8-K 1 form8kjan2003.txt 8-K REPORT ============================================================================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) January 1, 2003 SOUTHERN UNION COMPANY (Exact name of registrant as specified in its charter) Delaware 1-6407 75-0571592 (State or other jurisdiction of (Commission File Number) (I.R.S. Employer incorporation Identification No.) One PEI Center 18711 Wilkes-Barre, Pennsylvania (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (570) 820-2400 ============================================================================== ITEM 2. DISPOSITION OF ASSETS Effective January 1, 2003, Southern Union Company ("Southern Union" or the "Company") completed the sale of Southern Union Gas Company (Southern Union Gas), its Austin-based natural gas operating division, and other related assets to ONEOK, Inc. for approximately $420,000,000 in cash. In addition to Southern Union Gas, the sale involved the divestiture of Mercado Gas Services, Inc. (Mercado), SUPro Energy Company (SUPro), Southern Transmission Company (STC), Southern Union Energy International, Inc. (SUEI), Southern Union International Investments, Inc. (Investments) and Norteno Pipeline Company (Norteno). ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Disposed. Not applicable (b) Pro Forma Financial Information Unaudited Pro Forma Balance Sheet as of September 30, 2002 Unaudited Pro Forma Statement of Operations for the Three Months Ended September 30, 2002 Unaudited Pro Forma Statement of Operations for the Three Months Ended September 30, 2001 Unaudited Pro Forma Statement of Operations for the Twelve Months Ended June 30, 2002 Unaudited Pro Forma Statement of Operations for the Twelve Months Ended June 30, 2001 Unaudited Pro Forma Statement of Operations for the Twelve Months Ended June 30, 2000 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. SOUTHERN UNION COMPANY (Registrant) Date January 16, 2003 By DAVID J. KVAPIL ---------------------- -------------------------------------- David J. Kvapil Executive Vice President and Chief Financial Officer UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma condensed financial statements present the financial data of Southern Union, after giving effect to the disposition of Southern Union Gas, Mercado, SUPro, STC, SUEI, Investments and Norteno (collectively, Southern Union's "Texas Operations"), assuming the disposition had been effective for the periods indicated. The unaudited pro forma condensed financial statements have been prepared using the historical financial statements of Southern Union as previously filed with the Securities and Exchange Commission. Using the Southern Union balance sheet at September 30, 2002, the unaudited Pro Forma Condensed Balance Sheet as of September 30, 2002, is presented as if the disposition had occurred on that date. The unaudited Pro Forma Condensed Statements of Operations for the twelve months ended June 30, 2002, 2001, and 2000 as well as for the three months ended September 30, 2002 and 2001 assume that the disposition occurred on July 1, 1999 and include Southern Union's results of operations for its fiscal years ended June 30, 2002, 2001, and 2000 as well as for its quarters ended September 30, 2002 and 2001. The following unaudited pro forma condensed financial statements should be read in conjunction with Southern Union's historical financial statements and related notes thereto. The following unaudited pro forma condensed financial statements are presented for purposes of illustration only in accordance with the assumptions set forth below and are not necessarily indicative of the financial position or operating results that would have occurred if the disposition had been consummated on the dates as of which, or at the beginning of the period for which, the disposition is being given effect nor is it necessarily indicative of the future operating results or financial position of Southern Union. SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 2002 (Unaudited) ASSETS Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- --------
(thousands of dollars) Property, plant and equipment: Utility plant, at cost............................ $ 2,301,116 $ (509,172)(A) $ 1,791,944 Less accumulated depreciation and amortization.... (838,741) 221,430 (A) (617,311) ------------- ------------- -------------- Net property, plant and equipment............... 1,462,375 (287,742) 1,174,633 Current assets: Cash and cash equivalents......................... 985 420,000 (A) 420,985 Accounts receivable, billed and unbilled, net..... 94,337 (21,796)(A) 72,541 Inventories, principally at average cost.......... 139,193 (7,160)(A) 132,033 Deferred gas purchase costs....................... 14,699 -- 14,699 Investment securities available for sale.......... 414 -- 414 Prepayments and other............................. 11,745 (383)(A) 11,362 ------------- ------------- -------------- Total current assets............................ 261,373 390,661 652,034 Goodwill, net........................................ 713,390 (70,469)(A) 642,921 Deferred charges..................................... 217,238 (4,420)(A) 212,818 Investment securities, at cost....................... 9,786 -- 9,786 Other................................................ 46,151 (4,591)(A) 41,560 ------------- ------------- -------------- Total assets...................................... $ 2,710,313 $ 23,439 $ 2,733,752 ============= ============= ============== CAPITALIZATION AND LIABILITIES Capitalization: Common stockholders' equity....................... $ 679,917 $ 27,820 (B) $ 707,737 Preferred stock of subsidiary trust, $25 par...... 100,000 -- 100,000 Long-term debt and capital lease obligation....... 1,049,079 -- 1,049,079 ------------- ------------- -------------- Total capitalization............................ 1,828,996 27,820 1,856,816 Current liabilities: Long-term debt due within one year................ 98,316 -- 98,316 Notes payable..................................... 230,700 -- 230,700 Accounts payable.................................. 63,888 (14,265)(A) 56,051 6,428 (C) Federal, state and local taxes.................... 4,297 -- 4,297 Other............................................. 91,596 (27,950)(A) 63,646 ------------- ------------- -------------- Total current liabilities....................... 488,797 (35,787) 453,010 Deferred credits and other liabilities............... 392,520 (28,812)(A) 423,926 60,218 (D) ------------- ------------- -------------- Total capitalization and liabilities.............. $ 2,710,313 $ 23,439 $ 2,733,752 ============= ============= ============== See Notes to Pro Forma Condensed Financial Statements -------------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002 (Unaudited) Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- -------- (thousands of dollars, except shares and per share amounts)
Operating revenues................................... $ 147,399 $ (47,689)(E) $ 99,710 Cost of gas and other energy......................... (66,183) 24,123 (E) (42,060) Revenue-related taxes................................ (5,132) 1,946 (E) (3,186) ------------- ------------- -------------- Operating margin.................................. 76,084 (21,620) 54,464 Operating expenses: Operating, maintenance and general................ 52,762 (11,392)(E) 41,370 Depreciation and amortization..................... 18,862 (4,993)(E) 13,869 Taxes, other than on income and revenues.......... 8,137 (1,640)(E) 6,497 ------------- ------------- -------------- Total operating expenses........................ 79,761 (18,025) 61,736 ------------- ------------- -------------- Net operating revenues.......................... (3,677) (3,595) (7,272) ------------- ------------- -------------- Other income (expense): Interest.......................................... (21,196) 196 (E) (21,000) Dividends on preferred securities of subsidiary trust........................................... (2,370) -- (2,370) Other, net........................................ 16,835 (548)(E) 16,287 ------------- ------------- -------------- Total other income (expenses), net.............. (6,731) (352) (7,083) ------------- ------------- -------------- Earnings (loss) before income taxes (benefit)... (10,408) (3,947) (14,355) Federal and state income taxes (benefit)............. (3,913) (1,382)(F) (5,295) ------------- ------------- -------------- Net earnings (loss) from continuing operations before non-recurring charges or credits directly attributable to the transaction adjusted to give effect to the disposition of the Texas Operations. $ (6,495) $ (2,565) $ (9,060) ============= ============= ============= Net earnings (loss) from continuing operations per share: Basic............................................. $ (0.12) $ (0.17) ============= ============= Diluted........................................... $ (0.12) $ (0.17) ============= ============= Weighted average shares outstanding: Basic ............................................ 53,813,963 53,813,963 ============= ============= Diluted........................................... 53,813,963 53,813,963 ============= ============= See Notes to Pro Forma Condensed Financial Statements -----------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 (Unaudited) Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- -------- (thousands of dollars, except shares and per share amounts)
Operating revenues................................... $ 173,969 $ (53,390)(E) $ 120,579 Cost of gas and other energy......................... (92,987) 32,359 (E) (60,628) Revenue-related taxes................................ (6,032) 2,126 (E) (3,906) ------------- ------------- -------------- Operating margin.................................. 74,950 (18,905) 56,045 Operating expenses: Operating, maintenance and general................ 53,104 (9,428)(E) 43,676 Business restructuring charges.................... 32,706 (2,153)(E) 30,553 Depreciation and amortization..................... 21,877 (5,865)(E) 16,012 Taxes, other than on income and revenues.......... 8,309 (1,553)(E) 6,756 ------------- ------------- -------------- Total operating expenses........................ 115,996 (18,999) 96,997 ------------- ------------- -------------- Net operating revenues.......................... (41,046) 94 (40,952) ------------- ------------- -------------- Other income (expense): Interest.......................................... (27,159) 175 (E) (26,984) Dividends on preferred securities of subsidiary trust........................................... (2,370) -- (2,370) Other, net........................................ 23,596 (130)(E) 23,466 ------------- ------------- -------------- Total other income (expenses), net.............. (5,933) 45 (5,888) ------------- ------------- -------------- Earnings (loss) before income taxes (benefit)... (46,979) 139 (46,840) Federal and state income taxes (benefit)............. (16,576) (631)(F) (17,207) ------------- ------------- -------------- Net earnings (loss) from continuing operations before non-recurring charges or credits directly attributable to the transaction adjusted to give effect to the disposition of the Texas Operations. $ (30,403) $ 770 $ (29,633) ============= ============= ============== Net earnings (loss) from continuing operations per share: Basic............................................. $ (0.55) $ (0.54) ============ ============= Diluted........................................... $ (0.55) $ (0.54) ============ ============= Weighted average shares outstanding: Basic ............................................ 55,051,249 55,051,249 ============ ============= Diluted........................................... 55,051,249 55,051,249 ============ ============= See Notes to Pro Forma Condensed Financial Statements ------------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 2002 (Unaudited) Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- -------- (thousands of dollars, except shares and per share amounts)
Operating revenues................................... $ 1,290,550 $ (310,400)(E) $ 980,150 Cost of gas and other energy......................... (763,567) 190,954 (E) (572,613) Revenue-related taxes................................ (47,125) 13,716 (E) (33,409) ------------- ------------- -------------- Operating margin.................................. 479,858 (105,730) 374,128 Operating expenses: Operating, maintenance and general................ 221,243 (45,040)(E) 176,203 Business restructuring charges.................... 31,312 (2,153)(E) 29,159 Depreciation and amortization..................... 77,176 (18,187)(E) 58,989 Taxes, other than on income and revenues.......... 28,558 (4,710)(E) 23,848 ------------- ------------- -------------- Total operating expenses........................ 358,289 (70,090) 288,199 ------------- ------------- -------------- Net operating revenues.......................... 121,569 (35,640) 85,929 ------------- ------------- -------------- Other income (expense): Interest.......................................... (91,725) 733 (E) (90,992) Dividends on preferred securities of subsidiary trust........................................... (9,480) -- (9,480) Other, net........................................ 14,368 (6,858)(E) 7,510 ------------- ------------- -------------- Total other income (expenses), net.............. (86,837) (6,125) (92,962) ------------- ------------- -------------- Earnings (loss) before income taxes (benefit)... 34,732 (41,765) (7,033) Federal and state income taxes (benefit)............. 15,108 (15,297)(F) (189) ------------- ------------- -------------- Net earnings (loss) from continuing operations before non-recurring charges or credits directly attributable to the transaction adjusted to give effect to the disposition of the Texas Operations. $ 19,624 $ (26,468) $ (6,844) ============= ============= ============== Net earnings (loss) from continuing operations per share: Basic............................................. $ .36 $ (0.13) ============= ============== Diluted........................................... $ .35 $ (0.13) ============= ============== Weighted average shares outstanding: Basic ............................................ 53,886,998 53,886,998 ============= ============== Diluted........................................... 56,770,235 53,886,998 ============= ============== See Notes to Pro Forma Condensed Financial Statements ------------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 2001 (Unaudited) Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- -------- (thousands of dollars, except shares and per share amounts)
Operating revenues................................... $ 1,932,813 $ (471,874)(E) $ 1,460,939 Cost of gas and other energy......................... (1,374,750) 343,926 (E) (1,030,824) Revenue-related taxes................................ (68,801) 18,932 (E) (49,869) ------------- ------------- -------------- Operating margin.................................. 489,262 (109,016) 380,246 Operating expenses: Operating, maintenance and general................ 239,554 (44,989)(E) 194,565 Depreciation and amortization..................... 86,985 (17,824)(E) 69,161 Taxes, other than on income and revenues.......... 29,860 (6,265)(E) 23,595 ------------- ------------- -------------- Total operating expenses........................ 356,399 (69,078) 287,321 ------------- ------------- -------------- Net operating revenues.......................... 132,863 (39,938) 92,925 ------------- ------------- -------------- Other income (expense): Interest.......................................... (103,519) 591 (E) (102,928) Dividends on preferred securities of subsidiary trust........................................... (9,480) -- (9,480) Other, net........................................ 76,819 4,575 (E) 81,394 ------------- ------------- -------------- Total other income (expenses), net.............. (36,180) 5,166 (31,014) ------------- ------------- -------------- Earnings (loss) before income taxes (benefit)... 96,683 (34,772) 61,911 Federal and state income taxes (benefit)............. 40,000 (13,035)(F) 26,965 ------------- ------------- -------------- Net earnings (loss) from continuing operations before non-recurring charges or credits directly attributable to the transaction adjusted to give effect to the disposition of the Texas Operations. $ 56,683 $ (21,737) $ 34,946 ============= ============= ============== Net earnings (loss) from continuing operations per share: Basic............................................. $ 1.04 $ 0.64 ============= ============== Diluted........................................... $ 0.98 $ 0.61 ============= ============== Weighted average shares outstanding: Basic ............................................ 54,680,807 54,680,807 ============= ============== Diluted........................................... 57,716,973 57,716,973 ============= ============== See Notes to Pro Forma Condensed Financial Statements ------------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS ENDED JUNE 30, 2000 (Unaudited) Pro Forma for Southern Union Texas Operations Disposition Company Adjustments Adjusted -------------- ----------- -------- (thousands of dollars, except shares and per share amounts)
Operating revenues................................... $ 831,704 $ (265,611)(E) $ 566,093 Cost of gas and other energy......................... (497,698) 152,208 (E) (345,490) Revenue-related taxes................................ (34,896) 10,299 (E) (24,597) ------------- ------------- ------------- Operating margin.................................. 299,110 (103,104) 196,006 Operating expenses: Operating, maintenance and general................ 136,587 (38,765)(E) 97,822 Depreciation and amortization..................... 55,140 (17,222)(E) 37,918 Taxes, other than on income and revenues.......... 17,269 (4,997)(E) 12,272 ------------- ------------- -------------- Total operating expenses........................ 208,996 (60,984) 148,012 ------------- ------------- -------------- Net operating revenues.......................... 90,114 (42,120) 47,994 ------------- ------------- -------------- Other income (expense): Interest.......................................... (51,492) 540 (E) (50,952) Dividends on preferred securities of subsidiary trust........................................... (9,480) -- (9,480) Other, net........................................ (9,708) 1,094 (E) (8,614) ------------- ------------- ------------- Total other income (expenses), net.............. (70,680) 1,634 (69,046) ------------- ------------- ------------- Earnings (loss) before income taxes (benefit)... 19,434 (40,486) (21,052) Federal and state income taxes (benefit)............. 9,589 (15,016)(F) (5,427) ------------- ------------- ------------- Net earnings (loss) from continuing operations before non-recurring charges or credits directly attributable to the transaction adjusted to give effect to the disposition of the Texas Operations. $ 9,845 $ (25,470) $ (15,625) ============= ============= ============= Net earnings (loss) from continuing operations per share: Basic............................................. $ 0.21 $ (0.33) ============= ============= Diluted........................................... $ 0.20 $ (0.33) ============= ============= Weighted average shares outstanding: Basic ............................................ 47,840,785 47,840,785 ============= ============= Diluted........................................... 50,053,017 47,840,785 ============= ============= See Notes to Pro Forma Condensed Financial Statements ------------------------------------------------------------------------------
SOUTHERN UNION COMPANY AND SUBSIDIARIES NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS Adjustments to the Unaudited Pro Forma Condensed Balance Sheet (A) Represents the receipt of $420 million of cash proceeds, subject to working capital adjustment, from the sale of Southern Union's Texas Operations, and the elimination of the related assets and liabilities sold (at September 30, 2002). The Company plans to re-deploy substantially all the sales proceeds in interstate pipeline and other energy investments -- such as the Company's previously announced pending acquisition of the CMS Panhandle Companies. (B) The Company anticipates that the proceeds from the sale of Southern Union's Texas Operations will qualify as part of a like-kind exchange of property covered by Section 1031 of the Internal Revenue Code thereby enabling the Company to achieve certain tax savings. This figure reflects the estimated after-tax gain on the sale of the Texas Operations of $27.8 million (at September 30, 2002). (C) Represents the estimated accrual of costs to sell the Texas Operations (at September 30, 2002). (D) Reflects the estimated increase in deferred income taxes from the sale of the Texas Operations as a result of the like-kind exchange discussed in Note B above. Adjustments to the Unaudited Pro Forma Condensed Statement of Operations (E) Represents the elimination of historical revenues and expenses of the Texas Operations. (F) Reflects the income tax consequences at the federal statutory rate of the pro forma adjustments after excluding nondeductible goodwill amortization.