<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended February 28, 1999
-----------------
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 0-18656
-------
PONDER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2268672
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
5005 Riverway Drive, Suite 550
Houston, Texas 77056
(Address of principal executive offices, zip code)
(713) 965-0653
(Registrant's telephone number, including area code)
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 March 31, 1999
---------------------------- -----------------------------
Common Stock, $.01 par value 9,423,316
<PAGE> 2
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION (Unaudited)
- ------ ---------------------------------
Item 1: Condensed Consolidated Balance Sheets as of February 28, 1999, and August 31, 1998
3
Condensed Consolidated Statements of Operations for the Three Months and Six Months
Ended February 28, 1999 and 1998 5
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three
Months and Six Months Ended February 28, 1999 and 1998 6
Condensed Consolidated Statements of Cash Flows for the Six Months
Ended February 28, 1999 and 1998 7
Notes to Condensed Consolidated Financial Statements 9
Item 2: Management's Discussion and Analysis of Financial Condition and Results of
Operations 12
PART II OTHER INFORMATION
Item 1: Legal Proceedings 18
Item 2: Changes in Securities 18
Item 3: Defaults Upon Senior Securities 18
Item 4: Submission of Matters to a Vote of Security Holders 18
Item 5: Other Information 18
Item 6: Exhibits and Reports on Form 8-K 18
</TABLE>
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<PAGE> 3
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
February 28, August 31,
ASSETS 1999 1998
------ ------------ ----------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 198 $ 149
Receivables, net 6,164 4,672
Parts and supplies 4,421 4,435
Available for sale securities 240 560
Prepaid expenses and other 434 175
-------- --------
Total current assets 11,457 9,991
-------- --------
PROPERTY AND EQUIPMENT 39,773 40,992
Less- Accumulated depreciation and amortization (17,577) (16,656)
-------- --------
22,196 24,336
-------- --------
DEFERRED AND OTHER ASSETS, net 394 425
-------- --------
GOODWILL, net 1,239 1,280
-------- --------
TOTAL ASSETS $ 35,286 $ 36,032
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<PAGE> 4
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
February 28, August 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,163 $ 8,355
Accounts and notes payable, trade 4,808 4,096
Accrued liabilities and other 3,267 2,704
-------- --------
Total current liabilities 17,238 15,155
-------- --------
LONG-TERM DEBT, less current maturities 363 456
-------- --------
OTHER LONG-TERM LIABILITIES 6 31
-------- --------
DEFERRED TAXES PAYABLE 889 886
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 3)
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 10,000,000 shares, no shares
issued as of February 28, 1999, and August 31, 1998, respectively -- --
Common stock, $.01 par value, authorized 150,000,000 shares, issued
9,423,316 shares and 9,260,281 shares at February 28, 1999, and
August 31, 1998, respectively 94 93
Additional paid-in capital 48,309 48,179
Cumulative foreign currency translation adjustment 72 69
Accumulated deficit (30,756) (28,228)
Note receivable for common stock (69) (69)
Unrealized loss on available for sale securities (860) (540)
-------- --------
Total stockholders' equity 16,790 19,504
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 35,286 $ 36,032
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-4-
<PAGE> 5
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Three Months Six Months
Ended February 28 Ended February 28
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SERVICES AND TOOL RENTALS $ 3,631 $ 4,191 $ 7,990 $ 8,261
SALES OF TOOLS AND PARTS 717 785 1,483 1,816
----------- ----------- ----------- -----------
Services, tool rentals and sales 4,348 4,976 9,473 10,077
----------- ----------- ----------- -----------
COST OF SERVICES AND TOOL RENTALS 1,457 1,650 3,310 3,156
COST OF TOOLS AND PARTS SOLD 389 375 726 683
----------- ----------- ----------- -----------
Costs of service and sales 1,846 2,025 4,036 3,839
----------- ----------- ----------- -----------
Gross profit 2,502 2,951 5,437 6,238
----------- ----------- ----------- -----------
EXPENSES:
Operating 2,888 3,093 5,964 5,927
General and administrative 301 378 706 778
----------- ----------- ----------- -----------
3,189 3,471 6,670 6,705
----------- ----------- ----------- -----------
Operating income (loss) (687) (520) (1,233) (467)
OTHER INCOME (EXPENSE):
Interest, net (498) (470) (919) (913)
Gain (loss) on disposal of assets (392) (12) (396) (47)
Other 9 41 20 42
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (1,568) $ (961) $ (2,528) $ (1,385)
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER SHARE $ (.17) $ (.15) $ (.27) $ (.23)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 9,324,395 6,509,883 9,298,604 6,116,923
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<PAGE> 6
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Six Months
Ended February 28 Ended February 28
-------------------- ---------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) $(1,568) $ (961) $(2,528) $(1,385)
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on available-for-sale securities 20 200 (320) 200
Foreign currency translation gain (loss) (120) 32 3 66
------- ------- ------- -------
COMPREHENSIVE INCOME (LOSS) $(1,668) $ (729) $(2,845) $(1,119)
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
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<PAGE> 7
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months
Ended February 28
----------------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,528) $ (1,385)
Adjustments to reconcile net loss to net cash used in operating activities-
Depreciation and amortization 1,399 1,099
Loss on disposal of assets 396 47
Deferred compensation expense -- 1
Noncash interest expense -- 48
Net change in operating assets and liabilities-
Receivables, net (1,492) 352
Parts and supplies 14 (388)
Prepaid expenses and other (259) (403)
Accounts and notes payable, trade 1,218 (2,154)
Accrued liabilities and other 537 (1,132)
-------- --------
Net cash used in operating activities (715) (3,915)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (691) (684)
Acquisition of businesses, net of cash acquired -- (7,567)
Proceeds from asset sales 1,850 28
-------- --------
Net cash provided by (used in) investing activities 1,159 (8,223)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (8,040) (10,051)
Proceeds from long-term debt borrowings 8,615 8,804
Bank overdraft (970) --
Sale of common stock -- 11,000
Proceeds from Senior Convertible Notes -- 2,500
-------- --------
Net cash (used in) provided by financing activities (395) 12,253
-------- --------
CASH AND CASH EQUIVALENTS:
Increase 49 115
Beginning of period 149 4
-------- --------
End of period $ 198 $ 119
======== ========
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Six Months
Ended February 28
--------------------------------
1999 1998
---------- -----------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 816 $ 915
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in connection with debenture conversions $ -- $ 6,713
=========== ===========
Common stock issued in connection with conversion of Senior Notes $ -- $ 2,298
=========== ===========
Common stock contributed to 401(k) plan $ 67 $ 123
=========== ===========
Assets acquired in connection with acquisitions $ -- $ 2,470
=========== ===========
Liabilities assumed in connection with acquisitions $ -- $ 1,470
=========== ===========
Common stock issued in connection with acquisitions $ -- $ 1,000
=========== ===========
Capital lease obligation incurred $ 35 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
-8-
<PAGE> 9
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In Thousands, Except Share Information)
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements included herein have been
prepared by Ponder Industries, Inc., and subsidiaries (collectively referred to
as the Company), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. However, all adjustments have been made to
the accompanying financial statements which are, in the opinion of the
Company's management, necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for the periods
covered. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented herein not misleading. These consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's latest
Annual Report on Form 10-K.
The accompanying condensed consolidated financial statements of the Company
have been prepared on the basis of accounting principles applicable to a going
concern. At February 28, 1999, and August 31, 1998, the Company had deficit
working capital of $5,781 and $5,164, respectively, and an accumulated deficit
of $30,756 and $28,228, respectively. During the three and six months ended
February 28, 1999, the Company incurred a net loss of $1,568 and $2,528,
respectively. As discussed in Note 2, the Company was not in compliance with
certain of its debt covenants and, accordingly, all amounts due this lender
have been classified as a current liability at February 28, 1999, and August
31, 1998. There is no assurance the Company will be able to achieve future
positive cash flows to support operations. These matters, as well as additional
matters discussed in the notes to the Company's consolidated financial
statements in its latest Annual Report on Form 10-K, raise substantial doubt
about the Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern is dependent upon the ongoing support of
its customers, its ability to obtain capital resources to support operations
and its ability to successfully market its products and services. If the
Company is unable to obtain additional capital resources, or if the funds
obtained in such efforts are not adequate to support the Company until a
successful level of operations is attained, the Company would likely be unable
to continue operations as a going concern. The Company's financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and displaying comprehensive
income and its components in a full set of financial statements. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997, and,
accordingly, the Company has presented a Statement of Comprehensive Income
(Loss) for the three and six months ended February 28, 1999 and 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior period balances to conform
with current period presentation.
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<PAGE> 10
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. LONG-TERM DEBT:
As of February 28, 1999, and August 31, 1998, the Company was in technical
default with various affirmative debt covenants of its primary lender, KBK
Financial, Inc. (KBK). Consequently, all amounts due KBK have been classified
as a current liability at February 28, 1999, and August 31, 1998. There are no
assurances that the Company will be able to obtain modifications or waivers to
the covenants or terms governing the financing agreement.
In September 1998, the Company obtained $500 from KBK under a short-term
promissory note. The proceeds were used for working capital requirements. The
promissory note bears interest at 15 percent with the principal and accrued
interest originally due November 9, 1998, which was subsequently extended to
December 24, 1998. In December 1998, the due date of this note was extended to
March 24, 1999. In January 1999, accrued interest on this note was added to the
original principal balance. At the same time, a third party guaranteed $500 of
the revised principal balance. As of April 1999, no amounts had been paid on
this note.
During the three months ended February 28, 1999, the Company entered into three
separate note agreements, aggregating approximately $260,000, with various
shareholders of the Company. The notes mature at various dates between March
and July of 1999 and, as such, have been classified and reflected in the
condensed consolidated financial statements as current maturities of long-term
debt.
3. CONTINGENCIES:
On July 17, 1998, Titan sued the Company in the District Court of Harris
County, Texas. The suit alleges that in 1996, the Company made
misrepresentations in connection with the sale of all of the Company's
outstanding shares in Ponder International Services, Inc. (its former
Azerbaijan subsidiary), to Titan in return for 2,000,000 shares of Titan's
common stock. The suit alleges breach of contract, breach of warranty,
negligent misrepresentation and fraudulent misrepresentation. Titan seeks
unspecified damages. The Company is defending the case vigorously and has
counterclaimed for unspecified sums that Titan owes it pursuant to one of the
contracts executed in connection with this transaction.
The Company is also a party to additional claims and legal proceedings arising
in the ordinary course of business. The Company believes it is unlikely that
the final outcome of any of the claims or proceedings to which the Company is a
party, including those described above, would have a material adverse effect on
the Company's financial statements; however, due to the inherent uncertainty of
litigation, the range of possible loss, if any, cannot be estimated with a
reasonable degree of precision and there can be no assurance that the
resolution of any particular claim or proceeding would not have an adverse
effect on the Company's results of operations for the interim period in which
such resolution occurred.
In September 1998, the Company received notice from the Internal Revenue
Service (IRS) that it was delinquent in the remittance of payroll taxes. At
February 28, 1999, the Company had accrued approximately $1,131 in unpaid
payroll taxes and an additional $211 in penalties and interest relating to
these delinquent taxes. Until such amounts are paid, the IRS could file tax
liens or seize Company assets which would have a material adverse effect on the
Company's operations.
-10-
<PAGE> 11
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In July 1998, the Company received notification that it was subject to
delisting on the NASDAQ stock market as its minimum bid price for its common
stock had fallen below $1 per share. In November 1998, the Company effected a
one-for-five reverse common stock split in order to meet NASDAQ listing
requirements. Subsequent to the reverse common stock split, the minimum bid
price for the Company's common stock fell below $1 per share. On February 12,
1999, NASDAQ removed the Company's listing due to failure to maintain the $1
minimum bid price. The Company's stock is currently traded on the
over-the-counter Bulletin Board with the ticker symbol PNDR.
4. EQUITY TRANSACTIONS:
As discussed in Note 3, in November 1998, the Company's stockholders approved a
one-for-five reverse common stock split. On November 13, 1998, the Company
filed appropriate documentation with the Delaware Secretary of State affecting
such common stock split. Accordingly, all common stock and share information
has been adjusted to reflect the reverse stock split. The authorized capital
stock and par value of the Company (10,000,000 shares of preferred stock, $.01
par value, and 150,000,000 shares of common stock, $.01 par value) was not
reduced or otherwise affected by the reverse stock split.
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<PAGE> 12
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain "forward-looking"
statements as such term is defined in the Private Securities Litigation Reform
Act of 1995 and information relating to Ponder Industries, Inc., and its
subsidiaries (the Company) that are based on the beliefs of the Company's
management as well as assumptions made by and information currently available
to the Company's management. When used in this report, the words "anticipate,"
"believe," "estimate," "expect" and "intend" and words or phrases of similar
import, as they relate to the Company or its subsidiaries or Company
management, are intended to identify forward-looking statements. Such
statements reflect the current risks, uncertainties and assumptions related to
certain factors including, without limitations, competitive factors, general
economic conditions, customer relations, relationships with vendors, the
interest rate environment, governmental regulation and supervision,
seasonality, distribution networks, product introductions and acceptance,
technological change, changes in industry practices, one-time events and other
factors described herein and in the Company's other filings with the Securities
and Exchange Commission. Based upon changing conditions, should any one or more
of these risks or uncertainties materialize, or should any underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated, expected or intended. The
Company does not intend to update these forward-looking statements.
The following discussion is included to describe the Company's financial
position and results of operations for the three- and six-month periods ended
February 28, 1999 and 1998. The condensed consolidated financial statements and
notes thereto contain detailed information that should be referred to in
conjunction with this discussion.
BUSINESS REVIEW
The Company is an international oil field service and rental tool company that
specializes in the use of fishing tools for the recovery of unwanted
obstructions in oil and gas wells. The Company also rents specialized oil field
equipment such as pressure control equipment, tools, pipe, tubing and
whipstocks used in the drilling, completion and workover of wells. The Company
currently has 19 locations domestically and 2 locations in the United Kingdom
serving the North Sea area.
The oil and gas industry has historically experienced significant volatility.
Demand for the Company's services and products depends primarily upon the
number of oil and gas wells being drilled, the depth and drilling conditions of
such wells, the volume of production, the number of well completions and the
level of workover activity. Drilling and workover activity can fluctuate
significantly in a short period of time, particularly in the United States.
The willingness of oil and gas operators to make capital expenditures for the
exploration and production of oil and natural gas will continue to be
influenced by numerous factors over which the Company has no control, including
the prevailing and expected market prices for oil and natural gas. Such prices
are impacted by, among other factors, the ability of the members of OPEC to
maintain price stability through voluntary production limits, the level of
production by non-OPEC countries, worldwide demand for oil and gas, general
economic and political conditions, costs of exploration and production,
availability of new leases and concessions and governmental regulations
regarding, among other things, environmental protection, taxation, price
controls and product allocations. No assurance can be given as to the level of
future oil and gas industry activity or demand for the Company's services and
products.
-12-
<PAGE> 13
During 1996 and much of 1997, the oil field service industry experienced a
general improvement in product demand and pricing as relatively stable and
improved oil and natural gas prices combined with a strong world economy to
increase exploration and development activity worldwide. Beginning in late
1997, worldwide oil prices began to decline significantly and natural gas
prices weakened slightly on a year-to-year basis. These declines have been
attributed to, among other things, an excess supply of oil in world markets,
reduced domestic demand associated with an unseasonably warm winter, high
inventory levels of oil and gas and the impact of the economic downturn in
Southeast Asia and other factors over which the Company had no control.
During the Company's fiscal years ended August 31, 1996 and 1997, and until
December 1997, world oil prices ranged in the mid to near $20's per barrel
while natural gas prices ranged from approximately $2.00 to as high as $3.50
per thousand cubic feet. At the beginning of the Company's fiscal 1998 year,
approximately 1,030 drilling rigs and approximately 1,400 workover rigs were
operating domestically. During late 1997, oil prices began to decline
significantly, dropping from near $20 to below $10 per barrel for certain
posted prices. Natural gas prices maintained a range of $2.00 to $2.50. By
February 28, 1999, the activity of domestic drilling and workover rig
utilization had reduced to approximately 530 and 700, respectively. As crude
oil prices continued to stay below the $13 per barrel range, industry activity
continued to decline, especially in the Company's onshore operations. In
January 1998, the Company acquired Fishing Tools, Inc. (FTI). FTI has
historically been a profitable company with significant offshore operations,
which are less impacted by oil price fluctuations. With the Company's expansion
into the offshore market, the Company has aggressively marketed its operations
to merge the customer base of the Company and FTI with a focus on the major and
large independents with onshore and offshore operations.
The Company has substantially reduced costs by a reduction in operating and
administrative personnel and related expenses, the sale of certain
nonproductive equipment to reduce debt, resolving the litigation involving its
convertible debenture holders and substantially reducing other general and
administrative expenses. The Company is continuing to review its operations for
further cost reductions.
Demand for the Company's services and rentals depends primarily on the number
of oil and gas wells being drilled, the depth and drilling conditions of such
wells and the level of workover activity. Drilling and workover activity is
largely dependent on the prices for oil and natural gas. While the Company
anticipates continued long-term growth in the worldwide demand for hydrocarbons
and a related return to higher activity levels for oil and gas companies over
the next 12 to 18 months, the Company intends to actively monitor current
industry market conditions and to continue to react, if necessary, through
consolidation or elimination of operating locations, further reduction in
personnel and related costs and to continue to aggressively market its products
and services. The Company is unable to predict the duration of the crude oil
price declines and, to a lesser extent, natural gas price declines or the
extent of the impact that such declines may have on the Company's future
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1999, the Company had an accumulated deficit of approximately
$30.8 million. During the quarter ended February 28, 1999, the Company incurred
a net loss of approximately $1.6 million. As a result of continuing losses,
available cash resources are critical. The Company is currently in default under
its loan agreements with its primary lender, and such lender could foreclose on
the Company's assets at any time. The Company is currently attempting to obtain
a merger partner, equity funding or debt refinancing. There can be no assurance
that they will be successful in these efforts. If the Company is not successful
in these efforts, the Company would likely be unable to continue operating as a
going concern and would likely be required to seek protection under the United
States Bankruptcy laws. Included as a component of the Company's working capital
at February 28, 1999 and 1998, is $240,000 and $1,000,000, respectively,
representing the Company's investment in 2,000,000 shares of Titan's common
stock. The Titan common stock is a thinly traded and volatile security. See also
Note 3 of notes to consolidated financial statements.
In April 1996, the Company raised approximately $10 million, net of fees, by
issuing 8 percent convertible debentures. In August 1996, a case was filed in
U.S. District Court alleging that the Company breached an obligation to convert
certain of the debentures. In September 1997, the Company reached a settlement
whereby those convertible debenture holders who had not previously converted
their debentures with the Company agreed to convert the then outstanding
debenture debt of approximately $7,060,000, including accrued interest, into
2,205,217 shares of the Company's common stock. The conversion of the
debentures increased the Company's equity by approximately $6.7 million.
-13-
<PAGE> 14
In November 1996, the Company completed a $10 million financing agreement with
KBK Financial, Inc. (KBK). The agreement includes a $4 million Revolving
Receivable Facility, a $2.5 million Revolving Credit Note and a $3.5 million
Term Note (the Notes). The Receivable Facility is a two-year facility that was
scheduled to mature in December 1998, now scheduled to mature in March 1999,
that is based on accounts receivable and is utilized for short-term liquidity
needs. The $2.5 million Revolving Credit Note is a five-year facility, based on
inventory and equipment, and these funds were used to acquire capital assets to
expand the Company's business. The $3.5 million Term Note is a five and
one-half year note, interest only for the first six months and amortizes over
the remaining five years, collateralized by equipment. In June 1998, the
Company increased from $3.5 million to $4.0 million the Term Note payable to
KBK. The Term Note, as amended, requires monthly principal and interest
payments of $98,000 commencing July 1998 with a final payment of all principal
and interest due in June 2002. The proceeds from the note were used to pay off
existing bank debt of approximately $3 million with the balance being used to
fund operations and acquire capital equipment. At February 28, 1999, and August
31, 1998, the Company had borrowed approximately $8.1 million and $7.2 million,
respectively, under the Notes. The Notes require compliance with various
covenants, including the maintenance of a defined debt service coverage ratio
and a defined tangible net worth. As a result of continued losses primarily
relating to the Company's aggressive expansion commenced in fiscal year 1996
and the rapid decline in industry activity during the 1998 fiscal year and
continuing through the six months ended February 28, 1999, the Company is not
in compliance with such covenants and, accordingly, all amounts due this lender
have been classified as a current liability at February 28, 1999, and August
31, 1998. In September 1998, the Company obtained $500,000 from KBK under a
short-term promissory note. The proceeds were used for working capital
requirements. The promissory note principal and accrued interest were
originally due in November 1998 which was subsequently extended to December
1998 and then March 1999. The promissory note has cross-default provisions with
the Notes. See Note 2 of notes to condensed consolidated financial statements.
A $2,500,000 bridge loan (the Bridge Loan) was obtained in October 1997 from
White Owl Capital Partners (White Owl) and certain others with the intention of
providing additional capital for acquisitions and expansion of the Company's
business.
During the three months ended February 28, 1999, the Company entered into three
separate note agreements, aggregating approximately $260,000, with various
shareholders of the Company. The notes mature at various dates between March
and July and, as such, have been classified and reflected in the condensed
consolidated financial statements as current maturities of long-term debt.
In January 1998, the Company purchased all of the outstanding capital stock of
FTI, for $6.5 million cash and the issuance of approximately 129,000 shares of
the Company's common stock valued at $1 million. The Company also paid
approximately $1 million of acquired indebtedness of FTI. FTI has historically
been a profitable company with positive cash flow. FTI has significant offshore
operations which are less effected by temporary oil price fluctuations and the
acquisition has had a positive impact on the Company's operations. The cash
consideration for the acquisition was provided through an equity placement with
affiliates of White Owl. The equity placement consisted of the sale of 2.2
million shares of the Company's common stock at $5 per share. Concurrent with
this equity placement, the Bridge Loan was converted into 800,000 shares of the
Company's common stock. These transactions had increased the Company's equity
to approximately $22 million and provided stronger liquidity ratios.
In September 1998, the Company received notice from the Internal Revenue
Service (IRS) that it was delinquent in the remittance of payroll taxes. At
February 28, 1999, the Company had accrued approximately $1,131 in unpaid
payroll taxes and an additional $211 in penalties and interest relating to
these delinquent taxes. Until such amounts are paid, the IRS could file tax
liens or seize Company assets which would have a material adverse effect on the
Company's operations.
-14-
<PAGE> 15
In July 1998, the Company received notification that it was subject to
delisting on the NASDAQ stock market as its minimum bid price for its common
stock had fallen below $1 per share. In November 1998, the Company effected a
one-for-five reverse common stock split in order to meet NASDAQ listing
requirements. Subsequent to the reverse common stock split, the minimum bid
price for the Company's common stock fell below $1 per share. On February 12,
1999, NASDAQ removed the Company's listing due to failure to maintain the $1
minimum bid price. The Company's stock is currently traded on the
over-the-counter Bulletin Board with the ticker symbol PNDR.
At February 28, 1999, and August 31, 1998, the Company had a deficit working
capital of approximately $5.8 million and $5.2 million, respectively. The
current ratio was approximately .66 to 1.0 at both February 28, 1999, and
August 31, 1998. As previously discussed, the Company is in default of certain
covenants of the Notes and, as a result, all the amounts due this lender,
approximately $8.1 million, have been classified as a current liability and are
a component of the approximately $5.8 million working capital deficit at
February 28, 1999.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS
ENDED FEBRUARY 28, 1999 AND 1998
A net loss of $1,568,000, or $.17 per share, was recorded for the three months
ended February 28, 1999, as compared to a net loss of $961,000, or $.15 per
share, for the same period of the prior year.
Revenues were approximately $4.3 million and $5.0 million for the three months
ended February 28, 1999 and 1998, respectively. The approximate $700,000, or 14
percent, decrease in revenues reflect the continued decline in oil and gas
drilling and workover activity, partially offset by the acquisition of FTI in
mid-January 1998. Costs of service and sales decreased $179,000, or 9 percent,
to $1,846,000 for the three months ended February 28, 1999, from $2,025,000 for
the same period of the prior year and operating expenses decreased $205,000, or
7 percent, to $2,888,000 from $3,093,000. The net decrease resulted from the
closing of two marginal operating locations and the Company's cost reduction
actions. The Company's gross profit margin was 58 percent for the three months
ended February 28, 1999, as compared to 59 percent for the same period of the
prior year. Operating expenses, as a percentage of sales, were 66 percent for
the three months ended February 28, 1999, as compared to 62 percent for the
same period of the prior year.
-15-
<PAGE> 16
General and administrative expenses decreased $77,000, or 20 percent, to
$301,000 for the three months ended February 28, 1999, as compared to $378,000
for the same period of the prior year. The cost reduction programs instituted
in mid-1997 and fiscal 1998 have continued through the three and six months
ended February 28, 1999.
Interest expense, net, increased $28,000 to $498,000 for the three months ended
February 28, 1999, as compared to $470,000 for the same period of the prior
year. The increase is due primarily to additional debt incurred in association
with the Company's primary lender and related-party borrowings.
COMPARISON OF THE SIX MONTHS
ENDED FEBRUARY 28, 1999 AND 1998
A net loss of $2,528,000, or $.27 per share, was recorded for the six months
ended February 28, 1999, as compared to a net loss of $1,385,000, or $.23 per
share, for the same period of the prior year.
Revenues were approximately $9.5 million and $10.1 million for the six months
ended February 28, 1999 and 1998, respectively. The approximate $600,000, or 6
percent, decrease in revenues reflect the continued decline in oil and gas
drilling and workover activity, partially offset by the revenue attributable to
acquisition of FTI in mid-January 1998. Costs of service and sales increased
$197,000, or 5 percent, to $4,036,000 for the six months ended February 28,
1999, from $3,839,000 for the same period of the prior year. Operating expenses
remained relatively unchanged at $5,964,000 for the six months ended February
28, 1999, as compared to $5,927,000 for the same period of the prior year. The
Company's gross profit margin was 57 percent for the six months ended February
28, 1999, as compared to 62 percent for the same period of the prior year.
Operating expenses, as a percentage of sales, were 63 percent for the six
months ended February 28, 1999, as compared to 59 percent for the same period
of the prior year.
General and administrative expenses decreased $72,000, or 9 percent, to
$706,000 for the six months ended February 28, 1999, as compared to $778,000
for the same period of the prior year. The cost reduction programs instituted
in mid-1997 and fiscal 1998 have continued through the six months ended
February 28, 1999.
Interest expense, net, remained relatively unchanged at $919,000 for the six
months ended February 28, 1999, as compared to $913,000 for the same period of
the prior year.
YEAR 2000 COMPLIANCE
The efficient operation of the Company's business is dependent on its computer
software programs and operating systems (collectively, Programs and Systems).
These Programs and Systems are used in several key areas of the Company's
business, including information management services and financial reporting, as
well as in various administrative functions. The Company has been evaluating
its Programs and Systems to identify potential Year 2000 compliance problems,
as well as manual processes, external interfaces with customers and services
supplied by vendors to coordinate Year 2000 compliance and conversion. The Year
2000 problem refers to the limitations of the programming code in certain
existing software programs to recognize date sensitive information for the Year
2000 and beyond. Unless modified prior to the Year 2000, such systems may not
properly recognize such information and could generate erroneous data or cause
a system to fail to operate properly. Based on current information, the Company
believes its Programs and Systems are Year 2000 compliant.
-16-
<PAGE> 17
The Company's integrated accounting software is upgraded on a regular basis,
including testing and modification for Year 2000 compliance. During 1998, the
Company purchased additional new hardware and software. The Company believes
that the Year 2000 problem will not pose a significant operational problem.
However, because most computer systems are, by their very nature,
interdependent, it is possible that noncompliant third-party computers may not
interface properly with the Company's computer systems. The Company could be
adversely affected by the Year 2000 problem if it or unrelated parties fail to
successfully address this issue. Management of the Company currently
anticipates that the expenses and capital expenditures associated with its Year
2000 compliance project, including any costs associated with modifying the
Programs and Systems as well as the cost of purchasing or leasing certain
additional hardware and software, will not have a material effect on its
business, financial condition or results of operations and are expenses and
capital expenditures the Company anticipated incurring in the ordinary course
of business regardless of the Year 2000 problem. Purchased hardware and
software has been and will continue to be capitalized in accordance with normal
policy. Personnel and other costs related to this process are being expensed as
incurred.
The costs of Year 2000 compliance and the expected completion dates are the
best estimates of Company management and are believed to be reasonably
accurate. In the event the Company's plan to address the Year 2000 problem is
not successfully or timely implemented, the Company may need to devote more
resources to the process and additional costs may be incurred, which could have
a material adverse effect on the Company's financial condition and results of
operations. Problems encountered by the Company's vendors, customers and other
third parties also may have a material adverse effect on the Company's
financial condition and results of operations.
In the event the Company determines following the Year 2000 date change that
its Programs and Systems are not Year 2000 compliant, the Company will likely
experience considerable delays in processing customer orders and invoices,
compiling information required for financial reporting and performing various
administrative functions. In the event of such occurrence, the Company's
contingency plans call for it to switch vendors to obtain hardware and/or
software that is Year 2000 compliant, and until such hardware and/or software
can be obtained, the Company will plan to use noncomputer systems for its
business, including information management services and financial reporting, as
well as its various administrative functions.
The above Year 2000 disclosure constitutes a "Year 2000 Readiness Disclosure"
as defined in The Year 2000 Information and Readiness Disclosure Act (the Act),
which was signed into law on October 19, 1998. The Act provides added
protection from liability for certain public and private statements concerning
a company's Year 2000 readiness. The Act also potentially provides added
protection from liability for certain types of Year 2000 disclosures made after
January 1, 1996, and before October 19, 1998. As such, to the extent permitted
by applicable law, previously disclosed statements of or by the Company or its
management concerning the Company's Year 2000 readiness are intended to
constitute "Year 2000 Readiness Disclosures," as defined in the Act.
-17-
<PAGE> 18
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - For a description of legal proceedings against
the Company, see Note 3 of the notes to condensed consolidated
financial statements included herein.
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
*10.1 Promissory Note made by Ponder Industries, Inc., to White
Owl Investors L.L.C. dated December 15, 1998.
*10.2 Promissory Note made by Ponder Industries, Inc., to Brian
Sokol dated December 30, 1998.
*10.3 Promissory Note made by Ponder Industries, Inc., to White
Owl Investors L.L.C. dated February 24, 1999.
*10.4 Mortgage by Fishing Tools, Inc., dated February 17, 1999.
*11 Computation of Earnings (Loss) Per Share.
*27 Financial Data Schedule.
(b) Reports on Form 8-K
None
- ---------------
* Filed herewith
-18-
<PAGE> 19
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.
PONDER INDUSTRIES, INC.
By /s/ Eugene L. Butler
------------------------------------
Eugene L. Butler
President, Chief Executive
Officer and Chairman of
the Board of Directors
By /s/ Gerald A. Slaughter
------------------------------------
Gerald A. Slaughter
Senior Vice President and
Chief Financial Officer
Dated: April 16, 1999
-19-
<PAGE> 1
EXHIBIT 10.1
PROMISSORY NOTE
$100,000.00 HOUSTON, TEXAS DECEMBER 15, 1998
On December 15, 1998 (due date) for value received, PONDER INDUSTRIES,
INC., a Delaware corporation, ("Maker"), promises to pay to the order of WHITE
OWL INVESTORS L.L.C. (the "Payee") in lawful money of the United States of
America, the principal amount of ONE HUNDRED THOUSAND AND 00/100 DOLLARS
($100,000.00) together with interest on the principal balance from time to time
remaining unpaid from the date of this Note until maturity at a rate of
interest equal to the lessor of (a) ten (10% per annum or (b) the Maximum Rate
(as defined below) from time to time in effect. The Maker agrees to pay
interest at fifteen percent (15%) on all past due principal and interest on
this Note from the maturity thereof until paid. This Note may be prepaid in
whole or in part at any time without notice or prepayment penalty. All payments
on this Note shall be applied first to accrued interest and the balance, if
any, to principal.
"Maximum Rate" means the lesser of (a) eighteen percent (18%) per
annum or (b) the maximum lawful non-usurious rate of interest (if any) which
under Applicable Law the Payee is permitted to charge the Maker on this Note
from time to time.
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that the Texas Finance Code, Section 301 et. seq. and Section
303 et. seq. shall be included in the laws of the State of Texas in determining
Applicable Law; and for the purpose of applying said Section 301 and 303 to
this Note, the interest ceiling applicable to this Note under said Section 303
shall be the indicated rate ceiling from time to time in effect.
"Maturity Date" set as June 15, 1999.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this
Note. The Payee and the Maker specifically intend and agree to limit
contractually the interest payable on this Note to not more than an amount
determined at the Maximum Rate. Therefore, none of the terms of this Note or
any other instruments pertaining to or securing this Note shall ever be
construed to create a contract to pay interest at a rate in excess of the
Maximum Rate, and neither the Maker nor any other party liable herefor shall
ever be liable for interest in excess of that determined at the Maximum Rate,
and the provisions of this paragraph shall control over all provisions of this
Note or of any other instruments pertaining to or securing this Note. If any
amount of interest taken or received by the Payee shall be in excess of the
maximum amount of interest which, under Applicable Law, could lawfully have
been collected on this Note, then the excess shall be deemed to have been the
result of a mathematical error by the parties hereto and shall be refunded
promptly to the Maker. All amounts paid or agreed to be paid
<PAGE> 2
in connection with the indebtedness evidenced by this Note which would under
Applicable Law be deemed "interest" shall, to the extent permitted by
Applicable Law, be amortized, prorated, allocated, and spread throughout the
full term of this Note.
In the event of default in the payment when due of the principal of
this Note, or if any event occurs or condition exists which authorizes the
acceleration of the maturity of this Note, the Payee (or other holder of this
Note) may, at its option, upon notice to the Maker, without presentment or
demand, declare the unpaid principal balance of and accrued interest, if any,
on this Note to be immediately due and payable.
The Maker waives demand, presentment for payment, notice of
nonpayment, protest, notice of protest, notice of acceleration, notice of
intent to accelerate and all other notice, except as otherwise expressly set
forth herein, filing of suit and diligence in collecting this Note. The Payee
may transfer this Note, and the rights and privileges of the Payee under this
Note shall inure to the benefit of the Payee's successors or assigns.
This Note shall be collateralized by approximately 5 acres of land and
property located at 1145 - 1201 MacArthur Avenue, Jefferson Parish, Marrero,
Louisiana, more accurately described
in the attached Exhibit A.
PONDER INDUSTRIES, INC.
By:
------------------------------------
Eugene L. Butler
Chairman and
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.2
PROMISSORY NOTE
$100,000.00 HOUSTON, TEXAS DECEMBER 30, 1998
On or before March 31, 1999 ("Due Date") for value received, PONDER
INDUSTRIES, INC., a Delaware corporation, ("Maker"), promises to pay to the
order of BRIAN J. SOKOL (the "Payee") in lawful money of the United States of
America, the principal amount of ONE HUNDRED THOUSAND AND 00/100 DOLLARS
($100,000.00) together with interest in the stated amount of $5,000.00. The
Maker will have the option at the Due Date to extend the Note for an additional
ninety (90) day period. The stated interest of $5,000.00 will be due and
payable on the Due Date and only the principal payment may be subject to
extension. This Note may be prepaid in whole or in part at any time without
notice or prepayment penalty. If the Note is prepaid in whole or in part, the
stated $5,000.00 interest due March 31, 1999 will be prorated on a basis of the
ninety (90) day period of the principal balance outstanding on the Note. All
payments on this Note shall be applied first to accrued interest and the
balance, if any, to principal.
"Maximum Rate" means the lesser of (a) twenty percent (20%) per annum
or (b) the maximum lawful non-usurious rate of interest (if any) which under
Applicable Law the Payee is permitted to charge the Maker on this Note from
time to time.
"Applicable Law" means that law in effect from time to time and
applicable to this Note which lawfully permits the charging and collection of
the highest permissible lawful non-usurious rate of interest on this Note,
including laws of the State of Texas and laws of the United States of America.
It is intended that the Texas Finance Code, Section 301 et. seq. and Section
303 et. seq. shall be included in the laws of the State of Texas in determining
Applicable Law; and for the purpose of applying said Section 301 and 303 to
this Note, the interest ceiling applicable to this Note under said Section 303
shall be the indicated rate ceiling from time to time in effect.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this
Note. The Payee and the Maker specifically intend and agree to limit
contractually the interest payable on this Note to not more than an amount
determined at the Maximum Rate. Therefore, none of the terms of this Note or
any other instruments pertaining to or securing this Note shall ever be
construed to create a contract to pay interest at a rate in excess of the
Maximum Rate, and neither the Maker nor any other party liable herefor shall
ever be liable for interest in excess of that determined at the Maximum Rate,
and the provisions of this paragraph shall control over all provisions of this
Note or of any other instruments pertaining to or securing this Note. If any
amount of interest taken or received by the Payee shall be in excess of the
maximum amount of interest which, under Applicable Law, could lawfully have
been collected on this Note, then the excess shall be deemed to have been the
result of a mathematical error by the parties hereto and shall be refunded
promptly to the Maker. All amounts paid or agreed to be paid
in connection with the indebtedness evidenced by this Note which would under
Applicable Law be
<PAGE> 2
deemed "interest" shall, to the extent permitted by Applicable Law, be
amortized, prorated, allocated, and spread throughout the full term of this
Note.
In the event of default in the payment when due of the principal of
this Note, or if any event occurs or condition exists which authorizes the
acceleration of the maturity of this Note, the Payee (or other holder of this
Note) may, at its option, upon notice to the Maker, without presentment or
demand, declare the unpaid principal balance of and accrued interest, if any,
on this Note to be immediately due and payable.
The Maker waives demand, presentment for payment, notice of
nonpayment, protest, notice of protest, notice of acceleration, notice of
intent to accelerate and all other notice, except as otherwise expressly set
forth herein, filing of suit and diligence in collecting this Note. The Payee
may transfer this Note, and the rights and privileges of the Payee under this
Note shall inure to the benefit of the Payee's successors or assigns.
This Note shall be collateralized by the building and approximately
2.182 acres of land located at Highway 59 South, 6001 East Loop 175, Victoria
County, victoria, Texas, more accurately described in the attached Exhibit A.
MAKER:
PONDER INDUSTRIES, INC.
By:
------------------------------------
Eugene L. Butler
Chairman and
Chief Executive Officer
PAYEE:
By:
------------------------------------
Brian J. Sokol
<PAGE> 1
EXHIBIT 10.3
PROMISSORY NOTE
PRINCIPAL AMOUNT: NEW YORK, NEW YORK
$57,696.62 FEBRUARY 24, 1999
FOR VALUE RECEIVED, Ponder Industries, Inc., a Delaware corporation,
("Payor") promises to pay to the order of White Owl Investors, L.L.C.
("Payee"), at the office of Payee at c/o Parson & Brown LLP, 666 Third Avenue,
New York, NY 10017 or at such other place in the United States of America as
Payee may direct, in lawful money of the United States of America, the
principal amount of FIFTY-SEVEN THOUSAND SIX HUNDRED NINETY-SIX AND 62/100
DOLLARS ($57,696.62), and no interest.
1. Payment Terms. The principal of this Note shall be due and payable
in cash on July 1, 1999 (the "Maturity Date"). Payor shall be entitled to
prepay, without premium or penalty, all or any part of the principal of this
Note.
2. Representations and Warranties of Payor. Payor represents and
warrants that this Note has been duly executed and delivered by Payor,
constitutes the valid and legally binding obligation of Payor, and is
enforceable in accordance with its terms against Payor except as such
enforcement may be subject to and affected by (i) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights generally from
time to time in effect (including without limitation laws relating to fraudulent
conveyance) and (ii) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3. Events of Default. If any of the following events (each an "Event
of Default") shall occur:
(A) Payor defaults in the payment of any installment of principal
hereunder at the Maturity Date; or
(B) Payor shall make an assignment for the benefit of, or composition
with, creditors, or shall become insolvent or be unable or generally
fail to pay his debts when due; or Payor shall become a party or
subject to any liquidation action or proceeding with respect to Payor
or any bankruptcy reorganization, insolvency or other proceeding for
the relief of financially distressed debtors with respect to Payor, or
a receiver, liquidator, custodian or trustee shall be appointed for
Payor or a substantial part of his assets and, if any of the same
shall occur involuntarily as to Payor, it shall not be dismissed,
stayed or discharged within 60 days; or if any order for relief shall
be entered against Payor under Title 11 of the United States Code
entitled "Bankruptcy"; or Payor shall take any action to effect, or
which indicates its acquiescence in, any of the foregoing;
then, and in any such event, Payee may at any time at his option exercise the
remedies set forth in Section 4 hereof.
4. Acceleration of Maturity; Remedies. Upon the occurrence of an Event
of Default hereunder, Payee or any assignee which is a holder hereof may ( i )
by written notice to Payor, declare the principal of this Note to be forthwith
due and payable, whereupon the same shall become due and payable, and/or (ii)
proceed to protect its rights by an action at law, suit in equity or other
appropriate proceeding. No course of dealing and no delay on the part of Payee
or any assignee which is holder of this Note in exercising any right, power or
remedy shall operate as a waiver thereof or otherwise prejudice the rights of
Payee or such holder. No right conferred hereby on Payee or any holder of this
Note shall be exclusive of any other right referred to herein or now or
hereafter available by law, in equity, by statute or otherwise.
<PAGE> 2
5. Waiver. Payor waives demand, presentment for payment, notice of
intention to accelerate, notice of acceleration, protest, notice of protest,
notice of default and all other notices, filing of suit and diligence in
collecting this Note.
6. Amendment. Any term of this Note may be amended or modified, and
the observance of any term, representation, warranty or covenant thereof may be
waived (either generally or in a particular instance), only with the written
consent of Payor and of Payee. Any amendment, modification or waiver effected
in accordance with this paragraph shall be binding upon each holder of this
Note at the time outstanding, and each future holder of this Note and Payor.
7. Benefit. All of the provisions of this Note shall bind and inure to
the benefit of Payor, Payee and their respective successors and assigns.
8. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of New York without regard to conflict of law
principles.
9. Headings. The headings of the sections of this Note are inserted
for convenience only and shall not be deemed to constitute a part hereof.
IN WITNESS WHEREOF, Payor has executed this Note as of the date and
year first above written.
PONDER INDUSTRIES, INC.
By:
-------------------------------------------
Eugene L. Butler
Chairman and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.4
MORTGAGE * UNITED STATES OF AMERICA
*
BY * STATE OF TEXAS
*
FISHING TOOLS, INC. * COUNTY OF HARRIS
BE IT KNOWN, that on this 17th day of February, 1999,
BEFORE ME, Deborah S. Hudgeons, a Notary Public, duly commissioned and
qualified in and for the aforesaid State and County, and in the presence of the
undersigned, competent witnesses, personally came and appeared:
FISHING TOOLS, INC., a corporation organized under the laws of the State
of Louisiana, whose mailing address is 5005 Riverway Drive, #550,
Houston, Texas 77056, whose Employer Identification Number is
72-0461244, herein represented by Eugene L. Butler, its President, duly
authorized per resolutions adopted by the Board of Directors of said
corporation, a certified copy of which is annexed hereto (hereinafter
referred to as "Mortgagor").
Mortgagor declares and acknowledges that PONDER INDUSTRIES, INC. is
justly and truly indebted unto WHITE OWL INVESTORS L.L.C. ("Mortgagee") in the
principal sum of ONE HUNDRED THOUSAND AND NO/100 ($100,000.00) DOLLARS, as
evidenced by that certain promissory note (the "Note") for the said sum of One
Hundred Thousand and No/100 ($100,000.00) Dollars, payable to the order of
White Owl Investors L.L.C., with interest from date until paid at a rate equal
to the lesser of (a) ten (10%) percent per annum or (b) the Maximum Rate (as
defined therein) from time to time in effect, having a maturity date of June
15, 1999, together with interest, attorney's fees, insurance premiums, taxes,
collection costs, keeper fees, and all other costs as provided in this
mortgage, if any should accrue.
And now, in order to secure the full, complete, proper, and timely
payment, observance and performance of any and all present and future
liabilities, obligations, covenants, conditions, agreements and stipulations of
every nature and kind, direct or indirect, contingent or otherwise, by
Mortgagor and/or Ponder Industries, Inc. to Mortgagee, including but not
limited to the Note and any and all insurance premiums, taxes, keeper's fees,
and the performance of all obligations of Mortgagor under this mortgage; all
together with interest, attorneys' fees (Mortgagor agreeing that if the Note is
referred to an attorney-at-law to institute legal proceedings to recover all or
any part of the principal or interest on the Note, to protect interests of the
holder or holders of the Note, or for collection, compromise, or other action,
Mortgagor hereby agrees to pay the fee of the attorney who may be employed for
that purpose, which fee is hereby fixed at twenty (20%) percent of the amount
due, sued for, claimed, or sought to be protected, preserved or enforced) and
collection costs (collectively, the "Obligations"), Mortgagor specially
mortgages, pledges, assigns, affects, grants a security interest in, and
hypothecates in favor of Mortgagee, the following (collectively, the "Mortgaged
Property"):
(1) FIVE CERTAIN LOTS OF GROUND, together with all the buildings and
improvements thereon, and all the rights, ways, privileges,
servitudes, advantages and appurtenances thereunto belonging or
in anywise appertaining, situated, lying and being in the VILLAGE
OF MARRERO, PARISH OF JEFFERSON, STATE OF LOUISIANA, in MARRERO
INDUSTRIAL SUBDIVISION, SECTION "A", designated as LOTS NOS. 64,
65, 66, 67 AND 68, which lots adjoin each other and measure each
100 feet front on MacArthur Avenue, same in width in the rear, by
a depth of 435.60 feet between equal and parallel lines. All in
accordance with a survey made by Guy J. Seghers, C.E., dated July
20, 1956, revised April 19, 1957, and June 30, 1960, approved by
the Jefferson Parish Council by Ordinance No. 4654, recorded in
COB 512, folio 652 of the records of Jefferson Parish.
All in accordance with survey by Joseph L. Kreller, Jr., C.E.,
dated April 15, 1989.
Lots 64 and 65 being the same property acquired by Fishing Tools,
Inc. from Marrero Land and Improvement Association, Limited, per
act dated July 9, 1969, executed before Louis H. Marrero, Notary
Public, registered in COB 700, folio 932, Parish of Jefferson.
Lot 66 being the same property acquired by J & V Tool & Equipment
Co. Inc. from Marrero Land and Improvement Association, Limited,
per act dated January 12, 1961, executed before Maurice J. Pitre,
Notary Public, registered in COB 522, folio 507, Parish of
Jefferson.
Lots 67 and 68 being the same property acquired by J & V Tool &
Equipment Co. Inc. from Marrero Land and Improvement Association,
Limited, per act dated January 12, 1961, executed before Maurice
J. Pitre, Notary Public, registered in COB 522, folio 505, Parish
of Jefferson.
(The above described immovable property is collectively referred
to herein as the "Premises");
Together with all buildings, constructions, and improvements now
or hereafter existing on the Premises, all other component parts
of the Premises, all component parts of the buildings,
constructions, and improvements now or hereafter on the Premises,
all appurtenances, attachments, rights, ways, privileges,
<PAGE> 2
servitudes, advantages, batture and batture rights belonging or
in any wise appertaining to the Premises, affecting the Premises,
or now or hereafter forming part of, attached to, or connected
with the Premises or used in connection with the Premises.
To the extent any of the following may be applicable, this act is
made and accepted subject to the following:
a. Reservation of mineral rights, with waiver of surface
rights, as contained in Sale by Marrero Land & Improvement
Association, Limited, dated July 9, 1969, recorded in COB
700, folio 932.
b. Reservation of mineral rights, with no waiver of surface
rights, as contained in Sale by Marrero Land & Improvement
Association, Limited, dated January 12, 1961, recorded in
COB 522, folio 507, and COB 522, folio 505.
c. Right of way in favor of United Gas Pipe Line Company and
Interstate National Gas Company, recorded in COB 245, folio
342.
d. Right of way in favor of United Gas Pipe Line Company and
Interstate National Gas Company, recorded in COB 245, folio
344.
e. Right of way in favor of Louisiana Power & Light Company,
recorded in COB 107, folio 178.
The parties hereto declare that they do not hereby intend, by the
execution of these presents, to interrupt, or suspend, the
running of any prescription or peremption which has run or may
run in connection with the foregoing, nor do the parties intend
to revive, establish or initiate any one or more of the foregoing
which may not now or hereafter be binding upon the hereinabove
described property and/or the parties hereto.
(2) All present and future rents, fruits, revenues, income and
profits accruing from time to time from the use, possession,
occupancy or lease of all or any part of the Premises and from
Mortgagor's operation thereof including, without limitation,
rights to rents, royalties, rentals, shut in payments and other
payments which are rents or rentals attributable to Mortgagor's
sale, lease or other disposition of his right to explore or
develop mineral interests in the Premises (collectively, the
"Rents"), and all present and future leases of all or any part of
the Premises ("Leases"); and
(3) All incorporeal rights incidental or accessory to the Premises or
its use (the "Incorporeal Rights"), including without limitation
(i) the right to receive proceeds and awards from the sale,
lease, insurance loss, claims for damages, or condemnation,
expropriation or other taking of the Premises (the "Proceeds");
(ii) rights under service, maintenance, or warranty contracts
relating to the Premises; and (iii) rights under trade names,
patents, or copyrights that are subject to use in connection with
the Premises or Mortgagor's business or other activities
conducted thereon.
1. Covenants. 1.1 The Mortgaged Property shall remain specially
mortgaged, pledged, affected and hypothecated to, and subject to a security
interest in favor of, Mortgagee until the full and final payment, observance
and performance of the Obligations and cancellation of this Mortgage from the
public records. Mortgagor shall not sell, transfer, mortgage, assign, pledge,
alienate or create any security interest in the Mortgaged Property. In no event
shall any such act by Mortgagor, whether or not authorized by Mortgagee,
prejudice the rights of Mortgagee under this mortgage.
1.2. Mortgagor shall make all repairs, additions, and improvements
necessary to maintain the Mortgaged Property in good condition and to prevent
any impairment of the security of this mortgage. If Mortgagor fails to maintain
the Mortgaged Property in good condition, Mortgagee may, at its option, cause
the Mortgaged Property to be maintained in good condition at Mortgagor's cost.
1.3. (a) Mortgagor shall keep the Mortgaged Property constantly insured
against risk of loss by fire, wind, storm, flood, tornado, theft, and all such
other hazards, casualties, and contingencies as may be deemed necessary by
Mortgagee. The insurance shall be in such amounts and shall be issued by such
companies as are acceptable to Mortgagee. All policies of insurance shall be
delivered to Mortgagee, shall contain a loss payable clause in favor of
Mortgagee, and shall be in a form acceptable to Mortgagee. All renewal policies
shall be delivered to Mortgagee at least fifteen (15) days prior to the
expiration date of the existing policy.
(b) The insurance policies required by this mortgage shall
provide that any loss payable to Mortgagee and Mortgagor, as their respective
interests may appear, shall be payable to Mortgagee notwithstanding any act or
omission of Mortgagor or of any other party, which would otherwise result in a
forfeiture of such insurance, and that policies shall not be canceled even for
nonpayment of premium or the coverage reduced without at least thirty (30) days
prior written notice to Mortgagee.
(c) Mortgagor shall promptly notify Mortgagee of any insured
loss. If Mortgagee receives any sum of money from any insurance policy
affecting the Mortgaged Property, Mortgagee may, at its option and in such
manner
2
<PAGE> 3
as it may determine, (i) retain the money and apply it toward the payment,
observance and performance of any one or more of the Obligations, with
Mortgagee having the right to impute the money among the Obligations in any
manner specified by Mortgagee, or (ii) pay all or part of the money, under such
conditions as Mortgagee may determine, to Mortgagor to enable Mortgagor to
repair or restore the Mortgaged Property or use the money for any other purpose
satisfactory to Mortgagee, all without prejudice to, and without affecting the
lien of, this mortgage.
1.4. Mortgagor shall pay promptly when due all taxes, local and special
assessments, and governmental and utility charges (collectively, the "Taxes")
imposed, assessed, or levied on all or any part of the Mortgaged Property, and
Mortgagor shall furnish Mortgagee evidence of the payment of the Taxes. If
Mortgagor for any reason does not pay promptly when due any of the Taxes,
Mortgagee is hereby authorized to pay such unpaid Taxes with full subrogation
to all rights of all authorities imposing such Taxes by reason of Mortgagee's
payment, and Mortgagor shall promptly reimburse Mortgagee on demand for Taxes
paid by Mortgagee. Mortgagor shall, if requested by Mortgagee, pay to Mortgagee
an amount equal to the estimated annual Taxes and the premiums for the
insurance required by this Mortgage, so that Mortgagee shall have sufficient
funds available to pay such Taxes and insurance premiums, and Mortgagor shall,
at the option of Mortgagee, pay such amounts either thirty (30) days before
they become due, or in equal monthly payments in advance, with such payments
commencing one (1) month after the date of this mortgage.
1.5. Mortgagor shall pay promptly when due all of Mortgagor's
obligations that might, if unpaid, result in or permit the creation of a lien
or encumbrance on all or any part of the Mortgaged Property. Mortgagor shall do
everything necessary to preserve the priority of this mortgage without any
expense to Mortgagee. Mortgagor shall notify Mortgagee immediately if any lien
is filed against any part of the Mortgaged Property or if any part of the
Mortgaged Property is seized, attached, or levied against. Mortgagor shall
immediately obtain the release of the Mortgaged Property from any seizure,
lien, or attachment, and if Mortgagor fails to do so, Mortgagee may, at its
option, obtain the release of the Mortgaged Property at Mortgagor's expense.
1.6. (a) Mortgagor shall comply with all laws, ordinances, regulations,
covenants, conditions, and restrictions affecting the Mortgaged Property, its
use, construction, or maintenance, including, without limitation, all
Environmental Laws. As used in this Mortgage, "Environmental Laws" shall mean
any and all federal, state or local laws, rules, regulations, orders, permits,
or ordinances involving the environment including, but without limitation, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9607 et seq., as amended by the Superfund Amendment and Reauthorization
Act of 1986, Pub. L. No. 99-499, 100 Stat. 1613 (codified as amended in various
sections of 42 U.S.C.), the Hazardous Materials Transportation Act, Pub. L. No.
93-633, 88 Stat. 2156 (codified as amended in various sections of 46 U.S.C.);
the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., Article 2315.3 of the Louisiana Civil Code, Statewide Order 29-B
by Office of Conservation, Department of Natural Resources, State of Louisiana,
the Louisiana Abandoned Oilfield Waste State Law (La. R.S. 30:71, et seq.), and
the Louisiana Environmental Quality Act (La. R.S. 30:2001, et seq.) as they now
exist or may subsequently be modified, supplemented or amended. Mortgagor
warrants that neither Mortgagor, any occupant of the Mortgaged Property, or the
Mortgaged Property is in violation of or subject to any existing, pending, or
threatened investigation or inquiry by any governmental authority or to any
remedial obligations under any of the Environmental Laws.
(b) Mortgagor shall forever indemnify, defend and hold harmless
Mortgagee, its directors, officers, employees and agents from and against all
harms, including, without limitation, damages, punitive damages, liabilities,
losses, demands, claims, costs, recovery actions, lawsuits, administrative
proceedings, orders, response costs, compliance costs, investigation expenses,
consultant fees, attorneys' fees and litigation expenses arising from (i) the
operation of any of the Environmental Laws, and (ii) the violation by
Mortgagor, any occupant of the Mortgaged Property, or the Mortgaged Property of
any of the Environmental Laws. Mortgagor shall pay all costs and expenses
incurred by Mortgagee to enforce the provisions of this paragraph, including,
without limitation, attorneys' fees and litigation expenses. The provisions of
this paragraph shall survive the cancellation of this mortgage and shall remain
in full force and effect beyond the expiration of any applicable statute of
limitations and payment or satisfaction in full of any single claim of
Mortgagee within the scope of the provisions of this paragraph.
1.7. Mortgagor shall not remove any part of the Mortgaged Property from
its present location without Mortgagee's prior written consent.
1.8. Mortgagor shall permit Mortgagee and its agents to have access to,
and to inspect the Mortgaged Property at all reasonable times.
1.9. Mortgagor warrants that Mortgagor lawfully owns and possesses the
Mortgaged Property, that the Mortgaged Property is registered in Mortgagor's
name, that the Mortgaged Property has not been alienated by Mortgagor, and that
there are no mortgages, liens, judgments or encumbrances against the Mortgaged
Property unless specifically listed here:
a. Mortgage by Fishing Tools, Inc. in favor of Jefferson Guaranty
Bank in the amount of $1,500,000.00, dated April 21, 1998,
recorded in MOB 2511, folio 295.
3
<PAGE> 4
Mortgagor represents and warrants to Mortgagee that the obligations
secured by the $1,500,000.00 Mortgage has been fully paid or performed and that
Mortgagor will have the $1,500,000.00 Mortgage cancelled of record by not later
than February 28, 1999.
1.10. The maximum amount of the Obligations secured by this mortgage and
assignment of leases and rents shall not at any one time exceed One Hundred
Million ($100,000,000.00) Dollars. Mortgagee shall have full subrogation to
Mortgagor's rights to all Leases and Rents.
1.11 Mortgagor shall administer the Leases, Rents and Incorporeal Rights
in a fiduciary capacity for the benefit of Mortgagee. Although this instrument
creates a present pledge and assignment of and vested security right in the
Leases and Rents, Mortgagor shall be entitled to collect the Rents until the
occurrence of a Default or until Mortgagee sends written notice to Mortgagor at
Mortgagor's address set forth above, whereupon Mortgagee shall have the right
to receive and collect the Rents. All Proceeds shall be paid directly to
Mortgagee. Mortgagor hereby irrevocably appoints Mortgagee its agent and
attorney-in-fact (coupled with an interest), to demand, sue for, collect,
receive, and receipt for the Rents and Proceeds, and to exercise all the rights
and privileges of Mortgagor under any of the Leases or Incorporeal Rights
affecting the Mortgaged Property, including without limitation, the right to
fix or modify the amount of the Rents, to evict any lessee, tenant or occupant
(the "Lessee") from the Mortgaged Property, to relet such property and to do
all such things as Mortgagee may deem necessary. Mortgagor hereby irrevocably
consents that all Lessees of the Mortgaged Property shall be authorized to pay
the Rents directly to Mortgagee without liability for the determination of the
actual existence of any Default, the Lessees being hereby expressly relieved of
any obligation to Mortgagor with respect to Rents paid to Mortgagee. All Rents
and Proceeds collected under this mortgage shall be applied, after payment of
all costs and charges, as a credit against the Obligations. Mortgagee shall
have no legal or contractual responsibility for the condition of the Mortgaged
Property, for any obligation to perform leases affecting the Mortgaged
Property, or for any dangerous or defective condition of the Mortgaged
Property. Mortgagor indemnifies and shall defend the Mortgagee and its agents,
employees, successors, and assigns (the "Indemnified Parties") and to hold them
harmless from any cost, expense, liability, loss, or damage, including, without
limitation, reasonable attorneys' fees, which may or might be incurred by them
by reason of the assignment of and security interest in the Rents, Leases and
Incorporeal Rights. The obligation set forth herein to indemnify, defend, and
hold the Indemnified Parties harmless shall be secured by this mortgage.
1.12. Mortgagor hereby agrees to pay promptly all charges, costs, and
attorneys' fees incurred in connection with the preparation, execution, and
recordation of this mortgage.
1.13. If Mortgagor fails to perform any obligation under this mortgage,
then the Mortgagee may, at its option, perform such obligation, and the cost of
such performance shall be reimbursable to Mortgagee upon demand and added to
the amount secured by this mortgage, provided that the maximum amount to be
secured by this mortgage shall not, at any one time, exceed One Hundred Million
($100,000,000.00) Dollars. Authorizations granted to the Mortgagee to pay or
perform obligations on behalf of the Mortgagor, or to enforce or collect
Leases, Rents and Proceeds, are solely for the benefit of Mortgagee, to be
exercised in Mortgagee's sole discretion, and shall be performed at the sole
risk and expense of Mortgagor. Mortgagee shall have no liability to Mortgagor,
or any other party, either directly or by set-off or compensation, for failure
to perform such obligations or to enforce or collect Leases, Rents or Proceeds,
or for performing in a manner that causes damage to the Mortgagor.
2. Default and Remedies. 2.1. The occurrence of any one or more of the
following events shall constitute a default (a "Default") under this mortgage:
(a) failure to pay promptly on demand any principal or interest
due on the Note;
(b) failure to pay promptly on demand any sums advanced by
Mortgagee for the payment of insurance premiums, Taxes, the cost of maintaining
the Mortgaged Property in good repair, or the cost of obtaining the release of
the Mortgaged Property from any seizure, lien, or attachment;
(c) failure by Mortgagor to observe or perform any of Mortgagor's
covenants, agreements, and obligations under this mortgage;
(d) the inaccuracy of any warranty made by Mortgagor to Mortgagee
in this mortgage or otherwise; or
(e) the seizure, attachment or sequestration of any part of the
Mortgaged Property.
2.2. If a Default occurs, Mortgagee may, at Mortgagee's option, without
notice to Mortgagor, declare the Obligations to be immediately due and payable,
and may immediately exercise all remedies provided under this mortgage or by
law. For purposes of executory process, Mortgagor confesses judgment in favor
of Mortgagee for the full amount of the Obligations. Mortgagee may cause all or
any part of the Mortgaged Property to be seized and sold under executory or
other legal process without appraisement, which is hereby expressly waived, as
an entirety or in parcels, as Mortgagee may determine, to the highest bidder
for cash, or on such terms as are acceptable to Mortgagee.
2.3. To the extent permitted by law, Mortgagor hereby expressly waives
(a) the benefit of appraisement provided for in Articles 2332, 2336, 2723 and
2724, Louisiana Code of Civil Procedure, and all other laws conferring such
benefits; (b) the demand and three (3) days delay accorded by Articles 2639 and
2721, Louisiana Code of Civil
4
<PAGE> 5
Procedure; (c) the notice of seizure required by Articles 2293 and 2721,
Louisiana Code of Civil Procedure; (d) the three (3) days delay provided by
Articles 2331 and 2722, Louisiana Code of Civil Procedure; (e) the benefit of
the other provisions of Articles 2331, 2722, and 2723, Louisiana Code of Civil
Procedure; (f) the benefit of the provisions of any other articles of the
Louisiana Code of Civil Procedure not specifically mentioned above; (g) all
rights of division and discussion with respect to any Obligation; and (h) all
homestead and other exemptions relating to the Mortgaged Property.
2.4. In addition to all of the other rights and remedies of Mortgagee
under this mortgage, if a Default occurs, Mortgagee may, at Mortgagee's option,
without notice to Mortgagor, obtain an environmental site assessment for the
Mortgaged Property prepared by an environmental consulting firm selected by
Mortgagee and an appraisal of the Mortgaged Property prepared by an appraiser
selected by Mortgagee. Mortgagor shall promptly on demand reimburse Mortgagee
for the cost of the assessment and appraisal and the cost thereof shall be
secured by this Mortgage. Mortgagor shall grant and hereby irrevocably grants
to Mortgagee, and any consulting firms and appraisers hired by Mortgagee,
access to the Mortgaged Property for purposes of preparing and obtaining all
assessments and appraisals.
2.5. Pursuant to Louisiana Revised Statutes 9:5136, et seq., Mortgagor
hereby designates Mortgagee, or any employee, agent, or other person named by
Mortgagee at the time any seizure of the Mortgaged Property is effected by
Mortgagee to serve as a keeper of the Mortgaged Property pending the judicial
sale thereof. The keeper's fees shall be determined by the Court before which
the proceedings are pending, and the payment of such fees shall be secured by
this mortgage.
2.6. If any proceedings are instituted to enforce this mortgage by
executory process or otherwise, all declarations of fact made by authentic act
before a notary public in the presence of two witnesses by a person declaring
that such facts lie within that person's knowledge shall constitute authentic
evidence of such facts for the purpose of executory process.
3. Other Provisions. 3.1. The parties to this mortgage waive the
production of mortgage, tax and assessment certificates and all other
certificates or researches, and release the undersigned Notary Public and the
surety on the undersigned Notary Public's bond from all resulting
responsibility and liability.
3.2. It is expressly agreed that any and all stipulations, agreements,
warranties, and covenants by Mortgagor in favor of Mortgagee contained in this
mortgage, and all rights, powers, and privileges conferred in this mortgage on
Mortgagee by any of the provisions of this mortgage shall inure to and be for
the benefit of and may be exercised by Mortgagee, its successors, and assigns.
All covenants and agreements contained in this mortgage to be observed or
performed by Mortgagor shall be binding upon Mortgagor and upon Mortgagor's
heirs, administrators, executors, successors, and assigns, as well as upon any
person, firm, or corporation hereafter acquiring title to the Mortgaged
Property, or any part thereof, by, through, or under Mortgagor, and the word
"Mortgagor," unless the context otherwise requires, shall also mean and include
the heirs, administrators, executors, successors, and assigns of Mortgagor, and
any other person, firm, or corporation acquiring title to any of the Mortgaged
Property by, through, or under Mortgagor.
3.3. If any provision of this mortgage is invalid or unenforceable, such
invalidity or unenforceability shall not affect the other provisions of this
mortgage.
THUS DONE AND PASSED, in multiple originals at Houston, Texas, on the
day, month, and year first above written, in the presence of the undersigned
competent witnesses, who sign their names with the appearer and the undersigned
Notary Public.
WITNESSES: MORTGAGOR:
FISHING TOOLS, INC.
BY:
- --------------------------------- ----------------------------------
NAME: EUGENE L. BUTLER
TITLE: PRESIDENT
- ---------------------------------
---------------------------
NOTARY PUBLLC
MY COMMISSION EXPIRES __________________ [SEAL]
5
<PAGE> 1
EXHIBIT 11
PONDER INDUSTRIES, INC., AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28 February 28
----------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
COMPUTATION OF BASIC LOSS PER SHARE:
Net loss $ (1,568) $ (961) $ (2,528) $ (1,385)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 9,324,395 6,509,883 9,298,604 6,116,923
============ ============ ============ ============
BASIC LOSS PER COMMON SHARE $ (.17) $ (.15) $ (.27) $ (.23)
============ ============ ============ ============
COMPUTATION OF DILUTED LOSS PER SHARE:
Net loss $ (1,568) $ (961) $ (2,528) $ (1,385)
Interest and debt issue cost amortization expense not
incurred upon assumed conversion of Senior Notes
(1998) -- 32 -- 48
------------ ------------ ------------ ------------
Net loss applicable to common stockholders used for
computation $ (1,568) $ (929) $ (2,528) $ (1,337)
============ ============ ============ ============
Weighted average number of shares of common stock
outstanding 9,324,395 6,509,883 9,298,604 6,116,923
Weighted average incremental shares outstanding upon assumed
conversion of options and warrants -- 778,751 -- 573,712
Weighted average incremental shares outstanding upon assumed
conversion of Senior Notes (1998) -- 417,778 -- 340,332
------------ ------------ ------------ ------------
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS USED FOR
COMPUTATION 9,324,395 7,706,412 9,298,604 7,030,967
============ ============ ============ ============
DILUTED LOSS PER COMMON SHARE AND
COMMON SHARE EQUIVALENT $ (.17) $ (.12)(a) $(.27) $ (.19)(a)
============ ============ ============ ============
</TABLE>
(a) This calculation is submitted in accordance with Item 601(b)(11) of
Regulation S-K although it is not required by SFAS No. 128 because it is
antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PONDER
INDUSTRIES, INC.'S CONDENSED CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1999,
AND ITS CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN
ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1999
<CASH> 198
<SECURITIES> 240
<RECEIVABLES> 6,862
<ALLOWANCES> 698
<INVENTORY> 4,421
<CURRENT-ASSETS> 11,457
<PP&E> 39,773
<DEPRECIATION> (17,577)
<TOTAL-ASSETS> 35,286
<CURRENT-LIABILITIES> 17,238
<BONDS> 363
0
0
<COMMON> 94
<OTHER-SE> 16,696
<TOTAL-LIABILITY-AND-EQUITY> 35,286
<SALES> 9,473
<TOTAL-REVENUES> 9,473
<CGS> 4,036
<TOTAL-COSTS> 10,706
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 919
<INCOME-PRETAX> (2,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,528)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
