<PAGE> 1
________________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1995
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d)
- --- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ........... to ...........
Commission File Number 1-8287
RIO GRANDE, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
DELAWARE 74-1973357
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10101 REUNION PLACE, SUITE 210, SAN ANTONIO, TEXAS 78216-4156
(Address of Principal Executive Office) (Zip Code)
ISSUER'S TELEPHONE NUMBER INCLUDING AREA CODE: 210-308-8000
__________________
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 .
--- ---
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At June 14, 1995 there were 5,552,760 shares of the registrant's common stock
outstanding.
______________________________________________________________________
<PAGE> 2
RIO GRANDE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Condensed Combined Balance Sheets
April 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Combined Statements of Operations
Three Months Ended April 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Combined Statements of Cash Flows
Three Months Ended April 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RIO GRANDE, INC. AND SUBSIDIARIES
CONDENSED COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30,
1995
-------------
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 315
Receivables: Trade and other 692
Prepaid expenses and other 15
-------------
TOTAL CURRENT ASSETS 1,022
PROPERTY AND EQUIPMENT, AT COST 8,725
Less accumulated depreciation, depletion and amortization 3,026
-------------
NET PROPERTY AND EQUIPMENT 5,699
OTHER ASSETS 1,168
-------------
$ 7,889
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable 304
Accrued expenses 70
Current installments of long-term debt 967
-------------
TOTAL CURRENT LIABILITIES 1,341
Accrued platform abandonment expense 1,219
Minority interest combined limited partnership 1,167
Long-term debt, excluding current installments 2,067
-------------
TOTAL LIABILITIES 4,453
SHAREHOLDERS' EQUITY 2,095
=============
$ 7,889
=============
</TABLE>
See accompanying notes to combined condensed financial statements.
-3-
<PAGE> 4
ITEM 1- FINANCIAL STATEMENTS (CONTINUED)
RIO GRANDE, INC. AND SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 30,
------------------------------
1995 1994
------------ ------------
<S> <C> <C>
REVENUES:
Oil and gas leases $ 1,028 936
------------ ------------
TOTAL REVENUES 1,028 936
------------ ------------
COSTS AND EXPENSES:
Lease operating and other production expense 479 277
Dry hole costs - -
Depreciation, depletion and amortization 348 293
Provisions for abandonment 45 58
General and administrative 304 171
------------ ------------
TOTAL COSTS AND EXPENSES 1,176 799
------------ ------------
EARNINGS (LOSS) FROM OPERATIONS (148) 137
------------ ------------
OTHER INCOME (EXPENSES):
Interest expense (78) (13)
Interest income 1 9
Gain on sale of assets 5 42
Other (net) (7) 13
Minority interest in earnings of combined
limited partnership 3 (66)
------------ ------------
TOTAL OTHER INCOME (EXPENSES) (76) (15)
------------ ------------
Earnings (loss) from continuing operations (224) 122
State income and franchise taxes 2 13
------------ ------------
NET EARNINGS (LOSS) (226) 109
============ ============
Net earnings per common and common
equivalent share (0.04) 0.02
============ ============
Weighted average common and common
equivalent shares outstanding 5,927,760 5,965,727
============ ============
</TABLE>
See accompanying notes to combined financial statements.
-4-
<PAGE> 5
ITEM 1- FINANCIAL STATEMENTS (CONTINUED)
RIO GRANDE, INC. AND SUBSIDIARIES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
APRIL 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations $ (226) 109
Adjustments to reconcile earnings from
continuing operations to net cash used
in operating activities:
Depreciation and other amortization 16 6
Depletion of oil and gas producing properties 332 287
Gain on sale of assets (5) (42)
Minority interest in equity of limited partnerships (3) 66
(Increase) decrease in accounts and notes receivable 67 (4)
(Increase) decrease in prepaids and other assets 15 (52)
Increase (decrease) in accounts payable and accrued
expenses (14) 119
--------- ---------
Net cash provided by (used in) continuing
operating activities 182 489
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) disposition of oil and gas producing properties (58) (313)
(Purchase) of other property and equipment - (8)
(Additions to) deletions from platform abandonment fund
net of deferred liability 27 19
(Additions to) other assets 3 (5)
Proceeds from sale of property and equipment 3 62
--------- ---------
Net cash provided by (used in) investing activities (25) (245)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 125
Repayment of long-term borrowings 16 (155)
Distribution to limited partners (53) (88)
--------- ---------
Net cash provided by (used in) financing
activities (37) (118)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 120 126
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 195 340
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 315 466
========= =========
</TABLE>
See accompanying notes to combined financial statements.
-5-
<PAGE> 6
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
RIO GRANDE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Accounting Policies
The accounting policies of Rio Grande, Inc. and Subsidiaries as set
forth in the notes to the Company's audited financial statements in the
Form 10-K Report filed for the year ended January 31, 1995, are
incorporated herein by reference. Refer to those notes for additional
details of the Company's financial condition, results of operations and
cash flows. All material items included in those notes have not changed
except as a result of normal transactions in the interim, or any items
which are disclosed in this report.
In the opinion of management, the condensed combined financial
statements reflect all adjustments which are necessary for a fair
presentation of the financial position and results of operations.
Adjustments made for the three-month period ended April 30, 1995 are
considered normal and recurring in nature.
The Company adopted the successful efforts method of accounting for
the oil and gas properties purchased. Under this method of accounting,
the acquisition costs of the oil and gas properties applicable to proved
reserves are amortized on the unit-of-production method as produced.
Future development costs or exploratory costs applicable to purchased
properties are capitalized and amortized on the unit-of-production method
if proved reserves are discovered or expensed if the well is a dry hole.
Per share computations are based on the weighted average number of
shares and dilutive common stock equivalents outstanding during the
respective periods. Fully dilutive earnings per share is the same as
earnings per common and common equivalent shares.
(2) Statement of Financial Accounting Standards No. 109 ("Statement 109")
The Company adopted Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes, effective February 1, 1993. Statement
109 requires a change from the deferred method of accounting for income
taxes under APB Opinion 11 to the asset and liability method. Under the
asset and liability method, deferred income taxes are recognized for the
tax consequences resulting from "temporary differences" by applying
enacted statutory tax rates applicable to future years. These "temporary
differences" are associated with differences between the financial
statement amounts and the tax basis of existing assets and liabilities. A
valuation allowance is utilized to reduce deferred tax assets to their
expected realizable amount. A valuation allowance has been established to
decrease total gross deferred tax assets to the amount of the total gross
tax liabilities due to the uncertainties involved in the ultimate
realization of the deferred tax assets.
-6-
<PAGE> 7
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
(3) Statement of Financial Accounting Standards No. 121 ("Statement 121")
Statement 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related
to those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. Statement 121 is effective
for financial statements for fiscal years beginning after December 15,
1995, although earlier application is recommended. The Company
anticipates that the implementation of Statement 121 will be on an annual
basis upon the receipt of the annual estimate of reserves from the
independent petroleum reserve engineers retained by the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
1. Material Changes in Financial Condition.
There were no material changes in the financial condition of
the Company for the period from the fiscal year ended January 31, 1995
through the three months ended April 30, 1995.
2. Material Changes in Results of Operations.
Oil and Gas Production Segment
For the quarter ended April 30, 1995, revenues from oil and
gas production were approximately $1,028,000 as compared to $936,000
for the quarter ended April 30, 1994. Production operating expenses
for the quarter ended April 30, 1995 were approximately $479,000 as
compared to the operating expense of $277,000 for the quarter ended
April 30, 1994. The increase in operating expenses is the result of
additional expenses incurred from the additional oil and gas
properties acquired in 1994. Revenues did not increase commensurate
with expenses due to lower gas prices during the first quarter. The
average price of gas sold during the quarter ended April 30, 1995 was
$1.63 per MCF as compared to $2.30 per MCF during the quarter ended
April 30, 1994.
The Company utilizes the successful efforts method of
accounting for its oil and gas properties. Amortization expenses for
the quarter ended April 30, 1995 based on the unit-of-production
method were approximately $332,000 for 509 MMCF equivalent units of
production. Amortization expenses for the quarter ended April 30,
1994, were approximately $287,000 for 304 MMCF equivalent units of
production.
Interest expense for the quarter ended April 30, 1995 was
approximately $78,000. Interest expense for the quarter ended April
30, 1994 was approximately $13,000. Interest expense increased due to
the additional debt incurred with the acquisition of oil and gas
properties in 1994.
General and administrative expenses for the quarter ended
April 30, 1995 were approximately $304,000 as compared to $171,000 for
the quarter ended April 30, 1994. The increase in general and
administrative expenses is the result of the addition of office space
and employees necessary to operate the additional oil and gas
properties acquired in 1994. As the operator of these oil and gas
properties, the Company charges participating working interest
-7-
<PAGE> 8
owners, including an affiliated limited partnership, for overhead
based on the Council of Petroleum Accountants Societies ("COPAS")
monthly rates. COPAS overhead rates are charged on an individual well
basis to reimburse the operator for general costs of executive and
administrative functions incurred at the home office. General and
administrative expenses were not reduced significantly by charges to
other working interest owners since the Company is the majority owner
of the operated oil and gas properties.
Liquidity and Capital Resources
In May 1995, Rio Grande Offshore, Ltd. sold its interest in a
certain oil and gas property located offshore of Louisiana. Proceeds
from the sale of this property were approximately $1,290,000, which
resulted in a gain on sale to the partnership of approximately
$1,129,000. Rio Grande Drilling Company, as an eighty percent (80%)
partner, received a cash distribution of approximately $1,032,000 from
the sale of which $800,000 was applied as a principal payment on the
Company's outstanding debt. As a result of the principal payment, the
bank agreed to reduce principal and interest payments from $122,000 to
$50,000 per month beginning June 1995 through August 1995.
Thereafter, the monthly payments for principal and interest will be
$61,000 until the debt matures in May 1996. The Company intends to
seek a renewal and extension of the scheduled remaining bank debt of
approximately $1,400,000 in May 1996 on or before the maturity date.
The Company intends to use the remaining proceeds from the sale to
enhance certain oil and gas properties.
Lower gas prices are the primary reason for the decline in the
Company's financial performance during the quarter ended April 30,
1995. Approximately seventy percent (70%) of the Company's sales
production volume is from gas. The average gas price for the first
quarter of 1995 was approximately seventy cents per MCF less than the
average for the first quarter of 1994. The Company's ability to meet
its current financial commitments and to have access to additional
working capital to operate and develop its existing oil and gas
properties is dependent on the market prices for oil and natural gas
and the production levels of the specific properties. Production
levels have remained relatively stable. At current levels of
production, if market prices, particularly natural gas prices, decline
materially from current levels, no assurances can be given that the
Company will be able to meet its current obligations or secure
additional working capital for development of existing properties or
acquisition of additional properties.
The Company is not obligated to provide a fixed or
determinable quantity of oil or gas in the future under any existing
contracts, agreements or any hedge or swap arrangements.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
-8-
<PAGE> 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on June 1, 1995.
The slate of directors recommended by the Management of the
Company were: Robert A. Buschman, Guy R. Buschman, John G.
Hurd, H. M. Shearin, Jr., Hobby A. Abshier and Ralph F. Cox.
1. Approval of the selection of the slate of Directors
to serve for a term of one year or to the date of the
next annual meeting.
Shareholders present or entitled to vote for
the approval of the slate of Directors as
presented by management, voted 4,211,360
shares in favor of slate of the Directors
which constituted more than a majority of the
total number of shares able to vote.
2. Approval of the 1995 Incentive Stock Option Plan and
1995 Non-Qualified Stock Option Plan.
Shareholders present or entitled to vote for
the approval of the 1995 Incentive Stock
Option Plan voted 4,208,630 shares in favor
which constituted more than a majority of the
total number of shares able to vote.
Shareholders present or entitled to vote for
the approval of the 1995 Non-Qualified Stock
Option Plan voted 4,208,810 shares in favor
which constituted more than a majority of
the total number of shares able to vote.
.
3. Approval of the selection KPMG Peat Marwick as the
Company's auditors for the fiscal year commencing
February 1, 1995.
Shareholders present or entitled to vote for
the resolution voted 4,211,190 shares in
favor of the resolution which constituted
more than a majority of the total number of
shares able to vote.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
27 - Financial Data Schedule
Reports:
None
-9-
<PAGE> 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the issuer has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
RIO GRANDE, INC.
Date: June 14, 1995 By: /s/ Guy R. Buschman
------------------------------------------
Guy R. Buschman, President
Date: June 14, 1995 By: s/ Gary Scheele
------------------------------------------
Gary Scheele, Secretary and Treasurer
(principal financial officer)
-10-
<PAGE> 11
EXHIBIT INDEX
EXHIBIT
NO.
---------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<CASH> 315
<SECURITIES> 0
<RECEIVABLES> 692
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,022
<PP&E> 8,725
<DEPRECIATION> 3,026
<TOTAL-ASSETS> 7,889
<CURRENT-LIABILITIES> 1,341
<BONDS> 0
<COMMON> 56
0
0
<OTHER-SE> 2,039
<TOTAL-LIABILITY-AND-EQUITY> 7,889
<SALES> 1,028
<TOTAL-REVENUES> 1,028
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78
<INCOME-PRETAX> (224)
<INCOME-TAX> 0
<INCOME-CONTINUING> (224)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (224)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
