<PAGE>
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 May 31, 1996
-----------------------------------
or
[ ] 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: 1-9872
------------------------------------------
COLUMBUS ENERGY CORP.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0891713
- -----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
1660 Lincoln St., Denver, CO 80264
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 861-5252
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
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 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
---- ----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at July 11, 1996
- ----------------------------- ----------------------------
Common stock, $.20 par value 3,022,713
<PAGE>
COLUMBUS ENERGY CORP.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
May 31, 1996 and
November 30, 1995 3
Consolidated Statements of Income -
Three Months and Six Months
Ended May 31, 1996 and 1995 5
Consolidated Statement of
Stockholders' Equity -
Six Months Ended May 31, 1996 6
Consolidated Statements of Cash Flows -
Six Months Ended May 31, 1996
and 1995 7
Notes to the Financial Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Items 2-3. Not Applicable
Item 4. Submission of Matters to a Vote
of Security Holders 27
Item 5. Not Applicable
Item 6. Exhibits and Reports
on Form 8-K 27
Signatures 28
2<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLUMBUS ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
----------- -----------
(unaudited)
(in thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,552 $ 1,414
Accounts receivable:
Joint interest partners 1,086 1,258
Oil and gas sales 1,309 817
Less allowance for doubtful accounts (116) (116)
Income tax receivable - 7
Deferred income taxes (Note 3) 470 1,290
Inventory of oil field equipment,
at lower of average cost or market 94 76
Other 237 78
------- -------
Total current assets 4,632 4,824
------- -------
Property and equipment:
Oil and gas assets, successful efforts
method (Note 2) 25,958 22,244
Other property and equipment 1,983 2,028
------- -------
27,941 24,272
Less: Accumulated depreciation,
depletion and amortization
and valuation allowance (12,101) (10,775)
------- -------
Net property and equipment 15,840 13,497
------- -------
$ 20,472 $ 18,321
======== ========
</TABLE>
(continued)
3<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED BALANCE SHEETS - (continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
May 31, November 30,
1996 1995
----------- -----------
(unaudited)
(in thousands)
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,335 $ 1,314
Undistributed oil and gas
production receipts 230 348
Accrued production and property taxes 438 635
Prepayments from joint interest owners 281 189
Accrued expenses 327 318
Income taxes payable 46 -
Other 42 79
------ ------
Total current liabilities 2,699 2,883
------ ------
Long-term bank debt (excluding current
maturities) (Note 2) 3,300 1,600
Deferred income taxes (Note 3) 426 652
Commitments and contingent liabilities
(Note 2)
Stockholders' equity:
Preferred stock authorized 5,000,000
shares, no par value, none issued - -
Common stock authorized 20,000,000
shares of $.20 par value; shares issued
3,333,974 in 1996, and 3,328,580 in 1995
(outstanding 3,033,669 in 1996 and
3,068,149 in 1995) 667 666
Additional paid-in capital 15,845 15,842
Retained earnings (accumulated
deficit), since December 1, 1987 (295) (1,378)
------ ------
16,217 15,130
Less: Treasury stock at cost
300,305 shares in 1996 and
260,431 shares in 1995 (2,170) (1,944)
------ ------
Total stockholders' equity 14,047 13,186
------ ------
$ 20,472 $ 18,321
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
May 31, May 31,
---------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 5,231 $ 4,495 $ 2,639 $ 1,938
Operating and management
services 558 752 270 326
Interest and other income 235 81 31 40
------- -------- -------- --------
Total revenues 6,024 5,328 2,940 2,304
------- -------- -------- --------
Costs and expenses:
Lease operating expenses 975 953 410 363
Property and production taxes 504 412 239 179
Operating and management
services 417 544 215 252
General and administrative 541 778 330 407
Depreciation, depletion and
amortization 1,373 1,476 698 726
Impairment of long-lived
assets 165 - - -
Exploration expense 144 97 111 38
------- -------- -------- --------
Total costs and expenses 4,119 4,260 2,003 1,965
------- -------- -------- --------
Operating income 1,905 1,068 937 339
------- -------- -------- --------
Other expenses (income):
Interest 142 106 71 24
Retirement - 106 - 106
Litigation (Note 4) 10 117 1 43
Other 7 11 6 11
------- -------- -------- --------
159 340 78 184
------- -------- -------- --------
Earnings before
income taxes 1,746 728 859 155
Provision for income taxes
(Note 3) 663 277 326 59
------- -------- -------- -------
Net earnings $ 1,083 $ 451 $ 533 $ 96
======= ======== ======== ========
Earnings per share $ .36 $ .14 $ .18 $ .03
======= ======== ======== ========
Average number of common
shares outstanding 3,048 3,181 3,039 3,142
======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended May 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings Treasury Stock
----------------------- Paid-in (Accumulated ------------------------
Shares Amount Capital Deficit) Shares Amount
---------- ---------- ------------ ------------ ---------- -----------
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balances,
December 1, 1995 3,328,580 $ 666 $15,842 $(1,378) 260,431 $(1,944)
Purchase of shares - - - - 54,500 (332)
Shares issued for
Stock Purchase Plan 5,394 1 25 - (1,356) 10
Shares issued for
Incentive Bonus Plan
and directors' fees - - (22) - (13,270) 96
Net earnings - - - 1,083 - -
--------- ------- ------- ------- ------- -------
Balances,
May 31, 1996 3,333,974 $ 667 $15,845 $ (295) 300,305 $(2,170)
========= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended May 31,
----------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Net earnings $ 1,083 $ 451
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization 1,373 1,476
Impairment of assets 165 -
Deferred income tax provision 594 224
Gain on asset sale (175) -
Other 69 155
Changes in operating assets and
liabilities:
Accounts receivable (320) 299
Other current assets (161) 69
Accounts payable 21 906
Undistributed oil and gas production
receipts (118) (47)
Accrued production and property taxes (197) (213)
Accrued expenses 9 1
Prepayments from joint interest owners 92 101
Income taxes 53 (82)
Other current liabilities (37) (51)
-------- --------
(658) 983
-------- --------
Net cash provided by
operating activities 2,451 3,289
-------- --------
Cash flows from investing activities:
Additions to oil and gas properties (4,038) (3,335)
Additions to other assets (5) (65)
Proceeds from sale of Resources
common stock, net of cash - 4,071
Proceeds from sale of assets 336 28
-------- --------
Net cash from (used in)
investing activities $ (3,707) $ 699
-------- -------
</TABLE>
(Continued)
7<PAGE>
COLUMBUS ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended May 31,
----------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $ 2,700 $ 1,690
Reduction in long-term debt (1,000) (4,190)
Proceeds from issuance of
common stock 26 103
Purchase of treasury stock (332) (1,221)
Other - (2)
------ ------
Net cash provided by (used in)
financing activities 1,394 (3,620)
Effect of exchange rate on cash - 8
------ ------
Net increase (decrease) in cash and
cash equivalents 138 376
Cash and cash equivalents at
beginning of period 1,414 1,819
------ ------
Cash and cash equivalents at
end of period $ 1,552 $ 2,195
======= =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 163 $ 125
======= =======
Income taxes $ 16 $ 134
======= =======
Supplemental disclosure of non-cash
investing and financing activities:
Non-cash compensation expense
related to exercise of
stock options $ - $ 29
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
8<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include
the accounts of Columbus Energy Corp. ("Columbus") and its
wholly-owned subsidiaries, CEC Resources Ltd. ("Resources") and
Columbus Gas Services, Inc.("CGSI"). Resources activity is only
included through February 24, 1995 when it was divested by
Columbus by a rights offering to its shareholders. All
significant intercompany balances have been eliminated in con-
solidation. The term "Company" as used herein includes Columbus
and its subsidiary or previously owned subsidiaries.
Columbus engages in the production and sale of crude oil,
condensate and natural gas, as well as the acquisition and
development of leaseholds and other interests in oil and gas
properties, and also acts as manager and operator of oil and gas
properties for itself and others. It also engages in the
business of compression, transmission and marketing of natural
gas through CGSI. All of the Company's oil and gas reserves are
located in the United States with the majority of its production
and proved reserves being natural gas concentrated in South Texas
and the Gulf Coast.
The consolidated financial statements of the Company have
been prepared in accordance with generally accepted accounting
principles and require the use of managements' estimates and
assumptions. The Company's most significant financial estimates
are based on remaining proved oil and gas reserves. Proved
reserves are based on "current" oil and gas prices and low margin
and undeveloped reserves are particularly sensitive to price
changes. The financial statements contain all adjustments
(consisting only of normal recurring accruals) which, in the
opinion of management, are necessary to present fairly the
financial position of the Company as of May 31, 1996 and November
30, 1995, the results of its operations and cash flows for the
three and six months ended May 31, 1996 and 1995. The results of
operations for such interim periods are not necessarily
indicative of results to be expected for the full year.
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Hedging
activities are included in cash flow from operations in the cash
flow statements.
The Company uses crude oil and natural gas hedges to manage
price exposure. Realized gains and losses on the hedges are
recognized in oil and gas sales as settlement occurs.
9<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Earnings per share are computed using the weighted average
number of common shares outstanding. Stock options are included
as common stock equivalents, when dilutive, using the treasury
stock method.
The average shares outstanding for 1995 and the per share
earnings have been restated retroactively for the 10% stock
dividend paid to shareholders of record on February 24, 1995. A
total of 291,399 shares were issued from treasury stock and
$1,841 paid for fractional shares.
Oil and Gas Properties
- ----------------------
The Company follows the successful efforts method of
accounting. Lease acquisition and development costs (tangible
and intangible) for expenditures relating to proved oil and gas
properties are capitalized. Delay and surface rentals are
charged to expense in the year incurred. Dry hole costs incurred
on exploratory operations are expensed. Dry hole costs
associated with developing proved fields are capitalized.
Expenditures for additions, betterments and renewals are
capitalized. Geological and geophysical costs are expensed when
incurred.
Upon sale or retirement of proved properties, the cost
thereof and the accumulated depreciation or depletion are removed
from the accounts and any gain or loss is credited or charged to
income, if significant. Abandonment, restoration, and
dismantlement costs and salvage value are taken into account in
determining depletion rates. These costs are generally about
equal to the proceeds from equipment salvage upon abandonment of
such properties. Maintenance and repairs are charged to
operating expenses.
Provision for depreciation and depletion of capitalized
exploration and development costs are computed on the unit-of-
production method based on proved developed reserves of oil and
gas, as estimated by petroleum engineers, on a property by
property basis. Unproved properties are assessed periodically to
determine whether they are impaired. When impairment occurs, a
loss is recognized by providing a valuation allowance. When
leases for unproved properties expire, any remaining cost is
expensed. Depreciation of other assets are provided on the
straight line method over their estimated useful lives.
Effective for the fourth quarter beginning September 1, 1995
the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of" ("SFAS 121"). This
statement
10<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
prescribes the accounting for the impairment of long-lived
assets, such as oil and gas properties. An impairment loss is
reported as a component of income from continuing operations.
When property pools are determined to be impaired, an impairment
loss equal to the difference between the carrying value and the
fair value of the pool is recognized in that period. After
consideration of risk, fair value is estimated as the present
value of future net cash flows over the economic life of the
reserves. Future cash flows and fair values relating to SFAS 121
impairment are sensitive to anticipated prices of oil and gas.
The Company follows the entitlements method of accounting
for gas balancing of gas production. The Company's gas
imbalances are immaterial at November 30, 1995 and May 31, 1996.
Other Property and Equipment
----------------------------
Gains and losses from retirement or replacement of other
properties and equipment are included in income. Betterments and
renewals are capitalized. Maintenance and repairs are charged to
operating expense.
Accounting for Stock-Based Compensation
---------------------------------------
The Financial Accounting Standards Board issued Statement
No. 123 on the "Accounting for Stock-Based Compensation". This
statement prescribes the accounting and reporting standards for
stock-based employee compensation plans and is effective for the
Company's 1997 fiscal year unless adopted earlier. The Company
has not determined whether it will adopt this standard or use the
alternative pro forma disclosures as provided by the standard.
(2) LONG-TERM DEBT
The Company has a credit agreement with Norwest Bank Denver,
N.A. that was executed in July 1992. The credit is
collateralized by a first lien on oil and gas properties.
As directed by the Company, the borrowing base during 1995
and until October 1, 1996 is limited to $7,000,000, without
regard to the maximum allowable amount that would have been set
by the bank during its semi-annual redetermination. A fee of
.25% is required for any unused credit which is the difference
between the borrowing base and the outstanding borrowings.
11<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
(3) INCOME TAXES
The Company files a consolidated income tax return with CGSI
and has executed a tax allocation agreement which provides for
an allocation and payment of income taxes based upon each
company's separate tax liability calculation. Consolidated
income taxes are payable only when taxable income exceeds
available net operating loss carryforwards and other credits.
Pursuant to provisions enacted as part of the Tax Reform Act
of 1986, utilization of those corporate tax carryforwards in any
one taxable year is limited if a corporation experiences a 50%
change of ownership. Columbus experienced such a change of
ownership in October 1987 effectively limiting the utilization of
pre-change ownership net operating losses to approximately
$900,000 in each subsequent year. Additional accumulated
ownership changes again exceeded 50% by August 25, 1993, thereby
causing a second ownership change to occur which has further
limited the utilization of $593,000 of post-1987 net operating
losses until fiscal 1995 and subsequent years.
The Company has adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires the asset and liability approach be used to
account for income taxes. Under this method, deferred tax
liabilities and assets are determined based on the temporary
differences between financial statement and tax basis of assets
and liabilities using enacted rates in effect for the year in
which the differences are expected to reverse. Deferred tax
assets (net of a valuation allowance) primarily result from net
operating loss carryforwards, percentage depletion and certain
accrued but unpaid employee benefits. Deferred tax liabilities
result from the recognition of depreciation, depletion and
amortization in different periods for financial reporting and tax
purposes. Estimated utilization of deferred tax assets is
affected by oil and gas prices realized in the current period and
future periods as well as the success of drilling new wells or
developing undeveloped proved reserves.
Because of the Company's previous 1987 quasi-organization,
SFAS 109 requires the Company to report the effect of its net
deferred tax asset arising prior to December 1, 1987 as an
increase in stockholders' equity rather than as an increase to
net earnings.
12<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended May 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
Current:
Federal $ 35 $ 11
Foreign (Canada) - 29
State 34 13
---- ----
69 53
---- ----
Deferred:
Federal 594 180
Foreign (Canada) - 44
---- ----
594 224
---- ----
Total income tax expense $ 663 $ 277
====== ======
</TABLE>
The components of earnings before income taxes are (in
thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
May 31, May 31,
---------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
U.S. $1,746 $ 519 $ 859 $ 155
Canada - 209 - -
------ ------ ------ ------
Total $1,746 $ 728 $ 859 $ 155
====== ====== ====== ======
</TABLE>
The total tax provision has resulted in effective tax rates
which differ from the statutory Federal income tax rates. The
reasons for these differences are:
<TABLE>
<CAPTION>
Percent of Pretax Earnings
------------------------------
Six Months Ended May 31,
------------------------
1996 1995
---- ----
<S> <C> <C>
U.S. Statutory rate 34% 34%
Foreign taxes (Canada) - 10
Foreign tax credit - (10)
State income taxes 2 2
Other 2 2
----- -----
38% 38%
===== =====
</TABLE>
13<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (Continued)
(Unaudited)
During the three months of fiscal 1996, certain tax assets
were utilized as a result of the taxable income. The tax effect
of significant temporary differences representing deferred tax
assets and liabilities and changes were estimated as follows (in
thousands):
<TABLE>
<CAPTION>
Current Year
-------------------------------------
Dec. 1, May. 31,
1995 Operations 1996
------- ---------- -------
<S> <C> <C> <C>
Deferred tax assets:
Pre-1987 loss carryforwards $1,976 $ (284) $1,692
Post-1987 loss carryforwards 720 (360) 360
Percentage depletion
carryforwards 894 - 894
State income tax loss
carryforwards 197 (58) 139
Other 245 (21) 224
-------- ------ ------
Total 4,032 (723) 3,309
Valuation allowance (1,737) - (1,737)
-------- ------ ------
Deferred tax assets 2,295 (723) 1,572
-------- ------ ------
Deferred tax liabilities-
Depreciation, depletion and
amortization and other (1,657) 129 (1,528)
-------- ------ ------
Net tax asset (liability) $ 638 $ (594) $ 44
======== ====== ======
</TABLE>
The Company has net operating loss carryforwards (in
thousands) available at November 30, 1995 as follows:
Net
Expiration Year Operating loss
--------------- --------------
1999 $ 4,517
2000 907
2001 386
2003 478
2004 115
2010 1,593
-------
$ 7,996
=======
For U.S. Alternative Minimum Tax purposes the Company had
net operating loss carryforwards of $8,700,000 as of November 30,
1995. The Company also has percentage depletion carryforwards of
$2,350,000 which do not expire. State income tax operating loss
carryforwards of $2,900,000 were available at November 30, 1995.
14<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (continued)
(4) LITIGATION
Management is unaware of any asserted or unasserted claims
or assessments against the Company which would materially affect
the Company's future financial position or results of operations.
(5) CONTINGENCY
The Company entered into two separate swaps of 60,000 Mmbtu
per month each of natural gas for the period from April 1996
through November 1996. The first swap is at a price of $1.74 per
Mmbtu while the second swap is at a price of $1.88 per Mmbtu.
These volumes represented approximately 55% of Columbus' first
quarter gas production. To partially protect itself against
expected higher gas prices for October and November 1996, the
Company also purchased NYMEX call contracts for those two months
for 60,000 Mmbtu of natural gas at $1.805 and $1.875,
respectively. The October call contract was sold in June 1996
for $37,500 which will partially offset losses from the swaps for
that month. The remaining November contract should limit the
Company's potential loss to the difference between its trading
price and the $1.74 Mmbtu price of the original swap. It can be
liquidated at any time prior to contract expiration at which time
the amount of actual offset can be determined.
Columbus also entered into a swap of crude oil prices by
selling a strip of 10,000 barrels per month for the twelve month
period from January 1996 through December 1996 at an average
daily price of $17.25 per barrel with an upside cap of $19.50,
thereby limiting the maximum possible loss for a month to $2.25
per barrel, or $22,500. The difference between the hedge price
and the actual daily closing price of the near month contract on
the NYMEX is settled monthly. This contract volume represents
approximately 50% of recent monthly production.
The natural gas and crude oil swaps described above are
considered financial instruments with off-balance sheet risk and
were acquired in the normal course of business to reduce exposure
to downward movements in the price of crude oil and natural gas.
Such instruments can involve, to varying degrees, elements of
market and credit risk which exceed the amount recognized in the
balance sheet. As of May 31, 1996, calculated as of July 8,
1996, the Company had 1996 natural gas and crude oil swaps with a
notional value of approximately $2,511,000 and a market value of
approximately $1,890,000. Since the market value will change
constantly during the remaining term of the contracts, this may
result in additional loss or quite possibly some gain for the
15<PAGE>
COLUMBUS ENERGY CORP.
NOTES TO THE FINANCIAL STATEMENTS - (continued)
Company during that period. These swaps are primarily seen as
"insurance" against significant downside price fluctuations since
losses occurring when future prices are above the swap level are
mitigated somewhat by the higher prices actually received in the
field for the equivalent volumes.
(6) RELATED PARTY TRANSACTIONS
Reimbursement is made by Resources to Columbus for services
provided by Columbus officers and employees for managing
Resources and reduces general and administrative expense. This
reimbursement totaled $78,000 and $76,000 for the second quarter
of 1996 and 1995, respectively.
16<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Columbus' financial condition continues to be significantly
better than most of its peer energy companies. As of the end of
the first six months of 1996, shareholders' equity was
$14,047,000, despite repurchase of 54,500 shares of treasury
stock, up from $13,186,000 at November 30, 1995. Existing
positive working capital of $1,933,000 combined with the
Company's anticipated future cash flow should be sufficient to
fully fund its required expenditures to develop its undeveloped
reserves as well as allow participation in a modest exploratory
drilling program. The amount its outstanding loan balance is
exceeded by its $7,000,000 bank borrowing base is also available
as needed but has been designated by management for acquisitions
of new oil and gas properties. However, the bank loan itself is
not so restricted and may be used for any legal corporate
purpose.
Both six months and second quarter 1996 results in terms of
discretionary cash flow and net earnings showed a decided
improvement over fiscal 1995's similar periods. This was an
outgrowth of significantly higher prices (despite hedging
deductions) and improved production of both crude oil and natural
gas reported for both of the 1996 periods. This improvement will
be discussed in greater detail below but it is noteworthy that
discretionary cash flow for the first six months was up 35% while
net earnings rose by 140% despite Canadian operations being
included for almost all of first quarter in 1995.
Management's 1995 development program, which was designed to
restore the previous decline of 600 BOE per day since mid-1994
from its U.S. operations, was totally frustrated due to numerous
delays created by third parties. However, fiscal 1996 to date
has been much more rewarding beginning in December with an
acquisition of additional working interests in producing natural
gas wells where it served as an operator and an owner in several
fields near Laredo in Webb and Zapata Counties, Texas at a $2.63
million cost. This purchase utilized bank borrowings and was
effective as of November 1, 1995. Subsequent drilling successes
and higher prices have combined to make this addition a
significant contributor to first half results.
For the second quarter of 1996, revenues increased by 28%
compared to 1995 due to the aforementioned higher oil and natural
gas production and prices. Net income of $533,000 or $.18 per
share for 1996 is a significant improvement over last year's
$96,000, or $.03 per share, despite having to overcome increased
exploratory expenses. Proved developed and undeveloped natural
gas and crude oil reserves as of May 31, 1996 benefitted from
higher prices which in turn helped to reduce second quarter
depletion expense on a BOE unit basis as well as a percentage of
sales.
17<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
Management has steadfastly subscribed to the position that
the best measure of a company's cash flow is one determined
before any consideration is given to working capital changes or
deduction of exploration expenses. This is otherwise known as
discretionary cash flow ("DCF"). Columbus' DCF for the first six
months of 1996 was $3,253,000 compared to $2,403,000 in 1995
which also included $362,000 attributable to its former Canadian
subsidiary. For the second quarter periods, where there was no
influence from that source, the results showed a more impressive
improvement to $1,685,000 from $1,048,000.
Management continues its objection to the Financial
Accounting Standards Board Statement No. 95 requirement that
operating cash flow be determined after consideration of working
capital changes. It plans to continue to reflect its position
on this matter in all of its public filings and reports
because this pronouncement ignores entirely the significant
impact that the timing of income received for, or expenses
incurred on behalf of third party owners in wells has on working
capital. This is particularly true for a company such as
Columbus where it serves as an operator of and holds a fairly
small interest in several such properties.
Sales volume of natural gas averaged 7,190 Mcfd during
second quarter of 1996 which was up 18% from 1995's average of
6,093 Mcfd. Similarly oil sales reached 669 barrels per day in
1996 compared to 590 barrels per day in second quarter 1995.
Management's stated goal for 1996 is to reach 2,200 barrels of
oil equivalent per day by 1996's third quarter and hopefully it
will accomplish this objective. While second quarter 1996's
production approximated 1,858 BOE/D, several wells are scheduled
for connection during the upcoming third quarter. It should be
noted that all production for the second quarter of both years
was solely from U.S. operations.
No more dramatic example can be made of the positive effects
of improved prices, production and reserves than a comparison of
future net revenues discounted at 10%, before income taxes using
unescalated prices (SEC method). At the end of the quarter on
May 31, 1996, this figure had risen to $34,055,000 from
$24,163,000 as of fiscal year end of November 30, 1995. This
number was $28,140,000 on December 1, 1995 and $35,186,000 on
June 1, 1996 both figures being inclusive of Laredo property
additions so far during fiscal 1996.
Columbus' hedges of natural gas and oil prices are covered
in some detail in "Results of Operations - Oil and Gas Revenues
and Operating Costs" as well as Note 5 to the financial
statements in this Form 10-Q.
18<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
The Company's operation and management services segment
remains profitable despite divesting the principal source of its
prior profit that was generated in Canada from processing fees.
Fortunately, expenses are sufficiently lower that positive
results are still generated.
Columbus had outstanding borrowings of $3,300,000 as of
May 31, 1996 against its line of credit with Norwest Bank Denver,
N.A. of which $2,700,000 was borrowed in December 1995 for the
aforementioned property acquisition. This loan continues to be
collateralized by its oil and gas properties. At the end of the
second quarter 1996, the ratio of bank debt to shareholders'
equity was 0.23 and to total assets was 0.16. The debt outstand-
ing at the end of the quarter used a LIBOR option at an average
interest rate of 7.2%.
During the first six months of 1996, capital expenditures
incurred on oil and gas properties totaled $4,038,000 (including
acquisitions of $2,549,000). These were primarily directed
toward development drilling and recompletions in the South Texas
and Gulf Coast areas.
Columbus has continued its share repurchase program during
the first six months of 1996 by acquiring an additional 54,500
shares out of a 300,000-share repurchase authorization in
February, 1995. That resolution restricted purchases to a
maximum price of $8.75 from available cash and not with bank
borrowings. Thus far during the third quarter, an additional
16,600 shares have been repurchased reducing the remaining
authorized but unpurchased shares to 31,000. Management will
only purchase the balance of the authorized shares provided
blocks are available at much lower price levels.
RESULTS OF OPERATIONS
Revenues and expenses for 1996's second quarter can be
realistically compared with 1995's like period because the
latter was the first quarter which did not contain Canadian
subsidiary results following its divestiture on February 24,
1995.
19<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
Oil and Gas Revenues and Operating Costs
----------------------------------------
Reporting U.S. operations only, the following table shows
comparative crude oil and natural gas revenues, sales volumes,
average prices and percentage changes between periods for the
second quarters of 1996 and 1995 and the second quarter of 1996
versus the first quarter of 1996.
<TABLE>
<CAPTION>
Second Quarter
--------------------- % First Qtr. %
1996 1995 Change 1995 Change
------ ------ ------ ----------- ------
<S> <C> <C> <C> <C> <C>
Natural gas revenues M$ $1,424 $ 976 46% $ 1,496 (5)%
Oil revenue M$ $1,215 $ 962 26% $ 1,096 11 %
Natural gas sales volumes:
Millions of cubic feet 662 561 18% 661 - %
MCF/day 7,190 6,093 7,262
Oil sales volumes:
Barrels 61,576 54,277 13% 63,087 (2)%
Barrels/day 669 590 693
Average price received:
Natural gas - $/MCF $ 2.15 $ 1.74 24% $ 2.26 (5)%
Oil - $/BBL $19.74 $17.73 11% $17.37 14 %
</TABLE>
Natural gas revenues increased 46% in the second quarter of
1996 over 1995's quarter and were primarily generated by improved
prices plus the additional interests related to the property
acquisition as well as from newly developed wells. Average
prices for natural gas rose 24% in the second quarter of 1996
compared with last year. Increased demand and lower storage
levels following an extended winter heating season contributed to
this improvement. Reported 1995 revenues included gains of
$104,600 ($.19 per Mcf) from the hedging of natural gas prices
while 1996's quarter had a loss of $117,000 ($.18 per Mcf) or
otherwise the increased price would have been even more dramatic.
Sales volumes for the second quarter of 1996 versus the first
quarter of 1996 were about flat. The 5% decrease in natural gas
revenues when compared to first quarter 1996 was due to 5% lower
average prices primarily created by hedging losses.
Oil revenues for the second quarter were up 26% over the
similar 1995 quarter as a result of a 11% increase in the average
price received and 13% higher sales volumes. Crude oil
production improved because two new Jackson sand oil wells in
the Sralla Road field produced for a full quarter which overcame
normal decline elsewhere. Oil revenues and average price for the
second quarter of 1996 have been reduced by $67,500 and $1.10 per
barrel, due to hedging losses. No oil hedges existed in the 1995
quarter.
When compared to the first quarter of 1996, second quarter
1996 U.S. oil revenues were 11% higher because of a 14% increase
in the average price per barrel despite increased hedging loss.
20<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
No comparisons of oil and gas revenues and operations in
Canada are possible because of the spin-off of Resources in
February 1995. The following amounts were included in the 1995
first quarter results.
<TABLE>
<CAPTION>
First Quarter
-----------------------
1995
----
<S> <C>
Natural gas revenues M$ $ 492
Oil and plant liquids
revenues M$ $ 141
Natural gas sales volumes:
Millions of cubic feet 453
MCF/day 5,035
Oil and plant liquids
sales volumes:
Barrels 12,107
Barrels/day 135
Average price received:
Natural gas - $/MCF $ 1.09
Oil and liquids - $/BBL $11.61
</TABLE>
Lease operating expenses in the U.S. for the 1996 quarter
were higher than last year's quarter because of the 1996 property
acquisition but were lower on a barrel of oil equivalent basis at
$2.37 in 1996 compared to $2.45 in 1995. Operating costs in the
U.S. as a percentage of revenues have decreased in 1996 to 16%
compared to 19% in 1995's second quarter and were aided by higher
product prices.
Production and property taxes approximated 9 to 10% of
revenues in both periods. The relationship of taxes and revenue
is not always directly proportional because some local
jurisdiction's taxes are based upon reserve evaluations as
opposed to actual revenues or production for a given period.
Drilling for the 1996 second quarter was fairly active with
three (0.54 net) successful development well gas completions and
one (0.34 net) dry hole near Laredo. Neither of the two (1.05
net) development oil wells were successful and the one (0.34 net)
exploratory oil well prospect was also a dry hole. No
recompletion activity of behind-the-casing gas reserves in the
B.R. Cox field was begun during the quarter but record title to
most of those wells did get sold by the operator to two separate
fiscally responsible companies. This program has already been
under review by one of the operators who submitted proposals for
initial workovers and/or recompletions of three wells and began
work thereon in latter June. Initial results on two of the wells
has been encouraging while the third well with three zones
available
21<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
for recompletion had a workover rig moving on location.
Hopefully this workover program by both operators will be
completed during the last half of fiscal 1996 thereby restoring
most of the reduced productivity in that gas field.
As previously reported in its 1995 annual report 10-K and
the 1996 first quarter Form 10-Q, the Company has become a 6.25%
working interest participant in leaseholds in a three-township
Area of Mutual Interest ("AMI") in St. Landry and Avoyelles
Parishes in mid-Louisiana. This leasehold block has recently
been increased to over 40,000 acres which includes one block of
approximately 15,000 acres that is under an option which must be
exercised into new leases consisting of 2,000 acres each six
months for the next four years. As the option is exercised by
the operator, Belco Oil & Gas, the cost of same will not only be
free of additional cost to Columbus but, assuming the option is
exercised in full, profit of over $400,000 will be realized.
These leaseholds overlay a trend of fractured Austin Chalk
formation at a depth of 15,000 feet in which there is a 250 foot
section of limestone containing oil both in the fractures as well
as in the porosity of the matrix rock. Information about the
reservoir characteristics has been established by numerous wells
within the AMI that penetrated this zone while drilling to the
deeper Tuscaloosa formation during the 1970's and 1980's. Also,
several oil wells were successfully completed in this zone in
both vertical and horizontal wells. While the existence of
economically recoverable oil reserves under this property was a
fairly well accepted fact, past problems with the design of
equipment available to drill and complete the horizontal portion
of the holes as well as available technology to deal with
temperatures in excess of 300 degrees Fahrenheit and a geo-
pressured reservoir of about 10,000 psia led to excessive costs.
This in turn brought the potential return on investment into
question. Accordingly, most of the Austin Chalk trend in
Louisiana, and in particular this general area near Bunkie, has
remained fairly dormant for the five year period preceding 1996
while in Central Texas activity was accelerating as a result of
improved recoveries.
Fortunately, the combination of significantly improved
design of downhole equipment plus several outstanding completions
of this identical zone in numerous wells in the Brookeland Field
on the Texas-Louisiana border, and in the Masters Creek Field
area of Louisiana in Vernon and Rapides Parishes, has rejuvenated
the entire geologic trend. In fact, within just the past few
months several huge acreage block assemblages have been announced
in conjunction with multi-rig development programs by such firms
as Union Pacific Resources, Amoco, Occidental Petroleum,
Chesapeake Energy and Sonat. Leasehold prices have escalated
sharply throughout the trend area as a result of several
announced single
22<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
and dual lateral well completions with initial potentials in
excess of 5 million cubic feet of gas and/or 2,000 barrels of oil
or condensate per day. The key ingredient supporting these
latest accomplishments has been the use of improved equipment and
technology that had been developed for the deeper Austin Chalk
gas play near College Station, Texas. Not only has this lowered
well costs dramatically, but also has permitted completions
because natural fractures were not sealed off as a result of the
excessive loss of heavy barite drilling mud and cuttings. This
problem previously plagued most of the early development wells in
Columbus' AMI.
In the first quarter, Columbus and its three independent
producer co-venturers agreed to sell Belco 75% of their 25,000
acre leasehold and lease option position and assigned their well
bore re-entry farmout agreement. The latter called for a
previously drilled and cased well to be re-entered and a single
lateral hole of 3,000 to 4,000 feet to be drilled and completed
by kicking off at a vertical depth slightly above 15,000 feet.
Columbus will own no interest in this re-entry well but it will
have a 6.25% carried working interest reversion after payout of
an offset dual lateral well that will be commenced immediately
after the first re-entry well has been completed. Although this
second well will be newly drilled from the surface and is
forecasted to cost between $4 and $5 million, it is expected to
have a completion production rate equivalent to an oil well
previously completed nearby, or to several recent well
completions in the Masters Creek Field about 30 to 40 miles to
the northwest, which tested at rates of over 2,000 barrels and 3
million cubic feet per day. This would permit it to achieve pay
out in less than six months. The Company will also derive some
benefit from operator's experience gained from drilling the
horizontal legs of these two wells using the latest technology
before Columbus will be required to bear its share of costs of
future development wells.
Management is more excited about this prospect, and its
potential impact on this Company (because of our relatively small
capitalization), than in any prospect with which it has been
associated during its 48 years in the industry. There is
currently sufficient leasehold acreage on hand on which to drill
more than 20 of these dual lateral geo-pressured oil wells. Each
lateral will be about 4,000 feet in length and each dual lateral
well has potential reserves (based on established data from the
immediate area) that exceed two million barrels of crude oil and
two billion cubic feet of natural gas with the latter being a
very significant part of the value because of the high Btu
content of the gas. Those wells that may have lesser flow rates
due to encountering limited fracture systems in some of the
lateral holes do offer an alternative. By using the latest
technology several additional laterals can be drilled in
different directions using the same
23<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
vertical well bore after the initial laterals have been depleted.
The relatively thick continuous 250-foot porous limestone section
lends much support to such an alternative. At a net cost of
about $300,000 per well for Columbus' 6.25% working interest, the
Company will be able to easily handle, utilizing only its
existing cash flow, its share of total participation costs even
if two or more rigs are simultaneously drilling wells on a
continuous basis. When one also considers new funds expected to
be received from the anticipated sales from this new production,
the Company will not be restricted to only participating in this
one new prospect area even if as many as four rigs are used for
this development program. Management will therefore continue to
seek other prospects in its core operating areas while obviously
keeping a watchful eye on this exciting new area.
Inasmuch as the operator's re-entry operations have recently
begun on the initial re-entry farmout well, final results
therefrom should be known by the time our third quarter report is
issued and initial indications may appear in a matter of days.
Perhaps the second dual lateral well in which the Company will
have the 6.25% carried interest will be at a critical stage by
that time, also.
Operating and Management Services
---------------------------------
This segment of the Company's U.S. business includes opera-
tions and services conducted on behalf of third parties and also
includes compressor rentals. Operating and management services
profit for U.S. only operations was aided in 1996 by reduced
costs as a result of the staff reductions made at the beginning
of fourth quarter 1995. There was a $141,000 profit for the U.S.
segment during first six months of 1996 compared to an $87,000
profit for the equivalent period in 1995.
Interest Income
---------------
Interest income is primarily earned from short-term invest-
ments whose rates fluctuate with changes in the commercial paper
rates and the prime rate. Interest income decreased in 1996 to
$33,000 from $40,000 in 1995's second quarter primarily as result
of a decreased amount of investments and lower short-term
interest rates.
General and Administrative Expenses
-----------------------------------
General and administrative expenses are considered to be
those which relate to the direct costs of the Company which do
not originate from operation of properties or providing of
services. Corporate expense represents a major part of this
category although other nonbillable expenses are included. The
Company's general and
24<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
administrative expenses in the second quarter of 1996 were lower
than last year because of salary and staff reductions made in
August, 1995 plus incentive bonuses totaled only $83,000 in 1996
(all non-cash) versus $110,000 in 1995.
Reimbursement for services provided by Columbus officers and
employees for managing Resources is expected to decrease later in
fiscal 1996 after Canadian-based management takes over following
a Resources' merger. Columbus' general and administrative
expense will probably increase at that time since no further
staff reductions are planned. Reimbursement of $78,000 was
realized in second quarter 1996 and $281,000 for all of fiscal
year 1995 for providing these services to Resources.
Litigation Expense
------------------
The legal costs of the Porter Farrell II lawsuit were
included in this expense item in 1995 but his appeal was
dismissed in January 1996.
Depreciation, Depletion and Amortization
----------------------------------------
Depreciation, depletion and amortization of oil and gas
assets are calculated based upon the units of production compared
to proved reserves of each field. The expense is not only
directly related to the level of production, but also is
dependent upon past costs to find, develop, and recover those
reserves. Total charges for depletion expense for oil and gas
properties increased in 1996 over 1995 due to increased
production and also overcame the benefits realized from the 1995
write-down of the carrying value of certain properties upon
adoption of SFAS 121. However, the 1996 second quarter depletion
rate was only $3.82 per barrel of oil equivalent compared to
$4.57 per barrel of oil equivalent in the like period of fiscal
1995 and $4.21 per barrel of oil equivalent for all of 1995.
These amounts are generally below the industry average primarily
because of Columbus' historically low finding costs.
Depreciation and amortization of office equipment and computer
software is also included in the total charge.
A non-cash impairment loss of $165,000 was recognized during
the 1996 first quarter because a development well drilled in
Oklahoma proved to be uneconomic and its costs exceeded the
remaining future cash flows from other producing properties in
the field.
Exploration Expense
-------------------
In general, the exploration expense category relates to
Company-wide efforts to acquire and explore new prospective
areas, and primarily includes geological consulting, seismic
expense and exploratory dry holes. The successful efforts method
of accounting
25<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Continued)
for oil and gas properties requires that the cost of drilling
unsuccessful exploratory wells be currently expensed. During
second quarter 1996 an exploratory well drilled in Oklahoma
proved non-economic and $77,000 was expensed. During first
quarter 1995 no exploratory dry holes were drilled but seismic
survey costs of $46,000 were incurred in Canada before Resources
was divested. Accordingly, exploration expenses for comparative
six month periods amounted to $144,000 for 1996 and $97,000 for
1995 which reduced cash flow from operations as well as net
earnings, even though considered discretionary expenses. These
charges are added back to compute discretionary cash flow which
figure is highlighted each reporting period by the Company.
Interest Expense
----------------
Interest expense varies in a direct relationship to the
amount of bank debt and the level of bank interest rates. The
average amount of bank debt outstanding was lower for the 1995
second quarter than in 1996 but the average interest rate paid
during this latest quarter was 7.2% versus 8.4% in 1995.
Income Taxes
------------
During the second quarter of 1996 the U.S. net deferred tax
asset was reduced to a net asset of $44,000 which is comprised of
$470,000 current deferred tax asset and $426,000 long-term tax
liability. The estimated utilization of deferred tax assets was
$292,000 during the quarter. The valuation allowance remained
unchanged thus far in 1996. The effective tax rate for 1996 was
38%. See also Note 3 to the consolidated financial statements
for further explanation of income taxes.
26<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Management is unaware of any asserted or unasserted claims
or assessments against the Company which would materially affect
the Company's future financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting held May 9, 1996 elected three directors to a
two year term, Harry A. Trueblood, Jr., William H. Blount, Jr.
and Donald W. Ringsby. Continuing directors until May 1997 are
J. Samuel Butler, Clarence H. Brown and Jerol M. Sonosky.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Computation of per share earnings
27 - Financial data schedule
(b) Reports on 8-K
None
27<PAGE>
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 thereunto duly authorized.
COLUMBUS ENERGY CORP.
----------------------------
(Registrant)
DATE: July 11, 1996 Harry A. Trueblood, Jr.
--------------------------- ---------------------------
Harry A. Trueblood, Jr.
Chairman, President and
Chief Executive Officer
(a duly authorized officer)
DATE: July 11, 1996 Ronald H. Beck
--------------------------- --------------------------
Ronald H. Beck
Vice President
(Chief Accounting Officer)
28
Commission File No. 1-9872
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBIT
TO
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MAY 31, 1996
COLUMBUS ENERGY CORP.
(Exact Name of Registrant)
1660 Lincoln Street
Denver, Colorado 80264
(Address of Principal Executive Office)
<PAGE>
EXHIBIT 11
COLUMBUS ENERGY CORP.
Statement of Computation of Per Share Earnings
(Unaudited)
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Six Months Three Months
Ended May 31, Ended May 31,
------------- ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Based on weighted average
shares outstanding including
the effect of common stock
equivalents:
Weighted average shares
outstanding: 3,048 3,181 3,039 3,142
Incremental shares attributable
to dilutive stock options and
warrants outstanding based on
average market price during
the period calculated using
the treasury stock method 12 16 21 14
------ ------ ------ ------
Total average common and
common equivalent shares 3,060 3,197 3,060 3,156
====== ====== ====== ======
Net earnings $1,083 $ 451 $ 533 $ 96
====== ====== ====== ======
Earnings per share $ .35 $ .14 $ .17 $ .03
====== ====== ====== ======
</TABLE>
Note: Fully diluted incremental shares for the six months were 15,000 and
16,000 with total average common and common share equivalent shares
3,063,000 and 3,197,000 in 1996 and 1995, respectively.
Fully diluted incremental shares for the three months were 27,000
and 14,000 with total average common and common share equivalent
shares 3,066,000 and 3,156,000 in 1996 and 1995, respectively.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1996 AND THE
CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED MAY 31,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 1,552
<SECURITIES> 0
<RECEIVABLES> 2,395
<ALLOWANCES> 116
<INVENTORY> 94
<CURRENT-ASSETS> 4,632
<PP&E> 27,941
<DEPRECIATION> (12,101)
<TOTAL-ASSETS> 20,472
<CURRENT-LIABILITIES> 2,699
<BONDS> 0
<COMMON> 667
0
0
<OTHER-SE> 13,380
<TOTAL-LIABILITY-AND-EQUITY> 20,472
<SALES> 5,231
<TOTAL-REVENUES> 6,024
<CGS> 1,479
<TOTAL-COSTS> 4,119
<OTHER-EXPENSES> 17
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 142
<INCOME-PRETAX> 1,746
<INCOME-TAX> 663
<INCOME-CONTINUING> 1,083
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,083
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
