The government had regulated natural gas pricing for all but “deep gas” (gas from wells deeper than 15,000 feet). New regulations for deep-gas pricing were introduced and expected to go into effect within 180 days. Company had several undeveloped oil and gas leases for both shallow and deep oil and gas reserves that needed to be developed.

As a result of these pending government pricing regulations, lenders to the industry were reducing lines of credit to their customers. Company had a $125 million credit facility with a consortium of five money-center banks seeking a $15 million reduction while the company sought a larger facility to develop more of its undeveloped oil and gas leases.

Analyzed reserve values for the undeveloped leases using the new regulated pricing for deep gas, and compared this to the geological survey of expected developed reserve values. Compared increase in the value of reserves upon development to the cost of development, indicating a very significant increase in reserves or “collateral value” for the entire credit facility for the investment required. Requested a $10 million increase in credit line from the five-bank consortium handling the credit facility.

Company’s credit facility was increased $10 million to $135 million to develop additional oil and gas reserves, increasing income, asset values, collateral values, and market capitalization.

Company's current lender wanted to adjust its portfolio and limit long-term debt (worth $2.5 million) to the industry, but cash flow was strained due to significant 30% growth. Because of the unique industry—spas (beauty salons), hotels and restaurants—the usual banking facilities were not anxious to lend significant amounts to this industry or on such special-purpose real estate.

Developed a lender’s package of historical and projected financial information on the company. Initiated contact with the major financial institution locally and then to some smaller, local specialty lenders. Also contacted the lender who financed the company’s acquisition of its larger hotel property.

Successfully negotiated long-term portion of the company's debt package with specialty lender that financed the company's hotel acquisition, saving $400,000+ in cash flow in the first two years and elimination and performance ratio covenants in the agreement. Negotiated short-term debt by increasing lending amount from $250,000 to $400,000 and structuring a cash management program with the new bank, saving about $10,000 annually with lower net borrowing requirements.

The SEC made an accounting pronouncement targeted at large oil and gas development companies to permit capitalization of interest costs on borrowings to finance deep gas drilling (depths below 15,000 feet) for a combination or group of wells defined as a single project. Company was drilling several wells in a region that were all deep gas wells but were parts of several limited partnerships and not being developed as a single project.

Since company was the General Managing Partner of the various limited partnerships, it classified all wells as part of the company’s “Anadarko Basin Deep Gas Drilling Project.” Project was described and promoted in company’s Annual Report. Discussed project with SEC Oil and Gas Industry Accountant and gained permission to use the deep gas drilling project accounting policy.

Adoption of new SEC accounting policy provided for additional increased income recognition of $2.9 million or $0.36 per share over two years.

Company was growing rapidly, but Bills of Material (BOM) were manually prepared. R&D Engineers issued change orders to BOMs, making parts obsolete without analyzing on-hand inventories of parts eliminated and requiring new parts without understanding availability and lead times. Errors in production occurred when subassemblies were often produced using earlier version BOMs. Sales and marketing wanted to improve on-time delivery performance, requiring inventory system and internal communications to be restructured.

Purchased an inventory and purchasing software package designed to run on its IBM System III computer, and established project committee to develop data required of the new software and any modifications necessary to the package. Developed procedures to approve any modifications before implementation. System was tested for 60 days prior to implementation.

Within a year, reduced inventories by 20%, saving approximately $1.5 million. Diminished parts obsolesce by more than 90% and reduced production lead times. Sales and marketing indicated higher customer satisfaction with on-time deliveries and fewer implementation problems.

Company’s IBM System III Model 10 was approaching its capacity in speed and data storage. IBM announced it newest model in the System III line as the Model 15 to be available in 6-12 months. Model 12, which was larger and faster than the Model 10, was currently available. Company’s application software used the RPG programming language of the IBM System III product line. Upgrade to the Model 15 would not be available soon enough.

Negotiated with IBM to install an upgrade to the Model 12 first and install Model 15 when available. Built new mainframe computer room adjacent to the current room and installed and tested the Model 12 with parallel applications with the Model 10 for 45 days. Over a weekend, changed all connections from Model 10 to Model 12, resulting in a completely transparent conversion to system users. Removed Model 10 and used that room to house the Model 15, which was subsequently installed and Beta Site tested by IBM, running both systems in parallel for 90 days. When IBM and the company were both satisfied with the Model 15 test and implementation, a similar conversion to the Model 15 was completed on a weekend.

Operations were never disrupted, with completely transparent mainframe conversions. Company negotiated a “free upgrade” to the Model 12 and lower price for the Model 15 by agreeing to be a Beta Test Site for the IBM Model 15. The capacity and speed of the Model 15 satisfied system requirements for the foreseeable future.

Rapid growth dictated need to expand facilities. A 50,000 square foot building on a contiguous property became available when company occupying it filed for bankruptcy. Purchasing this building out of bankruptcy and remodeling would save more than $2 million in expansion costs and $500,000 in annual operating costs. Building under consideration for purchase was not zoned for industrial manufacturing. Rezoning a property required a public vote of the community.

Building was purchased subject to approval of its rezoning for industrial manufacturing. Working with the mayor and city council, zoning issue was approved for inclusion on ballot for the next election. Developed and distributed literature to the community, explaining and promoting benefits of approving rezoning of this property. Scheduled and conducted various public meetings on the zoning issue and secured support of the mayor and council. Passed out literature on Election Day outside of each polling location.

Rezoning issue passed with greater than 75% majority, saving the company more than $2.5 million. In addition, building was occupied at least one year earlier than new construction could have been completed with no disruption to current facilities.

Venture capital–funded startup company providing service to medical institutions for repair and maintenance of diagnostic radiology equipment wanted quick growth through acquisition of similar entities across the country. Most independent radiology equipment service companies were privately owned with little published data available about the industry. Financial information or any interest of owners in a merger or divestiture from such entities was very limited.

Contacted major medical facilities in various regions of the country to identify service companies with apparent solid customer base. Sent inquiries to strongest service organization in a regional market to inquire of any interest in merger or sale, identifying several potential candidates. Performed due diligence on financial information, market position, customer base and staffing. Recommended and negotiated purchase price and terms.

Negotiated acquisition of four regional service companies for an aggregate purchase price of $13 million financed over 5-10 years from lenders and venture funds, increasing revenues $20 million annually. Acquisitions also created a national presence and broader range of equipment service experience within the company.

Long-term, these acquisitions provided a strong foundation for sale growth and profitability for the company. With increasing revenues, consolidation of management, and coordinated and consistent marketing programs, organization grew annual revenue to more than $40 million within two years.

Company had sold limited partnership interests in the public market for several years, recognizing $3.1 million dollars ($0.39 per share) in fees as the General Managing Partner. The SEC issued a pronouncement stating that such fees could not be recognized in income until the time that “no risk of loss” for such fees could be determined.

Auditors had determined that a restatement of published financial reports for the preceding two years would be necessary unless a ruling was secured from the SEC permitting the recognition of fees as income in the periods claimed. Company had recognized the income in the quarter it collected the fees.

Researched basic SEC regulations and current pronouncement that provided a basis for the company to recognize the income during the period in question. Research determined that as long as company could record the successful development of undeveloped reserves in an amount exceeding the fee income recognized within 90 days (one public accounting period), fee recognition would be permitted. Provided records of development of reserves in each partnership that proved reserves in excess of the fee income collected in each partnership within one public accounting period.

Met with the Chief Accountant for the SEC in Washington and convinced him that company’s accounting procedures were in accordance with GAAP and SEC pronouncements. No restatement of prior published financial statements was required, and company recognized net income of $3.1 million or $0.39 per share.

Success of meetings with the Chief Accountant of the SEC and the oil and gas industry SEC accounting staff proved a valuable resource and credibility for future discussions that provided for the recognition of additional income of $2.9 million or $0.36 per share based on a different SEC accounting policy interpretation.

Two major product lines had more than quintupled growth, and span of control for division managers had expanded to theoretical limits. Product lines were best accounted for using different cost accounting methods: job cost for programmable controller line and process cost for numerical control product line. Marketing programs and customer markets did not significantly overlap in each product line. Engineering and R&D projects had different objectives for each product line. Company considered separation of both product lines into separate divisions but did not want to affect current operations or continued growth while new group management was established.

Corporate President and Division General Manager announced the project at third-quarter performance review, promoting each of the Senior Division managers to Group Managers and creating a task force of Group Managers to confidentially develop group management structure within 30 days. Personally assigned to chair task force, leased office space to meet away from the division facility to keep discussions confidential. Task force met at off-premise facility two afternoons each week and each Saturday to create new group management structure, identifying personnel for management positions and recommending compensation levels.

Task force recommendations were presented on time and approved by Corporate President and Vice President / Group General Manager. Each Group Manager met with their own staff and announced individual promotions. Within two years, the group had doubled in size again, resulting in annual revenues that had amplified from less than $10 million to approximately $120 million over six years. Subsequently promoted to Corporate Financial Manager under Corporate President.