SECURITIES AND EXCHANGE COMMISSION
Washington DC 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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-11516
BOX ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2369148
(State or other jurisdiction (IRS employer identification no.)
of incorporation or organization)
8201 Preston Road, Suite 600, Dallas, Texas 75225-6211
(Address of principal executive offices)
(Zip code)
(214) 890-8000
(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 shorter period than 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
There were 3,219,010 outstanding shares of Class A (Voting) Common Stock,
$1 par value, on November 10, 1997. There were also 17,087,410 outstanding
shares of Class B (Non-Voting) Common Stock, $1 par value, on such date.
<PAGE>
Box Energy Corporation
INDEX
PART I FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Condensed Balance Sheets as of September 30, 1997 and
December 31, 1996 3
Condensed Statements of Income - Three and nine months
ended September 30, 1997 and 1996 4
Condensed Statements of Cash Flows - Nine months ended
September 30, 1997 and 1996 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Box Energy Corporation
Condensed Balance Sheets
(In thousands, except share data)
September 30, December 31,
Assets 1997 1996
------------- ------------
Current assets (Unaudited)
Cash and cash equivalents $ 3,732 $ 2,997
Marketable securities - available
for sale 23,234 32,678
Accounts receivable - oil and
natural gas 5,625 7,093
Accounts receivable - other 427 1,456
Note receivable - S-Sixteen Holding
Company 6,765 -
Prepaid expenses and other current
assets 1,466 1,961
------------- ------------
Total current assets 41,249 46,185
------------- ------------
Properties
Oil and natural gas properties
(successful-efforts method) 210,231 187,251
Other properties 3,259 3,226
Accumulated depreciation, depletion
and amortization (134,062) (116,371)
------------- ------------
Total properties 79,428 74,106
------------- ------------
Other assets
Deferred income taxes (net of
valuation allowance) 14,663 14,723
Deferred charges (net of accumulated
amortization) 1,389 1,585
------------- ------------
Total other assets 16,052 16,308
------------- ------------
Total assets $ 136,729 $ 136,599
============= ============
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable $ 7,963 $ 5,043
Accrued interest payable 1,589 379
Accrued transportation payable -
related party 283 263
Short-term notes payable 6,000 -
Net Profits expense payable 1,050 1,481
------------- ------------
Total current liabilities 16,885 7,166
------------- ------------
Convertible subordinated notes
payable 55,077 55,077
------------- ------------
Total Liabilities 71,962 62,243
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, $1.00 par value
Class A (voting) - 15,000,000
shares authorized, 3,250,110
shares issued 3,250 3,250
Class B (non-voting) - 30,000,000
shares authorized, 17,553,010
shares issued 17,553 17,553
Additional paid-in capital 25,197 25,197
Treasury stock, at cost, 31,100
shares Class A, and 415,800 shares
Class B (3,465) -
Retained earnings 22,306 28,542
Valuation allowance for marketable
securities (74) (186)
------------- ------------
Total stockholders' equity 64,767 74,356
------------- ------------
Total liabilities and stockholders'
equity $ 136,729 $ 136,599
============= ============
See accompanying Notes to Financial Statements.
<PAGE>
Box Energy Corporation
Condensed Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues
Oil sales $ 5,011 $ 4,505 $15,544 $13,410
Gas sales 7,436 10,203 28,842 35,863
Interest income 556 551 1,702 1,721
Gain (loss) on sale of investments 35 - 30 (76)
Other income 437 564 1,551 1,839
-------- -------- -------- --------
Total revenues 13,475 15,823 47,669 52,757
Costs and expenses
Operating costs and expenses 1,032 922 2,750 3,037
Transportation expense 673 622 2,081 1,851
Net Profits Interest expense 1,883 2,182 6,588 9,241
Exploration expenses 2,617 5,725 6,523 17,878
Depreciation, depletion and amortization 5,587 4,877 17,741 13,058
General and administrative 1,603 2,146 5,030 5,769
Legal expense 558 1,272 2,275 2,914
Reorganization expense 6,434 1,934 7,072 1,934
Interest and financing expense 1,394 1,231 3,845 3,676
-------- -------- -------- --------
Total costs and expenses 21,781 20,911 53,905 59,358
-------- -------- -------- --------
Income (loss) before taxes (8,306) (5,088) (6,236) (6,601)
-------- -------- -------- --------
Income tax expense (benefit) (725) (1,950) - (2,407)
-------- -------- -------- --------
Net income (loss) $(7,581) $(3,138) $(6,236) $(4,194)
======== ======== ======== ========
-------- -------- -------- --------
Primary income per share $ (0.37) $ (0.15) $ (0.30) $ (0.20)
======== ======== ======== ========
Weighted average shares outstanding
Class A Voting 3,219 3,250 3,238 3,250
Class B Non-voting 17,088 17,553 17,341 17,553
-------- -------- -------- --------
Total 20,307 20,803 20,579 20,803
======== ======== ======== ========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Box Energy Corporation
Condensed Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 30,
1997 1996
--------- ---------
Cash flow provided by operations
Net income (loss) $ (6,236) $ (4,194)
Depreciation, depletion and amortization 17,741 13,058
Amortization of deferred charges 196 196
Amortization of premium on marketable
securities 29 13
Deferred income tax expense (benefit) - (2,407)
Dry hole and impaired property costs 3,823 15,226
Decrease in accounts receivable 2,497 1,859
Decrease (increase) in prepaid expenses and
other current assets 495 (756)
Increase in accounts payable and accrued
expenses 3,719 3,778
Loss on sale of properties 68 6
--------- ---------
Net cash flow provided by operations 22,332 26,779
--------- ---------
Cash from investing activities
Payments for capital expenditures (27,275) (31,290)
Sales and maturities of marketable
securities 10,216 17,020
Investment in marketable securities (597) (21,186)
Notes receivable - S-Sixteen Holding Company (7,250) -
Principal repayments - S-Sixteen Holding
Company 485 -
Repurchase common stock (3,465) -
Proceeds from property sales 289 82
Net cash used in investing activities (27,597) (35,374)
Cash from financing activities
Proceeds from notes payable 7,000 -
Payments on notes payable (1,000) -
--------- ---------
Net cash provided by financing activities 6,000 -
--------- ---------
Net increase (decrease) in cash and cash
equivalents 735 (8,595)
Cash and cash equivalents at beginning of
period 2,997 21,644
--------- ---------
Cash and cash equivalents at end of period $ 3,732 $ 13,049
========= =========
See accompanying Notes to Financial Statements.
<PAGE>
Box Energy Corporation
Notes to Financial Statements
September 30, 1997
Note 1. Accounting Policies and Basis of Presentation
Box Energy Corporation (the "Company") acquired all of the assets
and liabilities of OKC Limited Partnership (the "Predecessor
Partnership") on April 15, 1992, in exchange for the common stock of
the Company (the "Corporate Conversion"). The common stock was
distributed to the general partners, limited partners and other
unitholders of the Predecessor Partnership. The Company accounted for
the exchange in a manner similar to a pooling of interests and recorded
the assets and liabilities at the historical cost of the Predecessor
Partnership. References to the Company include the Predecessor
Partnership unless otherwise stated.
S-Sixteen Holding Company ("SSHC") (formerly known as Box
Brothers Holding Company ("BBHC")) owns 1.8 million shares or
approximately 57% of the Company's outstanding Class A (Voting) Common
Stock ("Class A Stock"). On August 29, 1997, entities controlled by Mr.
J. R. Simplot purchased all of the voting shares and approximately 90%
of the non-voting stock of BBHC (the "Simplot Transaction"). Mr.
Simplot is one of the plaintiffs in the Griffin, et al. v. Box, et al.
litigation (the "Griffin Case"). See Note 6. Contingencies - Griffin
Case.
The financial statements are prepared according to the
instructions to Form 10-Q and may not include all disclosures required
for financial statements prepared in conformity with generally accepted
accounting principles. The results of operations and financial position
for the interim periods presented include all transactions and
adjustments which management believe are necessary for fair
presentation. All adjustments are of a normal recurring nature. The
condensed balance sheet as of December 31, 1996 was derived from
audited financial statements but does not include all disclosures
required by generally accepted accounting principles. These financial
statements should be read together with the audited financial
statements of the Company for the year ended December 31, 1996, which
are included in the Company's Form 10-K for the period then ended. The
results of operations for the three and nine months ended September 30,
1997, are not necessarily indicative of the results for the full year.
There were no material changes in the significant accounting policies
or details of accounts during the interim periods except as stated
below.
Note 2. Note Receivable - S-Sixteen Holding Company
On April 29, 1997, the Company lent SSHC $7.25 million. The
original May 29, 1997, due date was extended to June 3, 1997, at which
time the note receivable was replaced by a new $6.95 million note
receivable dated June 3, 1997. The new note receivable matures May 29,
1998, and requires monthly installment payments of principal and
interest totaling $100,000 commencing June 29, 1997. The interest rate
is equal to the prime rate of Texas Commerce Bank National Association
plus 1% until the sixth month when the rate escalates monthly by 0.1%
over the previous month's rate. Pledged as collateral under the Amended
and Restated Pledge Agreement (the "Pledge Agreement") are the 1.8
million shares of the Company's Class A Stock, 800,000 shares of CKB
Petroleum, Inc. ("CKBP") common stock and 800,000 shares of CKB &
Associates, Inc. ("Associates") common stock. The pledged stock
represents approximately 57%, 94% and 94% of the outstanding shares of
the classes stock, respectively. The fair market value of the
collateral is required to be $2.00 for each $1.00 of unpaid principal
debt. Failure to pay the monthly installment within 10 days and failure
to maintain fair market value of collateral are two, among several,
actions which constitute events of default under the Pledge Agreement.
In the event of default, as defined in the Pledge Agreement, the
Company, upon five days' notice to SSHC, has the right to foreclose
upon and sell the collateral stock. The Pledge Agreement also provides
that upon the occurrence and during the continuance of an event of
default, if the collateral has not been foreclosed upon, the Company
may direct the vote of the collateral stock.
Note 3. Notes Payable
In December 1992, the Company issued $55.1 million of 8 1/4%
Convertible Subordinated Notes ("Notes"). The Notes mature December 1,
2002 and are convertible into shares of Class B (Non-Voting) Common
Stock ("Class B Stock") at the election of the holder any time before
maturity, unless previously redeemed. Interest accrued at 8 1/4% per
annum is payable semiannually on each June 1 and December 1. The
Company may redeem all or a portion of the Notes any time after
December 1, 1995, at 105.775% of the face amount. This percentage
decreases .825% each subsequent December 1. The Notes are unsecured and
subordinate in right of payment to all existing and future senior
indebtedness.
The Simplot Transaction caused a "change in control" as defined
in the Indenture for the Notes (the "Indenture"). On September 22,
1997, in accordance with the Indenture, the Company made an offer to
purchase the Notes at 100% of the face amount, plus accrued interest
through October 28, 1997 (the "Offer"). The Offer expired on October
22, 1997. On October 28, 1997, the Company repurchased $16.7 million of
the Notes outstanding, as a result of this offer to purchase required
by the Indenture.
Note 4. Treasury Stock
During the second and third quarters of 1997, the Company
purchased 31,100 shares of Class A Stock and 465,600 shares of Class B
Stock at a total cost of $3.5 million, or $6.98 per share. The Company
uses the cost method of accounting for the treasury stock. The Board of
Directors has approved the repurchase of up to an aggregate 1.0 million
shares of the Company's common stock.
Note 5. Reorganization Expense
Reorganization expense includes employee severance expense,
litigation settlement amounts and other costs. The litigation
settlement amounts certain other costs were connected with the Simplot
Transaction. The expense accrued and recorded through September 30,
1997 was $7.1 million of which $2.2 million has been paid as of that
date.
Employee Severance
The Company's prior management entered into severance agreements
with its employees in December 1995. The severance agreements provided
between 6 and 18 months' pay plus certain benefits to employees who are
terminated by the Company without cause (as defined in the severance
agreements) or who resign for good reason. Good reason (as defined in
the severance agreements) includes, among other things, any change in
benefits or job status that an employee believes is adverse to that
employee. Through October 31, 1997, 31 employees have been dismissed,
resigned or have notified the Company of their resignation. The 31
employees include three executive officers (Senior Vice
President/Operations, Vice President/Marketing and Supply, and
Treasurer), ten employees from the operations technical staff (eight
explorationists, one engineer and one landman), and 18 other
professional or clerical personnel. The total employee severance
expense was $3.6 million.
Thomas D. Box Settlement
In connection with the Simplot Transaction, the Company agreed to
pay Thomas D. Box $1.2 million to settle his severance claims and
lawsuits against the Company. See Note 7. Contingencies - Thomas D. Box
Cases. Thomas D. Box was the Chief Executive Officer and President of
the Company before his termination by the Company's Board of Directors
in August 1996.
Simplot Settlement
Further, in connection with the Simplot Transaction, the Company
and the plaintiffs in the Griffin Case executed a letter of intent to
settle all the litigation brought by the plaintiffs. See Note 7.
Contingencies - Griffin Case. Under the terms of the proposed
settlement the Company will pay to Mr. Simplot $1.9 million for
attorneys' fees and to Mr. James A. Lyle (one of the plaintiffs in the
Griffin Case) $100,000 for attorneys' fees.
Note 6. Related Party Transaction
Mr. Simplot, through entities controlled by him, controls 57% of
the outstanding Class A Stock of the Company and 94% of the outstanding
shares of both CKBP and Associates. Under both applicable law and Board
of Directors' resolution, transactions with affiliates must be approved
by the Board of Directors, be fair and reasonable to the Company and be
on terms no less favorable to the Company than can be obtained from an
unaffiliated party in an arm's-length transaction.
CKBP owns a minority interest in the pipeline that transports oil
from South Pass Area (offshore Louisiana) to Venice, Louisiana. The
pipeline tariff is $2.75 per barrel and is published with the Federal
Energy Regulatory Commission. The rate is consistent with all other
rates from the South Pass Area to Venice. Transportation incurred and
payable to CKBP was $777,000 and $2.4 million for the three and nine
months ended September 30, 1997, and $681,000 and $2.1 million for the
three and nine months ended September 30, 1996. The purchase and
ownership of this pipeline by CKBP has been the subject of litigation
in the Griffin Case. See Note 7. Contingencies - Griffin Case.
Under the Partnership Agreement of the Predecessor Partnership,
the general partners were entitled to advancement of litigation
expenses in the event they were named parties to litigation in their
capacity as general partners. In order to receive such advancements,
each general partner was required, in writing, to request advancement
of litigation expenses and undertake to repay any advancements in the
event it was determined, in accordance with applicable law, that the
general partners were not entitled to indemnification for litigation
expenses. Each general partner executed such an undertaking agreement
in relation to the Griffin Case. Accordingly, the Predecessor
Partnership and later the Company, advanced litigation expenses to CKB
& Associates, Inc. and Cloyce K. Box (and his estate following his
death) in connection with such litigation. No judicial determination
has been made that the general partners are not entitled to
indemnification for litigation expenses incurred in connection with the
Griffin Case. During the three and nine months ended September 30,
1997, the Company advanced $91,000 and $145,000, respectively, for
legal expenses related to the Griffin Case and $42,000 and $1.4 million
for the three and nine months ended September 30, 1996.
The Company has a $6.95 million note receivable from SSHC. See
Note 2. Note Receivable - S-Sixteen Holding Company. The balance of the
note receivable at September 30, 1997, was $6.77 million.
During September 1997, the Company recorded $1.9 million payable
to Mr. Simplot and $100,000 payable to Mr. Lyle for attorneys' fees in
connection with the settlement of the Griffin Cases. See Note 7.
Contingencies - Griffin Case.
During the nine months ended September 30, 1997, the Company paid
executive search fees totaling $76,000 to Preng and Associates Inc.,
which is a company controlled by a member of the Board of Directors.
Note 7. Contingencies
Griffin Case
Griffin et al. v. Box et al. was filed in November 1987, in the
United States District Court in Dallas, Texas by unitholders, including
Mr. Simplot, of the Predecessor Partnership, against the general
partners of the Predecessor Partnership and certain of their
affiliates. While the plaintiffs brought individual claims, all of
which were dismissed before or during the trial, the core of the action
was founded upon derivative claims brought on behalf of the Predecessor
Partnership and the Company. Chief among these derivative claims was
the allegation that the general partners breached the partnership
agreement, their fiduciary duties and implied duties in relation to
their affiliate's acquisition of an oil pipeline that transports oil
from the Gulf of Mexico to Venice, Louisiana. See Note 6. Related Party
Transactions.
Following a jury verdict adverse to the general partners, the
court entered judgment, on behalf of the Company, against the general
partners for approximately $20.0 million in actual damages and
approximately $2.2 million in punitive damages against the individual
general partner Cloyce K. Box. In addition, the court imposed a
constructive trust on the pipeline revenue of CKBP. On appeal, this
judgment was reversed because of inconsistent jury findings on which
the judgment was based, and the case was remanded for a new trial on
the pipeline derivative claims. Further, the appeals court held that
Mr. Lyle had standing to bring the derivative action but remanded for
further fact findings regarding the stock ownership status of two of
the original plaintiffs, who held a small number of units of the
Predecessor Partnership. In June 1997, the district court dismissed,
without prejudice, the case for lack of federal jurisdiction. On July
22, 1997, James A. Lyle filed a Notice of Appeal to the Fifth Circuit
challenging the District Court's dismissal. This action was
subsequently dismissed. Plaintiffs refiled the action in Texas State
Court, and on November 4, 1997, the action was dismissed.
The Company and Mr. Simplot have executed a letter of intent
concerning settlement of this litigation. The Company executed the
letter in order to avoid continuing litigation. The terms of the
settlement are that Mr. Simplot will receive $1.9 million for
attorneys' fees from the Company. Mr. Lyle will receive $100,000 for
attorneys' fees and has the right to convert 2,500 of his shares of the
Company's Class B Stock into a like number of shares of Class A Stock.
Phillips Petroleum Case
This litigation was filed against the Predecessor Partnership in
August 1990 by Phillips Petroleum Company ("Phillips") and is currently
pending in Orleans Parish, Louisiana. A non-jury trial was held in
April 1997. At this trial, Phillips claimed that pursuant to its 33%
Net Profits interest in South Pass Block 89, it was entitled to receive
an overriding royalty for months in which "net profits" were not
achieved; that an excessive oil transportation fee was being charged to
the Net Profits account; and that the entire $69.6 million lump sum
cash payment received by the Predecessor Partnership should have been
credited to the Net Profits account instead of the $5.8 million that
was credited. On the latter claim, Phillips alleged damages in excess
of $21.5 million, while on the first two claims Phillips alleged
aggregate damages of several million dollars. Phillips further
contended that it was entitled to double damages and cancellation of
the farmout agreement that created the Net Profits interest. In
addition to contesting the claims of Phillips, the Company asserted a
counterclaim at trial that Phillips had breached a settlement agreement
regarding previous litigation between the parties and claimed damages
in excess of $10.0 million. The parties presented oral arguments to the
court on September 3, 1997.
Devere and Nealon Cases
Two class actions, one styled Melissa Devere v. John F. Arning,
Don D. Box, Thomas D. Box, Kent R. Hance, Sr., John L. Kelsey, Alan C.
Shapiro, Norman W. Smith, Ewell Doak Walker and Box Energy Corporation,
and the other styled Caren M. Nealon and B. Peter Knudson v. John F.
Arning, Don D. Box, Thomas D. Box, Kent R. Hance, Sr., John L. Kelsey,
Alan C. Shapiro, Norman W. Smith, Ewell Doak Walker, Richard S.
Whitesell, Jr. and Box Energy Corporation, were filed in the Chancery
Court of Delaware in Wilmington in April and May 1995, respectively.
The plaintiffs, who are holders of the Company's Class B Stock, allege
that the Company failed to make a proper response to offers or
overtures previously made to purchase the Company's stock by Mr.
Simplot and Phoenix Canada Oil Co., Ltd. and failed to solicit other
offers for the sale of the Company. The Plaintiffs seek to compel the
Company to take certain steps intended to result in a sale of the
Company and unspecified amounts of damages, attorneys' fees and costs
from the individual defendants. The cases were consolidated, and the
defendants filed a motion seeking to dismiss the consolidated case. The
defendants also filed a motion to stay discovery while the motion to
dismiss is pending.
Thomas D. Box Cases
In August 1996, Thomas D. Box filed suit in state district court
in Dallas, purportedly on both his own behalf and on behalf of the
Company, against all of his brothers, SSHC (then BBHC) and CKBP. He
alleged breaches of fiduciary duties and waste of corporate assets. As
remedies, he claimed unspecified monetary damage, attorneys' fees, an
accounting and appointment of a receiver for SSHC. He later amended his
lawsuit to add the Company and several of its then directors as
defendants. In accordance with Delaware law, the Company's Board of
Directors appointed a special committee to review the litigation and
take any actions the committee, on the advice of independent counsel,
deemed necessary. All of Thomas D. Box's claims against the Company
were settled in connection with the Simplot Transaction. See Note 5.
Reorganization Expense - Thomas D. Box Settlement.
Other Contingencies
The Company is not a party to any material pending legal
proceedings other than the foregoing. If the Company is not successful
in the foregoing suits, it is the opinion of the Company that any
adverse judgments, other than certain possible results of the Phillips
Litigation, would not have a material adverse effect on the Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion is intended to assist in the
understanding of the Company's financial position and results of
operations and is intended to be read with the financial statements,
the related notes to financial statements and the Company's Form 10-K
for the year ended December 31, 1996. This discussion contains
historical information and certain forward-looking statements that
involve risks and uncertainties about the business, long-term strategy,
financial condition and future of the Company. Statements concerning
results of future exploration, exploitation, development and
acquisition expenditures and expense and reserve levels are forward-
looking statements. These statements are based on assumptions
concerning commodity prices, drilling results and production, and
administrative and interest costs that management believes are
reasonable based on currently available information of known facts and
trends; however, management's assumptions and the Company's future
performance are both subject to a wide range of business risks and
there is no assurance that these goals and projections can or will be
met.
Box Energy Corporation ("the Company") acquired all of the assets
and liabilities of OKC Limited Partnership (the "Predecessor
Partnership") on April 15, 1992, in exchange for the common stock of
the Company (the "Corporate Conversion"). The Predecessor Partnership
then distributed, as part of its liquidation and dissolution, 3,250,110
shares of Class A (Voting) Common Stock (the "Class A Stock") and
17,553,110 shares of Class B (Non-Voting) Common Stock (the "Class B
Stock") to the former general partners, limited partners and
unitholders of the Predecessor Partnership. After the Corporate
Conversion, Cloyce K. Box, one of the former general partners, owned
approximately 57% of the outstanding Class A Stock.
At the time of the Corporate Conversion, Mr. Simplot, Mr. Lyle
and others had pending litigation against the Predecessor Partnership
concerning voting issues and the purchase of an oil pipeline by a
privately controlled affiliate of Cloyce K. Box (the "Griffin Case").
See Notes to the Financial Statements - Note 7. Contingencies - Griffin
Case. After his death in October 1993, the Class A Stock was foreclosed
upon by Box Brothers Holding Company ("BBHC"). At the time of the
foreclosure, BBHC was primarily owned and controlled by the four sons
of Cloyce K. Box. A plethora of disputes and lawsuits concerning the
control of BBHC arose among the four brothers.
In March 1997, the Company named an outsider from within the oil
and gas industry, James A. Watt, as President and Chief Operating
Officer. Mr. Watt, who has significant oil and gas experience, is the
first executive from outside the controlling interest of the Company to
head the Company. In August 1997, an entity controlled by Mr. Simplot
purchased the controlling interest in BBHC (the "Simplot Transaction").
The name of Box Brothers Holding Company or BBHC was changed to S-
Sixteen Holding Company or SSHC. In connection with this purchase, Mr.
Simplot and the four Box brothers agreed to settle all lawsuits among
them and the Company. Mr. Simplot also owns or controls approximately
15% of the outstanding Class B Stock. The Simplot Transaction triggered
a requirement (discussed below) that the Company offer to purchase the
outstanding 8 1/4% Convertible Subordinated Notes previously issued by
the Company. This obligation has had a significant impact on the
liquidity of the Company. Moreover, liquidity has further been
negatively affected by the employee severance agreements, the Thomas D.
Box severance and settlement, and the settlement of the Griffin Case.
Liquidity and Capital Resources
Box Energy Corporation is an independent oil and gas exploration
and production company with activity and properties in three core
areas: offshore Gulf of Mexico, Mississippi/Alabama and South Texas. In
prior years, the Company's capital expenditures outside the South Pass
Area were primarily exploration oriented. The resulting finding and
development costs were abysmal when compared to the industry averages.
The Company's long-term strategy is, in 1997, to focus on stopping the
decline in oil and natural gas reserves and then increase reserves by
sustaining an acceptable annual growth rate with finding and
development costs which are in line with industry peers. The Company's
capital expenditures will entail a balanced exploration, development
and acquisition program. Consistent with this new strategy, in August
1997 the Company purchased $12.0 million of producing properties in
South Texas. In October 1997, the Company supplemented this acquisition
with an additional $2.5 million purchase of an additional working
interest in one of these properties. The Company drilled several
exploratory wells during the first nine months of this year and will
continue to drill additional exploratory wells in the future. For the
last quarter of the year, the Company has committed to approximately
$4.6 million for drilling costs of exploratory wells and $3.3 million
for development projects.
In connection with the Simplot Transaction, the Company was
required by the Indenture covering the Notes to make an offer to
repurchase the 8 1/4% Convertible Subordinated Notes. Accordingly on
September 22, 1997, the Company made an offer to purchase the Notes at
100% of the face amount, plus accrued interest through October 28,
1997. The offer to purchase expired on October 22, 1997. On October
28, 1997, the Company repurchased $16.7 million of the Notes
outstanding.
Previous management entered into severance agreements with its
employees in December 1995. The severance agreements provided between 6
and 18 months' pay plus certain benefits to employees who are
terminated by the Company without cause (as defined in the severance
agreements) or who resign for good reason. Good reason (as defined in
the severance agreements) includes, among other things; any change in
benefits or job status that an employee believes is adverse to him or
her. During 1996 and 1997, 46 employees were terminated by the Company
or resigned for "good reason." The total cost to the Company was $5.6
million for the two years. For the nine months ended September 30,
1997, the Company incurred severance costs totaling $3.6 million of
which approximately $2.6 million will be paid by year-end.
In connection with the Simplot Transaction, the Company paid
Thomas D. Box $1.2 million to settle his severance claims and lawsuits
against the Company. Thomas D. Box was the Company's Chief Executive
Officer and President before his termination in August 1996. Further,
the Company and the plaintiffs in the Griffin Case executed a letter of
intent to settle all the litigation brought by the plaintiffs. Under
the terms of the proposed settlement, which are subject to court
approval, the Company will pay to Mr. Simplot $1.9 million for
attorneys' fees and to Mr. Lyle $100,000 for attorneys' fees.
The Company and Phillips Petroleum Company are engaged in a
dispute concerning the Net Profits interest in South Pass Block 89. A
non-jury trial was held in April 1997. Phillips alleges damages in
excess of $21.5 million on one claim and several million dollars on two
additional claims. Phillips further contended that it was entitled to
double damages and cancellation of the farmout agreement that created
the Net Profits interest. Oral arguments were presented to the court
September 3, 1997.
The Company expects to use its current liquidity, cash flow from
operating activities and the line of credit facility to fund the
capital commitments discussed above. The current liquidity and capital
resources could be adversely affected if the Company were to make a
significant acquisition of properties, by certain possible outcomes of
the Phillips litigation, a material decline in oil or natural gas
prices or a material decline in oil and gas production or reserves. On
September 30, 1997, the current assets of the Company were $41.2
million which exceeded the current liabilities by $24.4 million
compared to current assets exceeding current liabilities by $39.0
million on December 31, 1996. Factors contributing to the decrease in
liquidity included a $4.4 million, or 17%, decrease in cash flow from
operations, a $3.4 million purchase of treasury stock and capital
expenditures totaling $27.3 million. The Company liquidated its
portfolio of marketable securities in order to have funds available to
purchase the notes that were tendered as a result of the Company's
offer to purchase the outstanding Notes. The remaining proceeds from
this liquidation have been invested in money market funds.
Oil and gas revenues less operating expense and Net Profits
expense (the "Net Operating Margin") from South Pass Block 89 Platform
B ("Platform B") was $11.6 million or 35% of the Company's total Net
Operating Margin for the nine months ending September 30, 1997. Natural
gas production from Platform B is sold under a long-term contract that
has a contract price significantly more than the current spot market
price. A significant portion of the Net Operating Margin from Platform
B is from one well, Well B-20S, which is the only well currently
producing from the U-1/1 reservoir.
During the first nine months of 1997, the Company observed an
increase in oil production from Well B-20S that may, among other
things, indicate that the oil column is moving into the perforations of
this well. In addition, the Company's net working interest
deliverability ("Seller's Delivery Capacity") has declined from 16.2
MMcfgd in September 1995 to 4.1 MMcfgd in September 1997. The decline
occurred because of the loss of production from two of the three gas
wells drilled into the U-1/1 reservoir and the natural depletion of
Well B-20S. A large portion of the remaining oil and gas reserves in
the U-1/1 reservoir are classified as proved undeveloped. The Company
is contemplating another well or side track of an existing wellbore in
the U-1/1 reservoir to maximize the production from this reservoir.
Recent discoveries, development wells and acquisitions lessen the
Company's dependence on oil and gas revenue from Platform B but may not
be adequate to replace the immediate decline in gas revenue from
unforeseen mechanical or other problems with Well B-20S.
During the second quarter of 1994, Box Energy established a one-
year line of credit with a bank. The line of credit with a borrowing
base of $10.0 million expires in June 1998. The Company renewed the
line in 1995, 1996 and 1997. The line of credit is collateralized by
the Company's South Pass oil and natural gas properties. The Company
has borrowed $6.0 million and has issued letters of credit totaling
$250,000 against this line of credit. The Company is currently
negotiating an increase in the borrowing base.
The Company's balance sheets reflect a net deferred income tax
asset of $14.7 million on September 30, 1997 and $14.7 million on
December 31, 1996. This asset arises primarily as a result of federal
income tax loss carryforwards and temporary differences between the
book basis and tax basis of the Company's oil and gas properties. The
net operating loss carryforwards will begin to expire by 2007. A
valuation allowance was recorded against the deferred income tax asset
generated this year. Based on the Company's projections, the deferred
income tax asset is expected to reverse during the next several years
as significant taxable income is generated from Platform B and the
reserves near Platform B are depleted. Such projections assume that the
Company's natural gas production from Platform B will be sold under its
long-term gas sale contract with prices significantly in excess of
current market prices. If actual taxable income from future operations
were substantially less than the projections, the deferred tax asset
would be impaired, causing an increase in the valuation allowance and a
significant charge to earnings.
Results of Operations
The Company recorded a net loss for the third quarter of 1997 of
$7.6 million, or $0.37 per share, compared to a net loss of $3.1
million, or $0.15 per share, during the third quarter of 1996. For the
nine months ended September 30, 1997, the Company 's net loss was $6.2
million or $0.30 per share, compared to a net loss for the first nine
months of 1996 of $4.2 million or $0.20 per share. The net loss
resulted primarily from reorganization costs charged during the third
quarter and lower natural gas revenues from Platform B.
Oil sales for the three and nine months ended September 30, 1997,
compared to the three and nine months ended September 30, 1996,
increased $2.1 million or 16% and $506,000 or 11%, respectively. The
increase was primarily a result of a 159,312 and 68,646 barrel increase
in oil sales volumes for the three and nine months, respectively. For
the nine months ended September 30, 1997, oil production from new wells
was 74,638 barrels and increased oil sales revenue by $1.2 million. Oil
production for the three months ended September 30, 1997 from new wells
was 43,106 barrels and increased oil sales revenue by $697,000. The
Moselle Dome property began producing in late March of this year and
produced 32,120 and 60,157 barrels of oil during the three and nine
months ended September 30, 1997. Oil production from the Indian Wells
property increased 25,341 barrels because of the second producing well
from this property. Oil production from properties in South Texas,
primarily the Smith properties acquired in August, was 11,074 barrels.
The remaining increase in oil production for the three and nine months
of 1997 was primarily from Platform C and Platform D in South Pass
Blocks 86, 87 and 89 partially offset by a decrease in production on
South Pass Block 89 Platform B. For the nine months ended September
30, 1997, average oil prices decreased from $19.33 to $18.22 or 6%.
Average oil prices for the third quarter decreased from $19.77 to
$16.90 or 15%. These decreases in average prices partially offset the
increases in volumes by $795,000 and $709,000, respectively, compared
to the three and nine-month periods of 1996.
For the three and nine months ended September 30, 1997, natural
gas sales decreased $3.8 million, or 27%, and $7.0 million, or 20%,
respectively. The primarily reason for the decrease was a 1.0 Bcf
decrease in natural gas production from South Pass Block 89 Platform B
during the first nine months of 1997. This decrease was partially
offset by an increase in production from other properties and an
increase in the contract gas price for natural gas sales from South
Pass Block 89.
Well B-20 located on Platform B experienced an expected decline
in natural gas production. The decrease in production from Platform B
has caused natural gas revenues to be $3.6 and $10.3 million lower for
the three and nine months ended September 30, 1997, respectively,
compared to the same periods in the prior year. Natural gas production
from other areas, primarily Platform C producing from South Pass Blocks
86 and 89 and Platform "D" producing from South Pass Block 87 and West
Delta Block 128, increased by a net 299,640 Mcf for the nine months
ended September 30, 1997 and by 175,373 Mcf for the three months then
ended. Such increase partially offset the decrease in gas sales from
Platform "B" by $1.7 million and $407,000, respectively.
Also offsetting the decrease was an increase in the contract
price for natural gas sales from South Pass Block 89 subject to the
long-term gas sales contract which increases 10% per year and resulted
in additional natural gas revenues for the first nine months of 1997 of
$941,000. The average sales price for spot gas sales increased slightly
from $2.51 per Mcf to $2.59 per Mcf for the nine months ended September
30, 1996 and 1997, respectively. The increase in spot prices increased
natural gas revenues by $185,000.
Operating costs and expenses and transportation expense during
the three and nine months ended September 30, 1997 compared to the same
period in the prior year did not vary significantly. Net Profits
expense decreased $299,000 or 14% for the three months ended September
30, 1997 and $2.6 million or 29% for the nine months ended September
30, 1997 when compared to the respective periods in the prior year. The
decrease in Net Profits expense primarily resulted from lower oil and
natural gas revenues from South Pass Block 89 partially offset by a
decrease in capital and operating expenses charged to the Net Profits
account.
Exploration expense decreased $3.1 million or 54% during the
three months ended September 30, 1997, compared to the three months
ended September 30, 1996. Exploration expense decreased $11.4 million
or 64% during the nine months ended September 30, 1997, compared to the
nine months ended September 30, 1996. The decrease occurred because of
lower dry hole costs of $3.5 million and $11.4 million for the third
quarter and nine months ended September 30, 1997. During the second
quarter of 1996, the Company drilled a dry hole on Ship Shoal Block 352
at a total cost of $7.8 million. During the third quarter of 1996 the
Company drilled dry holes on High Island Block 576 and West Cameron
365. The remaining decrease in dry hole costs was from various other
onshore wells.
Depreciation, depletion and amortization increased $700,000, or
15%, and $4.7 million, or 36%, for the three and nine months ended
September 30, 1997, respectively. The increase resulted for the
following three reasons: First, the cost base subject to depreciation,
depletion and amortization was higher in 1997 compared to 1996
primarily due to the reallocation of platform capital costs on
Platforms C and D in South Pass Blocks 86 and 87. Second, several new
properties became producing properties after the third quarter of 1996
and therefore were subject to depreciation, depletion and amortization.
Finally, the Company achieved an increase in production from Platforms
C and D in the South Pass area.
For the three months ended September 30, 1997, compared to the
same period in the prior year, general and administrative expense
decreased $543,000 or 25%. The decrease resulted from lower salaries of
$243,000, professional services of $127,000 and settlement expense of
$100,000. These were partially offset by increased director's fees of
$167,000. General and administrative expenses for the first nine months
of 1997 decreased $739,000 or 13% due to decreases in almost all line
items. However, the largest decreases came from lower salaries of
$515,000 or 21% and reduced professional fees of $206,000 or 46%.
Reorganization expense for the third quarter includes payments to
employees under the employee severance agreements and legal fees or
other charges that relate to or were paid because of the Simplot
Transaction. Reorganization costs accrued or paid are as follows:
employee severance payments $3.6 million, Thomas D. Box severance and
legal claims and fees $1.2 million, Mr. Simplot and Mr. Lyle $2.0
million and other associated expenses $300,000.
For the nine months ended September 30, 1997, the Company
generated a deferred income tax benefit because of the net loss before
income taxes. The deferred income tax benefit generated also increases
the deferred income tax asset. However, the Company increased the
valuation allowance for the deferred income tax asset generated by the
net loss before income taxes. The valuation allowance partially offset
the income tax expense for the three months ended September 30, 1997
and totally offset the deferred income tax benefit for the nine months
ended September 30, 1997. The income tax benefit recorded in the three
months ended September 30, 1997 is the reversal of the deferred income
tax expense recorded during the first six months of 1997.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated herein by this reference is the discussion of
litigation set forth in Part I, Item 1, Notes to the Financial
Statements - Note 7. Contingencies of this Form 10-Q.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
A change of control of the Company occurred on August 29, 1997,
as described in a Schedule 13D dated August 29, 1997 (the "Simplot
Schedule 13D"), filed on behalf of Box Brothers Holding Company
("BBHC"); BBHC Acquisition Co., L.L.C., a Delaware limited liability
company (the "LLC"), as the owner of the common stock described in the
following paragraph; S-Sixteen Limited Partnership, an Idaho Limited
Partnership, ("S-Sixteen), which is the sole member of the LLC; the J.
R. Simplot Self-Declaration of Revocable Trust, dated December 21,
1989, an intervivos revocable trust of which Mr. J. R. Simplot is the
trustee and beneficiary (the "Trust"), which is the sole general
partner of S-Sixteen; and Mr. J. R. Simplot. On October 31, 1997, BBHC
changed its name to S-Sixteen Holding Company.
On August 29, 1997, the LLC purchased, in privately negotiated
transactions pursuant to a certain Master Settlement Agreement, all 33
shares of the outstanding Class A (Voting) Common Stock of BBHC and
38,472 of the 42,875 outstanding shares of Class B (Nonvoting) Common
Stock of BBHC from Thomas D. Box, Don Box, Douglas Box, Gary Box, and
entities controlled by them. The Simplot Schedule 13D states that the
LLC purchased the securities with $21.8 million of working capital
contributed by S-Sixteen, none of which was borrowed funds. As part of
the purchase, Mr. Simplot also agreed to offer to purchase the
remaining 4,403 shares of outstanding BBHC Class B Common Stock, and
such transaction was effected on October 17, 1997, through the
redemption of such shares by BBHC with funds lent to BBHC by the LLC.
S-Sixteen Holding Company is the record and beneficial holder of
1,840,525 shares (57.2%) of the outstanding Class A Stock of the
Company. In connection with the LLC's purchase of BBHC common stock,
the Board of Directors of the Company expanded the size of the Board of
Directors of the Company to ten members and elected Mr. James A. Watt,
Mr. David H. Hawk and Mr. James Arthur Lyle to fill the newly created
directorships. According to the Simplot Schedule 13D, Mr. Hawk and Mr.
Lyle previously were members of a group with Mr. Simplot for purposes
of filing a prior Schedule 13D relating to beneficial ownership of
limited partnership interests in the Predecessor Partnership. The
Simplot Schedule 13D states that Mr. Simplot will review with the Board
of Directors of the Company the qualifications, background, willingness
to serve, and other factors relating to each of the current members of
the Board of Directors with a view to evaluating which members of the
Board will continue to serve as Directors, and that Mr. Simplot may
nominate himself or others to the Board of Directors in the future. Mr.
Simplot has agreed with the Company not to replace current members of
the Board of Directors until such time as a proposed settlement of
certain litigation involving the Company that was brought by Mr.
Simplot and others against the Box brothers and others is either
approved or disapproved by a majority of the Board of Directors,
excluding Mr. Hawk and Mr. Lyle.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1* Certificate of Incorporation, as amended.
3.2++ By-Laws, as amended.
4.1* Form of Indenture.
10.1* Amended and Restated Certificate and Articles of
Limited Partnership of OKC Limited Partnership.
10.2* Restatement and Amendment of Gas Purchase Contract
dated July 15, 1982, as amended on April 19, 1989.
10.3* Farmout Agreement with Aminoil USA, Inc. effective
May 1, 1977, dated May 9, 1977.
10.4* Transportation Agreement with CKB Petroleum, Inc.
dated March 1, 1985, as amended on April 19, 1989.
10.5* Agreement of Compromise and Amendment to Farmout
Agreement, dated July 3, 1989.
10.6* Settlement Agreement with Texas Eastern Transmission
Corporation, dated November 14, 1990.
10.7* Guarantee of Panhandle Eastern Corporation, dated
November 21, 1990.
10.8* Bill of Sale and Assumption of Obligations from OKC
Limited Partnership, dated April 15, 1992.
10.9* Asset Purchase Agreement, dated April 15, 1992.
10.10* 1992 Incentive Stock Option Plan of Box Energy
Corporation.
10.11* 1992 Non-Qualified Stock Option Plan of Box Energy
Corporation.
10.12** Pension Plan of Box Energy Corporation, effective
April 16, 1992.
10.13# First Amendment to the Pension Plan of Box Energy
Corporation, dated December 16, 1993.
10.14## Second Amendment to the Pension Plan of Box Energy
Corporation dated December 31, 1994.
10.15+ Form of Executive Severance Agreement dated as of
December 12, 1995, by and between Box Energy
Corporation and key employees.
10.16+ Form of Letter Agreement regarding severance benefits
dated as of December 12, 1995, by and between Box
Energy Corporation and employees not covered by
Executive Severance Agreements.
10.17*** Amended and Restated Promissory Note between Box
Energy Corporation and Box Brothers Holding Company.
10.18*** Amended and Restated Pledge Agreement between Box
Energy Corporation and Box Brothers Holding Company.
10.19*** Agreement by and between Box Energy Corporation and
James A. Watt.
11.1 Statement regarding computation of income per share.
27 Financial Data Schedule.
(b) The Company filed two Forms 8-K during the quarter ended
September 30, 1997.
- ---------------
*Incorporated by reference to the Company's Registration Statement on
Form S-2 (file number 33-52156) filed with the Commission and effective
on December 1, 1992.
**Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1992 filed with the
Commission and effective on or about March 30, 1993.
#Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1993 filed with the
Commission and effective on or about March 30, 1994.
##Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1994 filed with the
Commission and effective on or about March 30, 1995.
+Incorporated by reference to the Company's Form 10-K (file number 0-
19967) for the fiscal year ended December 31, 1995 filed with the
Commission and effective on or about March 30, 1996.
++Incorporated by reference to the Company's Form 10-K (file number 1-
11516) for the fiscal year ended December 31, 1996 filed with the
Commission and effective on or about March 30, 1997.
***Incorporated by reference to the Company's Form 10-Q (file number 1-
11516) for the fiscal quarter ended June 30, 1997 filed with the
Commission and effective on or about August 12, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
BOX ENERGY CORPORATION
Date: November 14, 1997 By: (James A. Watt)
------------------- --------------------------
James A. Watt
President and
Chief Operating Officer
Date: November 14, 1997 By: (J. Burke Asher)
------------------- --------------------------
J. Burke Asher
Chief Accounting Officer
Box Energy Corporation
Computation of Earnings per Share
Exhibit 11.1
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net income for primary income per share $ (7,581) $ (3,138) $ (6,236) $ (4,194)
Interest expense on 8 1/4 % convertible
subordinated notes 1,145 1,145 3,399 3,411
Income tax effect (assumed to be 35%) (401) (401) (1,189) (1,194)
---------- ---------- ---------- ---------
Net income for fully-diluted income per
share $ (6,836) $ (2,394) $ (4,027) $ (1,977)
========== ========== ========== =========
Primary income per share $ (0.37) $ (0.15) $ (0.30) $ (0.20)
========== ========== ========== =========
Fully-diluted income per share $ (0.27) $ (0.09) $ (0.16) $ (0.08)
========== ========== ========== =========
Calculation of weighted average shares
Class A (Voting) common stock 3,219 3,250 3,238 3,250
Class B (Non-Voting) common stock 17,088 17,553 17,341 17,553
Stock options considered common stock
equivalents - - - 4
---------- ---------- ---------- ---------
Total shares used for primary income per
share 20,307 20,803 20,579 20,807
---------- ---------- ---------- ---------
Contingent shares from remaining stock
options granted 217 331 217 313
Contingent shares from 8 1/4% convertible
subordinated notes 5,007 5,007 5,007 5,007
---------- ---------- ---------- ---------
Total shares used for fully-diluted
income per share 25,531 26,141 25,803 26,127
========== ========== ========== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOX
ENERGY CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER
30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000874992
<NAME> BOX ENERGY CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 3,732 3,732
<SECURITIES> 23,234 23,234
<RECEIVABLES> 6,052 6,052
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 41,249 41,249
<PP&E> 213,490 213,490
<DEPRECIATION> 134,062 134,062
<TOTAL-ASSETS> 136,729 136,729
<CURRENT-LIABILITIES> 16,885 16,885
<BONDS> 55,077 55,077
0 0
0 0
<COMMON> 20,803 20,803
<OTHER-SE> 43,964 43,964
<TOTAL-LIABILITY-AND-EQUITY> 136,729 136,729
<SALES> 12,447 44,386
<TOTAL-REVENUES> 13,475 47,669
<CGS> 11,792 35,683
<TOTAL-COSTS> 20,387 50,060
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,394 3,845
<INCOME-PRETAX> (8,306) (6,236)
<INCOME-TAX> (725) 0
<INCOME-CONTINUING> (7,581) (6,236)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (7,581) (6,236)
<EPS-PRIMARY> (.37) (.30)
<EPS-DILUTED> (.37) (.30)
</TABLE>
