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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 March 31, 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 (I.R.S. Employer
of 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
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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 May 12, 1995
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Common Stock, par value 14,169,258 shares
$.0005 per share
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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 -- March 31, 1995
and December 31, 1994 3
Consolidated Statements of Operations --
Three Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1995 and 1994 5
Notes to Financial Statements --
Three Months Ended March 31, 1995 and 1994 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 89,725 $ 40,453
Accounts receivable, less allowance for
doubtful accounts of $117,540
855,433 875,012
Inventories 227,545 228,193
Prepaid expenses 72,884 73,754
Federal income tax receivable 80,432 80,432
Other Receivables 20,435
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Total current assets 1,326,019 1,318,279
Property, plant & equipment, less accumulated
depreciation of $3,267,372 and $3,200,235 at
March 31, 1995 and December 31, 1994 1,342,942 1,380,157
Other assets 3,535 3,839
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Total assets $2,672,496 $2,702,275
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 827,461 $ 867,815
Accrued salaries and vacation 76,698 61,721
Accrued interest payable 1,404,023 1,276,675
Other accrued expenses 145,300 155,958
Notes payable to bank 90,356 82,227
Notes payable, related parties 636,331 623,531
Current maturities of long-term debt and
capital lease obligations 2,151,778 2,151,444
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Total current liabilities 5,331,948 5,219,371
Long-term debt and capital lease obligations,
less current maturities 341,722 237,341
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Total liabilities 5,673,670 5,456,712
Common stock, par value $.0005 per share,
50,000,000 shares authorized, 14,169,258
shares issued at March 31, 1995 7,084 7,084
Additional paid-in capital 1,992,695 1,992,695
Accumulated deficit (4,417,559) (4,170,823)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
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Total stockholders' equity (3,001,174) (2,754,437)
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Total liabilities and stockholders' deficit $2,672,496 $2,702,275
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
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March 31, March 31,
1995 1994
Net Revenues $ 1,525,319 $ 1,492,171
Operating costs and expenses (1,456,384) (1,516,671)
Depreciation and amortization expense (191,439) (213,362)
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Operating income (loss) (122,505) (237,862)
Interest expense and amortization
of debt discount and expense (150,332) (85,883)
Other income 25,509 45,556
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Net income (loss) $ (247,328) $ (278,189)
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Earnings (loss) per average common $ (0.02) $ (0.02)
share
Average common and common equivalent
shares outstanding 14,169,258 14,169,258
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BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
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March 31, March 31,
1995 1994
Net cash flows from operating activities: $ 53,890 $ (4,823)
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Cash flows used in investing activities:
Proceeds from the sale of fixed assets 38,750 13,600
Acquisition of property,
plant and equipment (169,012) (94,191)
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Net cash flow provided
by investing activities (130,262) (80,591)
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Cash flows provided by financing activities:
Increase in notes payable 194,234 114,347
Reductions in notes payable (68,590) (73,183)
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Net cash flow used in financing activities 125,644 41,164
Net increase (decrease) in cash 49,272 (44,250)
Cash - beginning of period 40,453 60,816
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Cash - end of period $ 89,725 $ 16,566
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Supplemental disclosure of cash flow information:
Interest paid $ 21,747 $ 15,550
Taxes paid $ 0 $ 0
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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.
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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 March 31, 1995, the Company owed
the partnership $289,293.
The Company had an outstanding balance of $347,037 in notes payable at
March 31, 1995 to the President of the Company and his spouse. These notes
are 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 $247,328 for the first three
months of 1995 as compared to a net loss of $278,189 for the same period of
1994. This slight improvement was the result of a more than 30% reduction in
operating expenses of the Company in the Black Warrior Basin. During this same
period, however, the Company's Boone division, which operates in the Permian
Basin of Texas and New Mexico, exceeded its expense budget on several jobs.
Tighter cost accounting control measures have been instituted to reduce
expenditures on future jobs and restore profitability.
Revenues increased by $33,148, or 2%, to $1,525,319 for the first three
months of 1995 as compared to $1,492,171 in the same period of 1994. This
increase is the direct result of the services performed for a major directional
drilling contractor in the Permian Basin. Revenues in this region increased 8.5%
from the first quarter of 1994 and 5% from the end of 1994. Revenues by business
line are summarized below:
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Three Months Ended
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March 31, March 31,
1995 1994
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Wireline services (logging, $1,124,847 $1,018,922
perforating, crane rental)
Completion (workover services) 345,806 382,980
Tools and Packers (sales and
rentals of bridge plugs) 54,667 90,269
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Total $1,525,319 $1,492,171
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Costs and expenses decreased $60,287 for the first three months of 1995
as compared to 1994. This decrease was due in large part to a reduction in
insurance expense related to workman's compensation. Salaries and benefits
decreased $35,257 for the first quarter of 1995 with the total number of
employees decreasing to 91 at March 31, 1995 from 94 at March 31, 1994.
Interest expense increased by $64,449 for the first quarter of 1995.
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 quarter of
1995 totaled $194,234. 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 to the
Permian Basin of Texas and New Mexico. Demand for such services is strong and
the Company expects this demand to increase. Also, the first horizontal well
ever drilled in the coal bed fields of the Black Warrior Basin will be attempted
in June of 1995. If successful, this will stimulate additional activity in a
region which has been declining for several years. The Company maintains a
strong presence in this market and feels it is positioned to take full advantage
of this new opportunity. Finally, the Company is submitting bids on work in East
Texas and expects activity in this area to be strong.
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The Company has developed an aggressive plan to increase the number of
operational wireline trucks in its fleet. The Company intends to purchase one
new tractor every ninety 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 second of five
trucks the Company will build is currently under construction and should be
ready for service by the end of the second quarter of 1995. The Company plans to
continue upgrading its rolling stock until all units have been reconditioned or
replaced. 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 virtually
non-existent.
Liquidity and Capital Resources
Cash flow provided by Company operations was $53,890 for the quarter
ended March 31, 1995 as compared to ($4,823) for the quarter ended March 31,
1994. The Company's net loss of $247,328 decreased operating cash flow by
$55,889 after adjusting for depreciation and amortization of approximately
$191,439. Additional uses of the Company's cash went to reduce current
liabilities and to repay $68,590 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 March 31, 1995, the Company had failed to make principal
payments aggregating $900,000 and interest payments aggregating $626,500
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 March 31, 1995,
interest arrearages amounted to $694,750.
The Company is currently negotiating a restructuring of both classes of
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.
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PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(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.
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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.
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(Registrant)
Date: May 12, 1995 WILLIAM L. JENKINS
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William L. Jenkins
President and
Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
