-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Igel5aa8EsRvGZXxkwniWbSP0nDaUgQdR9wLqf9bA7v85BrZyU0k0H/OmmBRqT4U ZMCPKahp2rblGwNT9n9SHQ== 0000100712-96-000010.txt : 19960510 0000100712-96-000010.hdr.sgml : 19960510 ACCESSION NUMBER: 0000100712-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRODUCTION OPERATORS CORP CENTRAL INDEX KEY: 0000100712 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 590827174 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-03919 FILM NUMBER: 96558501 BUSINESS ADDRESS: STREET 1: ONE PIEDMONT CENTER SUITE 515 CITY: ATLANTA STATE: GA ZIP: 30305 BUSINESS PHONE: 7134660980 FORMER COMPANY: FORMER CONFORMED NAME: UNICAPITAL CORP DATE OF NAME CHANGE: 19801229 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES FINANCE CO INC DATE OF NAME CHANGE: 19690828 FORMER COMPANY: FORMER CONFORMED NAME: UNITED STATES SHELL HOMES INC DATE OF NAME CHANGE: 19660911 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 / / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-3919 PRODUCTION OPERATORS CORP (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 59-0827174 (IRS Employer Identification No.) 11302 Tanner Road Houston, Texas 77041 (Address of principal executive offices) (713) 466-0980 (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 twelve 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 On April 26, 1996 there were 10,155,134 shares of the Company's common stock, $l.00 par value, outstanding (exclusive of treasury shares). 2 PART I. FINANCIAL INFORMATION FINANCIAL STATEMENTS PRODUCTION OPERATORS CORP AND SUBSIDIARY The condensed consolidated financial statements included herein have been prepared by Production Operators Corp, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The term "Company" as used herein refers to Production Operators Corp and its operating subsidiary, Production Operators, Inc., together with its subsidiaries, unless the context otherwise indicates. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's latest annual report on Form l0-K. In the opinion of the Company all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of March 31, 1996, and the results of their operations for the six months ended March 31, 1996 and 1995 and their cash flows for the six months ended March 31, 1996 and 1995 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. 3 PRODUCTION OPERATORS CORP AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1996 AND SEPTEMBER 30, 1995 (000'S OMITTED)
March 31, September 30, 1996 1995 (Unaudited) ASSETS Current assets: Cash and cash equivalents . . . . . . . . $ 638 $ 985 Marketable securities . . . . . . . . . . 202 202 Receivables: Sales and services, net of reserve of $172 at March 31, 1996 and $159 at September 30, 1995 . . . . . . . . . . 18,458 16,492 Construction work in progress . . . . . 1,590 6,835 Inventories - at cost: Compressor parts and supplies . . . . . 4,773 4,852 Construction work in progress . . . . . 1,432 2,452 Prepaid expenses and other. . . . . . . . 5,472 4,956 Current tax benefit . . . . . . . . . . . 2,323 2,785 Net assets of discontinued operations . . 8,121 8,981 Total current assets . . . . . . . . 43,009 48,540 Property and equipment, at cost, net of accumulated depreciation and amortization of $99,201 at March 31, 1996 and $91,386 at September 30, 1995 . . 166,478 162,995 Long-term receivable and other assets . . . 7,804 8,697 $217,291 $220,232 LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable. . . . . . . . . . . . . $ 5,550 $ 9,967 Accrued liabilities . . . . . . . . . . . 8,689 7,829 Total current liabilities. . . . . . 14,239 17,796 Senior term notes . . . . . . . . . . . . . 36,283 46,005 Deferred income taxes . . . . . . . . . . . 20,377 17,781 Stockholders' investment: Common stock. . . . . . . . . . . . . . . 10,259 10,259 Additional paid-in capital. . . . . . . . 71,515 71,156 Retained earnings . . . . . . . . . . . . 68,373 61,601 Deferred compensation - ESOP. . . . . . . (2,708) (3,202) Treasury stock. . . . . . . . . . . . . . (1,047) (1,164) Total stockholders' investment . . . . 146,392 138,650 $217,291 $220,232
4 PRODUCTION OPERATORS CORP AND SUBSIDIARY CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED-000'S OMITTED EXCEPT PER SHARE AMOUNTS)
Quarter Ended Six Months Ended March 31, March 31, 1996 1995 1996 1995 Net revenues from sales and services and other income . . . . $21,743 $17,465 $43,867 $34,275 Costs and expenses: Cost of sales and services . . . 9,362 8,040 19,131 15,900 Depreciation and amortization. . 3,890 2,646 7,617 5,188 General and administrative expenses. . . . . . . . . . . . 1,790 1,787 3,596 3,331 Interest and debt expenses . . . 603 176 1,191 120 15,645 12,649 31,535 24,539 Income before income taxes . . . . 6,098 4,816 12,332 9,736 Provision for income taxes . . . . 1,985 1,664 4,162 3,417 Income from continuing operations. 4,113 3,152 8,170 6,319 Loss from discontinued operations. -- (115) -- (204) Net income . . . . . . . . . . . . $ 4,113 $ 3,037 $ 8,170 $ 6,115 Net income per share: Primary and fully diluted: Income from continuing operations. . . . . . . . . . . $ .40 $ .31 $ .80 $ .62 Loss from discontinued operations. . . . . . . . . . . -- (.01) -- (.02) Net income . . . . . . . . . . . $ .40 $ .30 $ .80 $ .60 Weighted average shares outstanding . . . . . . . . . . . 10,282 10,171 10,270 10,169 Dividends per share. . . . . . . . $ .07 $ .06 $ .14 $ .12 Average shares outstanding upon which dividends were accrued. . . 10,149 10,078 10,148 10,078
5 PRODUCTION OPERATORS CORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED-000'S OMITTED)
Six Months Ended March 31, 1996 1995 Cash flows from operating activities: Cash received from customers. . . . . . . . . . $ 45,813 $ 35,454 Cash paid to suppliers and employees. . . . . . (25,063) (19,208) Interest paid . . . . . . . . . . . . . . . . . (1,078) (354) Income tax paid . . . . . . . . . . . . . . . . (1,016) (1,619) Interest and dividends received . . . . . . . . 253 393 Other income. . . . . . . . . . . . . . . . . . 365 377 19,274 15,043 Cash flows from investing activities: Net additions to property and equipment . . . . (12,486) (35,813) Proceeds from sale of securities. . . . . . . . -- 720 Proceeds from sale of property and equipment. . 3,978 1,044 Purchase of securities. . . . . . . . . . . . . -- (677) Additions to other long-term assets . . . . . . (647) (1,086) (9,155) (35,812) Cash flows from financing activities: Additions to (reduction of) net borrowings on long-term senior notes. . . . . . . . . . . (9,722) 22,737 Dividends paid. . . . . . . . . . . . . . . . . (1,421) (1,209) (Additions to) reduction of deferred compensation under Company's ESOP Plan . . . . 495 (167) Cash received upon exercise of stock options. . 279 10 Cash bonus paid upon exercise of stock options. (49) (2) Repurchases of stock awards . . . . . . . . . . (48) (19) (10,466) 21,350 Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . (347) 581 Cash and cash equivalents at beginning of year. . 985 1,037 Cash and cash equivalents at end of quarter . . . $ 638 $ 1,618
6 PRODUCTION OPERATORS CORP AND SUBSIDIARY RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED-000'S OMITTED)
Six Months Ended March 31, 1996 1995 Net income. . . . . . . . . . . . . . . . . . . . . $ 8,170 $ 6,115 Adjustments: Depreciation, depletion and amortization. . . . . 7,617 6,963 Provision for deferred income tax . . . . . . . . 2,596 1,453 Provision for tax benefits on stock option exercises and ESOP dividends . . . . . . . . . . 88 21 Issuance of stock awards. . . . . . . . . . . . . 228 74 Provision for bad debts . . . . . . . . . . . . . 13 12 Gain on sale of property and equipment. . . . . . (1,241) (188) Gain on sale of marketable securities, net of reserve . . . . . . . . . . . . . . . . . -- (25) (Increase) decrease in receivables . . . . . . . 3,011 (3,619) Decrease in inventories . . . . . . . . . . . . . 1,099 3,294 Increase in prepaid expenses and other. . . . . . (516) (816) Decrease in long-term receivable and other assets . . . . . . . . . . . . . . . . . . 1,568 964 Increase (decrease) in accounts payable . . . . . (4,417) 2,828 Increase (decrease) in accrued liabilities. . . . 596 (2,247) Decrease in current tax benefit . . . . . . . . . 462 -- Increase in income taxes payable. . . . . . . . . -- 214 11,104 8,928 Net cash provided by operating activities . . . . . $19,274 $15,043
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The Company reported net revenues for the three and six months ended March 31, 1996 of $21,743,000 and $43,867,000, respectively, reflecting increases of $4,278,000 (24%) and $9,592,000 (28%) over the same periods in the prior year. Revenues from contract gas handling services increased $4,573,000 (27%) to $21,465,000 and $9,722,000 (29%) to $43,201,000, respectively, during the second quarter and six months ended March 31, 1996 as compared to the year ago periods. The Company's revenue producing compression fleet, including contract operated units, averaged 393,000 and 387,000 horsepower, respectively, during the second quarter and six months of the current fiscal year as compared to 314,000 and 305,000 horsepower last year, increases of 25% and 27%, respectively, for the comparative periods. The increased revenue reflected the growth in revenue producing compression equipment which was at a record 406,000 horsepower as of March 31, 1996 with a backlog of 35,000 horsepower. Revenues from construction, installation and equipment sales declined as compared to last year's second quarter. Average realized prices per horsepower increased 6.5% and 7.9%, respectively, during the second quarter and six months ended March 31, 1996 as compared to the year ago periods due to an increase in international horsepower where the revenue per horsepower is greater than in the domestic market. As disclosed in the Company's annual report for its most recent fiscal year ended September 30, 1995, oil and gas producing activities have been classified as discontinued operations. In connection with this discontinuance, the Company adopted a plan for exiting the oil and gas production business and recorded a fiscal 1995 fourth quarter charge that included a writedown of oil and gas properties to their estimated net realizable value along with a provision for disposing of these operations, less applicable tax benefits. No further adjustments to the fourth quarter charge were recorded in the first six months of fiscal 1996. Other income, comprised principally of rents, interest and dividends totaled $278,000 and $666,000, respectively, for the three and six months ended March 31, 1996 as compared to $573,000 and $796,000 for the comparable periods last year. The decline was due primarily to the reduction in the Company's holdings of marketable securities as compared to the previous year. Operating income from contract gas handling services (revenues less cost of sales and services and depreciation) for the three and six month periods ended March 31, 1996 increased $2,007,000 (32%) to $8,213,000 and $4,062,000 (33%) to $16,453,000, respectively, compared to the year ago periods. These increases were due to the growth in horsepower and price per horsepower previously noted. This growth was driven by the continued expansion of our domestic alliance relationships, the launch of Argentine operations and expansion in Venezuela. An additional strong area of growth has been contract operation of client-owned equipment in the domestic market. 8 The provision for depreciation and amortization increased $1,244,000 (47%) to $3,890,000 and $2,429,000 (47%) to $7,617,000, respectively, for the second quarter and six months ended March 31, 1996 primarily due to the increase in revenue producing horsepower previously noted and a waterflood project in Venezuela that is being depreciated substantially more rapidly than typical compression equipment due to contract terms that include a purchase option. General and administrative expenses of $1,790,000 were relatively unchanged in the second quarter ended March 31, 1996 as compared to the same period last year. For the six months ended March 31, 1996, general and administrative expenses increased $265,000 (8%) to $3,596,000 which is reflective of changes in the Company's infrastructure to support the rapid business growth, principally in engineering and technical support. Interest expense for the second quarter and six months ended March 31, 1996 was $603,000 and $1,191,000, respectively, compared to $176,000 and $120,000 a year ago. These changes are the result of higher bank borrowings to fund increased capital spending that occurred at record levels during the prior fiscal year ended September 30, 1995. Income tax expense for the second quarter was $1,985,000 at an average effective tax rate of 33% as compared to $1,664,000 at an average effective tax rate of 35% in the prior fiscal year. Income tax expense for the six months ended March 31, 1996 was $4,162,000 at an average effective tax rate of 34% as compared to $3,417,000 at an average effective tax rate of 35% in the prior fiscal year. Slightly lower effective tax rates were recorded for the current fiscal periods as compared to the prior year due primarily to tax benefits realized from international operations. Liquidity and Capital Resources As of March 31, 1996 the Company had cash and cash equivalents in the amount of $638,000 versus $985,000 at September 30, 1995, the end of its preceding fiscal year. The principal sources of cash during the current year's first six months were $19,274,000 from operations and $3,978,000 on sales of property and equipment. The principal uses of cash were $12,486,000 in capital additions, $9,722,000 of payments on long term bank debt and $1,421,000 for dividend payments. Accounts receivable from sales and service increased $1,966,000 during the first six months of fiscal 1996 to $18,458,000 and accounts receivable from construction decreased $5,245,000 to $1,590,000. Inventories of compressor parts and supplies decreased $79,000 to $4,773,000 during the first six months of fiscal 1996 while inventories related to construction decreased $1,020,000 to $1,432,000 during the same period. Net assets of discontinued operations decreased $860,000 to $8,121,000 due to the sale of oil and gas properties during the fiscal 1996 second quarter. Sales of the remaining oil and gas properties were closed subsequent to the end of the second fiscal quarter. Property, plant and equipment, net of accumulated depreciation and amortization, increased $3,483,000 in the first half of the year. Accounts payable decreased $4,417,000 due to the collection of construction receivables and inventories previously noted and lower capital spending. The Company expects cash requirements for the remainder of fiscal 1996 to be satisfied principally from cash on hand, operating cash flows and additional bank borrowings as required. 9 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K The Registrant made no filing on Form 8-K during the period January 1, 1996 and March 31, 1996. All other items are inapplicable or have negative answers and are therefore omitted from this report. 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. PRODUCTION OPERATORS CORP (Registrant) By: D. John Ogren D. John Ogren President By: John B. Simmons John B. Simmons Principal Financial and Accounting Officer Date: May 8, 1996 EX-27 2
5 1,000 6-MOS SEP-30-1996 MAR-31-1996 638 202 20,220 172 6,205 43,009 265,679 99,201 217,291 14,239 36,283 0 0 10,259 136,133 217,291 43,201 666 19,131 19,131 11,213 0 1,191 12,332 4,162 8,170 0 0 0 8,170 .80 .80
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