UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended June 30, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ________ to _______.
Commission file number 0-27732
DAWSON PRODUCTION SERVICES, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2231546
(State or other jurisdiction (I.R.S. Employer
or organization) Identification No.)
901 N.E. Loop 410, Suite 700
San Antonio, Texas 78209-1306
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (210) 828-1838
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 9, 1996: Common Stock, $0.01 par value - 6,391,125 shares.
<PAGE>
DAWSON PRODUCTION SERVICES, INC.
INDEX TO FORM 10-Q
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1996 and June 30,
1996 ............................................................... 1
Consolidated Statements of Operations - Three Months
Ended June 30, 1995 and 1996 ....................................... 2
Consolidated Statements of Cash Flows - Three Months Ended
June 30, 1995 and 1996 ............................................. 3
Notes to Interim Consolidated Financial Statements ................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 6
SIGNATURE .................................................................... 9
PART II. OTHER INFORMATION ..................................................10
PART I
ITEM 1. FINANCIAL STATEMENTS (unaudited)
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1996 1996
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 13,863,108 $ 12,084,281
Trade receivables (net of allowance for doubtful accounts of
$193,362 and $290,839, respectively) ....................... 8,773,156 9,905,808
Other receivables ........................................... 95,202 7,115
Income taxes receivable ..................................... 740,768 580,098
Prepaid expenses and other .................................. 215,497 580,817
------------ ------------
Total current assets .............................. 23,687,731 23,158,119
Net property and equipment, substantially all pledged ............ 29,114,671 30,824,374
Goodwill and other assets ........................................ 3,565,555 3,591,624
------------ ------------
Total assets ...................................... $ 56,367,957 $ 57,574,117
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................ $ 2,909,390 $ 2,748,525
Accrued liabilities ......................................... 2,825,926 2,508,265
Current portion of long-term debt ........................... 20,055 195,679
Current portion of obligations under capital leases ......... 1,167,384 1,307,448
------------ ------------
Total current liabilities ......................... 6,922,755 6,759,917
------------ ------------
Long-term debt, net of current portion .......................... 1,530,903 1,526,145
Obligations under capital leases, net of current portion ........ 2,163,610 2,041,042
Deferred income taxes ............................................ 56,310 473,000
Shareholders' equity :
Preferred stock, no par value 560,600 shares authorized, none
issued and outstanding ...................................... -- --
Common stock, $.01 par value, 20,560,600 shares authorized,
6,382,526 and 6,391,126 issued and outstanding, respectively 63,826 63,912
Paid-in capital .................................................. 41,458,254 41,522,152
Retained earnings ................................................ 4,314,177 5,329,827
Notes receivable from officers ................................... (141,878) (141,878)
------------ ------------
Total shareholders' equity ........................ 45,694,379 46,774,013
Commitments and contingencies
------------ ------------
Total liabilities and equity ...................... $ 56,367,957 $ 57,574,117
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Revenues ........................................................ $ 12,647,883 $ 14,677,591
------------ ------------
Costs and expenses:
Operating .................................................. 8,139,613 9,492,960
General and administrative ................................. 2,157,018 2,259,617
Depreciation and amortization .............................. 1,012,358 1,375,239
------------ ------------
Total costs and expenses ......................... 11,308,989 13,127,816
------------ ------------
Operating income ............................... 1,338,894 1,549,775
------------ ------------
Other income and expenses:
Interest expense ........................................... 478,783 65,378
Other expense (income), net ............................... (10,955) (122,213)
------------ ------------
Total other income and expenses .................. 467,828 (56,835)
------------ ------------
Income before minority interest and income taxes . 871,066 1,606,610
------------ ------------
Minority interest in consolidated subsidiary .................... 390,928 --
------------ ------------
Income before income taxes ...................................... 480,138 1,606,610
Provision for income taxes ...................................... 153,993 590,960
------------ ------------
Net income ...................................................... 326,145 1,015,650
------------ ------------
Preferred stock dividends ....................................... 24,905 --
------------ ------------
Net income applicable to common stock ........................... $ 301,240 $ 1,015,650
============ ============
Earnings per common share:
Primary .................................................... $ 0.12 $ 0.16
Fully diluted .............................................. $ 0.12 $ 0.16
Weighted average common and common equivalent shares outstanding:
Primary .................................................... 2,405,962 6,509,816
Fully diluted .............................................. 3,124,634 6,509,816
</TABLE>
See accompanying notes to consolidated financial statements.
2
DAWSON PRODUCTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
---------------------------
1995 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 326,145 $ 1,015,650
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in net income of subsidiary company ...... 390,928 --
Depreciation and amortization .............................. 1,012,358 1,375,239
Allowance for doubtful accounts ............................ 6,000 (97,477)
Gain on sale of assets ..................................... (14,778) (601)
Increase (decrease) in deferred income taxes ............... -- 416,690
Decrease (increase) in receivables ......................... 241,379 (786,418)
Decrease (increase) in prepaid expense and other ........... (444,447) (365,320)
Decrease (increase) in other assets ........................ (12,500) 12,641
Increase (decrease) in accounts payable .................... 395,784 (160,865)
Increase (decrease) in accrued expenses .................... (206,897) (317,661)
----------- ------------
Net cash provided by operating activities ...... 1,693,972 1,091,878
Cash flows from investing activities:
Acquisitions ............................................... -- (1,452,450)
Additions to property and equipment ........................ (1,020,955) (969,830)
Proceeds from sales of property ............................ 16,750 31,256
----------- ------------
Net cash used in investing activities ......... (1,004,205) (2,391,024)
Cash flows from financing activities:
Long-term borrowings ....................................... 495,694 326,662
Payments on long-term debt ................................. (684,467) (155,796)
Capital lease payments ..................................... (67,002) (714,531)
Exercise of common stock options and warrants .............. -- 63,984
Cash dividends on preferred stock .......................... (24,905) --
----------- ------------
Net cash used in financing activities ........ (280,680) (479,681)
----------- ------------
Net increase (decrease) in cash .............. 409,087 (1,778,827)
Cash and cash equivalents at the beginning of the period .. 2,796,540 13,863,108
----------- ------------
Cash and cash equivalents at the end of the period ........ $ 3,205,627 $ 12,084,281
=========== ============
Supplemental disclosures of cash flow information: Cash paid for:
Interest ........................................ $ 507,615 $ 93,426
Income taxes .................................... 190,000 --
Supplemental disclosures of non-cash transactions:
Assets acquired under capital lease ......................... 679,326 732,027
</TABLE>
See accompanying notes to consolidated financial statements.
3
PART I---FINANCIAL INFORMATION
DAWSON PRODUCTION SERVICES, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The unaudited consolidated financial statements included herein have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. 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 such
rules and regulations. These unaudited consolidated financial statements should
be read in conjunction with Dawson Production Services, Inc. (the "Company's")
audited consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1996.
The unaudited consolidated financial information included herein
reflects all adjustments, consisting only of normal recurring adjustments, which
are necessary, in the opinion of management, for a fair presentation of the
Company's financial position or results of operations for the interim periods
presented. The interim information contained herein is not necessarily
indicative of the results to be expected for the full year.
2. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising
in the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operation.
3. ACQUISITIONS
In April 1996, the Company acquired the assets of two small
production testing companies in Louisiana. The aggregate purchase price was
approximately $673,000. Goodwill and a non-compete agreement were recognized on
these transactions which amounted to approximately $111,000. These items are
being amortized over a twenty year period and a five year period, respectively.
In May 1996, the Company acquired the Texas based well servicing
division of a non-affiliated company. The aggregate purchase price was $779,000.
The acquisitions have been accounted for as purchases and,
accordingly, the operating results have been included in the Company's statement
of income since the dates of acquisition. The effect on results of operations
would not have been material if such acquisitions had occurred at the beginning
of the year.
-4-
4. SUBSEQUENT EVENTS
In July 1996, the Company acquired all of the outstanding capital
stock of Taylor Companies, Inc., a Texas corporation for aggregate consideration
of approximately $12,750,000. Upon the closing of this transaction, the acquired
companies had certain outstanding liabilities relating to the ongoing business
operations of Taylor Companies, Inc. and its subsidiaries.
-5-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - Quarters ended June 30, 1996 and 1995
Revenues. Revenues were $14.7 million in the quarter ended June 30,
1996, a 16% increase compared with revenues of $12.6 million in the quarter
ended June 30, 1995. Compared to the same period in 1995, revenues in the
quarter ended June 30, 1996 increased by 15%, 27% and 3% in workover, liquid and
production services, respectively. The increase in revenues is attributable to
an addition of six workover rigs purchased as part of an acquisition in May
1996, the addition of eleven salt water disposal trucks in March 1996 and
increased demand in workover, liquid and production services due to a general
improvement in market conditions.
Costs and Expenses. The Company's costs and expenses for the quarter
ended June 30, 1996 were $13.1 million, a 16% increase compared to costs and
expenses of $11.3 million for the quarter ended June 30, 1995. Operating
expenses for the period increased $1.4 million reflecting the higher utilization
rates in all lines of business while general and administrative costs increased
$0.1 million.
Interest Expense. Interest expense in the first quarter of 1996 was
$0.1 million compared with $0.5 million in the first quarter of 1995. The
decrease of $0.4 million is attributable to the retirement of debt from funds
generated from the IPO completed in March 1996.
Minority Interest. The elimination of minority interest of $0.4
million from the quarter ended June 30, 1995 to June 30, 1996 was due to the
acquisition of the 39% minority interest in the Company's subsidiary, Dawson
Welltech, L.C.
Net Income. For the quarter ended June 30, 1996, the Company had net
income of $1.0 million, a 212% increase in earnings over the $0.3 million in
earnings for the quarter ended June 30, 1995. The increase in earnings reflects
stronger overall market conditions, the purchase of the minority interest and
interest savings resulting from the retirement of debt using a portion of the
funds generated from the Initial Public Offering (IPO) completed in March 1996.
Financial Condition and Liquidity
Cash Flows. The Company had cash and cash equivalents of $12.1 million at
June 30, 1996 compared to $13.9 million at March 31, 1996. Working capital was
$16.4 million and $16.8 million at June 30, 1996 and March 31, 1996,
respectively. The Company used a net of $2.4 million for investing activities in
the quarter ended June 30, 1996, primarily for acquisitions consisting of $1.4
million for the purchase of six workover rigs and two small production service
companies in Louisiana. Capital expenditures
-6-
consisting of $1.0 million for capital additions and improvements were utilized
in investing activities for the quarter. The Company used a net $1.0 million for
investing activities in the first quarter in 1995. The Company anticipates that
fiscal 1997 capital expenditures will consist of approximately $7.0 million for
capital additions and improvements, exclusive of acquisitions. Acquisitions of
additional assets and businesses are expected to continue to be an important
part of the Company's strategy for growth. The Company would, under certain
circumstances, need to obtain additional financing to fund such acquisitions.
Credit Facilities and Long-term Debt. The Company has available a
bank line of credit to finance temporary working capital requirements and to
support the issuance of letters of credit. The maximum availability is the
lesser of (i) $4.0 million, or (ii) a calculated amount based on a percentage of
accounts receivable meeting certain criteria. At June 30, 1996, the maximum
availability was $4.0 million, of which none had been drawn in cash, and $0.5
million being utilized to support the issuance of letters of credit related to
the Company's workers' compensation coverage.
Effective July 29, 1996 the Company acquired the common stock of
Taylor Companies, Inc. Taylor Companies, Inc. provides liquid services, which
are comprised of vacuum truck services, frac tank rentals and salt water
injection wells, in central and eastern Texas. The acquisition was funded by (i)
$7.0 million of bank debt, (ii) $1.75 million of seller financing and (iii)
approximately $4.0 million of cash reserves resulting from the Company's IPO in
March of 1996.
Forward-Looking Information. The statements herein regarding future
financial performance and results and the other statements which are not
historical facts are forward-looking statements that involve risks and
uncertainties, including but not limited to, industry conditions, prices of
crude oil and natural gas and other factors discussed herein and in the
Company's other Securities and Exchange Commission filings.
-7-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See note 2 herein to the Notes to the Unaudited Financial Statements.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters have been submitted to a vote of Security holders.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits Incorporated
Number Description by Reference
-------- ----------- ------------
Exhibit 11.1 Statement Regarding Computation Filed herein
of Per Share Earnings
(b.) Reports on Form 8-K
In a Current Report on Form 8-K dated August 13, 1996, the Company
reported that it had acquired the common stock of Taylor Companies,
Inc.
-8-
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, thereto duly authorized.
DAWSON PRODUCTION SERVICES, INC.
By: __________________________________
P. Mark Stark, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: August 14, 1996
-9-
EXHIBIT 11.1
DAWSON PRODUCTION SERVICES, INC.
EARNINGS PER SHARE COMPUTATIONS
THREE MONTHS ENDED
JUNE 30,
--------------------------
1995 1996
------------ ------------
Primary Earnings Per Share
Net Income........................... $ 326,145 $ 1,015,650
Preferred stock dividends............ (24,905) --
------------ ------------
Net income applicable to common
stock.............................. $ 301,240 $ 1,015,650
------------ ------------
Shares used in earnings per share
computation........................ 2,405,962 6,509,816
------------ ------------
Earnings per share................... $ 0.12 $ 0.16
------------ ------------
Fully Diluted Earnings Per Share
Net Income........................... $ 326,145 $ 1,015,650
Interest on convertible debt, net of
tax................................ 38,675 --
------------ ------------
Net income applicable to common
stock.............................. $ 364,820 $ 1,015,650
------------ ------------
Shares used in earnings per share
computations....................... 3,124,634 6,509,816
------------ ------------
Earnings per share................... $ 0.12 $ 0.16
------------ ------------
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS -- PRIMARY
Weighted average outstanding common
shares............................. 1,681,610 6,390,841
Dilutive effect of stock and warrants
issued within one year prior to
initial public offering............ 672,614 --
Average other common equivalent
shares -- dilutive effect of
warrant shares..................... 51,738 118,975
------------ ------------
Shares used in earnings per share
computations....................... 2,405,962 6,509,816
------------ ------------
COMPUTATION OF SHARES USED IN EARNINGS PER SHARE
COMPUTATIONS -- FULLY DILUTED
Weighted average outstanding common
shares............................. 1,681,610 6,390,841
Dilutive effect of stock and warrants
issued within one year prior to
initial public offering............ 672,614 --
Average other common equivalent
shares -- dilutive effect of
warrant shares..................... 51,738 118,975
Average shares attributable to
preferred stock.................... 347,440 --
Average shares attributable to
convertible debt................... 371,232 --
------------ ------------
Shares used in earnings per share
computation........................ 3,124,634 6,509,816
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,084,281
<SECURITIES> 0
<RECEIVABLES> 10,099,170
<ALLOWANCES> 193,362
<INVENTORY> 0
<CURRENT-ASSETS> 23,158,119
<PP&E> 44,972,701
<DEPRECIATION> 14,148,327
<TOTAL-ASSETS> 57,574,117
<CURRENT-LIABILITIES> 6,759,917
<BONDS> 0
0
0
<COMMON> 63,912
<OTHER-SE> 46,710,101
<TOTAL-LIABILITY-AND-EQUITY> 57,574,117
<SALES> 114,677,591
<TOTAL-REVENUES> 14,677,591
<CGS> 13,127,816
<TOTAL-COSTS> 13,127,816
<OTHER-EXPENSES> (122,213)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,378
<INCOME-PRETAX> 1,616,610
<INCOME-TAX> 590,960
<INCOME-CONTINUING> 1,015,650
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,650
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
