UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 21, 2000
SUPERIOR ENERGY SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-20310 75-2379388
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1105 Peters Road, Harvey, Louisiana 70058
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(504) 362-4321
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
(1) Audited consolidated balance sheets of H.B. Rentals,
L.C. as of December 31, 1999 and 1998 and the related
consolidated statements of income, consolidated
statements of members' interests and consolidated
statements of cash flows for the years then ended,
including the notes thereto, and the related report of
Broussard, Poche', Lewis & Breaux, L.L.P.
(b) Pro Forma Financial Information.
(1) Unaudited Pro Forma Consolidated Statement of Operations
of Superior Energy Services, Inc. for the year ended
December 31, 1999, including the notes thereto.
(2) Unaudited Pro Forma Consolidated Statement of Operations
of Superior Energy Services, Inc. for the three month
period ended March 31, 2000, including the notes thereto.
(3) Unaudited Pro Forma Consolidated Balance Sheet of
Superior Energy Services, Inc. as of March 31, 2000,
including the notes thereto.
(c) Exhibits.
23.1 Consent of Broussard, Poche', Lewis & Breaux, L.L.P
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SUPERIOR ENERGY SERVICES, INC.
By: /s/ Robert S. Taylor
--------------------------
Robert S. Taylor
Chief Financial Officer
Dated: July 5, 2000
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA INFORMATION
FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
(1) Audited consolidated balance sheets of H.B. Rentals,
L.C. as of December 31, 1999 and 1998 and the related
consolidated statements of income, consolidated
statements of members' interests and consolidated
statements of cash flows for the years then ended,
including the notes thereto, and the related report of
Broussard, Poche', Lewis & Breaux, L.L.P.
PRO FORMA FINANCIAL INFORMATION.
(1) Unaudited Pro Forma Consolidated Statement of Operations
of Superior Energy Services, Inc. for the year ended
December 31, 1999, including the notes thereto.
(2) Unaudited Pro Forma Consolidated Statement of Operations
of Superior Energy Services, Inc. for the three month
period ended March 31, 2000, including the notes thereto.
(3) Unaudited Pro Forma Consolidated Balance Sheet of
Superior Energy Services, Inc. as of March 31, 2000,
including the notes thereto.
H. B. RENTALS, L. C.
AND SUBSIDIARY
FINANCIAL REPORT
DECEMBER 31, 1999
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets 2
Consolidated statements of income 3
Consolidated statements of members' interests 4
Consolidated Statements of cash flows 5
Notes to consolidated financial statements 6 - 14
INDEPENDENT AUDITORS' REPORT
To the Members of
H.B. Rentals, L.C.
Lafayette, Louisiana
We have audited the accompanying consolidated balance sheets of H.B. Rentals,
L.C. and subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of income, members' interests, and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated 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 H.B.
Rentals, L.C. and subsidiary as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Broussard, Poche', Lewis & Breaux, L.L.P
--------------------------------------------
Broussard, Poche', Lewis & Breaux, L.L.P
Lafayette, Louisiana
February 25, 2000
H. B. RENTALS, L.C. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 730 $ 700
Receivables, net 3,349,613 2,499,664
Inventory 77,465 100,172
Other 46,110 60,906
------------ ------------
Total current assets 3,473,918 2,661,442
------------ ------------
RESTRICTED ASSETS:
Cash restricted for insurance claims 41,693 41,693
------------ ------------
PROPERTY AND EQUIPMENT (net of accumulated
depreciation, $4,784,567 and $3,037,056,
respectively) 5,098,094 6,085,678
------------ ------------
OTHER ASSETS (net of accumulated amortization,
$444,897 and $211,224, respectively) 2,049,777 2,374,987
------------ ------------
$10,663,482 $11,163,800
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
H. B. RENTALS, L.C. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Bank overdraft $ 287,149 $ 231,471
Accounts payable 586,634 365,921
Note payable - line of credit 1,151,938 574,481
Notes payable, current 601,169 85,218
Deferred tax liability, current 73,418 192,655
Other 279,953 261,659
------------- -------------
Total current liabilities 2,980,261 1,711,405
------------- -------------
LONG TERM LIABILITIES:
Notes payable, long-term 5,822,434 6,375,065
Deferred tax liability, long-term 18,583 35,354
------------- -------------
Total long-term liabilities 5,841,017 6,410,419
------------- -------------
MEMBERS' INTERESTS: 1,842,204 3,041,976
------------- -------------
$ 10,663,482 $ 11,163,800
============= =============
See Notes to Consolidated Financial Statements.
</TABLE>
H.B. RENTALS, L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1999 and 1998
1999 1998
----------- -----------
REVENUES $10,730,899 $10,948,915
OPERATING EXPENSES 7,307,771 6,523,393
----------- -----------
Gross profit 3,423,128 4,425,522
GENERAL AND ADMINISTRATIVE EXPENSES 3,280,484 2,544,467
----------- -----------
Operating income 142,644 1,881,055
----------- -----------
NON-OPERATING INCOME (EXPENSE)
Gain on sale of assets 11,947 59,405
Interest expense (920,597) (418,209)
Other (39) 10,796
----------- -----------
(908,689) (348,008)
----------- -----------
Income (loss) before taxes (766,045) 1,533,047
INCOME TAX BENEFIT (131,977) (310,951)
----------- -----------
Net income (loss) $ (634,068) $ 1,843,998
=========== ===========
See Notes to Consolidated Financial Statements.
H.B. RENTALS, L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' INTERESTS
For the Years Ended December 31, 1999 and 1998
1999 1998
----------- -----------
Members' interests, beginning of period $ 3,041,976 $ 1,911,517
Net income (loss) (634,068) 1,843,998
Members' draws (565,704) (713,539)
----------- -----------
Members' interests, end of period $ 1,842,204 $ 3,041,976
=========== ===========
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
H.B. RENTALS, L.C. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
<S> <C> <C>
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (634,068) $ 1,843,998
Adjustments to reconcile net income (loss)
to operating cash flows:
Depreciation and amortization 2,185,492 1,381,170
Bad debt expense 261,259 23,001
Gain on sale of assets (11,947) (59,405)
Changes in operating assets and liabilities -
Decrease (increase) in assets:
Receivables (1,111,208) 773,028
Other current assets 37,503 (121,204)
Other assets (8,463) (143,450)
Increase (decrease) in liabilities:
Accounts payable 220,713 33,288
Deferred tax liability (136,008) 42,291
Other current liabilities 18,294 (377,558)
------------ ------------
Net cash provided by
operating activities 821,567 3,395,159
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (922,592) (2,291,283)
Acquisition of Eagle, net of cash acquired - (5,012,190)
Proceeds from sales of assets 70,304 117,922
Net deposits into restricted cash account - (3,456)
------------ ------------
Net cash used in investing activities (852,288) (7,189,007)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Members' draws (565,704) (713,539)
Proceeds from issuance of notes payable 49,680 7,790,760
Principal payments on notes payable (86,360) (3,604,897)
Net draws on line of credit 577,457 393,060
Bank overdraft 55,678 (70,836)
------------ ------------
Net cash provided by financing activities 30,751 3,794,548
------------ ------------
Net increase in cash 30 700
Cash at beginning of period 700 -
------------ ------------
Cash at end of period $ 730 $ 700
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
H.B. RENTALS, L.C. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
H.B. Rentals, L.C. (HB) is a Louisiana limited liability company
engaged in the short-term rental of living quarters, related
accessories and equipment primarily to oil related businesses in need
of temporary housing and office space in remote areas. The Company
began operation on October 12, 1995 and operates mainly in the states
of Louisiana, Texas, Mississippi and Alabama. In August 1998, The
Company acquired Eagle Rental Co., Inc. (Eagle), which is engaged
primarily in the rental of equipment for offshore use. The term
"Company" herein refers to the total business conducted by HB and its
subsidiary, Eagle.
Consolidation:
The consolidated financial statements include the accounts of the
Company and its subsidiary. All significant intercompany accounts
and transactions are eliminated in consolidation.
Use of estimates in the preparation of financial statements:
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 the disclosures 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.
Revenue recognition:
The Company recognizes revenues as rentals and services are rendered.
Expenses are recognized as they are incurred.
Cash equivalents:
Holdings of highly liquid investments with original maturities of
three months or less.
Allowance for doubtful accounts:
An allowance is established when in the opinion of management, based
on economic conditions, a loss on accounts receivable is expected.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories:
Inventories, consisting primarily of raw materials, are stated at the
lower of first-in, first-out (FIFO) cost or market. Market is
considered as the net realizable value.
Property and equipment:
The Company provides for depreciation by charges to operations in
amounts estimated to allocate the cost of the assets over their
estimated useful lives as follows:
ASSET CLASSIFICATION USEFUL LIFE
-------------------- -----------
Buildings and improvements 10-40 years
Mobile homes 5 years
Equipment 5 years
Vehicles 3-5 years
Intangible assets:
Goodwill is amortized using the straight-line method over a period of
40 years. Other intangibles are amortized using the straight-line
method over their estimated useful lives ranging from 2 to 5 years.
Income taxes:
The parent company, HB, has elected to be taxed as a limited
liability company for federal and state income tax purposes. The
members have consented to include their pro rata share of the
Company's income or loss in their individual tax returns.
Accordingly, no provision for federal and state income taxes were
made in the accompanying financial statements for this entity.
The subsidiary company, Eagle, accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes." This pronouncement
requires that deferred tax balances be determined using the tax rate
expected to be in effect when the taxes are actually paid or refunds
received. Deferred income tax assets and liabilities result from
temporary differences. Temporary differences are differences between
the tax basis of assets and liabilities and their reported amounts in
the financial statements that will result in taxable or deductible
amounts in future years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Employee benefit plan:
Effective October 12, 1995, the Company established a 401(k) plan to
provide retirement benefits for employees. Any employee over the age
of twenty-one, who has been employed by the Company for one year, is
eligible to participate. Participants may contribute to the plan by
deferring up to 15% of their gross salary, within certain IRS
imposed limitations for maximum contributions in a given year. The
Company makes matching contributions equal to 50% of the
participants' salary reductions limited to 10%. The Company
contributed $56,690 and $43,527 to the plan for the year ended
December 31, 1999 and 1998, respectively.
Concentration of credit risk:
Financial instruments that potentially subject the Company to
significant concentrations of credit risk consist primarily of cash,
investments and accounts receivable.
The Company places its cash and investments with high quality
financial institutions. At times, such amounts may be in excess of
FDIC insurance limits. Credit risk with respect to accounts
receivable is generally diversified due to a large number of entities
comprising the Company's customer base; however, the Company's
customer base is in similar industries and principally operates
within the coastal region of the Gulf of Mexico. The Company
establishes an allowance for doubtful accounts based on factors
surrounding the credit risk of specific customers, historical trends
and other information.
Reclassification:
As of December 31, 1999, reclassifications were made in the
presentation of the financial statements for the prior year to
conform with the presentation of the 1999 financial statements.
These changes in the presentation did not affect net income as
previously reported.
Note 2. Acquisitions
On August 31, 1998, the Company completed the acquisition of its
wholly-owned subsidiary, Eagle Rental Co., Inc. for a purchase price
of $5,113,932. In addition to the purchase price, the Company also
paid $530,000 to the previous owners in consideration for two year
non-compete agreements. The acquisition has been accounted for by the
purchase method of accounting and, accordingly, the results of
operations of Eagle for the period beginning with acquisition date are
included in the accompanying consolidated financial statements.
Assets acquired and liabilities assumed have been recorded at their
estimated fair values. The excess of cost over the estimated fair
value of net assets acquired was allocated to goodwill. A total of
$1,786,920 was allocated to goodwill and is being amortized using the
straight-line basis over 40 years.
Note 3. Receivables
The balances of receivables consisted of the following components as
of December 31:
1999 1998
------------ -------------
Accounts receivable, net of allowance
for doubtful accounts, $281,620 and
$21,243, respectively) $ 2,946,924 $ 2,478,743
Due from employees 52,689 20,921
Due from member 350,000 -
------------ ------------
$ 3,349,613 $ 2,499,664
============ ============
Note 4. Summary of Property and Equipment
The following is a summary of property and equipment as of December
31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ACCUMULATED BOOK
COST DEPRECIATION VALUE
----------- ------------- ------------
Mobile homes and offshore units $3,773,448 $ 1,501,601 $ 2,271,847
Machinery and equipment 4,338,254 2,168,219 2,170,035
Autos and trucks 1,497,269 995,603 501,666
Furniture and fixtures 201,197 82,185 119,012
Buildings and improvements 60,707 36,959 23,748
Construction in process 11,786 - 11,786
----------- ------------- ------------
$9,882,661 $ 4,784,567 $ 5,098,094
=========== ============= ============
Depreciation expense for the years ended December 31, 1999 and 1998
was $1,851,819 and $1,243,918, respectively.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5. Notes Payable
The Company's notes payable on December 31 are described as follows:
1999 1998
----------- -----------
Note payable to bank, 12% interest payable
monthly, principal due in 44 install-
ments of $136,363 beginning January 1,
2001 and maturing on August 31, 2003,
collateralized by property and equip-
ment of the Company. $ 6,000,000 $ 6,000,000
Various notes payable to bank, interest
rates ranging from 8.00% to 8.5%, due
in equal monthly installments of principal
and interest totaling $9,035, maturities
ranging from September 11, 2001 to
November 19, 2002, collateralized by
equipment and vehicles of the Company. 198,603 235,283
Notes payable to members of the Company, 8%
interest rate, due on demand, uncollat-
eralized 225,000 225,000
----------- -----------
6,423,603 6,460,283
Less current maturities 601,169 85,218
----------- -----------
$ 5,822,434 $ 6,375,065
=========== ===========
Of the notes payable specified above, the loan balance aggregating
$6,000,000 is subject to restrictive covenants pursuant to the loan
agreement with the bank. Failure to comply with certain covenants
contained in the loan document has placed the Company in technical
default of the loan agreement. The bank has waived default under the
loan agreement, insofar as it relates to the failure of the Company to
comply as of December 31, 1999.
Subsequent to year end, on March 31, 2000, the $6,000,000 note payable
to the bank was refinanced. The note was replaced with a $4,000,000
note payable to the bank and a $2,000,000 note payable to a member of
the Company. The $4,000,000 note payable to the bank has an interest
rate of 8% and is payable in 35 monthly installments of principal and
interest totaling $81,339 beginning April 30, 2000 and a final balloon
payment of $1,795,715 due April 30, 2003. This note is collateralized
by equipment and vehicles of the Company and the limited guarantee of
one of the members of the Company. The $2,000,000 note payable to the
member of the Company also has an 8% interest rate with only interest
payments required monthly and a single principal payment due on April
30, 2002. This debt is subordinate to all bank debt. Amounts
included in the financial statements and notes to the financial
statements reflect the terms of the new debt issued in connection with
the refinancing arrangement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aggregate maturities of long-term notes payable including interest of
$1,303,937 through 2003 are as follows:
2000 $ 1,160,475
2001 1,245,172
2002 3,051,161
2003 2,270,732
-----------
7,727,540
Less amount representing interest 1,303,937
-----------
$ 6,423,603
===========
Cash payments of interest during the years ended December 31, 1999 and
1998 amounted to $830,353 and $513,368, respectively.
Note 6. Operating Leases
The Company has leased certain equipment, property and office space
under various non-cancelable agreements which expire between July 31,
2000 and July 1, 2009, and require various minimum annual rentals.
Minimum payments for operating leases having initial or remaining
non-cancelable terms in excess of one year are as follows:
YEAR ENDED
DECEMBER 31
-----------
2000 $ 330,825
2001 314,540
2002 314,540
2003 312,847
2004 312,000
2005 - 2007 1,404,000
-----------
$ 2,988,752
===========
Total rental expense during the fiscal years 1999 and 1998 totaled
$229,960 and $161,748, respectively.
Note 7. Commitments
The Company maintains a $2,000,000 line of credit agreement with Bank
One, Louisiana, NA. The agreement is secured by accounts receivable
of the Company. During fiscal years 1999 and 1998, interest on
advances accrue at a rate equal to the Chase Manhattan prime plus one-
half percent. Effective March 31, 2000, interest will accrue at a
rate equal to the 30 day LIBOR rate plus 2.25%. The balances
outstanding under this agreement at December 31, 1999 and 1998 were
$1,151,938 and $574,481, respectively.
In connection with the refinancing arrangement that took place on
March 31, 2000, the Company guaranteed a $2,000,000 note by a member
of the Company to the bank. This member's note requires interest
payments monthly at a rate of 8% and a single principal payment on
April 30, 2002.
Note 8. Income Taxes
Eagle Rental Co., Inc. uses Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" to account for
deferred income taxes. Under this pronouncement, the tax effect of
each item in the statement of income is recognized in the current
period regardless of when the tax is paid. Taxes on amounts which
affect financial and taxable income in different periods are reported
as deferred income taxes. Deferred taxes are provided only on items
which will result in a net tax liability or benefit in a future
period.
Deferred income taxes arise due to different accounting methods used
for financial and income reporting. The major differences are the
accruals of receivables, payables and other expenses required under
the accrual method of accounting used for financial reporting, while
using a cash basis method for income tax purposes. Differences also
arise from the use of accelerated depreciation methods for tax
reporting purposes, while expensing the cost over the expected useful
life of the assets for financial reporting purposes.
The benefit from income taxes consists of the following for the
periods ended December 31:
1999 1998
----------- -----------
Income tax expense (benefit) $ 4,031 $ (353,242)
Deferred income tax expense (benefit) (136,008) 42,291
----------- -----------
$ (131,977) $ (310,951)
=========== ===========
The reconciliation of the federal statutory income tax rate to
Company's effective rate is summarized as follows for years ended
December 31:
1999 1998
---------------- ------------
AMOUNT AMOUNT
-------- --------
Tax benefit based on federal
and state statutory rates
of subsidiary $ (59,037) $(333,730)
Other items (72,940) 22,779
-------- --------
$(131,977) $(310,951)
========= =========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets and liabilities at December 31 consist of the
following:
1999 1998
----------- ------------
Deferred tax assets:
Allowance for doubtful accounts $ 4,628 $ -
Accounts payable 11,636 4,295
Accrued expenses - 3,005
----------- ------------
16,264 7,300
----------- ------------
Deferred tax liability:
Accounts receivable 75,202 186,248
Inventory 9,753 13,345
Depreciation 23,310 35,716
----------- ------------
108,265 235,309
----------- ------------
Net deferred tax liability $ (92,001) $ (228,009)
=========== ============
Reflected as follows:
Current deferred tax liability $ 73,418 $ 192,655
Long-term deferred tax liability 18,583 35,354
----------- ------------
$ 92,001 $ 228,009
=========== =============
Cash paid for income taxes during the years ended December 31, 1999
and 1998 was $8,878 and $-0-, respectively.
Note 9. Warrants
During the fiscal year ended December 31, 1998, in connection with
debt incurred for the purchase of Eagle, the Company issued warrants
to a bank for the purchase of a total of five percent (5%) of the
membership interest of the Company. The exercise price is $1,000,000
and was effective August 31, 1998, the date of final closing of the
purchase of the subsidiary. The warrants have an expiration date of
the earlier of a liquidity event as defined in the securities purchase
agreement, eighteen (18) months after repayment of the debt, which
occurred on March 31, 2000, or August 31, 2006.
Note 10. Related Party Transactions
The Company is presently leasing their corporate office and shop
facility located in Broussard, Louisiana from Crossroads Investments,
a limited liability company owned by a member of the Company. The
lease in effect for 1998 was dated January 1, 1998 and was for a term
of 8 years and 10 months. The monthly rental under this lease was
$8,700.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1999, the Company relocated its Broussard office and effective
December 1, 1999, a new lease took effect with Crossroads Investments.
This lease requires monthly rental payments of $26,000 and expires on
July 1, 2009.
During the renovation phase of the new facility, the Company agreed to
reimburse Crossroads Investments for interest on its construction loan
in lieu of making rental payments. Total interest payments during
1999 was $76,328.
Total lease payments during the years ended December 31, 1999 and 1998
were $139,000 and $104,400, respectively.
The dollar volume of purchases and/or rentals with other related
companies during the fiscal years ended December 31, were:
1999 1998
------------- ------------
Purchases:
Moore's Pump and Supply, Inc. $ -0- $ 114,069
Alan P. Bernard $ 24,000 $ -0-
Sales:
Moore's Pump and Supply, Inc. $ -0- $ 654
The Company and Moore's Pump and Supply, Inc. had the same majority
ownership until April 30, 1998. Therefore, transactions listed above
are for the period ending on this date.
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On June 21, 2000, Superior Energy Services, Inc. acquired H.B.
Rentals, L.C. ("HB") for $7 million in cash, of which $1.9 million of the
purchase price was allocated to the net assets and the excess purchase
price of approximately $5.1 million over the fair value of net assets was
recorded as goodwill.
The following unaudited pro forma consolidated financial information
has been prepared by management utilizing the historical financial
statements of Superior Energy Services, Inc. ("Superior") and HB
Adjustments have been made to reflect the financial impact of purchase
accounting and other items had (a) the acquisition of HB (the "HB
Acquisition"), (b) the acquisition of Production Management Companies, Inc.
(the "PMI Acquisition") and (c) the merger of Superior Cardinal Acquisition
Company, Inc. with and into Cardinal Holding Corp. (the "Merger") all taken
place on January 1, 1999 with respect to operating data, and March 31,
2000 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
believes reasonable under the circumstances. Reclassifications have been
made to the consolidated statements of operations for pro forma purposes.
The unaudited pro forma financial information is for comparative
purposes only and does not purport to be indicative of the results which
would actually have been obtained had the acquisitions been effected on the
pro forma dates, or of the results which may be obtained in the future. The
unaudited pro forma consolidated financial information in the opinion of
management reflects all adjustments necessary to present fairly the data
for such periods.
<TABLE>
<CAPTION>
SUPERIOR ENERGY SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Historical Pre merger Pre-Acquisition Pre-Acquisition
Superior Superior PMI HB Adjustments Pro Forma
-----------------------------------------------------------------------------------------------
Revenues 113,076 34,035 44,323 10,731 A (122) 202,043
----------------------------------------------------------- ------------------
Costs and expenses:
Costs of services 67,364 13,579 39,480 5,601 A (122) 125,902
Depreciation and amortization 12,625 4,135 1,058 2,185 B 937 20,940
General and administrative 23,071 13,146 2,941 2,790 41,948
----------------------------------------------------------- ------------------
Total costs and expenses 103,060 30,860 43,479 10,576 188,790
----------------------------------------------------------- ------------------
Income from operations 10,016 3,175 844 155 13,253
Other income (expense):
Interest expense (12,969) (691) (624) (921) C 1,528 (13,677)
Interest income 308 308
----------------------------------------------------------- ------------------
Income(loss)before income
taxes (2,645) 2,484 220 (766) (116)
Income taxes (611) 399 49 (132) D 251 (44)
----------------------------------------------------------- ------------------
Income (loss) before
extraordinary losses (2,034) 2,085 171 (634) (72)
=========================================================== ==================
Net income (loss) per common
share and common share
equivalent $ (0.11) $ 0.00
================== ==================
Basic Weighted average shares
outstanding 31,131 59,730
================== ==================
Net income (loss) per common
share and common share
equivalent $ (0.11) $ 0.00
================== ==================
Diluted Weighted average shares
outstanding 31,131 59,987
================== ==================
</TABLE>
________________________________
(A) To record the elimination of intercompany transactions.
(B) In the Merger, Superior exchanged approximately 30 million shares
of Superior common stock for 100% of the outstanding stock of
Cardinal. The valuation of Superior's net assets were based upon
the approximate 28.8 million shares of Superior Common Stock
outstanding prior to the merger times the trading price of $3.78
at the time of negotiation of the Merger, plus additional
capitalized costs of approximately $3 million related to the
Cardinal merger costs for professional fees net of $2 million in
Superior merger costs. Superior's historical book basis for
its property and equipment was considered to be its fair market
value. This valuation reflects excess purchase price of $31.6
million, over the fair value of net assets, which has been
recorded as goodwill.
In the PMI Acquisition, Superior acquired PMI for aggregate
consideration of $3 million in cash and 610,000 shares of
Superior's common stock at the trading price of $5.66 at the time
of negotiation of the Merger. The purchase price allocated to net
assets was $3.5 million, and the excess purchase price of
approximately $3 million, over the fair value of net assets, was
recorded as goodwill.
In the HB Acquisition, Superior acquired HB for aggregate
consideration of $7 million in cash of which $1.9 million of the
purchase price was allocated to net assets, and the excess
purchase price of approximately $5.1 million, over the fair value
of net assets, was recorded as goodwill.
This adjustment reflects the increase in amortization as a result
of goodwill, described above, amortized over 30 years and non
compete agreements of approximately $1 million entered into as a
result of the Merger amortized over 4 years as follows:
Additional goodwill amortization from the Merger $565
Amortization of non-competes 121
Additional goodwill amortization from the PMI Acquisition 80
Additional goodwill amortization from the HB Acquisition 171
-------
$937
(C) To record the net decrease in interest expense resulting from a
$55 million equity contribution to Cardinal, used to pay down
debt, net with $10 million in additional debt incurred for the
acquisition of PMI. The reduction in interest expense due to the
equity contribution uses Cardinal's borrowing rate of 8.12% and
the offsetting increase due to the debt incurred for the
acquisition of PMI, uses Superior's borrowing rate of 9.28%. No
additional debt was incurred for the HB Acquisition.
(D) To adjust the provision for income taxes to give effect to the
Merger, PMI Acquisition and HB Acquisition adjustments, exclusive
of the amortization adjustment.
<TABLE>
<CAPTION>
SUPERIOR ENERGY SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Historical Pre-Acquisition
Superior HB Adjustments Pro Forma
-------------------------------------------------------------------
Revenues 47,274 3,246 50,520
---------------------------- -----------
Costs and expenses:
Costs of services 27,762 1,663 29,425
Depreciation and amortization 4,737 565 A 43 5,345
General and administrative 9,311 768 10,079
---------------------------- -----------
Total costs and expenses 41,810 2,996 44,849
---------------------------- -----------
Income from operations 5,464 250 5,671
Other income (expense):
Interest expense (2,920) (218) (3,138)
Interest income 193 - 193
---------------------------- -----------
Income before income taxes 2,737 32 2,726
Income taxes 1,149 - B (4) 1,145
---------------------------- -----------
Net income 1,588 32 1,581
============================ ===========
Net income per common
share and common share
equivalent $ 0.03 $ 0.03
========== ============
Basic Weighted average shares outstanding 59,856 59,856
========== ============
Net income per common
share and common share
equivalent $ 0.03 $ 0.03
========== ============
Diluted Weighted average shares outstanding 60,301 60,301
========== ============
</TABLE>
________________________________
(A) In the HB Acquisition, Superior acquired HB for an aggregate consideration
of $7 million in available cash, of which $1.9 million of the purchase
price was allocated to net assets, and the excess purchase price of
approximately $5.1 million, over the fair value of net assets, was
recorded as goodwill. These pro forma statements are adjusted to assume a
cash overdraft position, however, the total HB Acquisition costs were
funded by $63.2 million raised pursuant to Superior's secondary offering
on May 5, 2000. The $43,000 adjustment reflects the increase in
amortization as a result of goodwill amortized over 30 years.
(B) To adjust the provision for income taxes to give effecti to the HB
acquisition, exclusive of the amortization adjustment.
<TABLE>
<CAPTION>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
HISTORICAL PRE-ACQUISITION
SUPERIOR HB PRO FORMA
03/31/2000 03/31/2000 ADJUSTMENTS 03/31/2000
-----------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,275 84 A (3,359) $ -
Accounts receivable - net 40,210 2,932 43,142
Deferred tax asset 1,437 - 1,437
Prepaid insurance and other 4,146 440 4,586
------------------------------- ------------
Total current assets 49,068 3,456 49,165
Property, plant and equipment - net 138,594 5,038 143,632
Note receivable 8,898 - 8,898
Goodwill - net 78,116 1,986 A 5,125 85,227
Other assets - net 3,839 - 3,839
------------------------------- ------------
Total assets $278,515 10,480 $ 290,761
=============================== ============
</TABLE>
<TABLE>
<CAPTION>
SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Historical Pre-Acquisition
Superior HB Pro Forma
03/31/2000 03/31/2000 Adjustments 03/31/2000
--------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 9,742 $ 763 A 3,641 $ 14,146
Accrued expenses 11,758 - 11,758
Income taxes payable 972 - 972
Current maturities of long-term debt 2,782 1,914 4,696
Other - 216 216
----------------------------------- ------------
Total current liabilities 25,254 2,893 31,788
----------------------------------- ------------
Deferred income taxes 12,392 92 12,484
Long-term debt 117,380 5,620 123,000
Stockholders' equity:
Preferred stock of $.01 par value. Authorized,
5,000,000 shares; none issued - - -
Common stock of $.001 par value. Authorized,
125,000,000 shares; issued, 59,968,789 60 - 60
Additional paid in capital 249,348 - 249,348
Accumulated deficit (125,919) 1,875 A (1,875) (125,919)
------------------------------------ ------------
Total stockholders' equity 123,489 1,875 123,489
------------------------------------ ------------
Total liabilities and stockholders equity $ 278,515 $ 10,480 $ 290,761
==================================== ============
</TABLE>
