-----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, HegXuQvipDcP/YD9/nq5AAEE+WY7URYyqCytQAa9sQ0wKzPztpO6Q+3wVbqDureF v1thXfUYz/lJpMSIoxCrEw== 0000007332-96-000013.txt : 19960515 0000007332-96-000013.hdr.sgml : 19960515 ACCESSION NUMBER: 0000007332-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWESTERN ENERGY CO CENTRAL INDEX KEY: 0000007332 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION & DISTRIBUTION [4923] IRS NUMBER: 710205415 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08246 FILM NUMBER: 96563718 BUSINESS ADDRESS: STREET 1: 1083 SAIN ST STREET 2: P O BOX 1408 CITY: FAYETTEVILLE STATE: AR ZIP: 72702-1408 BUSINESS PHONE: 5015211141 FORMER COMPANY: FORMER CONFORMED NAME: ARKANSAS WESTERN GAS CO DATE OF NAME CHANGE: 19790917 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1996 =========================================================================== 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 March 31, 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 1-8246 SOUTHWESTERN ENERGY COMPANY (Exact name of registrant as specified in its charter) Arkansas 71-0205415 (State of incorporation (I.R.S. Employer or organization) Identification No.) 1083 Sain Street, P.O. Box 1408, Fayetteville, Arkansas 72702-1408 (Address of principal executive offices, including zip code) (501) 521-1141 (Registrant's telephone number, including area code) No Change (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 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: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at May 3, 1996 ---------------------------- ------------------------------ Common Stock, Par Value $.10 24,701,349 =========================================================================== - 1 - PART I FINANCIAL INFORMATION - 2 - SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS
March 31, December 31, 1996 1995 --------- --------- ($ in thousands) Current Assets Cash $ 1,249 $ 1,498 Accounts receivable 31,764 35,541 Income taxes receivable 2,491 8,221 Inventories, at average cost 12,913 15,448 Other 2,108 3,188 --------- --------- Total current assets 50,525 63,896 --------- --------- Investments 8,297 9,114 --------- --------- Property, Plant and Equipment, at cost Gas and oil properties, using the full cost method 533,455 517,979 Gas distribution systems 195,822 193,258 Gas in underground storage 27,109 32,616 Other 20,108 19,717 --------- --------- 776,494 763,570 Less: Accumulated depreciation, depletion and amortization 289,137 277,751 --------- --------- 487,357 485,819 --------- --------- Other Assets 11,346 10,264 --------- --------- Total Assets $ 557,525 $ 569,093 ========= =========
The accompanying notes are an integral part of the financial statements. - 3 - SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31, 1996 1995 --------- --------- ($ in thousands) Current Liabilities Current portion of long-term debt $ 3,071 $ 3,071 Accounts payable 19,237 23,989 Taxes payable 2,943 2,422 Interest payable 4,842 1,376 Customer deposits 4,639 4,619 Over-recovered purchased gas costs, net 4,703 7,327 Other 1,851 2,606 --------- --------- Total current liabilities 41,286 45,410 --------- --------- Long-Term Debt, less current portion above 189,857 207,757 --------- --------- Other Liabilities Deferred income taxes 117,999 115,461 Deferred investment tax credits 2,025 2,103 Other 3,972 3,858 --------- --------- 123,996 121,422 --------- --------- Commitments and Contingencies Shareholders' Equity Common stock, $.10 par value; authorized 75,000,000 shares, issued 27,738,084 shares 2,774 2,774 Additional paid-in capital 21,272 21,272 Retained earnings 212,484 204,632 Less: Common stock in treasury, at cost 33,795 33,795 Unamortized cost of 31,527 restricted shares in 1996 and 34,807 restricted shares in 1995, issued under stock incentive plan 349 379 --------- --------- 202,386 194,504 --------- --------- Total Liabilities and Shareholders' Equity $ 557,525 $ 569,093 ========= =========
The accompanying notes are an integral part of the financial statements. - 4 - SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Quarter Ended March 31 1996 1995 --------- --------- ($ in thousands, except per share amounts) Operating Revenues Gas sales $ 60,706 $ 49,213 Oil sales 1,316 834 Gas transportation 1,150 1,181 Other 690 523 --------- --------- 63,862 51,751 --------- --------- Operating Costs and Expenses Purchased gas costs 20,094 15,595 Operating and general 11,754 10,586 Depreciation, depletion and amortization 11,217 9,354 Taxes, other than income taxes 1,279 1,126 ---------- ---------- 44,344 36,661 ---------- ---------- Operating Income 19,518 15,090 ---------- ---------- Interest Expense 3,215 2,598 ---------- ---------- Other Income (Expense) (1,126) (945) ---------- ---------- Income Before Provision for Income Taxes 15,177 11,547 ---------- ---------- Income Tax Provision Current 3,383 2,885 Deferred 2,460 1,560 ---------- ---------- 5,843 4,445 ---------- ---------- Net Income $ 9,334 $ 7,102 ========== ========== Weighted Average Common Shares Outstanding 24,701,349 25,672,724 ========== ========== Earnings Per Share $0.38 $0.28 =========== ========== Dividends Declared Per Share Payable 5/3/96 and 5/5/95 $0.06 $0.06 =========== ==========
The accompanying notes are an integral part of the financial statements. - 5 - SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Quarter Ended March 31, 1996 1995 -------- -------- ($ in thousands) Cash Flows From Operating Activities Net income $ 9,334 $ 7,102 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 11,286 9,424 Deferred income taxes 2,460 1,560 Equity in loss of partnership 808 966 Change in assets and liabilities: Decrease in accounts receivable 3,777 6,022 Decrease in income taxes receivable 5,730 2,877 Decrease in inventories 2,535 1,817 Decrease in accounts payable (4,752) (3,589) Increase in taxes payable 521 709 Increase in interest payable 3,466 944 Increase (decrease) in over-recovered purchased gas costs (2,624) 4,953 Net change in other current assets and liabilities 345 (69) ---------- --------- Net cash provided by operating activities 32,886 32,716 ---------- --------- Cash Flows From Investing Activities Capital expenditures (18,721) (20,160) Investment in partnership - (1,140) Decrease in gas stored underground 5,507 3,993 Other items (539) 605 ---------- --------- Net cash used in investing activities (13,753) (16,702) ---------- --------- Cash Flows From Financing Activities Decrease in revolving long-term debt (17,900) (12,500) Increase in treasury stock - (1,157) Cash dividends (1,482) (1,541) ---------- -------- Net cash used in financing activities (19,382) (15,198) ---------- -------- Increase (decrease) in cash (249) 816 Cash at beginning of year 1,498 1,152 --------- -------- Cash at end of period $ 1,249 $ 1,968 ========= ========
The accompanying notes are an integral part of the financial statements. - 6 - SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 1. BASIS OF PRESENTATION The financial statements included herein are unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. The Company's accounting policies are summarized in the 1995 Annual Report to Shareholders, Notes to Financial Statements. Certain reclassifications have been made to the March 31, 1995, financial statements in order to conform with the 1996 presentation. These reclassifications had no effect on previously reported net income. 2. DIVIDEND PAYABLE A dividend of $.06 per share was declared April 10, 1996, payable May 3, 1996. 3. INTEREST AND INCOME TAXES PAID The following table provides interest and income taxes paid during each period presented. Quarter Ended March 31 1996 1995 ----------------------------------------------------------------------- (in thousands) Interest payments $321 $1,935 Income tax payments $9 $221 - 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following updates information as to the Company's financial condition provided in the Company's Form 10-K for the year ended December 31, 1995, and analyzes the changes in the results of operations between the three month period ended March 31, 1996, and the comparable period of 1995. RESULTS OF OPERATIONS Net income for the three months ended March 31, 1996, was $9.3 million, or $.38 per share, up from $7.1 million, or $.28 per share, for the same period in 1995. The increase in net income was the result of increased sales of the Company's gas production, higher prices received for that production, and increased deliveries of its utility systems. These factors led to improved operating results in both of the Company's major business segments. The following tables compare operating revenues and operating income by business segment for the first three months of 1996 and 1995: Increase 1996 1995 (Decrease) -------- -------- -------- Revenues (in thousands) Exploration and production $ 23,158 $ 17,724 $ 5,434 Gas distribution 54,274 45,337 8,937 Other 79 98 (19) Eliminations (13,649) (11,408) (2,241) -------- -------- -------- $ 63,862 $ 51,751 $ 12,111 ======== ======== ======== Operating Income Exploration and production $ 9,971 $ 6,900 $ 3,071 Gas distribution 9,712 8,328 1,384 Corporate and other (165) (138) (27) -------- ------- -------- $ 19,518 $15,090 $ 4,428 ======== ======= ======== Revenues of the exploration and production segment were up 31% for the three months ended March 31, 1996, as compared to the same period in 1995. Gas production during the first quarter of 1996 was 9.9 billion cubic feet (Bcf), up 8% from 9.2 Bcf for the same period in 1995. The increase was due to higher sales to the Company's utility subsidiary. Sales to Arkansas Western Gas Company (AWG), which operates the Company's northwest Arkansas gas distribution system, increased to 3.7 Bcf during the three months ended March 31, 1996, - 8 - compared to 3.3 Bcf for the same period in 1995. Associated Natural Gas Company (Associated), which operates the Company's systems in northeast Arkansas and Missouri, purchased 2.2 Bcf of the Company's gas production during the first three months of 1996, up from 1.9 Bcf for the first three months of 1995. The colder weather in 1996 resulted in higher demand of the gas distribution segment which enabled the Company to increase its production of reserves located on the utility's gathering system. Sales of gas production to unaffiliated purchasers were 4.0 Bcf in the first quarter of 1996, equal to the level of such sales for the same period in 1995. Production during the quarter from properties acquired in 1995 offset a decrease in production from the Company's Gulf of Mexico properties. The Company received an average price of $2.20 per thousand cubic feet (Mcf) for its gas production during the three months ended March 31, 1996, up from $1.84 per Mcf received in the first three months of 1995. The increased average price reflected the general improvement evident in the market for natural gas during the first quarter of 1996. The Company's oil production was 72 thousand barrels (MBbls) during the three months ended March 31, 1996, up from 47 MBbls for the same period of 1995. The increase was due primarily to production from properties acquired during 1995. Operating revenues of the gas distribution segment increased 20% in the first quarter of 1996, as compared to the first quarter of 1995. The increase was due primarily to higher deliveries to sales and end-use transportation customers. The Company's utility systems delivered 14.6 Bcf to these customers during the three months ended March 31, 1996, up from 12.5 Bcf for the same period in 1995. The higher deliveries reflected both the effects of weather which was 10% colder than normal and 20% colder than in the same period of the prior year and growth of 2% in the average number of customers. The Company's average rate for its utility sales increased during the first quarter of 1996 to $4.03 per Mcf, up from $3.95 per Mcf for the same period in 1995. The increase reflected higher prices paid for purchases of natural gas which are passed through to customers under automatic adjustment clauses. Operating costs and expenses increased 21% in the first quarter of 1996, as compared to the first quarter of 1995. The increase was primarily caused by higher purchased gas costs of the Company's gas distribution systems and increased depreciation, depletion and amortization expense in the exploration and production segment. The increase in depreciation, depletion and amortization expense was due both to an increase in production and an increase in the amortization rate per unit of production. Interest expense, net of capitalization, for the three months ended March 31, 1996, was up 24% compared to the same period in 1995. The increase was due to higher average borrowings, - 9 - partially offset by an increase in capitalized interest. Interest is capitalized in the exploration and production segment on costs that are unevaluated and excluded from amortization. The Company's share of the NOARK Pipeline System's (NOARK) pre-tax loss included in other income was $.8 million for the first quarter of 1996, as compared to $1.0 million for the same period in 1995. The decrease in NOARK's pre-tax loss resulted primarily from a decrease in interest expense. The Company, through a subsidiary, holds a 47.93% general partnership interest in NOARK and is the pipeline's operator. The changes in the provisions for current and deferred income taxes recorded in the three month period ended March 31, 1996, as compared to the same period in 1995, resulted primarily from the level of taxable income and from the deduction of intangible drilling costs in the year incurred for tax purposes, netted against the turnaround of intangible drilling costs deducted for tax purposes in prior years. Intangible drilling costs are capitalized and amortized over future years for financial reporting purposes under the full cost method of accounting. CHANGES IN FINANCIAL CONDITION Changes in the Company's financial condition at March 31, 1996, as compared to December 31, 1995, primarily reflect the seasonal nature of the gas distribution segment of the Company's business. Routine capital expenditures, cash dividends and scheduled debt retirements are predominantly funded through cash provided by operations. For the first three months of 1996 and 1995, net cash provided by operating activities was $32.9 million and $32.7 million, respectively, and exceeded the total of these routine requirements. The Company expects its outstanding borrowings to increase during the upcoming months of 1996 as cash generated from operations will be less than the requirements for routine capital expenditures and cash dividends due to lower levels of heating-generated revenues and seasonally higher capital expenditures resulting from favorable drilling and construction weather. The Company's capital expenditures for the first three months of 1996 were $18.7 million, compared to $20.2 million for the same period in 1995. Capital spending for the exploration and production segment was $15.9 million for the first quarters of both 1996 and 1995. Although spending for this segment was equal in the two periods, the Company expects exploration and production spending for calendar year 1996 to be less than the total spent in 1995. The Company has access to $80.0 million of medium to long-term capital at current market lending rates through two floating rate credit facilities. Of this amount, $5.0 million was outstanding at March 31, 1996, all of which was classified as long-term debt. During the first quarter of 1996, the Company's revolving long-term debt was reduced by $17.9 million, primarily due to the increased cash flow generated by seasonally high utility revenues. As a - 10 - result, long-term debt at March 31, 1996, accounted for 49% of the Company's capitalization, down from 52% at December 31, 1995. Accounts receivable has declined since December 31, 1995, due primarily to seasonally lower gas deliveries of the gas distribution segment. The decrease in income taxes receivable resulted from the receipt of federal income tax refunds related to the carryback of a 1995 tax net operating loss. The decrease in inventories since December 31, 1995, is both the result of withdrawals of gas stored underground to meet seasonal requirements in the gas distribution segment and sales of gas to unaffiliated parties from the Company's unregulated underground storage facility. Accounts payable has declined since December 31, 1995, due primarily to seasonally lower gas purchases of the gas distribution segment and to the timing of expenditures. Other changes in current assets and current liabilities between periods resulted primarily from the timing of expenditures and receipts. The Company had over-recovered $4.7 million of purchased gas costs at March 31, 1996, which will be refunded to its utility customers through automatic cost of gas adjustment clauses included in its filed rate tariffs. At December 31, 1995, the Company had over-recovered purchased gas costs in the amount of $7.3 million. These amounts are classified as current liabilities. - 11 - PART II OTHER INFORMATION Items 1 - 6(b) No developments required to be reported under Items 1 - 6(b) occurred during the quarter ended March 31, 1996. 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. SOUTHWESTERN ENERGY COMPANY --------------------------- Registrant DATE: May 14, 1996 /s/ GREGORY D. KERLEY ------------------ -------------------------------- Gregory D. Kerley Vice President - Treasurer and Secretary, and Chief Accounting Officer - 12 - EX-27 2 FINANCIAL DATA SCHEDULE FOR 1ST QTR - 1996
5 1,000 3-MOS DEC-31-1996 MAR-31-1996 1,249 0 31,764 0 12,913 50,525 776,494 (289,137) 557,525 41,286 189,857 0 0 2,774 199,612 557,525 62,022 63,862 0 44,344 0 0 3,215 15,177 5,843 9,334 0 0 0 9,334 .38 0
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