-----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, GOyAwsEn9wTNULf8rtMH4+MQ7hFJoTvKnOZrzYlmx7032Ihqr9fdzrAWpT5VM6Uh /PrrHI5lfwtyYvvH2jwpfw== 0000950134-96-004088.txt : 19960813 0000950134-96-004088.hdr.sgml : 19960813 ACCESSION NUMBER: 0000950134-96-004088 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: K N ENERGY INC CENTRAL INDEX KEY: 0000054502 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 480290000 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06446 FILM NUMBER: 96608495 BUSINESS ADDRESS: STREET 1: 370 VAN GORDON ST STREET 2: PO BOX 281304 CITY: LAKEWOOD STATE: CO ZIP: 80228-8304 BUSINESS PHONE: 3039891740 FORMER COMPANY: FORMER CONFORMED NAME: KN ENERGY INC DATE OF NAME CHANGE: 19920430 FORMER COMPANY: FORMER CONFORMED NAME: KANSAS NEBRASKA NATURAL GAS CO INC DATE OF NAME CHANGE: 19830403 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 ------------------------------------------------ OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------------------- ------------------------ Commission File Number 1-6446 -------------------------------------------------------- K N Energy, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Kansas 48-0290000 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 370 Van Gordon Street P.O. Box 281304, Lakewood, Colorado 80228-8304 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 989-1740 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 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 classes of common stock, as of the latest practicable date. Common stock, $5 par value; authorized 50,000,000 shares; outstanding 28,450,664 shares as of July 31, 1996. 2 Form 10-Q K N ENERGY, INC. AND SUBSIDIARIES FORM 10-Q QUARTER ENDED JUNE 30, 1996 INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page Number ----------- Consolidated Balance Sheets (Unaudited) . . . . . . . . . . . . . . . . . . . . 3 & 4 Consolidated Statements of Income (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 & 7 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 8 - 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 11 - 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Item 6. Exhibit 4 - Amended and Restated Credit Agreement* Exhibit 27 - Financial Data Schedule* Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
* Included in SEC EDGAR Filing only. 2 3 Form 10-Q CONSOLIDATED BALANCE SHEETS K N Energy, Inc. and Subsidiaries (Dollars in Thousands)
JUNE 30 DECEMBER 31 1996 1995 ---------- ---------- (Unaudited) ASSETS CURRENT ASSETS: Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 25,611 $ 22,571 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 181,363 214,963 Material and Supplies, at Average Cost . . . . . . . . . . . . . . . . . 9,942 10,515 Gas in Underground Storage . . . . . . . . . . . . . . . . . . . . . . . 3,573 9,762 Prepaid Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,765 7,800 Other Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 12,857 13,536 Gas Imbalances and Other . . . . . . . . . . . . . . . . . . . . . . . . 31,688 23,880 ---------- ---------- 272,799 303,027 ---------- ---------- INVESTMENTS: Investment in Tom Brown, Inc. . . . . . . . . . . . . . . . . . . . . . 40,342 -- Investment in Gas and Oil Properties, Net . . . . . . . . . . . . . . . -- 36,451 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,802 15,784 ---------- ---------- 46,144 52,235 ---------- ---------- PROPERTY, PLANT AND EQUIPMENT, AT COST: Retail Natural Gas Services . . . . . . . . . . . . . . . . . . . . . . 393,366 373,347 Interstate Transportation and Storage Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,934 315,686 Gathering, Processing and Marketing Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682,672 663,754 ---------- ---------- 1,400,972 1,352,787 Less Accumulated Depreciation, Depletion and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 514,826 489,812 ---------- ---------- 886,146 862,975 ---------- ---------- DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . 46,146 39,220 ---------- ---------- $1,251,235 $1,257,457 ========== ==========
3 4 Form 10-Q CONSOLIDATED BALANCE SHEETS K N Energy, Inc. and Subsidiaries (Dollars in Thousands)
JUNE 30 DECEMBER 31 1996 1995 ---------- ---------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current Maturities of Preferred Stock and Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,043 $ 28,197 Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,500 88,000 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,340 157,340 Accrued Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,173 5,423 Gas Imbalances and Other . . . . . . . . . . . . . . . . . . . . . . . . 58,644 50,878 ---------- ---------- 312,700 329,838 ---------- ---------- DEFERRED LIABILITIES, CREDITS AND RESERVES: Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 117,598 112,267 Deferred Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,629 20,823 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,477 30,356 ---------- ---------- 158,704 163,446 ---------- ---------- LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,907 315,564 ---------- ---------- MINORITY INTERESTS IN EQUITY OF SUBSIDIARIES . . . . . . . . . . . . . . 17,738 14,277 ---------- ---------- PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION . . . . . . . . . . . . -- 572 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred Stock- Authorized - Class A, 200,000 Shares; Class B, 2,000,000 Shares, All Without Par Value Redeemable Solely at Option of Company at $105 Per Share - Class A, $5.00 Cumulative Series; 70,000 Shares . . . . . . . . . . . . . . . . . . . . . 7,000 7,000 ---------- ---------- Common Stock- Authorized - 50,000,000 Shares, Par Value $5 Per Share, Outstanding 28,441,014 and 28,097,749 Shares, Respectively . . . . . 142,205 140,489 Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . 185,529 176,910 Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 121,300 109,895 Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . (538) (222) Treasury Stock, at Cost (38,761 and 10,739) Shares, . . . . . . . . . (1,310) (312) ---------- ---------- Respectively) Total Common Stockholders' Equity . . . . . . . . . . . . . . . . . . 447,186 426,760 ---------- ---------- Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . 454,186 433,760 ---------- ---------- $1,251,235 $1,257,457 ========== ==========
The accompanying notes are an integral part of these balance sheets. 4 5 Form 10-Q CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) K N Energy, Inc. and Subsidiaries (In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------- ------------------- 1996 1995 1996 1995 -------- -------- -------- -------- OPERATING REVENUES: Retail Natural Gas Services . . . . . . . . . . . . . . . . . . . . . $ 39,204 $ 38,895 $126,235 $115,073 Interstate Transportation and Storage Services . . . . . . . . . . . 5,066 5,165 11,527 12,316 Gathering, Processing and Marketing Services . . . . . . . . . . . . 232,878 191,717 525,237 400,355 Gas and Oil Production . . . . . . . . . . . . . . . . . . . . . . . -- 2,328 -- 4,419 -------- -------- -------- -------- Total Operating Revenues . . . . . . . . . . . . . . . . . . . . . . 277,148 238,105 662,999 532,163 -------- -------- -------- -------- OPERATING COSTS AND EXPENSES: Gas Purchases and Other Costs of Sales . . . . . . . . . . . . . . . 194,345 162,411 482,679 363,174 Operations and Maintenance . . . . . . . . . . . . . . . . . . . . . 42,899 39,161 86,736 83,136 Depreciation, Depletion and Amortization . . . . . . . . . . . . . . 12,631 12,539 24,830 24,877 Taxes, Other Than Income Taxes . . . . . . . . . . . . . . . . . . . 5,189 4,728 10,894 9,929 -------- -------- -------- -------- Total Operating Costs and Expenses . . . . . . . . . . . . . . . . . 255,064 218,839 605,139 481,116 -------- -------- -------- -------- OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . 22,084 19,266 57,860 51,047 -------- -------- -------- -------- OTHER INCOME AND (DEDUCTIONS): Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . (8,337) (8,516) (16,888) (17,470) Minority Interests . . . . . . . . . . . . . . . . . . . . . . . . . (1,119) (254) (1,665) (831) Other, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,196 266 1,871 546 -------- -------- -------- -------- Total Other Income and (Deductions) . . . . . . . . . . . . . . . . . (8,260) (8,504) (16,682) (17,755) -------- -------- -------- -------- INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . 13,824 10,762 41,178 33,292 Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,976 3,840 14,823 11,852 -------- -------- -------- -------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,848 6,922 26,355 21,440 Less Preferred Stock Dividends . . . . . . . . . . . . . . . . . . . 99 123 199 246 -------- -------- -------- -------- EARNINGS AVAILABLE FOR COMMON STOCK . . . . . . . . . . . . . . . . . $ 8,749 $ 6,799 $ 26,156 $ 21,194 ======== ======== ======== ======== Number of Shares Used in Computing Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . 29,181 28,353 29,055 28,243 -------- -------- -------- -------- EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . $ 0.30 $ 0.24 $ 0.90 $ 0.75 ======== ======== ======== ======== DIVIDENDS PER COMMON SHARE . . . . . . . . . . . . . . . . . . . . . $ 0.26 $ 0.25 $ 0.52 $ 0.50 ======== ======== ======== ========
The accompanying notes are an integral part of these statements of income. 5 6 Form 10-Q CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) K N Energy, Inc. and Subsidiaries (In Thousands)
SIX MONTHS ENDED JUNE 30 ------------------------- 1996 1995 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,355 $ 21,440 Adjustments to Reconcile Net Income to Net Cash from Operating Activities: Depreciation, Depletion and Amortization . . . . . . . . . . . . . . . . 24,830 24,877 Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 5,147 4,266 Deferred Purchased Gas Costs . . . . . . . . . . . . . . . . . . . . . . 7,844 5,806 Provisions for Losses on Accounts Receivable . . . . . . . . . . . . . . 123 600 Changes in Other Working Capital Items . . . . . . . . . . . . . . . . . 34,665 18,536 Changes in Deferred Revenues . . . . . . . . . . . . . . . . . . . . . . (14,194) (634) Other, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,453) 10,338 -------- -------- NET CASH FLOWS FROM OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . 83,317 85,229 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,967) (33,818) Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,439) (13,369) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,192) (4,385) Proceeds from Sale of Facilities . . . . . . . . . . . . . . . . . . . . . 4,590 2,595 Collections Under Basket Agreement . . . . . . . . . . . . . . . . . . . . 6 1,204 Other Funds Used During Construction . . . . . . . . . . . . . . . . . . . - 18 -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . (41,002) (47,755) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-Term Debt (Net) . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,500) (14,500) Long-Term Debt - Retired . . . . . . . . . . . . . . . . . . . . . . . . . (11,411) (14,764) Common Stock Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,859 4,032 Treasury Stock - Issued . . . . . . . . . . . . . . . . . . . . . . . . . . 4,819 1,213 - Acquired . . . . . . . . . . . . . . . . . . . . . . . . . (5,817) (269) Cash Dividends - Common . . . . . . . . . . . . . . . . . . . . . . . . . (14,751) (13,879) - Preferred . . . . . . . . . . . . . . . . . . . . . . . (199) (246) Minority Interests - Contributions . . . . . . . . . . . . . . . . . . . - 1,031 - Distributions . . . . . . . . . . . . . . . . . . . (2,275) (579) Premium on Debt Re-acquisition and Issue Costs . . . . . . . . . . . . . . - (35) -------- -------- NET CASH FLOWS USED IN FINANCING ACTIVITIES . . . . . . . . . . . . . . . . (39,275) (37,996) -------- -------- Net Increase in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . 3,040 (522) Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . . . . . 22,571 20,613 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . . . . . $ 25,611 $ 20,091 ======== ========
The accompanying notes are an integral part of these statements of cash flows. 6 7 Form 10-Q CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) K N Energy, Inc. and Subsidiaries (In Thousands)
SIX MONTHS ENDED JUNE 30 ------------------------- 1996 1995 ------- ------- CHANGES IN OTHER WORKING CAPITAL ITEMS SUMMARY (NET OF ACQUISITION EFFECTS): Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $33,477 $ 1,050 Material and Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . 572 843 Gas in Underground Storage. . . . . . . . . . . . . . . . . . . . . . . . . 6,189 20,900 Accounts Payable, Accrued Taxes and Other Current Liabilities . . . . . . . 1,521 (4,573) Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,094) 316 ------- ------- $34,665 $18,536 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash Paid During the Year for: Interest (Net of Amount Capitalized) . . . . . . . . . . . . . . . . . . . $16,902 $16,418 ======= ======= Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,056 $ 6,519 ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES On February 16, 1995, K N's gas transmission affiliate, AOG Gas Transmission Company, L.P., acquired natural gas transmission pipeline and storage assets in Texas. In conjunction with the acquisition, liabilities were assumed as follows:
1995 -------- Fair Value of Assets Acquired . . . . . . . . . . . . . . . . . . . . . . . $ 13,440 Cash Paid for Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,369) -------- Liabilities Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,071 ========
7 8 Form 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General In the opinion of management, all adjustments necessary for a fair statement of the results for the unaudited interim periods have been made. These adjustments consist only of normal recurring accruals. Certain prior year amounts have been reclassified to conform with the 1996 presentation. 2. Financing (A) Debt On July 26, 1996, K N sold publicly $125 million of 30-year 7.35% debentures at an all-in cost to the company of 7.40 percent. This debt was issued from the $200 million shelf registration filed with the Securities and Exchange Commission in November 1993. Net proceeds from this financing were used to reduce short-term indebtedness and fund capital expenditures, including costs of acquiring the Pony Express Pipeline (See Note 3(A)). (B) Equity On August 6, 1996, K N sold publicly 1,715,000 million shares of its common stock at $32.25 per share, less offering expenses. The Company applied approximately $8 million of the net proceeds from the offering to redeem and cancel outstanding warrants to purchase a total of 545,200 shares of K N's common stock. The balance of the net proceeds from the offering were used in the same manner as the net proceeds from the debt financing described above in Note 2(A). In connection with the sale of K N common stock described above, Cabot Corporation sold 1,850,000 shares of K N common stock. K N did not receive any of the proceeds from the sale of K N common stock by Cabot Corporation. After the sale, Cabot Corporation owned 2,990,186 shares, or 9.9 percent of the common stock of K N, including 642,232 shares of common stock underlying warrants expiring on September 30, 1999. 8 9 Form 10-Q 3. Merger and Acquisition (A) Pony Express Pipeline On May 8, 1996, K N Energy, Inc. ("K N") entered into a definitive agreement to purchase a 900-mile crude oil pipeline owned by Amoco Pipeline Company for conversion to natural gas service. Also in May, the Company's regulated interstate pipeline, K N Interstate Gas Transmission Co. ("KNI"), filed with the Federal Energy Regulatory Commission ("FERC") requesting authority to purchase from K N the portion of the line, renamed the Pony Express Pipeline, from Lost Cabin, Wyoming in central Wyoming to Freeman, Missouri near Kansas City. KNI also requested authority to convert the pipeline to natural gas service, install compression and construct additional pipeline facilities. The total cost of the project, including the purchase price, costs to convert the pipeline to natural gas service and to construct a lateral to Rockport, Colorado is expected to be less than $160 million. The pipeline is expected to be in limited service during the first quarter of 1997. (B) Gas and Oil Properties On January 31, 1996, K N and Tom Brown, Inc. ("TBI") closed a transaction pursuant to which K N transferred its stock in K N Production Company, a wholly owned subsidiary of K N, to TBI in exchange for common and convertible preferred stock of TBI. The transaction represents a non-monetary exchange (valued at approximately $36.3 million) of oil and gas assets for accounting purposes. In conjunction with this transaction, K N and TBI formed a limited liability company, owned 55 percent by K N and 45 percent by TBI which performs certain gathering, processing, field, marketing and storage services in a defined area of mutual interest. 4. TransColorado Project Agreements have been executed providing for the construction and operation of a new unregulated gas treating plant in southwestern Colorado to be owned by affiliates of K N and El Paso Natural Gas Company. The treating plant will tie into Phase I (New Mexico pre-build) of the TransColorado pipeline. A filing has been made with the FERC requesting approval to construct Phase I of the project which consists of 22.5 miles of 24-inch pipeline together with 2.5 miles of 16-inch lateral pipeline. Both the pipeline and plant, which have a combined capital cost of approximately $30 million and a design capacity to handle up to 120,000 MMBtu per day, are expected to be in service by the end of 1996. 9 10 Form 10-Q 5. Regulatory Matters On February 16, 1996, the Wyoming Public Service Commission issued an order authorizing K N to implement a program to allow approximately 10,500 residential and commercial customers to choose their energy provider from a qualified list of suppliers. This new service commenced on June 1, 1996. K N continues to provide all other utility services and manages the gas supplies for customers in the program. 10 11 Form 10-Q MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED EARNINGS The Company reported second quarter 1996 net income of $8.8 million, or $0.30 per common share after payment of preferred dividends, compared with 1995 second quarter net income of $6.9 million, or $0.24 per common share. For the first six months of 1996, net income was $26.4 million or $0.90 per common share, a 23 percent increase in earnings over 1995's first six month net income of $21.4 million, or $0.75 per common share. The 1996 improvement in earnings, for both the second quarter and the first six months, is attributable to business expansion, particularly in its interstate pipeline system and gathering and processing activities, corporate restructuring in 1995 and higher prices of natural gas liquids ("NGLs"). RESULTS OF OPERATIONS Operating results by business segment, consolidated other income and (deductions) and income taxes are discussed below. In January 1996, K N transferred its stock in a gas and oil subsidiary to Tom Brown, Inc. ("TBI"), in exchange for common and convertible preferred stock of TBI. Accordingly, operating results for the gas and oil segment are excluded from the following discussion; this segment reported operating income of $0.5 million in the first six months of 1995. Segment operating revenues, gas purchases, operations and maintenance expenses and volumetric data cited below are before intersegment eliminations (dollars in millions). 11 12 Form 10-Q
Second Quarter First Six Months --------------- ------------------ RETAIL NATURAL GAS SERVICES 1996 1995 1996 1995 ---- ---- ---- ---- Operating Revenues - Gas Sales $32.6 $34.4 $113.4 $106.3 Transportation and Other 7.2 4.7 13.6 9.1 ----- ----- ------ ------ 39.8 39.1 127.0 115.4 ----- ----- ------ ------ Operating Costs and Expenses - Gas Purchases and Other Costs of Sale 18.2 18.9 70.3 64.3 Operations and Maintenance 13.6 14.2 28.7 28.1 Depreciation, Depletion and Amortization 3.4 3.1 6.8 6.3 Taxes, Other Than Income Taxes 2.0 1.3 3.8 3.2 ----- ----- ------ ------ 37.2 37.5 109.6 101.9 ----- ----- ------ ------ Operating Income $ 2.6 $ 1.6 $ 17.4 $ 13.5 ===== ===== ====== ====== Systems Throughput (Trillion Btus) - Gas Sales 4.9 6.3 19.7 19.6 Transportation 7.4 5.0 14.3 11.2 ----- ----- ------ ------ 12.3 11.3 34.0 30.8 ===== ===== ====== ====== System-Wide Degree Days 802 1,018 4,177 3,841 ===== ===== ====== ======
Operating results during the second quarter of 1996 were favorably impacted by expense reductions made during the 1995 corporate restructuring. During the first quarter of 1996, the effect of 1995 cost savings programs was largely offset by the expense impact of higher systems throughput.
Second Quarter First Six Months --------------- ----------------- INTERSTATE TRANSPORTATION AND STORAGE SERVICES 1996 1995 1996 1995 ---- ---- ------ ------ Operating Revenues - Transportation and Storage $14.3 $14.0 $ 30.6 $ 29.3 Natural Gas Liquids and Other 1.5 1.4 3.5 2.7 ----- ----- ------ ------ 15.8 15.4 34.1 32.0 ----- ----- ------ ------ Operating Costs and Expenses - Gas Purchases and Other Costs of Sales 2.0 1.6 4.0 3.2 Operations and Maintenance 5.7 6.6 12.7 13.4 Depreciation, Depletion and Amortization 1.8 1.8 3.6 3.9 Taxes, Other Than Income Taxes 0.8 0.7 1.6 1.5 ----- ----- ------ ------ 10.3 10.7 21.9 22.0 ----- ----- ------ ------ Operating Income $ 5.5 $ 4.7 $ 12.2 $ 10.0 ===== ===== ====== ====== Systems Throughput (Trillion Btus) 34.1 33.4 87.6 72.3 ===== ===== ====== ====== Natural Gas Liquids (Millions of Gallons) 3.9 5.0 7.5 8.5 ===== ===== ====== ======
12 13 Form 10-Q Firm storage service rates were reduced, effective June 1, 1995, with the transfer of three storage fields to a non-regulated subsidiary. However, this revenue impact was more than offset by increased 1996 systems throughput volumes and customers converting to firm transport from interruptible service. Higher 1996 prices for natural gas liquids offset the second quarter 1996 decline in NGLs recoveries due to plant maintenance. The effect of the 1995 corporate restructuring is reflected in the lower second quarter 1996 operations and maintenance costs.
Second Quarter First Six Months ----------------- ----------------- 1996 1995 1996 1995 ------ ------ ------ ------ GATHERING, PROCESSING AND MARKETING SERVICES Operating Revenues - Gas Sales $183.6 $160.5 $435.6 $338.9 Natural Gas Liquids 41.6 28.1 82.2 55.4 Transportation, Gathering and Other 21.1 16.5 37.7 32.6 ------ ------ ------ ------ 246.3 205.1 555.5 426.9 ------ ------ ------ ------ Operating Costs and Expenses - Gas Purchases and Other Costs of Sales 198.6 165.0 461.3 341.9 Operations and Maintenance 23.9 18.5 46.0 41.0 Depreciation, Depletion and Amortization 7.4 6.4 14.4 12.3 Taxes, Other Than Income Taxes 2.4 2.4 5.5 4.7 ------ ------ ------ ------ 232.3 192.3 527.2 399.9 ------ ------ ------ ------ Operating Income $ 14.0 $ 12.8 $ 28.3 $ 27.0 ====== ====== ====== ====== Systems Throughput (Trillion Btus) - Gas Sales 89.9 105.4 205.6 194.5 Transportation and Gathering 82.4 65.2 171.3 146.8 ------ ------ ------ ------ 172.3 170.6 376.9 341.3 ====== ====== ====== ====== Natural Gas Liquids (Millions of Gallons) 121.6 91.0 237.6 183.8 ====== ====== ====== ======
This segment's improved 1996 second quarter and six month operating income largely result from higher prices for NGLs and growth in gathering volumes and NGLs recovered due to the October 1995 acquisition of a processing plant and gathering facilities. Average per gallon prices of NGLs were 11 percent and 15 percent higher during the 1996 second quarter and first six months, respectively, than the comparable 1995 periods. The decline in second quarter 1996 gas sales volumes primarily reflects lower sales to power plants and irrigation customers caused by milder temperatures and wet weather in June. The higher level of 1996 operations and maintenance expenses result from the 1995 acquisition discussed previously.
Second Quarter First Six Months ----------------- ----------------- 1996 1995 1996 1995 ------ ------ ------ ----- OTHER INCOME AND (DEDUCTIONS) Interest Expense $ (8.3) $ (8.5) $(16.9) $(17.5) Minority Interests and Other, Net - - 0.2 (0.3) ------ ------ ------ ----- $ (8.3) $ (8.5) $(16.7) $(17.8) ====== ====== ====== ======
13 14 Form 10-Q The decline in 1996 interest expense results from a lower amount of long-term debt outstanding. The positive amount for minority interests and other, net in the first six months of 1996 primarily reflects preferred dividends received from TBI. Common and convertible preferred stock was received from TBI in exchange for the Company's gas and oil subsidiary.
Second Quarter First Six Months ------------------ ----------------- INCOME TAXES 1996 1995 1996 1995 ------ ------ ------ ------ Provisions $ 5.0 $ 3.8 $ 14.8 $ 11.9 ====== ====== ====== ====== Effective Tax Rate 36.0% 35.7% 36.0% 35.6% ====== ====== ====== ======
LIQUIDITY AND CAPITAL RESOURCES The increase in 1996 net cash flows primarily results from the improved operating results. Net cash flows from operations (excluding $8.2 million of gas purchase contract buyouts) for the first six months of 1996 were $91.5 million, or $6.3 million greater than net operating cash flows for the comparable 1995 period. Short-term debt was $72.5 million at June 30, 1996, compared to $88.0 million and $45.5 million at December 31, 1995 and June 30, 1995, respectively. In July 1996, the Company consummated the first phase of its purchase of a 900-mile pipeline from Amoco Pipeline Company. The second and final phases of this purchase are expected to close during the third and fourth quarters. The total net cost of the Pony Express Pipeline is estimated at $155 million; approximately 75 percent of the costs will be incurred in 1996, with the remainder in 1997. K N sold $125 million of debentures in July, bearing an interest rate of 7.35 percent with a 30-year maturity. In August, K N sold 1.715 million shares of its common stock in a public offering. The proceeds of these two financings, net to K N, will be used to finance capital expenditures, including the Pony Express Pipeline, and to reduce short-term debt. 14 15 Form 10-Q OTHER INFORMATION Item 1. Legal Proceedings Grynberg v. K N, et al. As reported in the Company's Annual Report on Form 10-K, on October 9, 1992, Jack J. Grynberg filed suit in the United States District Court for the District of Colorado against the Company, Rocky Mountain Natural Gas Company and GASCO, Inc. (the "K N Entities") alleging that the K N Entities as well as K N Production Company ("KNPC") and K N Gas Gathering, Inc., have violated federal and state antitrust laws. In essence, Grynberg asserts that the companies have engaged in an illegal exercise of monopoly power, have illegally denied him economically feasible access to essential facilities to transport and distribute gas produced from fewer than 20 wells located in northwest Colorado, and illegally have attempted to monopolize or to enhance or maintain an existing monopoly. Grynberg also asserts certain causes of action relating to a gas purchase contract. No specific monetary damages have been claimed, although Grynberg has requested that any actual damages awarded be trebled. In addition, Grynberg has requested that the K N Entities be ordered to divest all interests in natural gas exploration, development and production properties, all interests in distribution and marketing operations, and all interests in natural gas storage facilities, separating these interests from the Company's natural gas gathering and transportation system in northwest Colorado. In an unrelated transaction, K N's exploration, production and development properties owned by KNPC were transferred to a third party in January 1996. The Company has indemnified the third party for any potential claims by Grynberg related to this litigation. On August 13, 1993, the United States District Court, District of Colorado, stayed this proceeding pending exhaustion of appeals in a related state court action involving the same plaintiff. The related state court action, which primarily involves a gas contract pricing dispute, was remanded to the state district court by the state court of appeals on June 13, 1996. The United States District Court lifted the stay in the above captioned case on July 11, 1996. Discovery is ongoing. No trial date has been set. The Company believes it has a meritorious position in these matters, and does not expect these lawsuits to have a material adverse effect on the Company's financial position or results of operations. 15 16 Form 10-Q Environmental Matters As reported in the Company's Annual Report on Form 10-K, pursuant to certain acquisition agreements in 1989 and 1992, The Maple Gas Corporation and Cabot Corporation ("Cabot"), the Company's largest stockholder, indemnified the Company for certain environmental liabilities. Issues have arisen concerning Cabot's indemnification obligations; however, in conjunction with the merger, the Company and Cabot entered into a standstill agreement pertaining to these and other matters, which was set to expire in June 1996. The parties have agreed to extend the standstill agreement to December 31, 1996. The Company is in the process of performing additional environmental audits on the affected properties, and is unable to estimate its potential exposure for such liabilities at this time. The Company believes it will be able to reach agreement with Cabot and does not expect this matter to have a material adverse impact on the Company's financial position or results of operations. For information relating to other legal proceedings see Notes 4 and 5 of Notes to Consolidated Financial Statements on Pages 41-44 of the 1995 Annual Report on Form 10-K. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 4 - Amended and Restated Credit Agreement 27 - Financial Data Schedule (B) Reports on Form 8-K On July 26, 1996, a Current Report on Form 8-K was filed to report that on that date K N Energy, Inc. sold $125 million of its 7.35% Debentures due August 1, 2026 pursuant to an underwritten public offering. On August 6, 1996, a Current Report on Form 8-K was filed to report that on that date K N Energy, Inc. sold up to 1,715,000 shares of its common stock pursuant to an underwritten public offering, and that Cabot Corporation sold an additional 1,850,000 shares of K N Energy, Inc. common stock pursuant to such offering. 16 17 Form 10-Q SIGNATURE 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. K N ENERGY, INC. (Registrant) August 12, 1996 /s/ Clyde E. McKenzie -------------------------------------------- Clyde E. McKenzie Vice President and Chief Financial Officer (On Behalf of the Registrant and as Principal Financial and Accounting Officer) 17 18 Form 10-Q EXHIBIT INDEX Exhibit No. Description - ------- ----------- 4 - Amended and Restated Credit Agreement 27 - Financial Data Schedule EX-4 2 AMENDED & RESTATED CREDIT AGREEMENT 1 CONFORMED COPY AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 19, 1996 among K N ENERGY, INC. (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H : WHEREAS, certain of the parties hereto have heretofore entered into a Credit Agreement dated as of December 1, 1994 (the "Agreement"); and WHEREAS, the parties hereto desire to amend the Agreement as set forth herein and to restate the Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended and restated hereby. The term "Notes" defined in the Agreement shall include from and after the date hereof the New Notes (as defined below). SECTION 2. Amendment of Termination Date. The definition of "Termination Date" in Section 1.01 of the Agreement is amended to read in its entirety as follows: "Termination Date" means July 1, 2001, or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. 2 SECTION 3. Amendment of Pricing Schedule. The Pricing Schedule is amended to read in its entirety as set forth in Exhibit A to this Amendment and Restatement. SECTION 4. Changes in Commitments. With effect from and including the date this Amendment and Restatement becomes effective in accordance with Section 7 hereof, (i) each Person listed on the signature pages hereof which is not a party to the Agreement (a "New Bank") shall become a Bank party to the Agreement and (ii) the Commitment of each Bank shall be the amount set forth opposite the name of such Bank on the signature pages hereof. Any Bank whose Commitment is changed to zero shall upon such effectiveness cease to be a Bank party to the Agreement, and all accrued fees and other amounts payable under the Agreement for the account of such Bank shall be due and payable on such date; provided that the provisions of Sections 8.03 and 9.03 of the Agreement shall continue to inure to the benefit of each such Bank. SECTION 5. Representations and Warranties. The Borrower hereby represents and warrants that as of the date hereof and after giving effect thereto: (a) no Default has occurred and is continuing; (b) each representation and warranty of the Borrower set forth in the Agreement is true and correct as though made on and as of this date; and (c) since March 31, 1996 there has been no material adverse change in the business, financial position or result of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 6. Governing Law. This Amendment and Restatement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts; Effectiveness. This Amendment and Restatement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment and Restatement shall become effective as of the date hereof when (i) the Agent shall have received duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have 2 3 been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (ii) the Agent shall have received a duly executed Note for each Bank (a "New Note"), dated on or before the date of effectiveness hereof and otherwise in compliance with Section 2.05 of the Agreement; (iii) the Agent shall have received an opinion of the Deputy General Counsel of the Borrower, substantially in the form of Exhibit B-1 hereto, and an opinion of Kansas counsel for the Borrower substantially in the form of Exhibit B-2 hereto, each with reference to the New Notes, this Amendment and Restatement and the Agreement as amended and restated hereby; and (iv) the Agent shall have received all documents it may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of the Agreement as amended and restated hereby, the New Notes and any other matters relevant hereto, all in form and substance satisfactory to the Agent. Promptly upon the receipt of its New Note, each Bank shall cancel the old Note currently held by it. 3 4 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. K N ENERGY, By /s/ E. Wayne Lundhagen ----------------------------------- Title: Vice President- Finance & Accounting 4 5 Commitments - ----------- $45,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ John Kowalczuk ----------------------- Title: Vice President $35,000,000 THE CHASE MANHATTAN BANK (as successor to the CHASE MANHATTAN BANK, N.A. and CHEMICAL BANK) By /s/ Mary Jo Woodford ------------------------------- Title: Vice President $35,000,000 NATIONSBANK OF TEXAS, N.A. By /s/ Malcolm C. Turner ------------------------------- Title: Senior Vice President $25,000,000 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Gary M. Tsuyuki ------------------------------- Title: Vice President 5 6 Commitments - ----------- $20,000,000 THE FIRST NATIONAL BANK OF CHICAGO By /s/ Holly Poolman ------------------------------- Title: Assistant Vice President $20,000,000 THE NORTHERN TRUST COMPANY By /s/ Michelle D. Griffin ------------------------------- Title: Vice President $20,000,000 NORWEST BANK COLORADO, N.A. By /s/ J.T. Reagan ------------------------------- Title: Vice President $0 CITIBANK, N.A By /s/ Arezoo Jafari ------------------------------- Title: Assistant Vice President - ----------------- Total Commitments $200,000,000 ================= 6 7 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ John Kowalczuk --------------------------- Title: Vice President 7 8 EXHIBIT A PRICING SCHEDULE The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
=================================================================================================================== Level Level Level Level Level Level Status I II III IV V VI - ------------------------------------------------------------------------------------------------------------------- Euro-Dollar 0.1400% 0.1450% 0.1600% 0.2000% 0.2500% 0.3125% Margin - ------------------------------------------------------------------------------------------------------------------- CD Margin 0.2650% 0.2700% 0.2850% 0.3250% 0.3750% 0.4375% - ------------------------------------------------------------------------------------------------------------------- Facility Fee Rate 0.0600% 0.0800% 0.0900% 0.1000% 0.1250% 0.1875% ===================================================================================================================
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower's senior unsecured long-term debt is rated AA- or higher by S&P and Aa3 or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower's senior unsecured long-term debt is rated A or higher by S&P and A2 or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower's senior unsecured long-term debt is rated A- or higher by S&P and A3 or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower's senior unsecured long-term debt is rated BBB+ or higher by S&P and Baa1 or higher by Moody's and (ii) none of Level I Status, Level II Status and Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower's senior unsecured long-term debt is 9 rated BBB or higher by S&P and Baa2 or higher by Moody's and (ii) none of Level I status, Level II Status, Level III Status and Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Moody's" means Moody's Investors Service, Inc. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. The credit ratings to be utilized for purposes of this Schedule are those assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect at any date is that in effect at the close of business on such date. 2 10 EXHIBIT B-1 OPINION OF DEPUTY GENERAL COUNSEL OF THE BORROWER To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am Deputy General Counsel of K N Energy, Inc. (the "Borrower"), and I have represented the Borrower in connection with the Amended and Restated Credit Agreement dated as of July 19, 1996 (the "Amendment and Restatement") relating to the Credit Agreement dated as of December 1, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as amended and restated by the Amendment and Restatement, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the request of my client pursuant to Section 7 of the Amendment and Restatement. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower has all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 11 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the New Notes require no action by or in respect of, or filing with, any governmental body, agency or official of the State of Colorado or, to the best of my knowledge, any other jurisdiction (other than (i) approval by the Public Service Commission of the State of Wyoming, which approval has been obtained and is in full force and effect, and (ii) filings of the Credit Agreement and the New Notes with the Securities and Exchange Commission pursuant to the reporting requirements of the Securities Exchange Act of 1934) and do not contravene, or constitute a default under, any provision of applicable law or regulation of the State of Colorado or, to the best of my knowledge, any other jurisdiction or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any, Lien on any asset of the Borrower or any of its Subsidiaries. 3. There is no action, suit or proceeding pending against, or to the best of my knowledge threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of the Credit Agreement or the New Notes. 4. Each of the Borrower's corporate Material Subsidiaries is a corporation validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. 5. The Credit Agreement constitutes a valid and binding agreement of the Borrower and each New Note constitutes a valid and binding obligation of the Borrower, in each case enforceable against the Borrower in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 2 12 I am a member of the Bar of the State of Colorado and the foregoing opinion is limited to the laws of the State of Colorado, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. Insofar as paragraph 2 above addresses the laws of other jurisdictions, I have relied upon my familiarity with advice given by counsel admitted to practice in those jurisdictions, in connection with this and other transactions. Insofar as paragraph 5 above addresses issues of New York law, I have assumed with your consent that such law is the same as Colorado law. This opinion is rendered solely to you and any Assignee or Participant in connection with the above matter. This opinion may not be relied upon by you or any Assignee or Participant for any other purpose or relied upon by any other person without my prior written consent. Very truly yours, 3 13 EXHIBIT B-2 OPINION OF KANSAS COUNSEL FOR THE BORROWER To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have acted as counsel in the State of Kansas for K N Energy, Inc. (the "Borrower") in connection with the Amended and Restated Credit Agreement dated as of July 19, 1996 (the "Amendment and Restatement") relating to the Credit Agreement dated as of December 1, 1994 among the Borrower, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as amended and restated by the Amendment and Restatement, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein as therein defined. This opinion is being rendered to you at the request of our client pursuant to Section 7 of the Amendment and Restatement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under 14 the laws of Kansas, and has all corporate powers required to carry on its business as now conducted. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and the New Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official of the State of Kansas and do not contravene, or constitute a default under, any provision of applicable law or regulation of the State of Kansas. We are members of the Bar of the State of Kansas and the foregoing opinion is limited to the laws of the State of Kansas. This opinion is rendered solely to you and any Assignee or Participant in connection with the above matter. This opinion may not be relied upon by you or any Assignee or Participant for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 2 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 25,611 0 181,363 0 13,515 272,799 1,400,972 514,826 1,251,235 312,700 307,907 142,205 0 7,000 304,981 1,251,235 662,999 662,999 482,679 605,139 0 0 16,888 41,178 14,823 26,355 0 0 0 26,355 0.90 0
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