<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission File Number: 001-11335
DOMINION RESOURCES BLACK WARRIOR TRUST
(Exact name of registrant as specified in its charter)
Delaware 75-6461716
(State or other jurisdiction (I.R.S. Employer
or incorporation or Identification No.)
organization)
NationsBank of Texas, N.A.
901 Main Street
12th Floor
Dallas, Texas 75202
(Address of principal executive offices)
(Zip code)
(214) 508-2400
(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
--- ---
Number of units of beneficial interest outstanding at May 13, 1996:
7,850,000
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
NationsBank of Texas, N.A., as Trustee (the "Trustee") of Dominion Resources
Black Warrior Trust (the "Trust"), pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in annual financial statements have been condensed
or omitted pursuant to such rules and regulations, although the Trustee believes
that the disclosures are adequate to make the information presented not
misleading. The condensed financial statements of the Trust presented herein
are unaudited and, therefore, are subject to year-end adjustments. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and notes thereto in the Trust's Report on Form 10-K
for the year ended December 31, 1995. The December 31, 1995 balance sheet is
derived from the audited balance sheet as of that date. In the opinion of the
Trustee, all adjustments necessary to present fairly the assets, liabilities and
trust corpus of the Trust as of March 31, 1996, the distributable income for the
three-month periods ended March 31, 1996 and 1995 and the changes in trust
corpus for the three-month periods ended March 31, 1996 and 1995, have been
included. The distributable income for such interim period is not necessarily
indicative of the distributable income for the full year.
The condensed financial statements as of March 31, 1996 and for the three-
month periods ended March 31, 1996 and 1995, included herein have been reviewed
by Deloitte & Touche LLP, independent public accountants, as stated in their
report appearing herein.
-2-
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
NationsBank of Texas, N.A.,
as Trustee of Dominion Resources
Black Warrior Trust
We have reviewed the accompanying condensed statements of assets, liabilities
and trust corpus of the Dominion Resources Black Warrior Trust as of March 31,
1996, and the related condensed statements of distributable income and changes
in trust corpus for the three-month periods ended March 31, 1996 and 1995.
These condensed financial statements are the responsibility of the Trustee.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
As described in Note 2 to the condensed financial statements, these condensed
financial statements have been prepared on a modified cash basis of accounting,
which is a comprehensive basis of accounting other than generally accepted
accounting principles.
Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
the basis of accounting described in Note 2.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of Dominion
Resources Black Warrior Trust as of December 31, 1995, and the related
statements of distributable income and changes in trust corpus for the year then
ended (not presented herein); and in our report dated March 22, 1996, we
expressed an unqualified opinion on those financial statements. In our opinion,
the information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 1995 is fairly stated, in all
material respects, in relation to the statement of assets, liabilities and trust
corpus from which it has been derived.
/s/ Deloitte & Touche LLP
Dallas, Texas
May 10, 1996
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<PAGE>
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF ASSETS,
LIABILITIES AND TRUST CORPUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 44,733 $ 24,521
Royalty interests in
gas properties (less accumulated
amortization of $35,356,689
at March 31, 1996 and $30,200,537
at December 31, 1995) 120,460,811 125,616,964
------------ ------------
TOTAL ASSETS $120,505,544 $125,641,485
============ ============
LIABILITIES AND TRUST CORPUS
- ----------------------------
Trust administration expenses payable $ 127,759 $ 95,646
Trust corpus -
7,850,000 units of
beneficial interest
authorized, issued and
outstanding 120,377,785 125,545,839
------------ ------------
TOTAL LIABILITIES
AND TRUST CORPUS $120,505,544 $125,641,485
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- --------------------------------------------------------------------------------
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<PAGE>
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For For
the Three the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Royalty income $5,719,160 $5,608,705
Interest income 14,170 14,682
---------- ----------
5,733,330 5,623,387
General and administrative
expenses (199,302) (105,780)
---------- ----------
Distributable income $5,534,028 $5,517,607
---------- ----------
Distributable income
per unit
(7,850,000 units) $ .70 $ .70
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- --------------------------------------------------------------------------------
-5-
<PAGE>
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For For
the Three the Three
Months Ended Months Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Trust corpus, beginning of period $125,545,839 $139,471,673
Amortization of royalty interests (5,156,152) (7,217,138)
Distributable income 5,534,028 5,517,607
Distributions to unitholders (5,545,930) (5,433,121)
------------ ------------
Trust corpus, end of period $120,377,785 $132,339,021
============ ============
Distributions per unit (7,850,000 units) $ .71 $ .69
============ ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- --------------------------------------------------------------------------------
-6-
<PAGE>
DOMINION RESOURCES BLACK WARRIOR TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. TRUST ORGANIZATION AND PROVISIONS
Dominion Resources Black Warrior Trust (the "Trust") was formed as a
Delaware business trust pursuant to the terms of the Trust Agreement of Dominion
Resources Black Warrior Trust (as amended, the "Trust Agreement") entered into
effective as of May 31, 1994, by and among Dominion Black Warrior Basin, Inc.,
an Alabama corporation (the "Company"), as trustor, Dominion Resources, Inc., a
Virginia corporation ("Dominion Resources"), and NationsBank of Texas, N.A., a
national banking association (the "Trustee"), and Mellon Bank (DE) National
Association, a national banking association (the "Delaware Trustee"), as
trustees. The trustees are independent financial institutions.
The Trust is a grantor trust formed to acquire and hold certain overriding
royalty interests (the "Royalty Interests") burdening proved natural gas
properties located in the Pottsville coal formation of the Black Warrior Basin,
Tuscaloosa County, Alabama (the "Underlying Properties") owned by the Company.
The Trust was initially created by the filing of its Certificate of Trust with
the Delaware Secretary of State on May 31, 1994. In accordance with the Trust
Agreement, the Company contributed $1,000 as the initial corpus of the Trust.
On June 28, 1994, the Royalty Interests were conveyed to the Trust by the
Company pursuant to the Overriding Royalty Conveyance (the "Conveyance") dated
effective as of June 1, 1994, from the Company to the Trust, in consideration
for all the 7,850,000 authorized units of beneficial interest ("Units") in the
Trust. The Company transferred its Units to its parent, Dominion Energy, Inc.,
a Virginia corporation, which in turn transferred such Units to its parent,
Dominion Resources, which sold 6,850,000 of such Units to the public through
various underwriters (the "Underwriters") in June 1994 and an additional 54,000
Units through the Underwriters in August 1994 (collectively, the "Public
Offering"). The remaining 946,000 Units held by Dominion Resources were sold to
the public through certain of the Underwriters in June 1995 pursuant to Post-
Effective Amendment No. 1 to the Form S-3 Registration Statement relating to the
Units (the "Post-Effective Amendment"). All of the production attributable to
the Underlying Properties is from the Pottsville coal formation and currently
constitutes coal seam gas that entitles the owners of such production, provided
certain requirements are met, to tax credits pursuant to Section 29 of the
Internal Revenue Code of 1986, as amended, upon the production and sale of such
gas.
The Trustee has all powers to collect and distribute proceeds received by
the Trust and to pay Trust liabilities and expenses. The Delaware Trustee has
only such powers as are set forth in the Trust Agreement or are required by law
and is not empowered to otherwise manage or take part in the management of the
Trust. The Royalty Interests are passive in nature and neither the Delaware
Trustee nor the Trustee has any control over, or any responsibility relating to,
the operation of the Underlying Properties or the Company's interest therein.
-7-
<PAGE>
The Trust is subject to termination under certain circumstances described in
the Trust Agreement. Upon the termination of the Trust, all Trust assets will
be sold and the net proceeds therefrom distributed to Unitholders.
The only assets of the Trust, other than cash and temporary investments
being held for the payment of expenses and liabilities and for distribution to
Unitholders, are the Royalty Interests. The Royalty Interests consist of
overriding royalty interests burdening the Company's interest in the Underlying
Properties. The Royalty Interests generally entitle the Trust to receive 65
percent of the Company's Gross Proceeds (as defined below). The Royalty
Interests are non-operating interests and bear only expenses related to
property, production and related taxes (including severance taxes). "Gross
Proceeds" consist generally of the aggregate amounts received by the Company
attributable to the interests of the Company in the Underlying Properties from
the sale of coal seam gas at the central delivery points in the gathering system
for the Underlying Properties. The definitions, formulas and accounting
procedures and other terms governing the computation of the Royalty Interests
are set forth in the Conveyance.
Because of the passive nature of the Trust and the restrictions and
limitations on the powers and activities of the Trustee contained in the Trust
Agreement, the Trustee does not consider any of the officers and employees of
the Trustee to be "officers" or "executive officers" of the Trust as such terms
are defined under applicable rules and regulations adopted under the Securities
Exchange Act of 1934.
2. BASIS OF ACCOUNTING
The financial statements of the Trust are prepared on a modified cash basis
and are not intended to present financial position and results of operations in
conformity with generally accepted accounting principles ("GAAP"). Preparation
of the Trust's financial statements on such basis includes the following:
- - Royalty income and interest income are recorded in the period in which
amounts are received by the Trust rather than in the month of production or
accrual, respectively.
- - General and administrative expenses recorded are based on liabilities paid
and cash reserves established out of cash received.
- - Amortization of the Royalty Interests is calculated on a unit-of-production
basis and charged directly to trust corpus when revenues are received.
- - Distributions to Unitholders are recorded when declared by the Trustee (see
Note 4).
The financial statements of the Trust differ from financial statements
prepared in accordance with GAAP because royalty income is not accrued in the
period of production, general and administrative expenses recorded are based on
liabilities paid and cash reserves established rather than on an accrual basis,
and amortization of the Royalty Interests is not charged against operating
results.
-8-
<PAGE>
Dominion Resources sold an aggregate of 6,904,000 Units in the Public
Offering at a price of $20.00 per unit during 1994 and sold the remaining
946,000 Units to the public through the Underwriters pursuant to the Post-
Effective Amendment during June 1995 at a price of $18.75 per Unit.
Accordingly, the Trust's royalty interests in gas properties and trust corpus at
March 31, 1996 and December 31, 1995 reflect the sale of 6,904,000 Units at the
price of $20.00 per Unit and the remaining 946,000 Units at the price of $18.75.
The Trust reviews the carrying value of its investment in the Royalty
Interests. If an impairment event occurs and it is determined that the carrying
value of these assets may not be recoverable, an impairment provision, as
measured by the amount by which the carrying value of the assets exceeds their
fair market value, will be recorded and charged to the trust corpus.
3. FEDERAL INCOME TAXES
The Trust is a grantor trust for Federal income tax purposes. As a grantor
trust, the Trust is not required to pay Federal or state income taxes.
Accordingly, no provision for income taxes has been made in these financial
statements.
Because the Trust is treated as a grantor trust, and because a Unitholder is
treated as directly owning an interest in the Royalty Interests, each Unitholder
will be taxed directly on his per Unit share of income attributable to the
Royalty Interests consistent with the Unitholder's method of accounting and
without regard to the taxable year or accounting method employed by the Trust.
Production from coal seam gas wells drilled after December 31, 1979 and
prior to January 1, 1993, qualifies for the Federal income tax credit for
producing nonconventional fuels under Section 29 of the Internal Revenue Code.
This tax credit is calculated annually based on each year's qualified production
through the year 2002. Such credit, based on a Unitholder's pro rata share of
qualifying production, may not reduce his regular tax liability (after the
foreign tax credit and certain other non-refundable credits) below his
alternative minimum tax. Any part of the Section 29 credit not allowed for the
tax year solely because of this limitation is subject to certain carryover
provisions. Each Unitholder should consult his tax advisor regarding Trust tax
compliance matters.
4. DISTRIBUTIONS TO UNITHOLDERS
The Trustee determines for each calendar quarter the amount of cash
available for distribution to Unitholders. Such amount (the "Quarterly
Distribution Amount") is an amount equal to the excess, if any, of the cash
received by the Trust attributable to production from the Royalty Interests
during such quarter, provided that such cash is received by the Trust on or
before the last business day prior to the 45th day following the end of such
calendar quarter, plus the amount of interest expected by the Trustee to be
earned on such cash proceeds during the period between the date of receipt by
the Trust of such cash proceeds and the date of payment to the Unitholders of
such Quarterly Distribution Amount, plus all other cash receipts of the Trust
during such quarter (to the extent not distributed or held for future
distribution as a Special Distribution Amount (as defined below) or included in
the previous Quarterly Distribution
-9-
<PAGE>
Amount) (which might include sales proceeds not sufficient in amount to qualify
for a special distribution as described in the next paragraph and interest),
over the liabilities of the Trust paid during such quarter and not taken into
account in determining a prior Quarterly Distribution Amount, subject to
adjustments for changes made by the Trustee during such quarter in any cash
reserves established for the payment of contingent or future obligations of the
Trust. An amount which is not included in the Quarterly Distribution Amount for
a calendar quarter because such amount is received by the Trust after the last
business day prior to the 45th day following the end of such calendar quarter
will be included in the Quarterly Distribution Amount for the next calendar
quarter. The Quarterly Distribution Amount for each quarter will be payable to
Unitholders of record on the 60th day following the end of such calendar quarter
unless such day is not a business day in which case the record date is the next
business day thereafter. The Trustee will distribute the Quarterly Distribution
Amount for each calendar quarter on or prior to 70 days after the end of such
calendar quarter to each person who was a Unitholder of record on the record
date for such calendar quarter.
The Royalty Interests may be sold under certain circumstances and will be
sold following termination of the Trust. A special distribution will be made of
undistributed net sales proceeds and other amounts received by the Trust
aggregating in excess of $10 million (a "Special Distribution Amount"). The
record date for a Special Distribution Amount will be the 15th day following the
receipt by the Trust of amounts aggregating a Special Distribution Amount
(unless such day is not a business day, in which case the record date will be
the next business day thereafter) unless such day is within 10 days or less
prior to the record date for a Quarterly Distribution Amount, in which case the
record date will be the date that is established for the next Quarterly
Distribution Amount. Distribution to Unitholders of a Special Distribution
Amount will be made no later than 15 days after the Special Distribution Amount
record date.
-10-
<PAGE>
Item 2. Trustee's Discussion and Analysis of Financial Condition and Results of
Operations.
The Trust makes quarterly cash distributions to holders of units of
beneficial interest ("Units") in the Trust ("Unitholders"). The only assets of
the Trust, other than cash and cash equivalents being held for the payment of
expenses and liabilities and for distribution to Unitholders, are certain
overriding royalty interests (the "Royalty Interests") burdening certain proved
natural gas properties located in the Pottsville coal formation of the Black
Warrior Basin, Tuscaloosa County, Alabama (the "Underlying Properties"). The
Royalty Interests owned by the Trust burden the interest in the Underlying
Properties that is owned by Dominion Black Warrior Basin, Inc. (the "Company"),
an indirect wholly owned subsidiary of Dominion Resources, Inc. ("Dominion
Resources").
Distributable income of the Trust consists of the excess of royalty income
plus interest income over the organizational and administrative expenses of the
Trust. Upon receipt by the Trust, royalty income is invested in short-term
investments in accordance with the Trust Agreement of Dominion Resources Black
Warrior Trust (as amended, the "Trust Agreement") until its subsequent
distribution to Unitholders.
The amount of distributable income of the Trust for any quarter may differ
from the amount of cash available for distribution to Unitholders in such
quarter due to differences in the treatment of the expenses of the Trust in the
determination of those amounts. The financial statements of the Trust are
prepared on a modified cash basis pursuant to which the expenses of the Trust
are recognized when they are paid or reserves are established for them.
Consequently, the reported distributable income of the Trust for any quarter is
determined by deducting from the income received by the Trust the amount of
expenses paid by the Trust during such quarter. The amount of cash available
for distribution to Unitholders is determined as adjusted for changes in
reserves for unpaid liabilities in accordance with the provisions of the Trust
Agreement. (See Note 4 to the financial statements of the Trust appearing
elsewhere in this Form 10-Q for additional information regarding the
determination of the amount of cash available for distribution to Unitholders.)
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
- ---------------------------------------------------------------------
The Trust was initially created by the filing of a Certificate of Trust with
the Secretary of State of Delaware on May 31, 1994. The Royalty Interests
consist of overriding royalty interests burdening the Company's interest in the
Underlying Properties. The Royalty Interests generally entitle the Trust to
receive 65 percent of the Company's Gross Proceeds (as defined below) during the
preceding calendar quarter. The Royalty Interests are non-operating interests
and bear only expenses related to property, production and related taxes
(including severance taxes). "Gross Proceeds" consist generally of the
aggregate amounts received by the Company attributable to the interests of the
Company in the Underlying Properties from the sale of coal seam gas at the
central delivery points in the gathering system for the Underlying Properties.
The definitions, formulas and accounting procedures and other terms governing
the computation of the Royalty Interests are set forth in the Overriding Royalty
Conveyance from the Company to the Trust.
-11-
<PAGE>
The Trust received royalty income amounting to $5,719,160 during the first
quarter of 1996, compared to $5,608,705 during the first quarter of 1995. This
revenue was derived from the receipt of cash on production of 3,072 Mmcf at an
average price received of $1.96 per mcf after deducting production taxes of
$316,393 compared to 3,261 Mmcf at an average price received of $1.81 per mcf
after deducting production taxes of $294,563 during the first quarter of 1995.
Because the Trust incurs administrative expenses throughout a quarter but
receives royalty income only once in a quarter, the Trustee has established, and
anticipates that it will maintain for the foreseeable future, a cash reserve to
enable it to pay administrative expenses as they become due. The amount of the
cash reserve will fluctuate from time to time as expenses are paid and royalty
income is received. Administrative expenses during the period amounted to
$199,302 compared to $105,780 in the first quarter of 1995. This increase is
primarily due to the timing of payments of expenses associated with year end
reporting. These transactions resulted in distributable income for the first
quarter of 1996 of $5,534,028, or $.70 per Unit, compared to distributable
income for the first quarter of 1995 of $5,517,607, or $.70 per Unit. The Trust
made a distribution on March 8, 1996 of $5,545,930, or $.71 per Unit.
-12-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
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<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.
DOMINION RESOURCES BLACK WARRIOR TRUST
By: NATIONSBANK OF TEXAS, N.A.,
Trustee
By: /s/ Ron E. Hooper
-------------------------------------
Ron E. Hooper
Vice President
Date: May 13, 1996
(The Trust has no directors or executive officers.)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 44,733
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,733
<PP&E> 155,817,500
<DEPRECIATION> 35,356,689
<TOTAL-ASSETS> 120,505,544
<CURRENT-LIABILITIES> 127,759
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 120,377,785
<TOTAL-LIABILITY-AND-EQUITY> 120,505,544
<SALES> 5,733,330
<TOTAL-REVENUES> 5,733,330
<CGS> 0
<TOTAL-COSTS> 199,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,534,028
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,534,028
<EPS-PRIMARY> .70
<EPS-DILUTED> 0
</TABLE>
