SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period endedSeptember 30, 2001. |
[ ] | 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: 33-61888-FW
COMPRESSCO, INC.
(Exact name of small business issuer in its charter)
Delaware | 72-1235449 |
1313 25th Street, Oklahoma City, Oklahoma | 73129 |
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 / /
The number of shares outstanding of the issuer's classes of Common Stock as of September 30, 2001:
Common Stock, $1.00 Par Value -- 153,235 shares
COMPRESSCO, INC.
Index to Form 10-QSB
Part I. FINANCIAL INFORMATION | |||
Item 1. | Consolidated Financial Statements (Unaudited) | ||
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| Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000 | |
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| Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000 | |
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| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 | |
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| Notes to the Consolidated Financial Statements | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
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Part II. OTHER INFORMATION | |||
Item 1. | Legal Proceedings | ||
Item 2. | Changes in Securities and Use of Proceeds | ||
Item 3. | Defaults Upon Senior Securities | ||
Item 4. | Submission of Matters to a Vote of Security Holders | ||
Item 5. | Other Information | ||
Item 6. | Exhibits and Reports on Form 8-K |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMPRESSCO, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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| September 30, 2001 |
| December 31, 2000 | |||
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ASSETS |
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CURRENT ASSETS: |
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| Cash and cash equivalents | $ 190,412 |
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| $ 860,043 |
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| Accounts receivable, net | 1,671,113 |
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| 1,023,945 |
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| Inventories | 1,220,286 |
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| 1,970,895 |
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| Notes receivable, current | 33,755 |
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| 53,529 |
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| Prepaid expenses | 177,920 |
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| 86,669 |
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| Deferred income tax asset | 25,073 |
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| 19,190 |
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| Total current assets | 3,318,559 |
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| 4,014,271 |
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PROPERTY AND EQUIPMENT: |
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| Compressors | 15,754,169 |
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| 9,251,030 |
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| Less - Accumulated depreciation | (1,448,261 | ) |
| (682,653 | ) | |
| Total compressors, net | 14,305,908 |
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| 8,568,377 |
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| Vehicles and Equipment | 1,014,866 |
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| 659,068 |
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| Less - Accumulated depreciation | (172,160 | ) |
| (112,480 | ) | |
| Total vehicles and equipment, net | 842,706 |
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| 546,588 |
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OTHER ASSETS | 101,674 |
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| 120,831 |
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| Total assets | $ 18,568,847 |
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| $ 13,250,067 |
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LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITES: |
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| Accounts payable | $ 906,187 |
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| $ 1,554,219 |
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| Accrued liabilities | 644,616 |
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| 192,762 |
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| Current portion of long-term debt | 606,680 |
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| 562,218 |
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| Total current liabilities | 2,157,483 |
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| 2,309,199 |
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LONG-TERM DEBT, net of current portion | 12,541,328 |
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| 7,784,330 |
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DEFERRED INCOME TAXES | 549,663 |
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| 260,734 |
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COMMITMENTS (Note 5) |
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STOCKHOLDERS' EQUITY: |
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| Preferred stock, $1 par value; | -- |
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| -- |
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| Common stock, $1 par value; | 153,235 |
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| 153,235 |
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| Warrants outstanding | 100,000 |
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| 100,000 |
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| Additional paid-in capital | 2,663,715 |
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| 2,663,715 |
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| Retained earnings (deficit) | 403,423 |
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| (21,146 | ) | |
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| Total stockholders' equity | 3,320,373 |
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| 2,895,804 |
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| Total liabilities and |
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The accompanying notes are an integral part of these consolidated balance sheets. | |||||||
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COMPRESSCO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Nine Months | For the Nine Months | For the Nine Months | For the Nine |
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REVENUES: |
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Rental revenue | $ 6,174,882 | $ 2,630,584 | $ 2,495,394 | $ 1,036,362 |
Sales - compressors and parts | 774,771 | 550,756 | 301,517 | 177,642 |
Service and other | 565,966 | 261,363 | 192,444) | 98,839 |
Total revenues | 7,515,619 | 3,442,703 | 2,989,355) | 1,312,843 |
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COST OF SALES AND EXPENSES: |
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Cost of sales | 506,682 | 325,342 | 165,089 | 92,186 |
Operating expenses | 4,503,570 | 2,565,785 | 1,737,718 | 1,075,014 |
Depreciation and amortization expense | 917,122 | 503,298 | 344,228) | 144,880 |
Total cost of sales and expenses | 5,927,374 | 3,394,425 | 2,247,035) | 1,312,080 |
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OPERATING INCOME | 1,588,245 | 48,278 | 742,320 | 763 |
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OTHER INCOME (EXPENSE) |
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Interest income | 5,155 | 15,528 | 1,332 | 5,136 |
Interest expense | (885,785) | (203,009) | (315,812) | (78,020) |
Total other (expense) | (880,630) | (187,481) | (314,480) | (72,884) |
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INCOME (LOSS) BEFORE | 707,615 | (139,203) | 427,840 | (72,121) |
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PROVISION (BENEFIT) FOR | 283,046 | (40,035) | 171,141 | (19,766) |
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NET INCOME (LOSS) | $ 424,569 | $ (99,168) | $ 256,699 | $ (52,355) |
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Earnings (Loss) per common share: |
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Basic | $ 2.77 | $ (0.74) | $ 1.67 | $ (0.34) |
Diluted | $ 2.62 | N/A | $ 1.60 | N/A |
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The accompanying notes are an integral part of these consolidated financial statements. |
COMPRESSCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2001 and 2000
(Unaudited)
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| 2001 |
| 2000 | |||
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CASH FLOWS FROM OPERATING ACTIVITIES |
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| Net income (loss) | $ 424,569 |
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| $ (99,168 | ) | |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities- |
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| Depreciation and amortization expense | 917,122 |
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| 503,298 |
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| Amortization of discount on subordinated debt | 25,002 |
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| --- |
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| Provision for bad debts | 22,500 |
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| --- |
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| Gain on sales of compressors | --- |
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| (116,262 | ) | |
| Gain on sales of other equipment | (3,841 | ) |
| --- |
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| Other assets | 1,183 |
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| (163,980 | ) | |
| Deferred income tax | 283,046 |
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| (40,035 | ) | |
| Changes in current assets and liabilities: |
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| Accounts receivable | (669,668 | ) |
| (259,528 | ) | |
| Notes receivable | 19,774 |
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| --- |
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| Inventories | 750,609 |
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| (767,621 | ) | |
| Prepaid expenses | (91,251 | ) |
| (13,969 | ) | |
| Accounts payable | (648,031 | ) |
| 1,274,600 |
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| Accrued liabilities | 451,854 |
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| 72,721 |
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| Other current liabilities | --- |
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| (318 | ) | |
| Net cash provided by operating activities | 1,482,868 |
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| 389,738 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Additions to rental units | (6,488,680 | ) |
| (3,627,022 | ) | |
| Additions to vehicles and equipment | (440,826 | ) |
| (210,548 | ) | |
| Proceeds from sales of compressors | --- |
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| 172,900 |
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| Proceeds from sales of other equipment | 27,000 |
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| --- |
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| Net cash used in investing activities | (6,902,506 | ) |
| (3,664,670 | ) | |
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CASH FLOWS FROM FINANCING ACTIVITES: |
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| Proceeds from issuance of common stock | --- |
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| 2,100,060 |
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| Proceeds from issuance of subordinated debt | 300,000 |
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| --- |
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| Deferred financing costs | (26,452 | ) |
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| Payments of notes payable | (375,547 | ) |
| (487,742 | ) | |
| Proceeds from line of credit | 5,899,695 |
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| 3,262,687 |
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| Principal payments on line of credit | (1,047,689 | ) |
| (1,492,798 | ) | |
| Net cash provided by financing activities | 4,750,007 |
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| 3,382,207 |
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NET INCREASE (DECREASE) IN CASH | (669,631 |
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| 107,275 |
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CASH AND CASH EQUIVALENTS, | 860,043 |
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| 96,256 |
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CASH AND CASH EQUIVALENTS, End of period | $ 190,412 |
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| $ 203,531 |
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The accompanying notes are an integral part of these consolidated financial statements. |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Compressco, Inc., formerly Emerging Alpha Corporation (the "Company"), was incorporated in the State of Delaware on February 10, 1993, for the purpose of acquiring business opportunities. On October 29, 1999, the Company purchased Compressco Field Services, Inc., an Oklahoma corporation, and Compressco Testing L.L.C. Subsequent to the acquisition the two companies are wholly owned subsidiaries of the Company.
Compressco Field Services, Inc., is engaged primarily in the manufacture, rental and service of natural gas compressors that provide economical well head compression to mature, low pressure natural gas wells. The Company's compressors are currently sold and rented to natural gas producers located primarily in Oklahoma, Kansas, Texas, Arkansas and New Mexico. Compressco Testing L.L.C. is a natural gas measurement, testing and service company, based in Oklahoma City, that began operations in September 1999.
The Company established in January 2000 a wholly owned energy production subsidiary, Providence Natural Gas, Inc. ("Providence"), to acquire certain pressure depleted reservoirs, having key reservoir characteristics known to be receptive to well-head compression. The Company plans to install compressors at the sites to enhance production and then market and sell the natural gas. Providence has acquired an interest in one natural gas well. Due to the current high market price of natural gas, management believes it is cost prohibitive to acquire gas-producing properties at this time. Therefore, the Company is not pursuing further development of Providence at this time.
2. BASIS OF PRESENTATION
The consolidated balance sheet as of September 30, 2001 and the consolidated statements of operations and cash flows for the periods ended September 30, 2001 and 2000 are unaudited. In the opinion of management, such consolidated financial statements include all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented.
The consolidated balance sheet data as of December 31, 2000 was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. The consolidated financial statements presented herein should be read in connection with the Company's December 31, 2000 consolidated financial statements included in the Company's Form 10-KSB.
The results of operations for the three and nine months ended September 30, 2001 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2001.
3. CHANGE IN ACCOUNTING ESTIMATE
Effective July 1, 2000, the Company changed its estimate of the useful life and salvage value of its compressors for purposes of computing depreciation. The estimated useful life and salvage value of its compressors was changed from seven years with no salvage to twelve years with a ten percent salvage. Based upon the Company's data relating to the service history of its compressor fleet, the Company believes that the new estimated useful life and salvage value more accurately reflects the service life of its compressor fleet. The change has been accounted for prospectively. The same accounting estimate was used for the three months ended September 30, 2001 and 2000 therefore there is no effect on the three month period.
The effect of the change in accounting estimate was as follows for the nine month period ended September 30, 2001.
| Depreciation expense decreased by | $395,290 |
| Net income increased by | $245,080 |
| Basic income per share increased by | $1.60 |
| Fully diluted income per share increased by | $1.51 |
4. LONG-TERM DEBT
Long-term debt consists of the following at September 30, 2001:
(a) | On December 22, 2000, the Company offered an issue of 13% subordinated promissory notes and stock warrants (see Note 6) to qualified private investors. At September 30, 2001, $5,550,000 of the subordinated promissory notes were issued. Of the $5,550,000 in proceeds, $100,000 was allocated to the stock warrants. The notes are subordinated unsecured obligations of the Company and rank junior to all other indebtedness of the Company. The Notes mature on the earlier of (1) the consummation of an underwritten public offering of the Company's capital stock or (2) December 31, 2003. The Company may, at any time prepay any part of the principal balance on the Notes, in increments of $10,000, without premium or penalty prior to maturity. Interest is payable at 13% per annum and is payable quarterly in arrears. |
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(b) | On October 29, 1999, the Company borrowed $2,800,000 under a term loan agreement with a bank. The note bears interest at a fixed rate of 8.8%. Principal payments of $46,667 plus accrued interest are due monthly until maturity on October 30, 2004. The loan balance at September 30, 2001 is $1,773,311, of which $1,166,631 is classified as long term. The loan is secured with the assets and compressor rental agreements of the Company and a personal guarantee of the Company's President. |
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(c) | On October 29, 1999, the Company entered into a revolving line of credit agreement with a bank. Under the agreement, as amended December 28, 2000, the Company can borrow the lesser of $7,500,000 or the sum of 80% of the aggregate amount of eligible receivables, plus 50% of the aggregate amount of eligible inventory, plus 85% of the appraised value of compressors fabricated since acquisition of the business on October 29, 1999. The line of credit bears interest at Wall Street Journal Prime Rate (6.0% at September 30, 2001). Interest is due monthly with all outstanding borrowings due at maturity on December 27, 2003. The loan is secured with the assets and compressor leases of the Company and a personal guarantee of the Company's President. The balance outstanding under the line of credit agreement at September 30, 2001 was $5,899,697. The Company's credit facility imposes a number of financial and restrictive covenants that among other things, limit the Company's ability to incur additional indebtedness, create liens and pay dividends. At September 30, 2001, the Company was in compliance with its loan covenant ratios. Management expects that the Company will be in compliance with the covenants under the credit facility for the next twelve months. |
5. COMMITMENTS
The Company entered into a purchase agreement on December 14, 2000, with a supplier to purchase 1,000 compressor engines by December 31, 2002. At September 30, 2001, the Company had taken delivery of 141 engines from the supplier. The purchase agreement provides that the Company's liability to the supplier for any failure to purchase the full amount of engines is limited to (i) pay for the engines delivered, (ii) reasonable direct out of pocket cost incurred by the supplier in acquiring material for production of the number of engines contemplated by the agreement and (iii) the reasonable costs incurred by the supplier for the work in progress at the time of termination of the agreement including labor costs and reasonable quantities of parts and materials ordered by the supplier.
6. STOCKHOLDERS' EQUITY
In connection with the offering of the subordinated promissory notes discussed in Note 4, the Company issued stock warrants to purchase 420 shares of the Company's common stock per every $50,000 amount of Notes purchased. The warrants have an exercise price of $120 per share. At September 30, 2001 total stock warrants of 46,620 had been issued. The warrants are exercisable upon issue, and expire on December 31, 2003.
The Company obtained a valuation as to the amount to be assigned to the warrants from the total proceeds received from the issuance of the subordinated promissory notes. The value was determined using the Valrex model, which is an option valuation model that uses established option pricing theory to price nontrading options and warrants. Based on the valuation estimate, the value assigned to the warrants is $100,000. This amount is shown as outstanding warrants in stockholders' equity and as a discount to the subordinated promissory notes. The discount is being amortized over the three-year life of the stock warrants as additional interest expense. The effective interest rate on the Notes is 13.77% when the value of the warrants is taken into consideration.
7. EARNINGS PER SHARE
Basic earnings per share is calculated using the weighted average number of shares issued and outstanding during the period. The weighted average shares issued and outstanding for the nine months ending September 30, 2001 and 2000 were 153,235 and 134,074, respectively, and 153,235 for the three months ending September 30, 2001 and 2000. Diluted weighted average shares for the nine and three months ending September 30, 2001 were 161,860. Diluted earnings per share is not shown for the nine and three months ended September 30, 2000 as the effect would be antidilutive.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
On October 29, 1999, the Company purchased Compressco Field Services, Inc., and Compressco Testing L.L.C. Compressco Field Services, Inc., is engaged primarily in the manufacture, rental and service of natural gas compressors that provide economical well head compression to mature, low pressure natural gas wells. The Company's compressors are currently sold and rented to natural gas producers located primarily in Oklahoma, Kansas, Texas, Arkansas and New Mexico. Compressco Testing L.L.C. is a natural gas measurement, testing and service company, based in Oklahoma City.
The following table sets forth selected consolidated financial information for the fiscal year ended December 31, 2000 and as of September 30, 2001 and for the nine months and three months ended September 30, 2001 and 2000 and is qualified in its entirety by the unaudited consolidated financial statements appearing elsewhere in this Form 10-QSB.
Results of Operations
SELECTED CONSOLIDATED FINANCIAL DATA
STATEMENT OF OPERATIONS DATA:
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| Nine Months Ended | Three Months Ended | ||
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| 2001 | 2000 | 2001 | 2000 |
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| Operating Revenues | $7,515,619 | $3,442,703 | $2,989,355 | $1,312,843 |
| Cost of Sales and Expenses | 5,927,374 | 3,394,425 | 2,247,035 | 1,312,080 |
| Operating Income | 1,588,245 | 48,278 | 742,320 | 763 |
| Net Income (Loss) | 424,569 | (99,168) | 256,699 | (52,355) |
BALANCE SHEET DATA (AT END OF PERIOD):
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| September 30, 2001 | December 31, 2000 | |||
| Cash and Cash Equivalents | $ 190,412 |
| $ 860,043 | ||
| Total Assets | 18,568,847 |
| 13,250,067 | ||
| Total Liabilities | 15,248,474 |
| 10,354,263 | ||
| Stockholders' Equity | 3,320,373 |
| 2,895,804 |
The following discussion regarding the consolidated financial statements of the Company should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2000
The revenues for the nine months ended September 30, 2001 of $7,515,619 increased by $4,072,916 or 118% for the comparable period in 2000. The following table sets forth the components of our revenue for the nine months ended September 30, 2001 and 2000:
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| 2001 |
| 2000 |
| Revenue: |
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| Rental revenue | $6,174,882 |
| $2,630,584 |
| Sale of compressors and parts | 774,771 |
| 550,756 |
| Service and other | 565,966 |
| 261,363 |
| Total revenue | $7,515,619 |
| $3,442,703 |
The Company had 648 compressors in service at September 30, 2001 compared to 317 at September 30, 2000, an increase of 331 compressors or 104%. In the nine months ended September 30, 2001 the Company sold seven compressors the same number as sold in 2000. The increase in activity was due to increasing the company's marketing efforts and the number of its sales representatives to eight in 2001 compared to three during most of 2000. The increased price of natural gas in 2001 compared to 2000 has also contributed to the increased demand.
The cost of sales and operating expenses for the 2001 period were $5,010,252, or 67% of operating revenues, compared to $2,891,127, or 84%, in the 2000 period. Operating expenses for the 2001 period were $4,503,570, or 67% of rental and service revenues, compared to $2,565,785, or 89% for the 2000 period. Operating expenses in the 2000 period include $206,588 of start up expenses related to Providence Natural Gas, Inc. The decrease in cost of sales and operating expenses as a percent of operating revenues in 2001 was due to the significant growth in rental revenue in 2001 as a result of increasing the rental units in service and increased rental rates with lower increases in operating expenses to support the increased units.
The Company manufactured 287 compressors in the 2001 period compared to 156 in the 2000 period. The increase in the number of compressors was due to higher demand as a result of increased marketing and sales efforts in 2001 supported by higher natural gas prices in 2001.
Depreciation and amortization expense increased in the 2001 period to $917,122 compared to $503,298 for the 2000 period. The increase was due to the increase in the Company's compressor fleet in 2001 to 753 units from 355 units at September 30, 2000. Effective July 1, 2000, the Company changed its estimate of the useful life and salvage value of its compressors for purposes of computing depreciation. The useful life and salvage value was changed from seven years with no salvage value to twelve years with ten percent salvage value. Based upon the Company's data relating to the service history of its compressor fleet, the Company believes that the new estimated useful life and salvage value more accurately reflects the service life of its compressor fleet. The effect of the change in the accounting estimate for the nine months ended September 30, 2001 was to decrease depreciation expense by approximately $395,290 and increase the net income after income taxes by approximately $245,080.
Interest expense for the 2001 period was $885,785 compared to $203,009 for the 2000 period. The increase was due to the interest expense related to the subordinated promissory notes issued in December 2000 and increased balance outstanding under the line of credit in 2001 used to finance the increased compressor rental fleet.
Net income was $424,569 for the 2001 period compared to a net loss of $(99,168) for the 2000 period. The increase in net income was primarily due to the growth in the company's compressor rental fleet in 2001.
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2000
The revenues for the three months ended September 30, 2001 of $2,989,355 increased by $1,676,512 or 128% for the comparable period in 2000. The following table sets forth the components of our revenue for the three months ended September 30, 2001 and 2000:
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| 2001 |
| 2000 |
| Revenue: |
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| Rental revenue | $2,495,394 |
| $1,036,362 |
| Sale of compressors and parts | 301,517 |
| 177,642 |
| Service and other | 192,444 |
| 98,839 |
| Total revenue | $2,989,355 |
| $1,312,843 |
The Company had 648 compressors in service at September 30, 2001 compared to 317 at September 30, 2000, an increase of 331 compressors or 104%. In the three months ended September 30, 2001, the Company sold one compressor, the same number sold in the comparable period in 2000. The increase in activity was due to increasing the company's marketing efforts and the number of its sales representatives to eight in 2001 compared to four in 2000. The increased price of natural gas in 2001 over 2000 also contributed to the increased demand.
The cost of sales and operating expenses for the 2001 period were $1,902,807, or 64% of operating revenues, compared to $1,167,200, or 89%, in the 2000 period. Operating expenses for the 2001 period were $1,737,718 or 65% of rental and service revenues, compared to $1,075,014, or 95% for the 2000 period. Operating expenses in the 2000 period include $77,453 of start up expenses related to Providence Natural Gas, Inc. The decrease in cost of sales and operating expenses as a percent of operating revenues in 2001 was due to the significant growth in rental revenue in 2001 as a result of increasing the rental units in service and increased rental rates with lower increases in operating expenses to support the increased units.
The Company manufactured 106 compressors in the 2001 period compared to 84 in the 2000 period. The increase in the number of compressors was due to higher demand as a result of increased marketing and sales efforts in 2001 supported by higher natural gas prices in 2001.
Depreciation and amortization expense increased in the 2001 period to $344,228 compared to $144,880 for the 2000 period. The increase was due to the increase in the Company's compressor fleet in 2001 to 753 units from 355 units at September 30, 2000.
The 2001 period includes interest expense of $315,812 compared to $78,020 for the 2000 period. The increase was due to the interest expense related to the subordinated promissory notes issued in December 2000 and increased balance outstanding under the line of credit in 2001 used to finance the increased compressor rental fleet.
Net income was $256,699 for the 2001 period compared to a net loss of $(52,355) for the 2000 period. The increase in net income was primarily due to the growth in the company's compressor rental fleet in 2001.
LIQUIDITY AND CAPITAL RESOURCES
In December 2000 and January 2001, the Company offered its 13% subordinated promissory notes and stock warrants in a private placement. At September 30, 2001, $5,550,000 of the subordinated promissory notes were issued. Of the $5,550,000 in proceeds, $100,000 was allocated to the stock warrants. The notes are subordinated unsecured obligations of the Company and rank junior to other indebtedness of the Company. The Notes mature on the earlier of (1) the consummation of an underwritten public offering of the Company's capital stock , and (2) December 31, 2003. The Company may, at any time, prepay any part of the principal balance on the notes, in increments of $10,000, without premium or penalty prior to maturity. Interest is payable at 13% per annum and is payable quarterly in arrears.
In March 2000 the Company issued 70,002 shares of its common stock through a Private Placement for $30.00 per share or total equity proceeds of $2,100,060. The equity proceeds were used in part to repay borrowings under the Company's line of credit and the remaining proceeds will be used primarily to fund the growth in our compressor fleet.
On October 29, 1999, the Company borrowed $2,800,000 under a term loan agreement with Hibernia National Bank. The related note bears interest at a fixed rate of 8.8%. Principal payments of $46,667, plus accrued interest, are due monthly until maturity on October 30, 2004. The loan is secured with the assets and compressor leases of the Company and a personal guarantee of the Company's President.
On October 29, 1999, the Company entered into a revolving line of credit agreement with Hibernia National Bank. Under the agreement, as amended December 28, 2000, the Company can borrow the lesser of $7,500,000 or the sum of 80% of the aggregate amount of eligible receivables, plus 50% of the aggregate amount of eligible inventory, plus 85% of the appraised value of compressors fabricated since acquisition of the business on October 29, 1999. The line of credit bears interest at Wall Street Journal Prime Rate (6.0% at September 30, 2001). Interest is due monthly with all outstanding borrowings due at maturity on December 27, 2003. The loan is secured with the assets and compressor rental agreements of the Company and a personal guarantee of the Company's President. The balance outstanding under the line of credit agreement at September 30, 2001 was $5,899,697. The Company's credit facility imposes a number of financial and restrictive covenants that among other things, limit the Company's ability to incur additional indebtedness, create liens and pay dividends.
The Company believes that cash flow from operations and funds available under its credit facilities will provide the necessary working capital to fund the Company's requirements for current operations through 2001. However, in connection with any expansion of operations or acquisition activities, it is likely that the Company will need additional sources of debt or equity financing. The Company cannot provide assurance that these funds will be available or if available will be available on satisfactory terms.
IMPORTANT FACTORS RELATING TO FORWARD-LOOKING STATEMENTS
In connection with forward-looking statements contained in this Form 10-QSB and those that may be made in the future by or on behalf of the Company which are identified as forward-looking by such words as "believes," "intends" or words of a similar nature, the Company notes that there are various factors that could cause actual results to differ materially from those set forth in any such forward-looking statements. The forward-looking statements contained in this Form 10-QSB were prepared by management and are qualified by, and subject to, significant business, economic, competitive, regulatory and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of the Company. Accordingly, there can be no assurance that the forward-looking statements contained in this Form 10-QSB will be realized or the actual results will not be significantly higher or lower. These forward-looking statements have not been audited by, examined by, compiled by or subjected to agreed-upon procedures by independent accountants, and no third-party has independently verified or reviewed such statements. Readers of this Form 10-QSB should consider these facts in evaluating the information contained herein. In addition, the business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in the forward-looking statements contained in this Form 10-QSB. The inclusion of the forward-looking statements contained in this Form 10-QSB should not be regarded as a representation by the Company or any other person that the forward-looking statements contained in this Form 10-QSB will be achieved. In light of the foregoing, readers of this Form 10-QSB are cautioned not to place undue reliance on the forward-looking statements contained herein.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | ||
| None. | ||
Item 2. | Changes in Securities and Use of Proceeds | ||
| None. | ||
Item 3. | Defaults Upon Senior Securities | ||
| None. | ||
Item 4. | Submission of Matters to a Vote of Security Holders | ||
| None. | ||
Item 5. | Other Information | ||
| None. | ||
Item 6. | Exhibits and Reports on Form 8-K | ||
| (a) | Exhibits. The following exhibits of the Company are included herein. | |
| 3. | Certificate of Incorporation and Bylaws | |
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| *3.1 | Restated Certificate of Incorporation |
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| *3.2 | Bylaws |
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| *3.3 | Proposed Certificate of Amendment to the Restated Certificate of Incorporation |
| 10. | Material Contracts | |
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| *10.1 | 1993 Stock Option Plan |
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| *10.2 | Form of Stock Option Agreements with Messrs. Keenan, Killeen, Jarrell and Chaffe with Schedule of Details |
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| **10.3 | Stock Purchase Agreement, dated as of October 29, 1999, by and between the Company and the Stockholders of Gas Jack, Inc. |
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| **10.4 | Loan Agreement, dated as of October 29, 1999, by and between Hibernia National Bank and the Company |
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| ***10.5 | Amended and Restated Loan Agreement, dated as of December 28, 2000, by and among Hibernia National Bank, the Company and Compressco Field Services, Inc. |
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| ***10.6 | Securities Purchase Agreement, dated as of December 22, 2000, between the Company and each investor party thereto |
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| ***10.7 | Stock Warrant Agreement, dated as of December 22, 2000, between the Company and each investor party thereto |
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| ***10.8 | Subordinated Promissory Note, dated as of December 22, 2000, issued by the Company to each purchaser of the notes |
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| ***10.9 | Registration Rights Agreement, dated as of December 22, 2000, between the Company and each investor party thereto |
| (b) | Reports of Form 8-K. |
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* | Filed with Registration Statement on Form SB-2, File No. 33-61888-FW and incorporated by reference herein. |
** | Filed with Current Report on Form 8-K (October 29, 1999) and incorporated by reference herein. |
*** | Filed with Form 10-KSB (December 31, 2000) and incorporated by reference herein. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on November 9, 2001.
| COMPRESSCO, INC.
| |
| By: | GARY MCBRIDE |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on November 9, 2001.
By: | BURT H. KEENAN | Chairman of Board and Director |
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By: | BROOKS MIMS TALTON | Chief Executive Officer, President and Director |
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By: | JERRY W. JARRELL | Secretary and Director |
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By: | GARY MCBRIDE | Chief Financial Officer |