FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-9392
CLX ENERGY, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0749623
-------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
518 17th Street, Suite 745, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 825-7080
Indicate by 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 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 ____
--
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
As of February 7, 2001, there were 10,545,132 shares of the Registrant's sole
class of Common Stock outstanding.
Transitional Small Business Disclosure Format Yes No X
---
CLX ENERGY, INC.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Independent Accountants' Report 1
Condensed Balance Sheet
December 31, 2000 2
Condensed Statements of Operations
Three Months December 31, 2000 and 1999 3
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 2000 4
Condensed Statements of Cash Flows
Three Months Ended December 31, 2000 and 1999 5
Notes to Condensed Financial Statements
Three Months Ended December 31, 2000 and 1999 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 9
PART II - OTHER INFORMATION 11
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
CLX Energy, Inc.
We have reviewed the accompanying condensed balance sheet of CLX Energy, Inc. as
of December 31, 2000, the related condensed statements of operations, changes in
stockholders' equity and cash flows for the three-month period then ended. These
condensed financial statements are the responsibility of the Company's
management.
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 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.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
EASTON AND BARSCH
Certified Public Accountants
Lakewood, Colorado
February 12, 2001
1
CLX ENERGY, INC.
Condensed Balance Sheet
December 31, 2000
(Unaudited)
ASSETS
- ------
Current assets:
Cash $ 595,952
Accounts receivable:
Trade 426,594
Oil and gas sales 626,390
Prepaid expenses 2,342
---------
Total current assets 1,651,278
---------
Property and equipment, at cost:
Oil and gas properties (successful effort method):
Proved 1,239,484
Unproved 72,794
Office equipment 16,353
---------
1,328,631
Less accumulated depreciation and depletion ( 397,064)
---------
931,567
---------
Other assets - oil and gas bond deposit 25,972
---------
$ 2,608,817
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable:
Trade $ 845,305
Oil and gas sales 591,906
Current portion of long-term debt 120,000
Accrued liabilities and other 13,244
---------
Total current liabilities 1,570,455
---------
Long-term debt, less current portion 457,857
---------
Stockholder's equity:
Preferred stock, $.01 par value, 2,000,000
shares authorized, 600,000 shares designated
Series A $.06 cumulative convertible
no shares outstanding -
Common stock, $.01 par value, 50,000,000 shares
authorized, 10,545,132 issued and outstanding 105,451
Additional paid in capital 742,488
Accumulated deficit ( 267,434)
---------
Net stockholders' equity 580,505
---------
$ 2,608,817
=========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
2
CLX ENERGY, INC.
Condensed Statements of Operations
Three Months Ended December 31, 2000 and 1999
(Unaudited)
Three Months Ended
December 31,
------------------
2000 1999
---- ----
Revenues:
Oil and gas sales $ 240,068 94,215
Management fees and other 17,620 68,135
------- -------
Total revenue 257,688 162,350
------- -------
Operating expenses:
Lease operating 34,339 20,588
Production taxes 14,804 6,122
Lease rentals 935 4,171
Dry holes and abandoned leases 30,266 -
Depreciation and depletion 32,504 19,532
General and administrative 57,222 69,393
------- -------
Total operating expenses 170,070 119,806
------- -------
Operating income 87,618 42,544
------- -------
Other income (expenses):
Gain on sale of assets 7,305 -
Interest income 2,254 880
Interest expense ( 9,719) ( 12,010)
------- -------
Other income (expenses) ( 160) ( 11,130)
------- -------
Net income $ 87,458 31,414
======= =======
Net income per common share
Basic $ .01 .00
======= =======
Diluted $ .01 .00
======= =======
Weighted average number of
common shares outstanding
Basic 10,545,132 10,548,132
========== ==========
Diluted 10,711,799 10,590,989
========== ==========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
3
CLX ENERGY, INC.
Condensed Statement of Stockholders' Equity
Three Months Ended December 31, 2000
(Unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
Balances,
October 1, 2000 10,545,132 $105,451 742,488 (354,892)
Net income - - - 87,458
---------- ------- ------- -------
Balances,
December 31, 2000 10,545,132 $105,451 742,488 (267,434)
========== ======= ======= =======
<FN>
The accompanying notes are an integral part of these condensed financial statements.
4
CLX ENERGY, INC.
Condensed Statements of Cash Flows
Three Months Ended December 31, 2000 and 1999
(Unaudited)
Three Months Ended
December 31,
--------------------
2000 1999
---- ----
Cash flows from operating activities:
Net income $ 87,458 31,414
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and depletion 32,504 19,532
Gain on sale of assets ( 7,305) -
(Increase) decrease in accounts receivable ( 515,377) 211,372
Decrease in prepaid expense 1,204 -
Increase (decrease) in accounts payable 480,796 ( 204,012)
Increase (decrease) in accrued
liabilities and other ( 3,500) 22,398
Other - 500
--------- ---------
Total adjustments ( 11,678) 49,790
--------- ---------
Net cash provided by
operating activities 75,780 81,204
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property and equipment 36,525 -
Reduction in assets held for sale - 1,585,640
Purchase of property and equipment ( 364,609) ( 25,526)
Addition to other assets ( 369) -
--------- ---------
Net cash provided by (used in)
investing activities ( 328,453) 1,560,114
--------- ---------
Cash flows from financing activities:
New long-term borrowings 265,000 -
Reductions to long-term debt ( 20,907) (1,570,182)
--------- ---------
Net cash provided by (used in)
financing activities 244,093 (1,570,182)
--------- ---------
Net increase (decrease) in cash ( 8,580) 71,136
Cash, beginning of period 604,532 318,330
--------- ---------
Cash, end of period $ 595,952 389,466
========= =========
Supplemental disclosures of cash flow:
Interest paid $ 8,357 22,398
========= =========
Income taxes paid $ 4,300 -
========= =========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
5
CLX ENERGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
(UNAUDITED)
Note A - Basis of Presentation
The condensed balance sheet as of December 31, 2000, the condensed statements of
operations for the three months ended December 31, 2000 and 1999, the condensed
statement of stockholders' equity for the three months ended December 31, 2000
and the condensed statements of cash flows for the three months ended December
31, 2000 and 1999 have been prepared by the Company without audit. The
preparation of financial statements requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
December 31, 2000 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as permitted by the rules and regulations of the
Securities and Exchange Commission. While the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with the
September 30, 2000 financial statements of the Company, the notes thereto and
the independent Auditors' Report thereon.
Note B - Net income per common share
SFAS No. 128, Earnings per Share, requires dual presentation of basic and
diluted earnings or loss per share (EPS) with a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity.
Basic income (loss) per share of common stock is computed based on the average
number of common shares outstanding during the period. Diluted EPS includes the
potential conversion of stock options. Stock options are not considered in the
calculation for those periods with net losses as the impact of the potential
common shares would be to decrease loss per share.
Note C - Oil and Gas Property Acquisition
In December 2000 the Company acquired interests in fifteen producing oil and gas
wells for approximately $265,000. The Company borrowed $265,000 from a bank in
connection with the acquisition.
6
Note D - Income Taxes
No provision for income taxes is required for the three months ended
December 31, 2000 and 1999.
The following table reconciles the U.S. statutory rate to the Company's
effective tax rate:
2000 1999
---- ----
Federal statutory rate 35.0% 35.0%
Net operating losses ( 2.4 ) (17.5 )
State taxes ( 0.0 ) ( 0.0 )
Statutory depletion ( 7.8 ) (14.0 )
Intangible drilling costs (24.8 ) ( 3.5 )
----- -----
Effective tax rate 0.0% 0.0%
===== =====
At September 30, 2000, after giving effect to ownership changes that
occurred in the 1999 fiscal year, the Company has a net operating loss
carryforward of approximately $360,000 which expires in varying amounts
from September 30, 2003 through 2017. The $360,000 carryforward is subject
to an annual limitation of approximately $23,500. Differences between
income tax and financial statement basis of assets at September 30, 2000
consists of basis difference of oil and gas properties ($40,000) as a
result of a purchase acquisition in a prior fiscal year and intangible
drilling costs ($140,000) which are expensed for tax purposes.
Benefit relating to the net operating loss carryforward has not been
reflected as a net deferred tax asset because the limited carryover period
combined with the history of losses of the Company, prior to the year ended
September 30, 2000, make it more likely than not that the net operating
losses will not be utilized by the Company prior to their expiration.
Note E - Contingency
The Company has been advised by the Panhandle Eastern Pipe Line Company that on
September 10, 1997, the Federal Energy Regulatory Commission (FERC) issued an
order that requires first sellers of gas to make refunds for all Kansas Ad
Valorem tax reimbursements collected for the period from October 3, 1983 through
June 28, 1988, with interest.
This claim resulted from a FERC order issued September 10, 1997 which stated
that ad valorem tax levied by the State of Kansas could not be considered as an
add-on to the Maximum Lawful Price (MLP) of gas sold under the NGPA of 1978 for
the period from October 3, 1983 through June 28, 1988. This order reversed the
FERC rules in effect during the time periods that ad valorem taxes paid to the
State of Kansas by producers could be recovered from the pipeline company by the
producers over and above the MLP of gas sold under the guidelines set forth in
the NGPA of 1978.
7
The predecessor of the Company, Calvin Exploration Inc. was operator of certain
Kansas gas wells during the period covered by the order. Panhandle Eastern Pipe
Line Company has advised the Company that Calvin Exploration, Inc., as first
seller, was paid $57,732 in Kansas ad valorem taxes. The Company was also
advised that as successor in interest to the first seller, the amount of the
refund that must be repaid with interest approximated $196,000 on the original
due date of March 9, 1998.
On February 6, 1998 the Company Filed a request for Staff review with the FERC
relative to their order. The Company asked that the Company be responsible only
for reimbursement of ad valorem taxes attributable to its working interest in
the properties subject to the FERC order, that the Company not be required to
reimburse taxes on behalf of royalty owners since taxes are not recoverable from
the royalty owners, and that the Company be allowed to service it's obligation
over a five year period due to the financial hardship which would result from
one lump sum payment.
The Company has received various correspondence from the FERC concerning its
request for Staff review. The Company was advised by FERC that it was
responsible only for reimbursement of it's working interest share of the total
refund. Additional information was requested prior to the Commission making a
decision to relieve the Company of the obligation to reimburse taxes on behalf
of the royalty owners. The request for installment payments was not addressed.
The Company has booked approximately $61,000 as a current liability to cover the
Company's estimated share of the reimbursable claim.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
General
The statements contained in this Form 10-QSB, if not historical, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, and involve risks and uncertainties that could
cause actual results to differ materially from the results, financial or
otherwise, or other expectations described in such forward-looking statements.
Any forward-looking statement or statements speak only as of the date on which
such statements were made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or circumstances after the date
on which such statements are made or reflect the occurrence of unanticipated
events. Therefore, forward-looking statements should not be relied upon as
prediction of actual future results.
Liquidity, Capital Resources and Commitments
In the three months ended December 31, 2000 the Company participated in drilling
of three wells, one of which the Company believes is capable of commercial
production. In December 2000 the Company purchased an interest in 15 oil and
gas wells for approximately $265,000. The Company obtained a bank loan for
$265,000 in connection with the acquisition.
The Company currently has a positive current ratio with current assets exceeding
current liabilities by approximately $80,823. Based on current prices for oil
and gas, the Company believes that net cash flow from oil and gas sales should
be adequate to participate in the drilling of additional wells and cover the
fixed costs of the Company for the next fiscal year including servicing the bank
debt.
The Company currently has drilling prospects which it will be actively marketing
to industry participants on a promoted basis and the Company is attempting to
purchase additional producing oil and gas properties.
Analysis of Results of Operations:
Oil and gas sales increased for the three months ended December 31, 2000
compared to the three months ended December 31, 1999 primarily as a result of
higher prices for gas and oil and additional revenues from oil and gas wells
that the Company participated in drilling during the last year.
Management fees and other income received for the three months ended December
31, 2000 decreased over the prior year period due to a one time management fee
received in the prior period in connection with the acquisition of oil and gas
properties for a limited partnership.
9
Lease operating expenses and production taxes increased for the three months
ended December 31, 2000 due to additional wells and the increase in oil and gas
sales. Dry hole expense increased as a result of participating in two dry holes
during the three months ended December 31, 2000. Depreciation and depletion
increased as a result of the increase in oil and gas properties and related
production. General and administrative expenses decreased for the three months
ended December 31, 2000 as compared to the prior period primarily due to a
decrease in expenses associated with the limited partnership for which it
received management fees as described in the preceding paragraph. During the
three months ended December 31, 2000 the Company had a gain of $7,305 from
selling part of its interest in undeveloped oil and gas leases. Interest income
increased as a result of an increase in the amount of interest bearing cash
accounts. Interest expense decrease as a result of a reduction in the average
amount of debt outstanding.
10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11. Statement of Computation of Earnings Per Share
(b) Reports on Form 8-K
None
11
SIGNATURES
Pursuant to the Securities and Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CLX ENERGY, INC.
(REGISTRANT)
Date: February 12, 2001 By: /s/ E. J. Henderson
------------------------
By: E. J. Henderson
President and Chief Financial Officer
12