equipment was delivered in four stages on
separate delivery dates that commenced June 7, 1993 and ended
August 15, 1993. The lessee has the option to purchase the
equipment at the end of the lease term for $450,000. Rental
payments are as follows (in thousands):
1993 $ 700
1994 700
1995 1,400
1996 300
__________
$ 3,100
==========
Rental income is recognized on a straight-line basis. Unearned
income is recorded for lease payments in excess of rental income
recognized.
(5) Property, Plant and Equipment
A summary of property, plant and equipment at December 31, 1995
and 1994 (in thousands) is as follows:
1995 1994
_______ _________
Buildings $ 462 $ -
Machinery and equipment 5,669 989
Automobiles, trucks, trailers
and tractors 839 467
Furniture and fixtures 74 10
Construction-in-progress 360 131
Land 320 -
_________ _________
7,724 1,597
Less accumulated depreciation 820 404
_________ __________
Property, plant and
equipment, net $ 6,904 $ 1,193
========= ==========
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Notes Payable
The Company's notes payable as of December 31, 1995 and 1994
consist of the following (in thousands):
1995 1994
_____ ______
Revolving line of credit in the original amount
of $1,000,000 bearing a variable rate of interest
which equals the Wall Street Journal posted
prime rate (8.5% at December 31, 1995)
plus 2%; principal due March 31, 1996 $ 918 $ -
Master note loan agreement with bank with a
maximum principal amount of $1,400,000 bearing
interest at the bank's prime rate plus 1/2% (10% at
December 31, 1995) - 605
Installment notes payable, annual interest rates
of 8.00% to 8.75% at December 31, 1995 90 55
Notes payable to insurance company, due July
1996, annual interest rate of 7.5% 96 90
Other installment notes payable with interest
rates ranging from 7.35% to 12.0% due in monthly
installments through 1996 145 -
__________ _________
$ 1,249 $ 750
========== =========
(7) Income Taxes
Prior to the Reorganization on December 13, 1995, the Superior
Companies, with the exception of Superior Tubular Services,
Inc., which is a sub-chapter C corporation, were sub-chapter S
corporations for income tax reporting purposes. Therefore,
through December 13, 1995, no provision for federal and state
income taxes had been made. In accordance with the terms of the
Reorganization, the sub-chapter S shareholders received a note
to be paid in five equal installments during the twelve-month
period ended NovemberE1, 1997 for undistributed earnings prior
to January 1, 1995 in the amount of $1,374,000. In addition,
they received $1,091,000 primarily to pay taxes on earnings from
January 1, 1995 through December 13, 1995.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
Notes to Consolidated Financial Statements
Proforma income tax expense and net income (loss) as adjusted
for income taxes is presented on the Statements of Operations in
order to reflect the impact of income taxes as if Superior had
been a taxable entity for the entire two years presented.
The components of income tax expense for the year ended December
31, 1995 are as follows (in thousands):
Current:
Federal $ 497
State 78
_______
575
Deferred: _______
Federal (384)
State (60)
_______
(444)
_______
$ 131
=======
The significant components of deferred tax assets and
liabilities at December 31, 1995 are as follows ( in thousands):
Deferred tax assets:
Property, plant and equipment $ 527
Unearned income 401
Allowance for doubtful accounts 75
Net operating loss carryforward 1,118
_______
2,121
Valuation allowance (1,900)
_______
Net deferred tax asset 221
_______
Deferred tax liability , patent (373)
_______
$ (152)
=======
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A valuation allowance is provided to reduce the deferred tax
assets to a level which, more likely than not, will be realized.
The net deferred tax assets reflect management's estimate of the
amount which will be realized from future profitability which
can be predicted with reasonable certainty.
As of December 31, 1995, the Company has a net operating loss
carryforward of approximately $4.8 million which is available to
reduce future Federal taxable income through 2010. The
utilization of the net operating loss carryforward is limited to
approximately $200,000 a year and will limit the ultimate
utilization of the net operating loss carryforward to
approximately $3.0 million.
A reconciliation between the statutory federal income rate and
the Company's effective tax rate on pretax income (loss) for the
year ended December 31, 1995 is as follows:
Federal income tax rate (34.0)%
Impairment of long lived assets 50.6
Sub-chapter S income not subject to corporate tax (17.2)
Other 5.4
________
Effective income tax rate 4.8%
========
(8) Joint Venture
Subsequent to year end, on January 15, 1996, the Company entered
into a joint venture with the G&L Tool Company ("G&L"), an
unrelated party, which extends through JanuaryE31, 2001. The
Company has contributed assets of Superior Fishing with a book
value of approximately $4.5 million to the joint venture which
will be engaged in the business of renting specialized oil well
equipment and fishing tools to the oil and gas industry in
connection with the drilling, development and production of oil,
gas and related hydrocarbons.
Superior Fishing will receive as its share of distributions from
operations $110,000 a month commencing February 1996 through
January 1998 and $80,000 a month for the period February 1998
through January 2001. The Company's share of distributions is
personally guaranteed by a principal of G&L. In connection with
the joint venture, Superior Fishing also sold G&L land for
$300,000.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The responsibility and authority for establishing policies
relating to the strategic direction of the joint venture
operations and ensuring that such policies are implemented have
been vested in a policy committee consisting of three members,
one of which is a Company employee. G&L will be responsible for
the maintenance and repair, insurance and licenses and permits
for all joint venture assets.
At the end of the joint venture term, G&L will have at its
election, the option to purchase all of the Superior Fishing
assets contributed to the joint venture for $2 million.
(9) Impairment of Long-Lived Assets
The Company has elected the early adoption of Statement of
Financial Accounting Standards (FAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. FAS No. 121 requires that when events or changes
in circumstances indicate that carrying amounts of an asset may
not be recoverable, there has been an impairment, and the asset
should be written down to its fair asset value. In such
instances where there is goodwill associated with the asset as a
result of a business combination accounted for using the
purchase method, the goodwill is eliminated before making any
reduction of the carrying amounts of the impaired long lived
asset.
Subsequent to year end, the Company, through Superior Fishing,
entered into the joint venture described in Note 8. The joint
venture involves the utilization of the equipment and tools,
buildings, autos and trucks of Superior Fishing. The
undiscounted net cash flows from the joint venture were less
than the carrying value of the above fixed assets and associated
goodwill indicating that an impairment had taken place.
The fair value of the fixed assets was determined by discounting
the estimated net cash flows from the joint venture. The result
was an impairment charge of $4,042,000, consisting of a write-
off of goodwill of $3,520,000 associated with the acquisition of
Small's and a write-off of $522,000 of property, plant and
equipment.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Stockholders' Equity
Subsequent to year end at a special meeting of stockholders on
February 23, 1996, the shareholders approved increasing the
authorized number of common stock to 40,000,000. At December
31, 1995, the following were outstanding:
(a) Class A Warrants issued in connection with the
Company's initial public offering, entitling the
holders to purchase an aggregate of 1,121,251 Common
Shares until July 6, 1997 at an exercise price of $6.00
per Common Share;
(b) Class B Warrants issued December 13, 1995 entitling
the holder to purchase an aggregate of 4,500,000 Common
Shares until December 13, 1999 at an exercise price of
$3.60 per Common Share;
(c) Warrants entitling the holders thereof to purchase an
aggregate of 66,666 Common Shares until January 17,
2000 at an exercise price of $1.00 per share;
(d) Options to purchase an aggregate of 75,000 Common
Shares at an exercise price of $3.60 per share;
(e) Options issued to management of Small's to purchase an
aggregate of 150,000 Common Shares at an exercise price
of $4.75 per share;
(f) Options issued in July 1992 to purchase (a) an
aggregate of 210,000 Common Shares until July 6, 1997
at an exercise price of $3.60 per share and (b) Class A
Warrants at an exercise price of $.07 per warrant,
which Class A Warrants entitle the holders thereof to
purchase an aggregate of 210,000 Common Shares at a
price of $6.00 per Common Share, and
(g) Underwriters Unit Purchase Options issued December 13,
1995 entitling the holder to purchase up to 150,000
Units until December 13, 1999 at an exercise price of
$10.40.
In connection with the Reorganization, the Company entered into
employment agreements with six executives. Under the employment
agreements four executives were granted ten-year options to
purchase 150,000 common shares at an exercise price equal to the
fair market value of $2.53 on the date of the grant.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under a Stock Option Plan (1991 Option Plan), approved by
Small's stockholders and Board of Directors, the Company may
grant to officers, directors, employees, consultants and agents
stock options for up to 75,000 shares of the Company's common
stock. Stock options are exercisable at the greater of the fair
market value of the common shares on the date of grant or $5.00
and options may not be granted to persons who hold 10% or more
of the Company outstanding common shares on the date of a
proposed grant. All options expire ten years from the date of
grant. None of the stock options under the 1991 Option Plan has
been granted.
In October 1995, the shareholders approved the 1995 Stock
Incentive Plan (Incentive Plan) to provide long-term incentives
to its key employees, including officers and directors who are
employees of the Company (Eligible Employees). Under the
Incentive Plan, the Company may grant incentive stock options,
non-qualified stock options, restricted stock, stock awards or
any combination thereof to Eligible Employees for up to 600,000
shares of the Company's Common Stock. The Compensation
Committee of the Board of Directors establishes the exercise
price of any stock options granted under the Incentive Plan,
provided the exercise price may not be less than the fair market
value of a common share on the date of grant. Pursuant to
employment agreements, four executives in December 1995 were
granted ten-year options under the Incentive Plan to purchase
150,000 common shares at an exercise price equal to the fair
market value of $2.53 on the date of grant. The options will
vest and be exercisable six months from grant.
In October 1995, Statement of Financial Accounting Standards
(FAS) No. 123, Accounting for Stock-Based Compensation, was
issued. FAS No. 123 encourages a fair value based method of
accounting for the compensation costs associated with employee
stock option and similar plans. However, it also permits the
continued use of the intrinsic value based method prescribed by
the Accounting Principles Board's Opinion No. 25 (Opinion No.
25), "Accounting for Stock Issued to Employees." If the
accounting prescribed by Opinion No. 25 is continued, then pro
forma disclosure of net income and earnings per share must be
presented as if the method of accounting defined in FAS No. 123
had been applied in both 1995 and 1996. FAS No. 123 is
effective for the Company's 1996 fiscal year, though it may be
adopted earlier.
The Company has elected to continue to apply the provisions of
Opinion No. 25 and will calculate compensation cost prescribed
by FAS No. 123 and present pro forma disclosures in 1996. Until
such calculations are completed, the Company cannot estimate the
impact such will have on the pro forma disclosures.
(Continued)
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Commitments and Contingencies
The Company leases certain office, service and assembly
facilities under operating leases. The leases expire at various
dates over the next several years. Total rent expense was
$85,000 in 1995 and $62,000 in 1994. Future minimum lease
payments under non-cancelable leases for the five years ending
December 31, 1996 through 2000 are as follows: $133,000,
$133,000, $108,000, $18,000 and none, respectively.
From time to time, the Company is involved in litigation arising
out of operations in the normal course of business. In
management's opinion, the Company is not involved in any
litigation, the outcome of which would have a material effect on
its business or operations.
(12) Related Party Transactions
The Company has entered into certain transactions which have
given rise to amounts receivable from and payable to the
shareholders. The balances at December 31, 1995 and 1994 were
as follows (in thousands):
1995 1994
_____ _____
Due from shareholders $ - $ 267
======= ======
Due to shareholders $ 3,422 $ 179
======= ======
Due from shareholders at December 31, 1994 consisted of demand
loans made in 1993 and 1994 which were repaid in 1995. Due to
shareholders at December 31, 1995 consists of $2,000,000 due
January 2, 1996 to the former sole shareholder of Oil Stop in
the acquisition of that company and approximately $1,374,000
due to the former shareholders of Superior for undistributed
earnings in sub-chapter S corporations prior to December 31,
1994. In 1994, the due to shareholders represents primarily
amounts due for the purchase of various property and equipment
in 1988 and 1992.
The Company paid consulting fees to a director, who is not an
employee, of $25,000 in 1995 and $23,000 in 1994. The Company
also paid a director, who is also an employee and a shareholder
approximately $2,400 for rent in 1995. The Company is obligated
to make such rent payments in the future as follows: $46,200 in
1996, $46,200 in 1997 and $46,200 in 1998. The Company also
paid an employee $36,000 in 1995 and $15,000 in 1994 for the
rent of two facilities. As of December 31, 1995, the Company
negotiated the cancellation of lease with an officer and
director in the amount of $125,000.
<PAGE>
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
(in thousands)
6/30/96 12/31/95
(Unaudited) (Audited)
___________ ____________
ASSETS
Current assets:
Cash and cash equivalents $ 2,114 $ 5,068
Accounts receivable - net 4,050 3,759
Inventories 1,200 968
Deferred income taxes 256 256
Other 195 227
____________ ____________
Total current assets 7,815 10,278
Property, plant and equipment - net 6,693 6,904
Goodwill - net 4,461 4,576
Patent - net 1,176 1,226
____________ ____________
Total assets $ 20,145 $ 22,984
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 94 $ 1,249
Accounts payable 734 2,345
Notes payable - other 1,396 3,422
Unearned income 738 1,085
Accrued expenses 642 456
Income taxes payable 1,215 545
Other 200 200
____________ ____________
Total current liabilities 5,019 9,302
____________ ____________
Deferred income taxes 408 408
Other - 180
Stockholders' equity:
Preferred stock of $.01 par value.
Authorized,
5,000,000 shares; none issued - -
Common stock of $.001 par value.
Authorized,
40,000,000 shares; issued,
17,047,045 17 17
Additional paid-in capital 16,265 16,230
Accumulated deficit (1,564) (3,153)
____________ _____________
Total stockholders' equity 14,718 13,094
____________ _____________
Total liabilities and
stockholders' equity $20,145 $22,984
============= ==============
<PAGE>
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1996 and 1995
(in thousands, except per share data)
(unaudited)
Three Months Six Months
_____________________ ____________________
1996 1995 1996 1995
____ _____ ____ _____
REVENUES $ 4,690 $ 3,211 $ 9,330 $ 6,147
Costs and expenses:
Costs of services 2,142 1,934 4,413 3,713
Depreciation and amortization 297 47 590 88
General and administrative 1,007 733 2,189 1,449
__________ __________ _________ _________
Total costs and expenses 3,446 2,714 7,192 5,250
__________ __________ _________ _________
Income from operations 1,244 497 2,138 897
Other income (expense):
Interest expense (18) (29) (48) (48)
Other 15 (3) 180 56
__________ __________ __________ __________
Income before income taxes 1,241 465 2,270 905
Provision for income taxes 372 - 681 -
__________ __________ __________ __________
Net income $ 869 $ 465 $ 1,589 $ 905
========== ========== ========== ==========
Income before income taxes Pro forma(1) Pro forma(1)
as per above $ 465 905
Pro forma income taxes 172 335
______________ _____________
Net income as adjusted for pro
forma income taxes $ 293 570
============== =============
Net income per common share and
common share equivalent $ 0.05 $ 0.03 $ 0.09 $ 0.06
======== ======== ======== ========
Weighted average
shares outstanding 17,086,611 8,400,000 17,079,763 8,400,000
========== ========= ========== =========
(1) Net income as adjusted for pro forma income taxes
<PAGE>
Superior Energy Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995
(in thousands)
(unaudited)
1996 1995
_____ _____
Cash flows from operating
activities:
Net income $ 1,589 $ 905
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 590 88
Unearned income (347) -
Changes in operating assets and liabilities:
Accounts receivable (336) (626)
Notes receivable - 110
Inventories (232) (46)
Other - net (68) (7)
Accounts payable (1,611) 203
Due to shareholders (26) 49
Accrued expenses 186 -
Income taxes payable 670 -
_____________ _____________
Net cash provided by operating activities 415 676
_____________ _____________
Cash flows from investing activities:
Proceeds from sale of property and equipment 357 -
Payments for purchases of property and equipment (572) (342)
______________ ______________
Net cash provided by (used in)
investing activities (215) (342)
______________ ______________
Cash flows from financing activities:
Notes payable - bank (1,154) 462
Deferred payment for acquisition of
Oil Stop, Inc. (2,000) -
Shareholder distributions - (691)
_____________ ______________
Net cash provided by (used in)
financing activities (3,154) (229)
_____________ _____________
Net increase (decrease) in cash (2,954) 105
Cash and cash equivalents at beginning of period 5,068 207
_____________ _____________
Cash and cash equivalents at end of period $ 2,114 $ 312
============= =============
<PAGE>
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996 and 1995
(1) Reorganization
On December 13, 1995, the Company consummated a share exchange
(the "Reorganization") whereby it (i) acquired all of the
outstanding capital stock of Superior Well Service, Inc.,
Connection Technology, Ltd. and Superior Tubular Services, Inc.
(collectively, "Superior") in exchange for 8,400,000 Common
Shares and (ii) acquired all of the outstanding capital stock of
Oil Stop, Inc. ("Oil Stop") in exchange for 1,800,000 Common
Shares and $2.0 million cash.
As used in the consolidated financial statements, the term
"Small's" refers to the Company as of dates and periods prior to
the Reorganization and the term "Company" refers to the combined
operations of Small's, Oil Stop and Superior after the
consummation of the Reorganization.
As a result of the controlling interest the Superior shareholders
have in the Company following the Reorganization, among other
factors, the Reorganization has been accounted for as a reverse
acquisition (i.e., a purchase of Small's by Superior) under the
"purchase" method of accounting. As such, the Company's
consolidated financial statements and other financial information
reflect the historical operations of Superior for periods and
dates prior to the Reorganization. The net assets of Small's and
Oil Stop, at the time of the Reorganization, were reflected at
their estimated fair value pursuant to purchase accounting at the
date of the Reorganization. The net assets of Superior have been
reflected at their historical book values.
(2) Basis of Presentation
Certain information and footnote disclosures normally in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange
Commission; however, management believes that this information is
fairly presented. These financial statements and footnotes
should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1995 and the accompanying
notes and Management's Discussion and Analysis or Plan of
Operation.
<PAGE>
(Continued)
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The financial information for the six months ended June 30, 1996
and 1995, has not been audited. However, in the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of
operations for the periods presented have been included therein.
The results of operations for the first six months of the year
are not necessarily indicative of the results of operations which
might be expected for the entire year.
(3) Pro Forma Income Taxes and Earnings per Share
Prior to the Reorganization, the Superior Companies, with the
exception of Superior Tubular Services, Inc., which was a sub-
chapter C corporation, were sub-chapter S corporations for income
tax reporting purposes. Therefore, through June 30, 1995, no
provision for federal and state income taxes had been made. Pro
forma income tax expense and net income as adjusted for income
taxes is presented for the three and six months ended June 30,
1995 on the Statement of Operations in order to reflect the
impact on income taxes as if Superior had been a taxable entity
during those periods. In computing weighted average share
outstanding, 8,400,000 shares issued in exchange for Superior's
capital stock is assumed to be outstanding as of January 1, 1995.
All other common shares issued or sold are included in the
weighted average shares outstanding calculation from the date of
issuance or sale.
(4) Joint Venture
On January 15, 1996, the Company entered into a joint venture
with G&L Tool Company ("G&L"), an unrelated party, which extends
through January 31, 2001. The Company has contributed assets of
Superior Fishing with a book value of approximately $4.5 million
to the joint venture which is engaged in the business of renting
specialized oil well equipment and fishing tools to the oil and
gas industry in connection with the drilling, development and
production of oil, gas and related hydrocarbons.
Superior Fishing receives as its share of distributions from
operations $110,000 a month commencing February 1996 through
January 1998 and $80,000 a month for the period February 1998
through January 2001. The distributions are included in revenues
on the Condensed Consolidated Statement of Operations. The Company's
share of distributions is personally guaranteed by a principal of
G&L. In connection with the joint venture, Superior Fishing also
sold G&L land for $300,000.
<PAGE>
(Continued)
SUPERIOR ENERGY SERVICES, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
The responsibility and authority for establishing policies
relating to the strategic direction of the joint venture
operations and ensuring that such policies are implemented have
been vested in a policy committee consisting of three members,
one of which is a Company employee. G&L will be responsible for
the maintenance and repair, insurance and licenses and permits
for all joint venture assets.
At the end of the joint venture term, G&L will have at its
election, the option to purchase all of the Superior Fishing
assets contributed to the joint venture for $2 million.
(5) Stockholder's Equity
At a special meeting of stockholders on February 23, 1996, the
shareholders approved increasing the authorized number of shares
of common stock to 40,000,000.
(6) Subsequent Event
Subsequent to June 30, 1996, the Company purchased Baytron, Inc.
for $1,100,000 cash and 550,000 Common Shares. Baytron, Inc.
designs, manufactures, sells and rents oil and gas drilling
instrumentation and computerized rig data acquisitions systems
used to monitor, display and record drill site functions. For
the nine months ended June 30, 1996, Baytron recorded revenues of
$2.0 million.
<PAGE>
Independent Auditors' Report
The Board of Directors
Dimensional Oil Field Services, Inc.:
We have audited the accompanying balance sheet of Dimensional Oil Field
Services, Inc. as of December 31, 1995, and the related statements of
operations and retained earnings 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 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
that 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 financial statements referred to above present fairly, in
all material respects, the financial position of Dimensional Oil Field
Services, Inc. as of December 31, 1995, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
New Orleans, Louisiana
November 11, 1996
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Balance Sheet
December 31, 1995
Assets
Current assets:
Cash and cash equivalents $ 103,198
Accounts receivable - net of allowance
for doubtful accounts of $39,342 1,056,978
Prepaid expenses 73,593
_________________
Total current assets 1,233,769
Property and equipment - net 1,140,054
Certificate of deposit 50,000
Other assets 103,339
________________
$ 2,527,162
================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 907,563
Current portion of notes payable 225,756
_________________
Total current liabilities 1,133,319
_________________
Notes payable 287,500
Other liabilities 26,872
Stockholders' equity :
Common stock no par value, authorized-100,000 shares;
issued - 100,000 shares 17,663
Retained earnings 1,061,808
________________
Total stockholders' equity 1,079,471
________________
$ 2,527,162
================
See accompanying notes to financial statements.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Statement of Operations and Retained Earnings
Year ended December 31, 1995
Revenues $ 4,123,376
____________
Expenses:
Cost of services 3,028,381
Selling, general and administrative 861,279
Interest 62,489
Depreciation 181,371
_____________
Loss from continuing operations (10,144)
Discontinued operations (note 6 ):
Loss from operations of the
discontinued wireline division (20,708)
______________
Net loss (30,852)
Stockholder distributions
(132,538)
Retained earnings at beginning of year 1,225,198
______________
Retained earnings at end of year $ 1,061,808
==============
See accompanying notes to financial statements
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Statement of Cash Flows
Year ended December 31, 1995
Cash flows from operating activities:
Net loss from continuing operations $ ( 10,144)
Adjustments to reconcile net loss from continuing
operations to net cash provided by operating activities:
Depreciation 181,371
Allowance for doubtful accounts 39,342
Changes in operating assets and
liabilities:
Accounts receivable (463,629)
Prepaid expense 41,379
Accounts payable and accrued expenses 502,542
Other assets and liabilities, net 46,528
Net cash provided by continuing operations 337,389
Net cash provided by discontinued operations 36,695
_________
Net cash provided by operating activities 374,084
_________
Cash flows from investing activities:
Payments for purchases of property and equipment (15,978)
Certificate of deposit (50,000)
__________
Net cash used in investing activities (65,978)
__________
Cash flows from financing activities:
Notes payable (198,739)
Stockholder distributions (16,100)
__________
Net cash used in financing activities (214,839)
__________
Net increase in cash 93,267
Cash and cash equivalents at beginning of year 9,931
__________
Cash and cash equivalents at end of year $ 103,198
==========
Supplemental disclosures on cash flow information -
cash paid during the year for interest $ 79,306
==========
See accompanying notes to financial statements.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Notes to Financial Statements
December 31, 1995
(1) Organization and Summary of Significant Accounting Policies
(a) Organization
Dimensional Oil Field Services, Inc. (the Company) was
incorporated under the laws of Louisiana and began its operations in 1979.
The Company provides offshore oil and gas plug and abandonment services.
(b) Use of Estimates
The preparation of financial statements requires management to
make estimates and assumptions that effect the reported amounts in the
financial statements and related disclosures. Actual results could
differ from these estimates.
(c) Property and Equipment
Property and equipment is carried at cost. Depreciation is
computed using the straight-line method based on the following estimated
useful lives:
Estimated
Description useful lives
Machinery and equipment 5-15 years
Automobiles, trucks, trailers
and tractors 3-5 years
Furniture and equipment 5-7 years
(d) Income Taxes
The Company with the consent of its stockholders, has elected
under applicable provisions of the Internal Revenue Code not to be taxed
as a corporation but to have its income taxed to the individual stockholders.
Therefore, no provision for federal and state income taxes has been made in
the accompanying financial statements.
(e) Cash Flows
For purposes of the statement of cash flows, cash equivalents
include demand deposits with original maturities of less than three months.
(f) Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, accounts receivable accounts payable and notes payable.
The carrying amount of these financial instruments approximates their fair
value.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Notes to Financial Statements
g) Revenue Recognition
The Company recognizes revenues as services are provided.
(h) Employee Benefit Plan
The Company has an elective employee benefit program which
qualifies under section 401(k) of the Internal Revenue Code. The Company can
make both discretionary and matching contributions at the discretion of the
Board of Directors. In 1995, the Company matched up to 50% of the first six
percent of participant retirement contributions. The Company's contribution
was approximately $25,000 in 1995.
(i) New Accounting Pronouncement
In March 1995, Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," was issued by the Financial Accounting Standards
Board. This statement is effective for fiscal years beginning after December
15, 1995. Management does not believe that this pronouncement will have a
material impact on its financial statements.
(2) Concentration of Credit Risk
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash and cash equivalents and trade
accounts receivable. The Company places cash and temporary cash investments
with high quality financial institutions and currently invests primarily in
certificates of deposit.
A majority of the Company's business is conducted with major oil and gas
exploration companies with operations in the Gulf of Mexico. The Company
continually evaluates the financial strength of their customers but does not
require collateral to support the customer receivables.
Customers which accounted for 10 percent or more of operating revenue
were as follows for the year ended December 31, 1995:
1995
Chevron USA 18.1%
Murphy Oil Corporation 17.2%
Louisiana Department of Natural Resources 16.0%
Unocal 15.3%
The Company's largest six customers accounted for approximately 82% of
total revenues
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Notes to Financial Statements
(3) Property and Equipment
A summary of property and equipment at December 31, 1995 follows:
Machinery and equipment $ 2,848,789
Automobiles, trucks, trailers and tractors 157,622
Leasehold improvements 11,749
______________
3,018,160
Less accumulated depreciation 1,878,106
______________
Net property and equipment $ 1,140,054
(4) Notes Payable
A summary of notes payable at December 31, 1995 follows:
Installment note payable, annual interest
rate of 12.0%, due February 2003 $ 333,500
Note payable to insurance company, due
March 1996, annual interest rate of 7.19% 33,269
Note payable to bank, annual interest rate of 10.0%,
due January 1996 121,360
Other installment notes payable with
interest rates ranging from 7.0 % to 9.0 %
due in monthly installments through 25,127
_____________
513,256
Less current portion 225,756
_____________
$ 287,500
=============
Maturities of long-term debt for the five years ended December 31, 2000
are as follows: $225,756, $46,000, $46,000, $46,000 and $46,000.
(5) Commitments and Contingencies
The Company leases, from its principal shareholder, an office and
service facility under an operating lease. Total rent expense in 1995 was
$56,000. Subsequent to year end, the Company renewed its lease for this
facility through December 31, 2000. Future minimum lease payments under this
non-cancelable lease are $54,000 annually through December 31, 2000.
From time to time the Company is involved in litigation arising out of
operations in the normal course of business. In management's opinion, the
Company is not involved in any litigation, the outcome of which would have a
material effect on its business operations.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Notes to Financial Statements
(6) Discontinued Operations
On December 29, 1995, the Company in a series of agreements distributed
the assets of it's wireline division with a net book value of approximately
$116,000 for 100,000 shares of Wireline Common Stock. The Company immediately
distributed Wireline Common Stock to the stockholders of the Company. The net
book value of approximately $116,000 is included in stockholder distributions.
During the period ended December 29, 1995, Wireline lost $20,708 on revenues
of $1,100,000.
(7) Related Party Transaction
The Company and the principal stockholder have entered into certain
transactions which have given rise to a net due to shareholders of $23,128.
This consists primarily of $50,000 which was loaned to the Company to
obtain a letter of credit.
(8) Subsequent Event
On September 15, 1996, the stockholders, pursuant to a merger agreement,
sold all its common stock for cash of $1,500,000, a promissory note of
$1,000,000 and 1,000,000 share of Superior Energy Services, Inc.'s common
stock. Promissory notes having an aggregate value of $750,000 are subject to a
custodial agreement under which the notes will be released to the former
Dimensional shareholders upon Dimensional's meeting specified earnings levels
through December 31, 1998.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Balance Sheet
(Unaudited)
June 30, 1996
Assets
Current assets:
Cash and cash equivalents $ 11,957
Accounts receivable - trade 1,354,269
Prepaid expenses 220,781
______________
Total current assets 1,587,007
Property and equipment - net 1,113,945
Certificate of deposit 50,000
Other assets 44,660
______________
$ 2,795,612
==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 878,765
Current portion of notes payable 351,294
______________
Total current liabilities 1,230,059
______________
Notes payable 264,500
Other liabilities 50,000
Stockholders' equity:
Common stock no par value authorized -
100,000 shares; issued - 100,000 shares 17,663
Retained earnings 1,233,390
_______________
Total stockholders' equity 1,251,053
_______________
$ 2,795,612
===============
See accompanying notes to financial statements.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Statements of Operations and Retained Earnings
(Unaudited)
Six Months Ended June 30, 1996 and 1995
1996 1995
_______ _______
Revenues $ 2,352,463 $ 1,241,916
Expenses:
Cost of services 1,223,912 880,583
Selling, general and administrative 848,485 314,235
Interest 30,983 26,643
Depreciation 77,501 72,978
_______________ ________________
Income (loss) from continuing
operations 171,582 (52,523)
Discontinued operations:
Income from operations of the
discontinued wireline division - 56,681
_______________ ________________
Net income 171,582 4,158
Stockholder distributions - (16,100)
Retained earnings at beginning of year 1,061,808 1,225,198
_______________ _______________
Retained earnings at end of year $ 1,233,390 $ 1,213,256
=============== ================
See accompanying notes to financial statements
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, 1996 and 1995
1996 1995
_______ ________
Cash flows from operating activities:
Net income (loss) $ 171,582 $ (52,523)
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation 77,501 72,978
Changes in operating assets and
liabilities:
Accounts receivable (296,929) (232,542)
Other current assets and liabilities, net 34,913 (85,690)
Accounts payable and accrued expenses (211,261) (42,868)
Other non-current assets & liabilities, net 81,807 77,811
_____________ ____________
Net cash used by continuing operations (142,387) (262,834)
Net cash provided by discontinued operations - 102,343
_____________ ____________
Net cash used by operating activities (142,387) (160,491)
_____________ ____________
Cash flows from investing activities:
Payments for purchases of property and equipment (51,392) -
Certificate of deposit - (50,000)
____________ ___________
Net cash used in investing activities (51,392) (50,000)
_____________ ___________
Cash flows from financing activities:
Notes payable 125,538 248,449
Long term debt (23,000) (23,000)
Stockholder distributions - (16,100)
_____________ ____________
Net cash provided by financing activities 102,538 209,349
_____________ ___________
Net increase (decrease) in cash (91,241) (1,142)
Cash and cash equivalents at beginning of year 103,198 9,931
_____________ __________
Cash and cash equivalents at end of year $ 11,957 $ 8,789
============= ==========
See accompanying notes to financial statements.
<PAGE>
DIMENSIONAL OIL FIELD SERVICES, INC.
Notes to Financial Statements
(Unaudited)
June 30, 1996 and 1995
(1) Basis of Presentation
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission; however, management of Dimensional Oil
Field Services, Inc. believes the disclosures which are made are adequate to
make the information presented not misleading. These financial statements and
footnotes should be read in conjunction with the financial statements and
notes thereto included in Dimensional Oil Field Services, Inc. historical
financial statements for the years ended December 31, 1995 included elsewhere
herein.
The unaudited financial information for the six months June 30, 1996 and 1995
has not been audited by independent accountants; however, in the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations for the periods
presented have been included therein. The results of operations for the first
six months of the year are not necessarily indicative of the results of
operations which might be expected for the entire year.
(2) Adoption of Accounting Pronouncement
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS No. 121) "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
sets forth guidelines regarding when to recognize an impairment of long-lived
assets and how to measure such impairment. The adoption of SFAS No. 121 did
not have an effect on the Company's financial position or results of
operations.
<PAGE>
Pro Forma Financial Information:
The following unaudited pro forma condensed financial information is
derived from the historical financial statements of Superior Energy Services,
Inc., Small's, Oilstop, Dimensional Oilfield Services, Inc. and Baytron, Inc..
Adjustments have been made to reflect the financial impact of the
Reorganization and purchase accounting for the Dimensional and Baytron
acquisitions which would have been effected had the Reorganization and
acquisitions taken place on January 1, 1995 with respect to the operating
data and June 30, 1996 with respect to the balance sheet data. The pro forma
adjustments are described in the accompanying notes and are based upon
preliminary estimates and certain assumptions that management of the companies
believe reasonable in the circumstances. This pro forma information is not
necessarily indicative of the results of operations had the acquisitions
been effected on the assumed date.
The Company, pursuant to a merger, acquired all the common stock of
Baytron, Inc. on July 31, 1996. Although Baytron, Inc. did not meet the
reporting requirements under regulation S-B, it has been included in the
following pro forma financial information.
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Historical Historical Historical Pro forma
Superior Dimensional Baytron Adjustments Pro forma
____________ ______________ ____________ ______________ ___________
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,114 $ 12 $ 83 $ (600)(A) $ 509
(1,100)(B)
Accounts receivable -net 4,050 1,354 354 5,758
Inventories 1,200 - - 1,200
Deferred income taxes 256 - - 256
Other 195 316 8 519
____________________________________________________________________
Total current assets 7,815 1,682 445 (1,700) 8,242
Property, plant and
equipment - net 6,693 1,114 241 550 (B) 9,001
403 (A)
Goodwill - net 4,461 - - 1,209 (B) 8,463
2,793 (A)
Patent - net 1,176 - - - 1,176
____________________________________________________________________
Total assets $ 20,145 $ 2,796 $ 686 $ 3,255 $ 26,882
====================================================================
</TABLE>
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
JUNE 30, 1996
(in thousands)
Continued
<TABLE>
<CAPTION>
Historical Historical Historical Pro forma
Superior Dimensional Baytron Adjustments Pro forma
____________ ______________ ____________ ______________ ___________
<S> <C> <C> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 94 $ 351 $ 12 $ ( 900) (B) $ 1,357
Accounts Payable 734 879 29 - 1,642
Notes payable - other 1,396 50 - - 1,446
Unearned income 738 - - - 738
Accrued expenses 642 - - - 642
Income taxes payable 1,215 - - - 1,215
Other 200 - - - 200
______________________________________________________________________
Total current liabilities 5,019 1,280 41 (900) 7,240
______________________________________________________________________
Notes payable - 265 - (250) (A) 515
Deferred income taxes 408 - 43 (161) (B) 1,121
(509) (A)
Stockholders' equity:
Common stock 17 18 23 23 (B) 19
(1) (B)
18 (A)
(1) (A)
Additional paid in capital 16,265 - - (1,099) (B) 19,551
(2,187) (A)
Retained earnings (deficit) (1,564) 1,233 579 579 (B) (1,564)
1,233 (A)
________________________________________________________________________
Total stockholder equity 14,718 1,251 602 (1,435) 18,006
_________________________________________________________________________
Total liabilities &
stockholders' equity $ 20,145 $ 2,796 $ 686 $ (3,255) $ 26,882
=========================================================================
</TABLE>
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Historical Historical Historical Pro forma
Superior Dimensional Baytron Adjustments Pro forma
____________ ______________ ____________ ______________ ___________
<S> <C> <C> <C> <C> <C>
Revenues $ 9,330 $ 2,353 $ 1,115 - $ 12,798
_____________________________________________________________________
Costs and expenses:
Costs of services 4,413 1,224 253 5,890
Depreciation & Amortization 590 78 34 $ (15) (I) 811
23 (L)
30 (K)
71 (H)
General and administrative 2,189 848 716 - 3,753
Total costs and expenses 7,192 2,150 1,003 109 10,454
______________________________________________________________________
Income from operations 2,138 203 112 (109) 2,344
Other Income (expense):
Interest expense (48) (31) (7) - (86)
Other 180 - - - 180
_______________________________________________________________________
Income before income tax 2,270 172 105 (109) 2,438
131 (J)
Provision for income taxes 681 - - 30 (M) 842
________________________________________________________________________
Net income $ 1,589 $ 172 $ 105 $(270) $ 1,596
========================================================================
Net income (loss) per Common
Share and Common Share
Equivalent $ .09 $ .09
============ ============
Weighted Average Shares
Outstanding 17,079,763 18,629,763
=============== ==============
</TABLE>
<PAGE>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORM A CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Superior
Historical Historical Historical ProForma after Historical Historical Pro Forma
Superior Small's Oil Stop Adjustments Reorganization Dimensional Bayton Adjustments Pro Forma
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 12,338 $6,020 $1,969 580(O) $19,747 $4,123 $ 2,000 -- $25,870
________________________________________________________________________________________________________
Costs and expenses:
Cost of
Services 7,487 5,528 575 (1,118)(O) 12,472 3,028 500 $ 35 (H) 16,000
Depreciation and 259 1,596 244 229 (F) 2,036 181 79 (55) (L) 2,478
amortization (464)(D) 60 (I)
172 (C) 142 (K)
Impairment of long-
lived assets 4,042 -- -- -- 4,042 -- -- -- 4,042
General and
administrative 3,258 287 980 250 (E) 4,775 861 1,053 6,689
__________________________________________________________________________________________________________
Total costs and
expenses 15,046 7,411 1,799 (931) 23,325 4,070 1,632 182 29,209
__________________________________________________________________________________________________________
Income (loss) from
operations (2,708) (1,391) 170 351 (3,578) 53 368 (182) (3,339)
Other income (expense):
Interest expense (86) (422) (82) (422) (168) (62) (23) -- (253)
Other 79 2 -- -- 81 -- -- -- 81
__________________________________________________________________________________________________________
Income (loss) before
income tax (2,715) (1,811) 88 773 (3,665) (9) 345 (182) (3,511)
Provision for income
tax 131 (69) 37 116(G) 215 -- 33 82 (M) 347
17 (J)
__________________________________________________________________________________________________________
Net income(loss) $(2,846) $(1,742) $ 51 $ 657 $ (3,880) $ (9) $ 312 $ (281) $(3,858)
==========================================================================================================
Net income (loss) as adjusted
for pro-forma income taxes:
Income (loss) before
income taxes as per
above $(2,846) $(3,858)
Pro forma income
taxes 640 640
_________ _________
Net income (loss) as
adjusted pro forma
income taxes $(3,355) $(4,498)
========= =========
Net income (loss) per
common share and
common share
equivalent $ (.38) $ (.43)
========= =========
Weighted average shares
outstanding 8,847,946 10,397,946
========== ==========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
A. To reflect the purchase price adjustments related to the acquisition of
Dimensional Oil Field Services, Inc. The purchase price is the sum of
$1,500,000 in cash, a promissory note of $1,000,000 and 1,000,000 Common
Shares at the current approximate $2 3/16 market price at the date of
purchase. Promissory notes having an aggregate value of $750,000 are subject
to certain minimum earnings requirements and are not reflected in the purchase
price which approximates $3,984,000. The property, plant and equipment of
Dimensional were valued at their estimated fair market value of approximately
$1,517,000. Deferred taxes have been provided for the difference between the
book and tax basis of the property, plant and equipment acquired. The
remaining assets and liabilities approximated their fair values. The excess
purchase price over the fair value of the net assets of Dimensional at
September 15, 1996 of approximately $2,793,000 was allocated to goodwill to be
amortized over 20 years.
B. To reflect the purchase price adjustments related to the acquisition of
Baytron, Inc. The purchase price is the sum of $1.1 million in cash and
550,000 Common Shares at the current approximate $2.00 market price at date of
purchase for a total purchase price of $2,200,000. The property, plant and
equipment of Baytron were valued at their estimated fair market value of
approximately $791,000. Deferred taxes have been provided for the difference
between the book and tax basis of the property, plant and equipment acquired.
The remaining assets and liabilities approximated their fair values. The
excess purchase price over the fair value of the net assets of Baytron at July
31, 1996 of $1,209,000 was allocated to goodwill to be amortized over 20
years.
C. To reflect the amortization of goodwill associated with Small's.
D. To reflect the adjustment to depreciation associated with the
application of purchase accounting to Small's property, plant and
equipment.
E. To reflect an adjust for compensation associated with the
Reorganization.
F. To reflect the amortization of goodwill associated with Oil Stop.
G. To provide income tax expense on a pro forma basis for Oil Stop and
Small's.
H. To reflect the amortization of goodwill associated with Dimensional.
I. To reflect the additional depreciation associated with the application
of purchase accounting to Dimensional's fixed assets.
J. To provide income tax expense on the pro forma income of Dimensional.
K. To reflect the amortization of goodwill associated with Baytron.
L. To reflect the additional depreciation associated with the application
of purchase accounting to Baytron's fixed assets.
M. To provide income tax expense on the pro form income of Baytron.
N. Represents loss from continuing operations.
O. To eliminate revenues and cost of services of Small's and Oil Stop
included in historical Superior from the date of the acquisition.
<PAGE>
No dealer, salesperson or
any other person has been
authorized to give any
information or to make any
representation other than is [LOGO]
contained in this Prospectus,
and, if given or made, such
information or representation
must not be relied upon as
having been authorized by
Superior. Neither the 6,296,251 Shares
delivery of this Prospectus
nor any sale made hereunder
shall under any circumstances Superior Energy
create any implication that Services, Inc.
there has been no change in
the affairs of Superior since
any of the dates as to which
information is furnished
herein or since the date
hereof. This Prospectus does
not constitute an offer to Common Stock
sell or a solicitation of an
offer to buy any of the
securities offered hereby to
any person or in any
jurisdiction in which such
offer or solicitation is not
authorized or in which the ______________
person making the offer or
solicitation is not qualified PROSPECTUS
to do so, or to make such ______________
offer or solicitation in such
jurisdiction.
____________________
TABLE OF CONTENTS
Page
January 10, 1997
Available Information ..... 3
Prospectus Summary......... 4
The Company................ 4
Risk Factors................ 6
Use of Proceeds............. 8
Dividends and Price Range of
Common Stock.............. 8
Capitalization.............. 9
Management's Discussion and
Analysis of Financial
Condition and Results
of Operations............. 10
Business.................... 12
Management.................. 14
Principal Stockholders...... 17
Description of Capital
Stock..................... 18
Plan of Distribution........ 21
Legal Matters............... 21
Experts..................... 22
Index to Consolidated
Financial Statements.......F-1
