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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended June 30, 1995; 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 0-18754
Black Warrior Wireline Corp.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-2904094
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3748 Highway 45 North, Columbus, Mississippi 39701
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(Address of Principal Executive Offices)
(Zip Code)
(601) 329-1047
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(Issuer's Telephone Number, Including Area Code)
Indicate by a check mark whether the Issuer (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the Issuer
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 August 9, 1995
------------------------------ ------------------------------
Common Stock, par value 14,169,258 shares
$.0005 per share
Page 1 of Pages 12
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BLACK WARRIOR WIRELINE CORP.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I -- FINANCIAL INFORMATION
Page
-----
Item 1. Financial Statements
Consolidated Balance Sheets -- June 30, 1995
and December 31, 1994 3
Consolidated Statements of Operations --
Three Months Ended June 30 , 1995 and 1994 4
Consolidated Statements of Operations --
Six Months Ended June 30, 1995 and 1994 5
Consolidated Statements of Cash Flows --
Six Months Ended June 30, 1995 and 1994 6
Notes to Financial Statements --
Six Months Ended June 30, 1995 and 1994 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Page 2 of Pages 12
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PART I -- FINANCIAL INFORMATION
Financial Statements
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,886 $ 40,453
Accounts receivable, less allowance for
doubtful accounts of $98,937 and $117,540 at
June 30, 1995 and December 31, 1994,
respectively.
1,032,794 875,012
Inventories 212,697 228,193
Prepaid expenses 30,513 73,754
Federal income tax receivable 80,432 80,432
Other Receivables 20,435
Total current assets 1,318,279
Property, plant & equipment, less accumulated
depreciation of $3,374,412 and $3,200,235 at
June 30, 1995 and December 31, 1994 1,264,142 1,380,157
Other assets 5,219 3,839
Total assets $ 2,632,683 $ 2,702,275
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 796,709 $ 867,815
Accrued salaries and vacation 65,130 61,721
Accrued interest payable 1,531,480 1,276,675
Other accrued expenses 145,814 155,958
Notes payable to bank 74,967 82,227
Notes payable, related parties 636,331 623,531
Current maturities of long-term debt and
capital lease obligations 2,170,650 2,151,444
Total current liabilities 5,421,081 5,219,371
Long-term debt and capital lease obligations,
less current maturities 374,867 237,341
Total liabilities 5,456,712 5,456,712
Common stock, par value $.0005 per share,
50,000,000 shares authorized, 14,169,258
shares issued at June 30, 1995 and December 7,084 7,084
31, 1994.
Additional paid-in capital 1,992,695 1,992,695
Accumulated deficit (4,579,651) (4,170,823)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
Total stockholders' equity (3,163,265) (2,754,437)
Total liabilities and stockholders' deficit $ 2,632,683 $ 2,702,275
</TABLE>
Page 3 of Pages 12
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
June 30, June 30,
1995 1994
---------- ---------
<S> <C> <C>
Net Revenues $1,639,035 $1,543,202
Operating costs and expenses (1,482,650) (1,517,121)
Depreciation and amortization expense (184,252) (192,548)
---------- ---------
Operating income (loss) (27,868) (166,467)
Interest expense and amortization
of debt discount and expense (150,587) (194,951)
Other income 16,967 42,696
---------- --------
Net income (loss) $(161,488) $(318,722)
========== =========
Earnings (loss) per average common 2)
share $(0.01) $(0.02)
Average common and common equivalent
shares outstanding 14,169,258 14,169,258
========== ==========
</TABLE>
Page 4 of Pages 12
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------------
June 30, June 30,
1995 1994
------------ ----------
<S> <C> <C>
Net Revenues $3,164,354 $3,035,373
Operating costs and expenses (2,939,035) (3,033,791)
Depreciation and amortization expense (375,692) (405,910)
------------ ----------
Operating income (loss) (150,372) (404,329)
Interest expense and amortization
of debt discount and expense (300,919) (280,834)
Other income 42,476 88,252
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Net income (loss) $(408,816) $(596,911)
------------ ----------
Earnings (loss) per average common
share $(0.03) $(0.02)
Average common and common equivalent
shares outstanding 14,169,258 14,169,258
------------ ----------
</TABLE>
Page 5 of Pages 12
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1995 1994
--------- ----------
<S> <C> <C>
Net cash flows from operating activities: $24,141 $157,180
Cash flows used in investing activities:
Proceeds from the sale of fixed assets 45,050 41,681
Acquisition of property,
plant and equipment (231,227) (127,862)
Net cash flow provided
by investing activities
(186,177) 86,181
Cash flows provided by financing activities:
Net advances on receivables
financed 0 3,681
Increase in notes payable 235,634 144,139
Reductions in notes payable (107,164) (168,743)
Net cash flow used in financing activities 128,469 (20,923)
Net increase (decrease) in cash (33,566) 50,076
Cash - beginning of period 40,453 60,816
Cash - end of period $6,886 $110,892
Supplemental disclosure of cash flow information:
Interest paid $43,331 $31,294
Taxes paid $ 0 $ 0
</TABLE>
Page 6 of Pages
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
The accompanying financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the financial
position of Black Warrior Wireline Corp. and subsidiaries (the "Company"). Such
adjustments are of a normal recurring nature. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the full year. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1994 should be read in conjunction with this document.
2. LONG-TERM DEBT
The Company is in default of its 14% subordinated debenture and 13% convertible
subordinated debenture agreements due to its failure to make scheduled principal
and interest payments. Debenture holders representing $800,000 of the 14%
subordinated debentures outstanding at December 31, 1994 and 1993 have notified
the Company of default and requested immediate payment of the entire outstanding
balance. In accordance with the default provisions in the 14% subordinated
debenture and 13% subordinated debenture agreements, the stated interest rate
was increased to 2% per month effective November 30, 1991 and June 30, 1992,
respectively. The default on the 14% debentures has caused the Company to be in
violation of certain covenants related to the 13% convertible subordinated
debentures.
In addition, the Company is in violation of several other covenants related to
the 14% and 13% subordinated debenture agreements, including, but not limited
to, timely payment of taxes and compliance with provisions and terms of all
material agreements and commitments. Although the remaining 14% debenture
holders and the 13% debenture holders have not notified the Company regarding
acceleration of payment, the debenture holders have the right to require
immediate payment. Accordingly, the entire balances of the debentures have been
classified as current liabilities.
Under the covenants of the debenture agreements, the Company is prohibited from
declaring or paying any dividends to stockholders as long as the debentures are
in default.
3. NOTES PAYABLE - RELATED PARTIES
In October 1991, the Company entered into an agreement with a partnership
consisting of officers and spouses of officers of the Company, whereby such
partnership advanced funds to the Company for operations. These advances are
collateralized by certain accounts receivable of the Company and bear interest
at a rate of prime plus 2%. At June 30, 1995, the Company owed the partnership
$289,293.
The Company had an outstanding balance of $347,037 in notes payable at June 30,
1995 to the President of the Company and his spouse. These notes are
Page 7 of Pages 12
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collateralized by certain assets of the Company.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company experienced a net loss of $161,488 for the second quarter of 1995 as
compared to a net loss of $318,722 for the same period of 1994. During the first
six months of 1995, the Company had a net loss of $408,816 as compared to a net
loss of $596,911 for the first six months of 1994. Although activity in the
Black Warrior basin increased almost 30% from the same period last year, tighter
cost control measures helped keep expenditures down and contributed to the
reduction in losses.
Revenues increased by $95,833, or 6.2%, to $1,639,035 for the second quarter of
1995 as compared to $1,543,202 in the same period of 1994. Revenues for the
first six months of 1995 increased $128,981, or 4.2%, to $3,164,354 as compared
to $3,035,373 for the same period last year. This increase is the direct result
of the services performed for a major directional drilling contractor in the
Permian Basin. Revenues in the Permian Basin increased 4.7% from the second
quarter of 1994 and 9% from the first quarter of 1995. Revenues by business line
are summarized below:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
--------------------------------------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C>
Wireline services
(logging, crane
rental, perforating) $2,369,114 $2,101,619 $1,244,267 $1,082,698
Completion (workover
services) $686,621 $763,957 340,815 380,977
Tools and Packers
(sales and rentals of
bridge plugs) $ 108,619 $169,796 53,953 79,527
----------------------------------------------------------
Total $3,164,354 $3,035,372 $1,639,035 $1,543,202
==========================================================
</TABLE>
Costs and expenses decreased $34,470 for the second quarter of 1995 and $94,757
for the first six months of 1995 as compared to the same periods in 1994. This
decrease was due in large part to a reduction in insurance expense related to
workman's compensation. Salaries and benefits decreased $25,728 for the first
six months of 1995 with the total number of employees decreasing to 89 at June
30, 1995 from 95 at June 30, 1994.
Interest expense increased by $44,364 for the second quarter of 1995. However,
interest expense declined $20,085 for the first six months of 1995 as
Page 8 of Pages 12
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compared to the same period in 1994. Three to five year notes were used to
purchase new vehicles during the last quarter of 1994 and early in 1995. Net new
borrowings for the first six months of 1995 totaled $235,634. Interest on the
new debt ranged from prime to 11.75%.
Changes in the oil and gas industry induced the Company to reevaluate its
strengths and weaknesses. Resources are being redirected around services in
which the Company maintains key competitive advantages. This evaluation has
revealed potential opportunities in the oil and gas industry which the Company
hopes to fully explore. For instance, the Company has developed an alliance with
a major drilling contractor providing horizontal drilling services in the U.S.
Demand for such services is strong and the Company expects this demand to
increase.
The Company has developed a plan to modernize and increase the number of
operational wireline trucks in its fleet. The Company intends to purchase one
new tractor every 120 days and build the technologically advanced wireline
trucks "in-house." This method will save the Company approximately $100,000 from
the cost of purchasing a new, fully equipped wireline truck. The third of five
trucks the Company will build is currently under construction and should be
ready for service by the end of the third quarter of 1995. The Company plans to
continue upgrading its rolling stock until its fleet is competitive with the
other companies in the industry. With this new technology, the Company will
increase its activity in the "deep-hole" sector of the market. In this sector,
where well depths are below 10,000 feet, there are fewer competitors and price
discounts are much less than shallower wells.
Liquidity and Capital Resources
Cash flow provided by Company operations was $24,141 for the quarter ended June
30, 1995 as compared to $157,180 for the quarter ended June 30, 1994. The
Company's net loss of $408,816 decreased operating cash flow by $351,551 after
adjusting for depreciation and amortization of approximately $375,692.
Additional uses of the Company's cash went to reduce current liabilities and to
repay $107,164 net principal indebtedness.
The Company is in default in payment of principal and interest on $900,000 in
aggregate principal amount of its 14% Subordinated Debentures due August 31,
1993. At June 30, 1995, the Company had failed to make principal payments
aggregating $900,000 and interest payments aggregating $680,500 including
interest at the penalty rate, as discussed below. The holders of $800,000 of
such debentures have given notice of the default and acceleration thereunder.
Under the terms of the debentures, the entire principal balance plus accrued but
unpaid interest is due by virtue of the notice of default and acceleration. In
addition, the stated interest rate applicable to the debentures was increased to
2% per month as of November 30, 1991.
The Company is also in default of payment of interest under the Company's
$1,100,000 in outstanding aggregate principal amount of 13% Convertible
Subordinated Debentures due August 31, 1995. At June 30, 1995, interest
arrearages amounted to $760,750.
The Company is currently negotiating a restructuring of both classes of
Page 9 of Pages 12
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debentures in an effort to resolve the defaults in a manner which would minimize
or reduce the potential adverse effect on the Company's liquidity. Such
negotiations include, but are not limited to, an exchange of principal for
equity. However, no agreements with respect to such a resolution are in place.
Even if such arrearages could be resolved on a basis favorable to the Company,
the Company will still require improved cash flow from operations and additional
working capital to meet its obligations. Therefore, the Company is seeking
commitments from investment bankers to assist the Company in raising such
capital in the financial markets.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter for which this
Quarterly Report on Form 10-QSB is filed.
No other Items of Part II are applicable to the Registrant for the period
covered by this Quarterly Report on Form 10-QSB.
Page 10 of Pages 12
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EXHIBIT 27
Page 11 of Pages 12
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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.
BLACK WARRIOR WIRELINE CORP.
(Registrant)
Date: Aug WILLIAM L. JENKINS
--------------------------------
William L. Jenkins
President and
Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
Page 12 of Pages 12
