<PAGE> 1
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, 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: 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, N.A., d/b/a Bank of America, N.A.
901 Main Street
17th Floor
Dallas, Texas 75202
(Address of principal executive offices)
(Zip code)
(214) 209-2400
(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 14, 1999:
7,850,000
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by
NationsBank, N.A., d/b/a Bank of America, 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 except for the balances as of December 31, 1998,
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, 1998. The December 31, 1998 balance sheet is derived from the
audited balance sheet as of that date. In the opinion of the Trustee, all
adjustments consisting of normal recurring adjustments necessary to present
fairly the assets, liabilities and trust corpus of the Trust as of March 31,
1999, the distributable income for the three-month periods ended March 31, 1999
and 1998 and the changes in trust corpus for the three-month periods ended March
31, 1999 and 1998, have been included. The distributable income for such interim
periods are not necessarily indicative of the distributable income for the full
year.
The condensed financial statements as of March 31, 1999 and for the
three-month periods ended March 31, 1999 and 1998 included herein have been
reviewed by Deloitte & Touche LLP, independent certified public accountants, as
stated in their report appearing herein.
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<PAGE> 3
INDEPENDENT ACCOUNTANTS' REPORT
NationsBank, N.A., d/b/a Bank of America, N.A.
as Trustee of Dominion Resources
Black Warrior Trust
We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of Dominion Resources Black Warrior Trust as of March 31, 1999, and
the related condensed statements of distributable income and changes in trust
corpus for the three-month periods ended March 31, 1999 and 1998. These
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, 1998, 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 15, 1999, 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, 1998, 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 11, 1999
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<PAGE> 4
DOMINION RESOURCES BLACK WARRIOR TRUST
CONDENSED STATEMENTS OF ASSETS,
LIABILITIES AND TRUST CORPUS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 51,825 $ 59,455
Royalty interests in
gas properties (less accumulated
amortization of $73,102,851
at March 31, 1999 and $70,231,426
at December 31, 1998) 82,714,649 85,586,074
----------- -----------
TOTAL ASSETS $82,766,474 $85,645,529
=========== ===========
LIABILITIES AND TRUST CORPUS
Trust administration expenses payable $ 144,860 $ 112,500
Trust corpus -
7,850,000 units of
beneficial interest
authorized, issued and
outstanding 82,621,614 85,533,029
----------- -----------
TOTAL LIABILITIES
AND TRUST CORPUS $82,766,474 $85,645,529
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- --------------------------------------------------------------------------------
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<PAGE> 5
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, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Royalty income $ 4,858,538 $ 6,917,233
Interest income 13,059 24,710
----------- -----------
4,871,597 6,941,943
General and administrative
expenses (199,565) (193,101)
----------- -----------
Distributable income $ 4,672,032 $ 6,748,842
=========== ===========
Distributable income
per unit (7,850,000 units) $ .60 $ .86
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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<PAGE> 6
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, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Trust corpus, beginning of period $ 85,533,029 $ 97,670,701
Amortization of royalty interests (2,871,425) (2,860,263)
Distributable income 4,672,032 6,748,842
Distributions to unitholders (4,712,022) (6,867,344)
------------ ------------
Trust corpus, end of period $ 82,621,614 $ 94,691,936
============ ============
Distributions per unit (7,850,000 units) $ .60 $ .87
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
- --------------------------------------------------------------------------------
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<PAGE> 7
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 grantor, Dominion Resources, Inc., a
Virginia corporation ("Dominion Resources"), and NationsBank, N.A., d/b/a Bank
of America, N.A., as successor to NationsBank, 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.
Royalty income to the Trust is attributable to the sale of depleting
assets. All of the Underlying Properties consist of producing properties.
Accordingly, the proved reserves attributable to the Underlying Properties are
expected to decline substantially during the term of the Trust and a portion of
each cash distribution made by the Trust will, therefore, be analogous
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<PAGE> 8
to a return of capital. Accordingly, cash yields attributable to the Units are
expected to decline over the term of the Trust.
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.
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 period of
production and accrual, respectively.
- - General and administrative expenses recorded are based on liabilities
paid and cash reserves established out of cash received.
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<PAGE> 9
- - 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.
The net amount of royalty interests in gas properties is limited to the
fair value of these assets, which would likely be measured by discounting
projected cash flows attributable to the Trust's gas reserves plus the estimated
future Section 29 credits for federal income tax purposes. If the net cost of
royalty interests in gas properties exceeds the aggregate of these amounts, an
impairment provision is 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
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<PAGE> 10
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 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.
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<PAGE> 11
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.)
Three Month Period Ended March 31, 1999 Compared to Three Months Ended March 31,
1998
The Trust's 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.
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<PAGE> 12
The Trust received royalty income amounting to $4,858,538 during the
first quarter of 1999 compared to $6,917,233 during the first quarter of 1998.
This revenue was derived from the receipt of cash on production of 2,505 Mmcf at
an average price received of $1.94 per mcf after deducting production taxes of
$276,070 compared to 2,765 Mmcf with an average price of $2.65 per mcf after
deducting production taxes of $419,670 in the first quarter of 1998. For the
three-month period ended March 31,1999, the Trust was negatively impacted by the
decrease in natural gas prices and the decline in production as compared with
the three month period ended March 31, 1998. These prices are influenced by
many factors such as seasonal temperatures, domestic demand and other factors
that are beyond the control of the Trustee. The decrease in production is
attributed to normal depletion of existing available reserves. Production taxes
are based on revenues rather than production volumes. Accordingly, production
taxes did not fluctuate proportionately to the decrease in volumes.
Administrative expenses during the first quarter of 1999 amounted to
$199,565 compared to $193,101 in the comparable period in 1998. For this period,
these expenses were primarily related to administrative services provided by
Dominion Resources and the Trustee and Mellon Bank (DE) National Association, a
national banking association, and the preparation of year-end reports for
submission to the Securities and Exchange Commission and to Unitholders during
the period.
Distributable income for the first quarter of 1999 was $4,672,032, or
$.60 per Unit, compared to distributable income for the first quarter of 1998 of
$6,748,842, or $.86 per Unit. The Trust made a distribution on March 11, 1999 of
$.600257 per Unit compared to a distribution of $.874820 per Unit made during
the first quarter of 1998.
Year 2000
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed and developed without
considering the impact of the upcoming change in the century. If not corrected,
many computer applications could fail or create erroneous results by or at the
Year 2000. The Year 2000 issue affects virtually all companies and
organizations. If a company or organization does not successfully address its
Year 2000 issues, it may face material adverse consequences. The Trustee has
identified the General Ledger/Accounts Payable System as the primary system that
is vulnerable to the Year 2000 issue. The current system is Year 2000 compliant.
The Trust selected a system that has been warranted to be Year 2000 compliant
and completed the installation of the new system at the beginning of 1998. The
cost of the system was approximately $6,000. To date the Trustee has incurred no
other costs in connection with its efforts to identify, assess, remediate and
test the Trust's systems for Year 2000 compliance.
The Trustee is in the process of identifying and assessing other
information technology ("IT") systems used in connection with the Trust as well
as other systems for Year 2000 compliance. Non-IT systems are generally more
difficult to assess because they often contain embedded technology that may be
subject to Year 2000 problems. The total cost of the Trustee's
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<PAGE> 13
Year 2000 efforts is expected to be approximately $10,000 (including the $6,000
referred to above), all of which will be incurred and paid by the second
quarter of 1999. Of this amount, the Trustee has paid $4,000 for
identification and assessment of affected systems.
The Trustee has additionally identified those vendors it believes could
have an impact on its day-to-day operations if their operations were interrupted
as a result of Year 2000 problems. The Trustee has developed a questionnaire
regarding the vendor's Year 2000 status.
The Trustee has no reason to believe that its vendors will not be Year
2000 compliant. In the event the Trustee learns that a vendor's system will not
be Year 2000 compliant, the Trustee will assess the potential risk and develop
contingency plans at that time.
The Trust is a passive entity with no business operations, and the IT
systems employed by the Trustee in connection with its duties on behalf of the
Trust are less extensive than the systems employed by many business entities.
The Trust has no formal IT budget, and the Trustee does not anticipate making
any other significant expenditures relating to the Trustee's IT systems used in
connection with Trust during 1999. Thus, the expenditures expected to be made in
connection with the Year 2000 efforts described above will represent
substantially all of the Trustee's IT-related expenditures on behalf of the
Trust during 1999. These expenditures will be treated as Trust expenses on the
financial statements of the Trust.
Because the royalty interests held by the Trust are fixed, the Trustee
is dependent upon the third parties (primarily energy companies) that hold
operating interests with respect thereto for the receipt of royalty income.
Thus, if any such third party failed to deliver royalty income, the Trustee
would have available no alternative source for such income. The Trustee believes
that the worst case scenario would be the failure by the Trustee and one or more
third parties who pay royalties to the trust to identify or remediate Year 2000
problems on a timely basis, which could cause the Trustee to be unable to make
required distributions to Unitholders. Such inability could result in the
incurrence by the Trust of interest charges or other liabilities to Unitholders.
The Trustee believes that in the event of a failure of any of its internal
systems it would be able to replace such systems in a relatively short period of
time, relying on internal resources of NationsBank, N.A., d/b/a Bank of America,
N.A., which serves as the Trustee, although there can be no assurance that such
replacement would not be costly or that it would be completed without resulting
in a significant delay in the distributions to Unitholders. With respect to a
failure by a third party to deliver royalty income on a timely basis, the
Trustee believes that it would have no control over the efforts of such third
party to correct the problems, and significant delays in the receipt of royalty
income could result.
The Trust will utilize both internal and external resources to achieve
Year 2000 compliance. The Trustee estimates that its identification and
assessment activities are approximately 90 percent complete. It expects that all
of its Year 2000 efforts related to the Trust's internal systems will be
completed by the end of the second quarter of 1999. However, there can be no
guarantee that the Trustee will be able to identify all potential Year 2000
problems or to fully remediate all Year
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<PAGE> 14
2000 problems identified on a timely basis. There also can be no assurance that
the systems of third party vendors on which the Trust relies will be timely
remediated. The failure by the Trustee or any such third party to fully
remediate its Year 2000 problems on a timely basis could have a material adverse
affect on the Trustee's ability to account for and make timely distribution of
the Trust's distributable income.
Certain of the statements made above regarding the Trustee's Year 2000
program are forward-looking statements, and there can be no assurance that the
Trustee will be able to achieve Year 2000 compliance in the manner and by the
dates indicated.
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<PAGE> 15
Forward-Looking Statements
This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical fact included in this Form 10-Q, including,
without limitation, statements contained in this "Trustee's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the Trust's
financial position and industry conditions, are forward-looking statements.
Although the Trustee believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Trust invests in no derivative financial instruments, and has no
foreign operations or long-term debt instruments. The Trust is a passive entity
and other than the Trust's ability to periodically borrow money as necessary to
pay expenses, liabilities and obligations of the Trust that cannot be paid out
of cash held by the Trust, the Trust is prohibited from engaging in borrowing
transactions. The amount of any such borrowings is unlikely to be material to
the Trust. The Trust periodically holds short term investments acquired with
funds held by the Trust pending distribution to Unitholders and funds held in
reserve for the payment of Trust expenses and liabilities. Because of the
short-term nature of these borrowings and investments and certain limitations
upon the types of such investments which may be held by the Trust, the Trustee
believes that the Trust is not subject to any material interest rate risk. The
Trust does not engage in transactions in foreign currencies which could expose
the Trust or Unitholders to any foreign currency related market risk.
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<PAGE> 16
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> 17
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, N.A., d/b/a BANK OF
AMERICA, N.A.
By: /s/ Ron E. Hooper
---------------------------------
Ron E. Hooper
Vice President
Date: May 14, 1999
(The Trust has no directors or executive officers.)
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
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