SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[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 0-18754
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Black Warrior Wireline Corp.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 11-2904094
-------------------------------- ---------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3748 Highway 45 North, Columbus, Mississippi 39701
--------------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(601) 329-1047
---------------------------------
(Issuer's Telephone Number, Including Area Code)
Indicate by a check mark whether the Issuer (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the Issuer
was required to file such Reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------ -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at May 7, 1996
----------------------- -------------------------------
Common Stock, par value 759,052 shares
$.0005 per share
Page 1 of 13 Pages
BLACK WARRIOR WIRELINE CORP.
QUARTERLY REPORT ON FORM 10-QSB
INDEX
PART I -- FINANCIAL INFORMATION
Page
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1996
and December 31, 1995 3
Consolidated Statements of Operations --
Three Months Ended March 31, 1996 and 1995 4
Consolidated Statements of Operations --
Three Months Ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows --
Three Months Ended March 31, 1996 and 1995 6
Notes to Financial Statements --
Three Months Ended March 31, 1996 and 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Page 2 of 13 Pages
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March December
31, 31,
1996 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 194,426 $ 284,825
Accounts receivable, less allowance for
doubtful accounts of $130,117 and $130,115
at March 31, 1996 and December 31, 1995,
respectively 826,095 830,384
Inventories 180,988 185,313
Prepaid expenses 28,608 31,917
Federal income tax receivable 80,432 80,432
Other receivables 178
----------------- ------------------
Total current assets 1,310,549 1,413,549
Property, plant & equipment, less accumulated
depreciation of $3,432,176 and
$3,311,919 at March 31, 1996 and December 31, 1995,
respectively 1,413,493 1,306,126
Other assets 5,635 5,405
----------------- ------------------
Total assets $ 2,729,677 $ 2,725,080
================= ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 784,548 $ 821,254
Accrued salaries and vacation 32,939 15,839
Accrued interest payable 1,256,922 1,214,422
Other accrued expenses 272,698 229,446
Notes payable to bank 51,169 68,575
Notes payable, related parties 0 0
Current maturities of long-term debt and
capital lease obligations 1,566,061 1,526,127
----------------- ------------------
Total current liabilities 3,964,337 3,875,663
Long-term debt and capital lease obligations,
less current maturities 486,615 385,696
----------------- ------------------
Total liabilities 4,450,952 4,261,359
Common stock, par value $.0005 per share,
50,000,000 shares authorized, 759,052
shares issued at March 31, 1996 and December
31, 1995. 380 380
Additional paid-in capital 3,375,700 3,375,702
Accumulated deficit (4,513,962) (4,328,968)
Treasury stock, at cost, 814,626 shares (583,393) (583,393)
----------------- ------------------
Total stockholders' equity (1,721,275) (1,536,279)
----------------- ------------------
Total liabilities and stockholders' deficit $ 2,729,677 $ 2,725,080
================= ==================
Page 3 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
-----------------------------------------------------------
March 31, March 31,
1996 1995
---------------------- -----------------------
Net revenues $ 1,534,301 $ 1,525,319
Operating costs and expenses (1,484,266) (1,456,384)
Depreciation and amortization expense (143,511) (191,439)
---------------------- -----------------------
Operating income (loss) (93,476) (122,504)
Interest expense and amortization
of debt discount and expense (101,307) (150,332)
Other income 9,818 25,509
---------------------- -----------------------
Net income (loss) $(184,965) $(247,327)
====================== =======================
Earnings (loss) per average common
share $(0.24) $(0.33)
Average common and common equivalent
shares outstanding 759,052 759,0521
====================== =======================
- --------
<FN>
(1)Average common shares outstanding March 31, 1995, reflects 1 for 200
reverse split effectuated October 31, 1995.
</FN>
Page 4 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
-----------------------------------------------------------
March 31, March 31,
1996 1995
---------------------- -----------------------
Net revenues $ 1,534,301 $ 1,525,319
Operating costs and expenses (1,484,266) (1,456,384)
Depreciation and amortization expense (143,511) (191,439)
---------------------- -----------------------
Operating income (loss) (93,476) (122,504)
Interest expense and amortization
of debt discount and expense (101,307) (150,332)
Other income 9,818 25,509
---------------------- -----------------------
Net income (loss) $(184,965) $(247,327)
====================== =======================
Earnings (loss) per average common
share $(0.24) $(0.33)
Average common and common equivalent
shares outstanding 759,052 759,052(2)
====================== =======================
- --------
<FN>
(2)Average common shares outstanding March 31, 1995, reflects 1 for 200
reverse split effectuated October 31, 1995.
</FN>
Page 5 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
--------------------------------------------------------
March 31, March 31,
1996 1995
---------------------- ----------------------
Net cash flows from operating activities: $ 30,105 $ 53,890
---------------------- ----------------------
Cash flows used in investing activities:
Proceeds from the sale of fixed assets 6,500 38,750
Acquisition of property,
plant and equipment (250,441) (169,012)
---------------------- ----------------------
Net cash flow provided
by investing activities (243,941) (130,262)
---------------------- ----------------------
Cash flows provided by financing activities:
Net advances on receivables
financed 0 0
Increase in notes payable 210,122 194,234
Reductions in notes payable (86,685) (68,590)
---------------------- ----------------------
Net cash flow used in financing activities 123,437 125,644
Net increase (decrease) in cash (90,399) 49,272
Cash - beginning of period 284,825 40,453
---------------------- ----------------------
Cash - end of period $ 194,426 $ 89,725
====================== ======================
Supplemental disclosure of cash flow information:
Interest paid $ 16,252 $ 21,747
Taxes paid $ 0 $ 0
Page 6 of 13 Pages
BLACK WARRIOR WIRELINE CORP. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
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The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. and subsidiaries
(the "Company"). Such adjustments are of a normal recurring nature. The
results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year. The
Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994 should be read in conjunction with this document.
2. LONG-TERM DEBT
--------------
On November 30 1995, the Company executed a Reorganization Agreement
with the holder of certain debt of the Company whereby the Company
converted a portion of the 13% convertible subordinated debentures and
the notes payable to related parties to common stock. In conjunction
with the conversion, accrued interest and certain debt were forgiven by
the debtholders, resulting in the recognition of an extraordinary gain
of $387,967, net of income taxes of $226,554. The Company is in default
of its 14% subordinated debenture and 13% convertible subordinated
debenture agreements due to its failure to make scheduled principal and
interest payments. Debenture holders representing $800,000 of the 14%
subordinated debentures outstanding at December 31, 1995 and 1994 have
notified the Company of default and requested immediate payment of the
entire outstanding balance. In accordance with the default provisions
in the 14% subordinated debenture and 13% subordinated debenture
agreements, the stated interest rate was increased to 2% per month
effective November 30, 1991 and June 30, 1992, respectively.
In addition, the Company is in violation of several other covenants
related to the 14% and 13% subordinated debenture agreements,
including, but not limited to, timely payment of taxes and compliance
with provisions and terms of all material agreements and commitments.
Although the 14% debenture holders and the remaining 13% debenture
holders have not notified the Company regarding acceleration of
payment, the debenture holders have the right to require immediate
payment. Accordingly, the entire balances of the debentures have been
classified as current liabilities.
Under the covenants of the debenture agreements, the Company is
prohibited from declaring or paying any dividends to stockholders as
long as the debentures are in default.
3. NOTES PAYABLE - RELATED PARTIES
-------------------------------
In October 1991, the Company entered into an agreement with a
partnership consisting of officers and spouses of officers of the
Company, whereby such
Page 7 of 13 Pages
partnership advanced funds to the Company for operations. These
advances are collateralized by certain accounts receivable of the
Company and bear interest at a rate of prime plus 2%. On December 20,
1995, RABAD accepted 148,565 shares of common stock of the Company in
full satisfaction of advance totaling $297,131. In addition, the
Company guaranteed that RABAD would be able to sell its common stock
received in the conversion for $2 per share within one year of this
conversion. This agreement is collateralized by $100,000 of the
Company's accounts receivable.
The Company had an outstanding balance of $334,237 in notes payable and
$8,976 in accrued interest at December 31, 1994 to the President of the
Company and his spouse. Interest expense recognized for 1995, 1994, and
1993 was $28,611,$31,491, and $11,600, respectively. On December 20,
1995, the president of the Company and his spouse accepted 200,000
shares of the Company's common stock in full satisfaction of the
outstanding balance of notes payable.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The Company experienced a net loss of $184,965 for the first quarter of
1996 as compared to a net loss of $247,327 for the same period of 1995. During
the first three months of 1996, the Company had a net loss of $184,965 as
compared to a net loss of $247,327 for the first three months of 1995.
Continuing efforts to control costs and improved margins generated by the
Company's directional drilling services led to this improvement.
Revenues increased by $8,982 to $1,534,301 for the first quarter of
1996 compared to $1,525,319 in the same period in 1995. Revenues for the first
three months of 1996 increased $8,982 to $1,534,301 as compared to $1,525,319
for the same period last year. While revenues remain stable, as compared to the
same period of 1995, there was an over all decrease in revenues from Wireline
services. In the Permian Basin, cased hole revenue decreased because of
reduction in activity in the Hobbs, New Mexico district, while the directional
drilling activity increased slightly from the same period last year. Cased hole
increased in the Black Warrior Basin area, but the over all effect resulted in a
reduction in the Wireline services. Revenues by business line are summarized
below:
Page 8 of 13 Pages
Three Months Ended
---------------------------------------------
March March
31,1996 31,1995
---------------------- ----------------------
Wireline services
(logging, directional
services, perforating) $ 1,062,448 $ 1,124,847
Completion (workover
services) $ 382,578 $ 345,806
Tools and Packers
(sales and rentals of
bridge plugs) $ 89,275 $ 54,667
---------------------- ----------------------
Total $ 1,534,301 $ 1,525,319
====================== ======================
====================== ======================
Costs and expenses increased $27,882 for the first quarter of 1996 and
$27,882 for the first three months of 1996 as compared to the same periods in
1995. This increase was due to increased costs for supplies and materials from
our vendors.
Salaries increased $42,059 for the first three months of 1996 with the total
number of employees increasing to 92 at March 31, 1996 from 91 at March 31,
1995. This increase was the result of an effort by the Company to remain
competitive and retain its key employees.
Interest expense decreased by $49,025 for the first quarter of 1996 and
$49,025 for the first three months of 1996 as compared to the same periods in
1995. Three to five year notes were used to purchase new vehicles during the
last quarter of 1995 and the first three months of 1996. Net new borrowing for
the first three months of 1996 totaled $210,122. Interest on the debt ranged
from prime to 12.00%. The decrease in interest expense is related to the
conversion of portions of the 13% debenture holders to equity.
The Company is continually reevaluating its strengths and weaknesses to
meet the demands of an evolving oil and gas industry. Resources are being
redirected around services in which the Company maintains key competitive
advantages. One such area is directional drilling services. Demand for these is
strong and the Company expects this demand to continue to grow.
The Company is continuing its plan to modernize its wireline truck
fleet. The Company is purchasing one new tractor every 120 days and building
technologically advanced wireline trucks "in-house". This plan will save the
Company approximately $100,000 from the cost of purchasing a new, fully equipped
wireline truck. The third of five trucks the company was completed during this
period and was placed in service in Odessa, Texas. The Company plans to continue
upgrading its rolling stock until the fleet is competitive with the other
companies in the industry. The Company is currently evaluating which new down
hole tools will best compliment
Page 9 of 13 Pages
these trucks. When this evaluation is complete, the Company will seek financing
to acquire this equipment With this new technology, the Company will increase
its activity in the "deep-hole" sector of the market. In this sector, where well
depths are below 10,000 feet, there are fewer competitors and price discounts
are much less than shallower wells.
The Company, whose Common Stock is trade on OTC Bulletin Board,
effected a reverse stock split on a 1-for-200 basis effective on October 30,
1995.
Liquidity and Capital Resources
Cash flow provided by Company operations was $30,105 for the quarter
ended March 31, 1996 as compared to $53,890 for the quarter ended March 31,
1995. This decrease is a result of purchasing supplies and tools with cash
rather than on account. The Company's net loss of $184,965 for decreased
operating cash flow by $41,454 after adjusting for depreciation and amortization
of $143,511. Uses of the Company's cash went to reduce current liabilities and
to repay $86,685 net principal indebtedness.
The Company is in default in payment of principal and interest on
$900,000 in aggregate principal amount of its 14% Subordinated Debentures due
August 31, 1993. At March 31, 1996, the Company had failed to make principal
payments aggregating $900,000 and interest payments aggregating $842,500
including interest at the penalty rate, as discussed below. The holders of
$800,000 of such debentures have given notice of the default and acceleration
thereunder. Under the terms of the debentures, the entire principal balance plus
accrued but unpaid interest is due by virtue of the notice of default and
acceleration. In addition, the stated interest rate applicable to the debentures
was increased to 2% per month as of November 30, 1991.
The Company is also in default of payment of interest under the
Company's $443,750 in outstanding aggregate principal amount of 13% Convertible
Subordinated Debentures due August 31, 1995. At March 31, 1996, interest
arrearages amounted to $384,892.
The Company is in the process of raising addtional funds to remove the
remaining debenture holders. Even if the remaining debenture agreements were
satisfied, the Company will still require improved cash flow from operations and
addtional working capital to meet its obligations. Therefore, the Company is
seeking commitments from investment bankers to assist the Company in raising
such capital in the financial markets.
Page 10 of 13 Pages
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
for which this Quarterly Report on Form 10-QSB is filed.
No other Items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-QSB.
Page 11 of 13 Pages
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.
BLACK WARRIOR WIRELINE CORP.
-----------------------------------
(Registrant)
Date: May 7 , 1996 WILLIAM L. JENKINS
----------- ------------------------------------
William L. Jenkins
President and
Chief Operating Officer
(Principal Executive, Financial
and Accounting Officer)
Page 12 of 13 Pages