-----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, CiZNAszMYa0r8P0Hoj5fz5mUTlpobpMSUXDCIPOaLEjf1aCtfa7+xZAZeHJC3mF1 ba1HPg0RT3pTEQpCaCM6sA== 0000100712-97-000015.txt : 19970520 0000100712-97-000015.hdr.sgml : 19970520 ACCESSION NUMBER: 0000100712-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97609809 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, 1997 / / 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 24 1997 there were 10,219,464 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, 1997, and the results of their operations for the six months ended March 31, 1997 and 1996 and their cash flows for the six months ended March 31, 1997 and 1996 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, 1997 AND SEPTEMBER 30, 1996 (000'S OMITTED) March 31, September 30, 1997 1996 --------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents . . . . . . . . $ 2,226 $ 1,466 Marketable securities . . . . . . . . . . 201 201 Receivables: Sales and services, net of reserve of $203 at March 31, 1997 and $156 at September 30, 1996 . . . . . . . . . . 20,801 20,388 Construction work in progress . . . . . 4,185 4,592 Inventories - at cost: Compressor parts and supplies . . . . . 6,635 6,486 Construction work in progress . . . . . 1,721 2,433 Prepaid expenses and other. . . . . . . . 6,530 5,866 --------- -------- Total current assets . . . . . . . . 42,299 41,432 Property and equipment, at cost, net of accumulated depreciation and amortization of $107,372 at March 31, 1997 and $100,940 at September 30, 1996. . 187,428 173,307 Long-term receivable and other assets . . . 12,323 7,952 -------- -------- $242,050 $222,691 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable. . . . . . . . . . . . . $ 7,705 $ 8,361 Accrued liabilities . . . . . . . . . . . 6,795 13,084 Income taxes payable. . . . . . . . . . . 997 1,283 -------- -------- Total current liabilities. . . . . . 15,497 22,728 Senior term notes . . . . . . . . . . . . . 36,084 23,131 Deferred income taxes . . . . . . . . . . . 24,106 21,178 ------- -------- Stockholders' investment: Common stock. . . . . . . . . . . . . . . 10,259 10,259 Additional paid-in capital. . . . . . . . 72,646 72,223 Retained earnings . . . . . . . . . . . . 85,913 76,294 Deferred compensation - ESOP. . . . . . . (1,860) (2,340) Treasury stock. . . . . . . . . . . . . . (595) (782) -------- -------- Total stockholders' investment . . . . 166,363 155,654 -------- -------- $242,050 $222,691 ========= ========
4 PRODUCTION OPERATORS CORP AND SUBSIDIARY CONSOLIDATED INCOME STATEMENTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED-000'S OMITTED EXCEPT PER SHARE AMOUNTS) Quarter Ended Six Months Ended March 31, March 31, ----------------- ----------------- 1997 1996 1997 1996 ------- ------- ------- ------- Net revenues from sales and services and other income . . . . $28,181 $21,743 $54,928 $43,867 ------- ------- ------- ------- Costs and expenses: Cost of sales and services . . . 12,294 9,362 24,240 19,131 Depreciation and amortization. . 4,590 3,890 8,988 7,617 General and administrative expenses. . . . . . . . . . . . 1,874 1,790 3,777 3,596 Interest and debt expenses . . . 517 603 921 1,191 ------- ------- ------- ------- 19,275 15,645 37,926 31,535 ------- ------- ------- ------- Income before income taxes . . . . 8,906 6,098 17,002 12,332 Provision for income taxes . . . . 3,143 1,985 5,975 4,162 ------- ------- ------- ------- Net income . . . . . . . . . . . . $ 5,763 $ 4,113 $11,027 $ 8,170 ======= ======= ======= ======= Net income per share: Primary and fully diluted: $ .56 $ .40 $ 1.07 $ .80 Weighted average shares outstanding . . . . . . . . . . . 10,342 10,282 10,327 10,270 Dividends per share. . . . . . . . $ .07 $ .07 $ .14 $ .14 Average shares outstanding upon which dividends were accrued. . . 10,205 10,149 10,204 10,148
5 PRODUCTION OPERATORS CORP AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED-000'S OMITTED) Six Months Ended March 31, -------------------- 1997 1996 -------- -------- Cash flows from operating activities: Cash received from customers. . . . . . . . . . $ 51,140 $ 45,813 Cash paid to suppliers and employees. . . . . . (33,938) (25,063) Interest paid . . . . . . . . . . . . . . . . . (920) (1,078) Income tax paid . . . . . . . . . . . . . . . . (3,156) (1,016) Interest and dividends received . . . . . . . . 94 253 Other income. . . . . . . . . . . . . . . . . . 387 365 -------- -------- 13,607 19,274 -------- -------- Cash flows from investing activities: Net additions to property and equipment . . . . (24,200) (12,486) Proceeds from sale of property and equipment. . 5,144 3,978 Other . . . . . . . . . . . . . . . . . . . . . (6,066) (647) -------- -------- (25,122) (9,155) -------- -------- Cash flows from financing activities: Additions to (reduction of) net borrowings on long-term senior notes. . . . . . . . . . . 12,953 (9,722) Dividends paid. . . . . . . . . . . . . . . . . (1,429) (1,421) Reduction of deferred compensation under Company's ESOP Plan. . . . . . . . . . . . . . 480 495 Cash received upon exercise of stock options. . 363 279 Cash bonus paid upon exercise of stock options. (59) (49) Repurchases of stock awards . . . . . . . . . . (33) (48) -------- -------- 12,275 (10,466) -------- -------- Net increase (decrease) in cash and 760 (347) cash equivalents . . . . . . Cash and cash equivalents at beginning of year. . 1,466 985 -------- -------- Cash and cash equivalents at end of quarter . . . $ 2,226 $ 638 ======== ========
6 PRODUCTION OPERATORS CORP AND SUBSIDIARY RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED-000'S OMITTED) Six Months Ended March 31, -------------------- 1997 1996 ------- ------- Net income. . . . . . . . . . . . . . . . . . . . .$11,027 $ 8,170 ------- ------- Adjustments: Depreciation, depletion and amortization. . . . . 8,988 7,617 Provision for deferred income tax . . . . . . . . 2,928 2,596 Provision for tax benefits on stock option exercises and ESOP dividends . . . . . . . . . . 177 88 Issuance of stock awards. . . . . . . . . . . . . 183 228 Provision for bad debts . . . . . . . . . . . . . 47 13 Gain on sale of property and equipment. . . . . . (2,365) (1,241) Increase (decrease) in receivables. . . . . . . . (1,768) 3,011 Decrease in inventories . . . . . . . . . . . . . 563 1,099 Increase in prepaid expenses and other. . . . . . (664) (516) Decrease in long-term receivable and other assets . . . . . . . . . . . . . . . . . . 1,722 1,568 Decrease in accounts payable. . . . . . . . . . . (656) (4,417) Increase (decrease) in accrued liabilities. . . . (6,289) 596 Decrease in current tax benefit . . . . . . . . . -- 462 Decrease in income taxes payable. . . . . . . . . (286) -- ------- ------- 2,580 11,104 ------- ------- Net cash provided by operating activities . . . . .$13,607 $19,274 ======= =======
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - The Company reported net revenues from sales and services and other income for the three and six months ending March 31, 1997 of $28,181,000 and $54,928,000 respectively, reflecting increases of $6,438,000 (30%) and $11,061,000 (25%) over the same periods in the prior year. Revenues from contract gas handling services increased $6,480,000 (30%) to $27,945,000 and $11,364,000 (26%) to $54,565,000, respectively, during the second quarter and six months ended March 31, 1997 as compared to the year ago periods. Revenues from installation, demobilization, construction and equipment sales grew at a more rapid rate than horsepower as activity continued to increase with domestic alliances, especially client owned equipment. The Company's fleet of revenue producing compression equipment, including operations of customer owned units, averaged 487,000 and 473,000 horsepower during the second quarter and six months of the current fiscal year, as compared to 393,000 and 387,000 horsepower last year, increases of 24% and 22%, respectively, for the comparative periods. At its March 31, 1997 quarter end, the Company had operating horsepower of 507,000 with a backlog, including client owned units, of 72,000 horsepower which compares to 406,000 and 35,000, respectively, a year ago. Average realized price per horsepower decreased 1.8% and 2.4%, respectively, during the second quarter and six months ended March 31, 1997 as compared to the year ago periods due to a substantial increase in client owned revenue producing horsepower where the revenue per horsepower is lower. Average realized price per horsepower on company owned units increased modestly. Other income, consisting principally of rents, interest and sales of miscellaneous assets was $236,000 and $363,000 for the three and six months ended March 31, 1997 as compared to $278,000 and $666,000 for the comparable periods last year. The decrease in other income was due primarily to a charge related to the retirement of computer hardware during the fiscal 1997 first quarter. Operating income from contract gas handling services (revenues less cost of services and depreciation) for the three and six month periods ended March 31, 1997 increased $2,848,000 (35%) to $11,061,000 and $4,884,000 (30%) to $21,337,000, respectively, compared to the year ago periods. This growth continues to be driven by the growth in revenue producing horsepower from the expansion of the Company s domestic alliance relationships, the continued expansion of international operations and improvement in operating expense margins. 8 The provision for depreciation and amortization increased $700,000 (18%) to $4,590,000 and $1,371,000 (18%) to $8,988,000 respectively, for the second quarter and six months ended March 31, 1997 primarily due to the increase in horsepower previously noted. General and administrative expenses increased $84,000 (5%) to $1,874,000 and $181,000 (5%) to $3,777,000, respectively for the second quarter and six months ended March 31, 1997. Interest expense for the second quarter and six months ended March 31, 1997 improved to $517,000 and $921,000, respectively, compared to $603,000 and $1,191,000 a year ago. Income tax expense for the second quarter was $3,143,000, an average effective tax rate of 35% as compared to $1,985,000, an average effective tax rate of 33% in the comparable quarter a year ago. Income tax expense for the six months ended March 31, 1997 was $5,975,000, an average effective tax rate of 35% as compared to $4,162,000, an average effective tax rate of 34% for the year ago period. On February 7, 1997, the Company announced the award and signing of a service contract by Lagoven, S.A., a subsidiary of Petroleos de Venezuela, to Williams International Company ( Williams ) and the Company, which is to be the largest outsourced natural gas injection project in Venezuela. The project involves the design, construction, and twenty year total responsibility operation of facilities to provide gas compression, transmission and injection services into Lagoven s prolific El Furrial reservoir in northeastern Venezuela. The facilities will handle over 600 million cubic feet of natural gas per day and require 112,000 horsepower of compression equipment. Williams and the Company will construct and manage the project through a joint venture with ownership interests of two-thirds and one-third, respectively. Funding for a significant portion of the approximate $200 million in investment costs is expected to be provided by limited or non-recourse, project based financing with the remainder to be provided by equity investments from the two companies. On February 27, 1997, the Company announced a definitive agreement to be acquired by Camco International Inc. ( Camco ), a company focused on providing high quality, value added oilfield products and services in over fifty foreign countries. Under the terms of the agreement, each common share of the Company will be exchanged for 1.3 common shares of Camco in a transaction expected to be tax free and that will be accounted for as a pooling of interests. Management believes the acquisition of the Company by Camco will enhance the Company s international expansion opportunities because of Camco s existing infrastructure of offices, clients and business relationships. The merger is subject to regulatory approvals and the approval of the shareholders of both companies. Closing is expected to take place by the end of the second calendar quarter of 1997. 9 Liquidity and Capital Resources - As of March 31, 1997, the Company's cash position was $2,226,000 versus $1,466,000 at the close of the prior fiscal year ended September 30, 1996. The principal sources of cash during the period were internally generated funds from operating activities of $13,607,000, proceeds from the sale of property and equipment of $5,144,000 and additional bank borrowings totaling $12,953,000. The primary uses of cash were capital expenditures of $24,200,000, payment of dividends amounting to $1,429,000, and additions to other long- term assets of $6,066,000. Additions to other long-term assets consisted primarily of investments in the El Furrial project previously discussed, international importation and installation, and information system development. Accounts receivable for sales and services increased $413,000 to $20,801,000 at March 31, 1997 as compared to yearend 1996 principally due to the increased revenue during the quarter from the additional revenue producing horsepower previously noted. Accounts receivable from construction work in progress decreased $407,000 to $4,185,000 as certain domestic projects were completed and collected during the quarter. Inventories of compressor parts and supplies increased $149,000 to $6,635,000 primarily due to continued expansion internationally. Construction work in progress decreased $712,000 to $1,721,000 due to the completion of certain projects previously noted. Long-term receivable and other assets increased $4,371,000 to $12,323,000 as previously discussed above under uses of cash. Accounts payable decreased $656,000 to $7,705,000 and accrued liabilities decreased $6,289,000 to $6,795,000 due to the completion of obligations under certain contractual arrangements for the fabrication of client owned units. Since year end, bank borrowings increased $12,953,000 to $36,084,000 to meet cash requirements for operating expenditures and capital expenditures not provided by cash flow from operations. Management expects cash requirements for the remainder of fiscal 1997 to be satisfied from cash on hand, cash flow from operations and additional bank borrowings as required, including project based financing for the El Furrial project previously discussed. 10 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, 1997 and March 31, 1997. 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) /S/ D. John Ogren D. John Ogren President /s/ John B. Simmons John B. Simmons Principal Financial and Accounting Officer Date: May 14, 1997 EX-27 2
5 1,000 6-MOS SEP-30-1997 MAR-31-1997 2,226 201 25,189 203 8,356 42,299 294,800 107,372 242,050 15,497 36,084 0 0 10,259 156,104 242,050 54,565 54,928 24,240 24,240 12,765 0 921 17,002 5,975 11,027 0 0 0 11,027 1.07 1.07
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