<PAGE>
=================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------
FORM 10-Q
For the quarterly period ended
March 31, 1995
Commission File No. 1-6407
--------------------
SOUTHERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-0571592
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
504 Lavaca Street, Eighth Floor 78701
Austin, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 477-5981
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange in which registered
------------------- -----------------------------------------
Common Stock, par value New York Stock Exchange
$1 per share
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
--- ---
The number of shares of the registrant's Common Stock outstanding
on April 27, 1995 was 11,518,622.
=================================================================
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
FORM 10-Q
March 31, 1995
Index
PART I. FINANCIAL INFORMATION Page(s)
Item 1. Financial Statements
Statements of consolidated operations -
three, nine and twelve months ended
March 31, 1995 and 1994
Consolidated balance sheet -
March 31, 1995 and 1994 and
June 30, 1994
Statement of common stockholders' equity -
nine months ended March 31, 1995 and
and twelve months ended June 30, 1994
Statements of consolidated cash flows -
three, nine and twelve months ended
March 31, 1995 and 1994
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(See "CONTINGENCIES" under Notes to Consolidated
Financial Statements)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10.1 -- Third Amendment to Revolving
Credit Agreement dated as of
April 28, 1995
(b) Exhibit 11 -- Computation of primary and fully
diluted earnings per share
(c) Exhibit 27 -- Financial Data Schedule
(d) Reports on Form 8-K -- None
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
Three Months Ended March 31,
-------------------------------
1995 1994
---------- ----------
(thousands of dollars, except
shares and per share amounts)
Operating revenues ............ $ 181,370 $ 175,454
Gas purchase costs ............ 99,749 107,760
--------- ---------
Operating margin. . . . . . 81,621 67,694
--------- ---------
Operating expenses:
Operating, maintenance and
general. . . . . . . . . 23,966 23,631
Taxes, other than on income 15,077 13,744
Depreciation and amortization 8,016 6,842
--------- ---------
Total operating expenses . 47,059 44,217
--------- ---------
Net operating revenues . 34,562 23,477
--------- ---------
Other income (expenses):
Interest on long-term debt.. (9,365) (8,088)
Other interest. . . . . . .. (530) (254)
Other, net. . . . . . . . .. 1,750 960
--------- ---------
Total other expenses, net (8,145) (7,382)
--------- ---------
Earnings before income taxes . 26,417 16,095
Federal and state income taxes 10,264 6,141
--------- ---------
Net earnings available for
common stock. . . . . . . . $ 16,153 $ 9,954
========= =========
Net earnings per common share. $ 1.41 $ .87
========= =========
Weighted average shares
outstanding . . . . . . . . 11,492,136 11,431,269
========== =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
Nine Months Ended March 31,
-----------------------------
1995 1994
---------- ----------
(thousands of dollars, except
shares and per share amounts)
Operating revenues. . . . . . .. $ 395,981 $ 281,055
Gas purchase costs. . . . . . .. 206,208 164,614
--------- ---------
Operating margin . . . . . .. 189,773 116,441
--------- ---------
Operating expenses:
Operating, maintenance and
general . . . . .. . . . . 80,844 49,914
Taxes, other than on income.. 31,637 20,704
Depreciation and amortization 24,225 14,477
--------- ---------
Total operating expenses. 136,706 85,095
--------- ---------
Net operating revenues. . 53,067 31,346
--------- ---------
Other income (expenses):
Interest on long-term debt .. (28,100) (13,820)
Other interest . . . . . . .. (2,024) (1,798)
Other, net . . . . . . . . .. 4,085 5,780
--------- ---------
Total other expenses, net. (26,039) (9,838)
--------- ---------
Earnings before income taxes. .. 27,028 21,508
Federal and state income taxes.. 10,486 8,067
--------- ---------
Net earnings available for
common stock . . . . . . . .. $ 16,542 $ 13,441
========= =========
Net earnings per common share .. $ 1.44 $ 1.44
========= =========
Weighted average shares
outstanding. . . . . . . . .. 11,465,296 9,341,397
========== =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
Twelve Months Ended March 31,
--------------------------------
1995 1994
---------- ----------
(thousands of dollars, except
shares and per share amounts)
Operating revenues. . . . . . . $ 489,490 $ 317,482
Gas purchase costs. . . . . . . 252,722 182,213
--------- ---------
Operating margin . . . . . . 236,768 135,269
--------- ---------
Operating expenses:
Operating, maintenance and
general . . . . . . . . . 110,596 61,613
Taxes, other than on income. 40,704 23,760
Depreciation and amortization 31,666 17,859
--------- ---------
Total operating expenses. 182,966 103,232
--------- ---------
Net operating revenues. . 53,802 32,037
--------- ---------
Other income (expenses):
Interest on long-term debt . (37,848) (16,895)
Other interest . . . . . . . (2,123) (2,010)
Other, net . . . . . . . . . 5,251 6,972
--------- ---------
Total other expenses, net (34,720) (11,933)
--------- ---------
Earnings before income taxes. . 19,082 20,104
Federal and state income taxes. 7,604 7,587
--------- ---------
Earnings before preferred
dividends. . . . . . . . . . 11,478 12,517
Preferred dividends . . . . . . -- (249)
--------- ---------
Net earnings available for
common stock . . . . . . . . $ 11,478 $ 12,268
========= =========
Net earnings per common share . $ 1.00 $ 1.35
========= =========
Weighted average shares
outstanding. . . . . . . . .11,460,347 9,070,933
========== =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, June 30,
----------------------
1995 1994 1994
---------- ---------- ----------
(thousands of dollars)
Property, plant and equipment:
Plant in service. . . . . $ 859,472 $ 807,209 $ 813,055
Construction work in
progress . . . . . . . 24,108 13,967 21,991
--------- --------- ---------
883,580 821,176 835,046
Less accumulated deprecia-
tion and amortization. (297,704) (277,491) (279,120)
--------- --------- ---------
585,876 543,685 555,926
Additional purchase cost
assigned to utility
plant, net . . . . . . 158,553 164,934 167,374
--------- --------- ---------
Net property, plant and
equipment. . . . . . . 744,429 708,619 723,300
--------- --------- ---------
Current assets:
Cash and cash equivalents . 5,730 25,307 5,881
Accounts receivable,
billed and unbilled. . . 70,830 101,141 48,273
Inventories, principally
at average cost. . . . . 19,015 14,786 23,612
Prepayments and other . . . 1,616 7,081 1,621
--------- --------- ---------
Total current assets . . 97,191 148,315 79,387
--------- --------- ---------
Deferred charges . . . . . . . 110,296 78,294 74,367
Real estate. . . . . . . . . . 10,803 12,017 11,983
Other. . . . . . . . . . . . . 2,540 2,895 1,913
--------- --------- ---------
Total . . . . . . . . . . .$ 965,259 $ 950,140 $ 890,950
========= ========= =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
STOCKHOLDERS' EQUITY AND LIABILITIES
March 31, June 30,
----------------------
1995 1994 1994
---------- ---------- ----------
(thousands of dollars)
Common stockholders' equity:
Common stock, $1 par value;
authorized 50,000,000
shares; issued
11,509,294 shares
at March 31, 1995 . . . $ 11,570 $ 10,952 $ 11,497
Premium on capital stock . 198,818 188,765 198,272
Less treasury stock,
at cost . . . . . . . . (794) (794) (794)
Retained earnings. . . . . 16,542 13,082 --
--------- --------- ---------
Total common stockholders'
equity. . . . . . . . . 226,136 212,005 208,975
--------- --------- ---------
Long-term debt. . . . . . . . 478,062 479,565 479,048
--------- --------- ---------
Current liabilities:
Long-term debt due
within one year . . . . 956 20,490 889
Notes payable. . . . . . . 18,000 -- --
Accounts payable . . . . . 45,453 72,718 44,631
Federal, state and
local taxes . . . . . . 19,791 21,727 8,706
Accrued interest . . . . . 6,323 7,285 15,579
Customer deposits. . . . . 14,192 10,252 13,029
Deferred gas purchase costs
due to customers. . . . 15,215 11,672 8,509
Other. . . . . . . . . . . 11,502 15,508 12,435
--------- --------- ---------
Total current
liabilities. . . . . 131,432 159,652 103,778
--------- --------- ---------
Deferred credits and other
liabilities. . . . . . . . 99,129 79,624 69,437
Accumulated deferred income
taxes. . . . . . . . . . . 30,500 19,294 29,712
Commitments and contingencies -- -- --
--------- --------- ---------
Total. . . . . . . . . . . $ 965,259 $ 950,140 $ 890,950
========= ========= =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF COMMON STOCKHOLDERS' EQUITY
Trea-
Common Premium sury
Stock on Stock,
$1 Par Capital at Retained
Value Stock Cost Earnings Total
------- ------- ------ --------- -------
(thousands of dollars)
Balance July 1,
1993. . . . . . . $ 5,302 $144,902 $(794) $ 1,744 $151,154
Net earnings. . . -- -- -- 8,378 8,378
Rights Offering
for 2,000,000
shares of
common stock . 2,000 47,351 -- -- 49,351
Three-for-two
stock split. . 3,628 (3,628) -- -- --
Stock dividend. . 545 9,524 -- (10,069) --
Exercise of stock
options. . . . 22 186 -- -- 208
Stock issuance
costs and
other. . . . . -- (63) -- (53) (116)
------- -------- ----- -------- --------
Balance June 30,
1994. . . . . . . 11,497 198,272 (794) -- 208,975
Net earnings. . . -- -- -- 16,542 16,542
Exercise of
stock options. 73 546 -- -- 619
------- -------- ----- -------- --------
Balance March 31,
1994. . . . . . . $11,570 $198,818 $(794) $16,542 $226,136
======= ======== ===== ======= ========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Three Months Ended March 31,
-------------------------------
1995 1994
---------- ----------
(thousands of dollars)
Net cash flow from operating
activities. . . . . . . . . $ 48,513 $ 84,902
-------- --------
Cash flow from (used in)
investing activities:
Additions to property,
plant and equipment . (13,758) (12,655)
Acquisition of operations,
net of cash received. -- (400,334)
Net change in customer
advances. . . . . . . 1,168 (3,016)
Net change in deferred
charges and deferred
credits . . . . . . . (5,365) 3,524
Other, net . . . . . . . 1,308 300
-------- --------
Net cash flows used
in investing
activities . . . . (16,647) (412,181)
-------- --------
Cash flow from (used in)
financing activities:
Net borrowings (pay-
ments) under
revolving credit
facility. . . . . . . (26,000) (20,100)
Repayment of debt. . . . (660) (86,541)
Proceeds from rights
offering, net . . . . -- 475,000
Credit facility renewal
fee . . . . . . . . . -- (13,715)
Bank checks outstanding,
less balance per bank -- (5,089)
Other, net . . . . . . . 524 113
-------- --------
Net cash flows from
(used in) financing
activities . . . . (26,136) 349,668
-------- --------
Decrease in cash and cash
equivalents . . . . . . . . 5,730 22,389
Cash and cash equivalents at
beginning of period . . . . -- 2,918
-------- --------
Cash and cash equivalents
at end of period. . . . . . $ 5,730 $ 25,307
======== ========
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest . . . . . $ 18,974 $ 3,567
======== ========
Income taxes . . . $ 535 $ 148
======== ========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Nine Months Ended March 31,
-----------------------------
1995 1994
---------- ----------
(thousands of dollars)
Net cash flow used in operating
activities. . . . . . . . . . $ 37,691 $ 82,829
--------- ---------
Cash flow from (used in)
investing activities:
Additions to property,
plant and equipment . . (50,363) (23,857)
Acquisition of operations,
net of cash received. . (1,072) (435,619)
Leasehold improvements . . (249) (1,473)
Net change in deferred
charges and deferred
credits . . . . . . . . (6,743) 2,934
Other, net . . . . . . . . 3,007 (1,426)
--------- ---------
Net cash flows used in
investing activities (55,420) (459,441)
--------- ---------
Cash flow from (used in)
financing activities:
Net borrowings (payments)
under revolving credit
facility. . . . . . . . 18,000 (28,200)
Repayment of debt. . . . . (1,041) (87,002)
Issuance of debt . . . . . -- 475,000
Premium on early extinguish-
ment of debt. . . . . . -- (13,715)
Debt issuance costs. . . . -- (5,089)
Proceeds from rights
offering, net . . . . . -- 49,351
Credit facility renewal fee -- (1,050)
Other, net . . . . . . . . 619 446
--------- ---------
Net cash flows from
financing activities . 17,578 389,741
--------- ---------
Increase (decrease) in cash
and cash equivalents . . . . . (151) 13,129
Cash and cash equivalents at
beginning of period . . . . . . 5,881 12,178
--------- ---------
Cash and cash equivalents
at end of period. . . . . . . .$ 5,730 $ 25,307
========= =========
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest . . . . . . .$ 38,205 $ 10,726
========= =========
Income taxes
(refunded). . . . .$ 517 $ 5,583
========= =========
See accompanying notes to the consolidated financial statements.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
Twelve Months Ended March 31,
------------------------------
1995 1994
---------- ----------
(thousands of dollars)
Net cash flow from operating
activities. . . . . . . . . .$ 53,966 $ 83,677
--------- ---------
Cash flow from (used in)
investing activities:
Additions to property,
plant and equipment . . (65,841) (27,038)
Acquisition of operations,
net of cash received. . (5,877) (435,324)
Leasehold improvements . . (639) (2,017)
Collection of note
receivable. . . . . . . (6,000) --
Net change in deferred
charges and deferred
credits . . . . . . . . (6,434) 373
Other, net . . . . . . . . 2,342 (1,785)
--------- ---------
Net cash flows used
in investing
activities . . . . . (70,449) (16,300)
--------- ---------
Cash flow from (used in)
financing activities:
Net borrowings under
revolving credit
facility. . . . . . . . 18,000 (16,300)
Repayment of debt. . . . . (21,346) (86,728
Issuance of debt . . . . . -- 475,000
Premium on early
extinguishment of debt. -- (13,715)
Debt issuance costs. . . . -- (6,139)
Proceeds from rights
offering, net . . . . . -- 49,351
Redemption of preferred
stock . . . . . . . . . -- (18,100)
Other, net . . . . . . . . 252 (228)
--------- ---------
Net cash flows from
financing
activities . . . . . (3,094) 383,141
--------- ---------
Increase (decrease) in cash
and cash equivalents. . . . . (19,577) 937
Cash and cash equivalents at
beginning of period . . . . . 25,307 24,370
--------- ---------
Cash and cash equivalents
at end of period. . . . . . .$ 5,730 $ 25,307
========= =========
Supplemental disclosures
of cash flow information:
Cash paid during the
period for:
Interest . . . . . .$ 39,441 $ 14,364
========= =========
Income taxes . . . .$ 754 $ 9,757
========= =========
See accompanying notes to the consolidated financial statements.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The interim financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for a fair
presentation of the results of operations for such periods.
Because of the seasonal nature of the Company's operations, the
results of operations for any interim period are not necessarily
indicative of results for the full year.
As described below, the Company acquired Missouri Gas Energy on
January 31, 1994 and Rio Grande Valley Gas Company ("Rio Grande")
on September 30, 1993. The earnings from operations of Missouri
Gas Energy and Rio Grande are consolidated with the Company
subsequent to the respective acquisition dates. The timing of the
acquisitions of Missouri Gas Energy and Rio Grande substantially
impacts the comparability of the three-, nine- and twelve-month
periods ended March 31, 1995 and 1994.
These financial statements should be read in conjunction with the
financial statements and notes thereto contained in Southern Union
Company's ("Southern Union" or the "Company") Transition Report on
Form 10-K for the fiscal year ended June 30, 1994. Certain prior
period amounts have been reclassified to conform with the current
period presentation.
CHANGE IN FISCAL YEAR
On May 25, 1994, Southern Union's Board of Directors approved a
change in the Company's fiscal year-end from December 31 to June 30
effective with the period ended June 30, 1994. The new fiscal year
more closely conforms the Company's reporting of its financial
condition and results of operations to its seasonal business cycle.
ACQUISITIONS
Missouri Gas Energy
On January 31, 1994, the Company consummated the acquisition of
Missouri Gas Energy (the "Missouri Acquisition") from Western
Resources, Inc. ("Western Resources") for $400,300,000 in cash,
based on account balances as of December 31, 1993. The final
purchase price, which was determined through post-closing
adjustments and subsequent arbitration, was approximately
$401,600,000. See "Contingencies." The Missouri Acquisition was
financed with proceeds from the sale of $475,000,000 of 7.60%
Senior Notes due 2024 (the "Senior Debt Securities") completed on
January 31, 1994 and net proceeds from the sale of $50,000,000 of
common stock in a subscription rights offering (the "Rights
Offering") completed on December 31, 1993. See "Capitalization."
The assets of Missouri Gas Energy were included in the Company's
consolidated balance sheet at January 31, 1994 and earnings from
the operations of Missouri Gas Energy have been included in the
statement of consolidated operations since February 1, 1994.
Missouri Gas Energy serves approximately 478,000 customers in 147
communities in central and western Missouri, including Kansas City,
St. Joseph, Joplin and Monett. The acquisition was accounted for
using the purchase method. The additional purchase cost assigned
to utility plant of approximately $71,000,000 reflects the excess
of the purchase price over the historical book carrying value of
net assets acquired plus certain accounting entries to record
certain preacquisition contingencies. The additional purchase cost
assigned to utility plant is amortized on a straight-line basis
over forty years.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rio Grande Valley
On September 30, 1993, the Company acquired Rio Grande for
$30,500,000. Rio Grande serves approximately 82,000 customers in
the south Texas counties of Willacy, Cameron and Hidalgo. Rio
Grande's service area includes 32 towns and cities along the Mexico
border, including Harlingen, McAllen and Brownsville (the southern-
most city in the continental U.S.). The Company initially funded
the purchase with borrowings from its revolving credit facility
which were subsequently repaid with proceeds from the sale of the
Senior Debt Securities completed on January 31, 1994, and the
Rights Offering completed on December 31, 1993. The assets of Rio
Grande were included in the consolidated balance sheet at September
30, 1993 and earnings from operations of Rio Grande has been
included in the statement of consolidated operations beginning
October 1, 1993. The acquisition was accounted for using the
purchase method. The additional purchase cost assigned to utility
plant of approximately $11,600,000 reflects the excess of the
purchase price over the historical book carrying value of the net
assets acquired. The additional purchase cost assigned to utility
plant is amortized on a straight-line basis over forty years.
PRO FORMA CONDENSED STATEMENT OF CONSOLIDATED OPERATIONS
The following unaudited pro forma condensed statement of
consolidated operations for the three and twelve months ended
March 31, 1994 is presented as though the following events had been
consummated at the beginning of the periods presented: (i) the
Missouri and Rio Grande Acquisitions; (ii) the sale of the Senior
Debt Securities; (iii) the completion of the Rights Offering; (iv)
the refinancing of certain short-term and long-term debt; and (v)
the elimination of preferred stock dividends resulting from the
purchase and redemption of all outstanding preferred stock. The
pro forma financial information is not necessarily indicative of
the results which would have actually been obtained had the
acquisitions of Missouri Gas Energy and Rio Grande, the Rights
Offering, the sale of Senior Debt Securities or the refinancings
been completed as of the assumed date for the periods presented or
which may be obtained in the future.
Twelve Months Ended
March 31,
--------------------
1994 1993
--------- ---------
(thousands of
dollars, except
per share
amounts)
Operating revenues. . . . . . . . . . $ 251,602 $ 613,061
Gas purchase costs. . . . . . . . . . 161,834 368,745
-------- ---------
Operating margin . . . . . . . . . 89,768 244,316
Operating expenses. . . . . . . . . . 56,170 194,054
--------- ---------
Net operating
revenues . . . . . . . . . . . . . 33,598 50,262
Interest on long-
term debt. . . . . . . . . . . . . (9,428) (37,269)
Other income
(expense), net . . . . . . . . . . (88) 5,739
--------- ---------
Earnings before
income taxes. . . . . . . . . . 24,082 18,732
Federal and state
income taxes . . . . . . . . . . . 9,151 7,118
--------- ---------
Net earnings
available for
common stock. . . . . . . . . . $ 14,931 $ 11,614
Net earnings per
common share . . . . . . . . . . . $ 1.31 $ 1.02
========= =========
Weighted average
shares outstanding
(thousands). . . . . . . . . . . . 11,431 11,420
========= =========
Percent of normal
weather, based on
30-year average. . . . . . . . . . 90% 98%
========= =========
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The pro forma condensed statement of consolidated operations
includes adjustments that are based on assumptions and estimates
made by the Company's management regarding anticipated efficiencies
resulting from the combined operations, reductions in costs planned
by management, accruals for certain preacquisition contingencies
and the fair market value of certain assets acquired in the
Missouri Acquisition.
CAPITALIZATION
First mortgage bonds and other long-term debt outstanding,
including current maturities, were as follows:
March 31, June 30,
1995 1994
------------ --------
(thousands of dollars)
First mortgage bonds:
11.5% due 2000 -- collateralized
by utility plant in service. . . $ 1,200 $ 1,700
Other long-term debt:
7.60% Senior Notes due 2024 . . . . 475,000 475,000
Other . . . . . . . . . . . . . . . 2,818 3,237
--------- --------
Total debt . . . . . . . . . . . . . . 479,018 479,937
Less current portion. . . . . . . . 956 889
--------- --------
Total long-term debt . . . . . . $ 478,062 $479,048
========= ========
On April 28, 1995, Southern Union entered into an amendment to
their existing revolving credit facility (the "facility"). The
facility was increased from $100,000,000 to $125,000,000. The
increase of $25,000,000 (the "bridge") may only be used for certain
restricted purposes. The amended facility contains substantially
the same covenants and is uncollateralized. There are no borrowing
base limitations as long as the Company's Senior Debt Securities
meet certain rating criteria. The interest rate on borrowings is
calculated based on a formula using the LIBOR and prime interest
rates.
On March 29, 1995, Southern Union filed a Registration Statement
with the Securities and Exchange Commission to sell a combination
of preferred securities of financing trusts and senior and
subordinated debt securities of the Company of up to $300,000,000
from time to time, at prices determined at the time of any
offering.
On January 31, 1994, Southern Union completed the sale of the
Senior Debt Securities. The net proceeds from the sale of the
Senior Debt Securities, together with the net proceeds from the
Rights Offering and working capital from operations, were used to:
(i) fund the Missouri Acquisition; (ii) repay approximately
$59,300,000 of borrowings under the revolving credit facility
previously used to fund the Rio Grande Acquisition and repurchase
all outstanding preferred stock; (iii) refinance, on January 31,
1994, the $10,000,000 aggregate principal amount of 9.45% notes due
January 31, 2004 and $25,000,000 aggregate principal amount of 10%
notes due January 31, 2012 and the related premium of approximately
$10,400,000 resulting from the early extinguishment of such notes;
(iv) refinance, on March 2, 1994, $50,000,000 aggregate principal
amount of 10.5% Sinking Fund Debentures due May 15, 2017 and the
related premium of approximately $3,300,000 resulting from the
early extinguishment of such debentures; and (v) retire, on May 16,
1994, $20,000,000 aggregate principal amount of 10-1/8% notes.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CASH FLOW INFORMATION
Twelve Months Ended
March 31, 1995
-------------------
(thousands of dollars)
Non-cash assets (liabilities) acquired
other than cash:
Property, plant and equipment, net . $ 1,072
=========
Excluded from the statement of consolidated cash flows were the
following effects of non-cash investing and financing activities:
Three Months Ended Twelve Months Ended
March 31, 1995 March 31, 1994
------------------ -------------------
(thousands of dollars)
Other obligations
incurred. . . . . . . $ -- $ 2,331
======== ========
STOCK DIVIDEND AND SPLIT
On May 25, 1994, Southern Union's Board of Directors declared a 5%
stock dividend, distributed on June 30, 1994 to stockholders of
record on June 14, 1994. A portion of the 5% stock dividend was
characterized as a distribution of capital due to the level of the
Company's retained earnings available for distribution as of the
declaration date. The 5% stock dividend is consistent with the
Board of Directors' approval in February 1994 of the commencement
of regular stock dividends of approximately 5% annually. In
addition, on February 11, 1994, the Board of Directors declared a
three-for-two stock split distributed in the form of a 50% stock
dividend on March 9, 1994, to stockholders of record on
February 23, 1994. Unless otherwise stated, all per share data
included in the accompanying consolidated financial statements and
in these Notes to Consolidated Financial Statements has been
restated to give effect to the stock dividend and stock split.
UTILITY REGULATION AND RATES
Prior to the Missouri Acquisition, Western Resources was required
pursuant to a 1989 Missouri Public Service Commission ("MPSC")
order to undertake a major gas safety program in the service
territories of Missouri Gas Energy. Such activities included
replacement of company- and customer-owned gas service and yard
lines, the movement and resetting of meters, the replacement of
cast iron mains and the replacement and cathodic protection of bare
steel mains ("Missouri Safety Program"). In recognition of the
significant capital expenditures associated with this safety
program, the MPSC issued Western Resources certain Accounting
Authority Orders ("AAO") providing for the deferral, and subsequent
recovery through rates, of depreciation expenses, property taxes
and associated carrying costs related to the Missouri Safety
Program.
Missouri Gas Energy is required to continue the Missouri Safety
Program and has deferred depreciation expense, property taxes and
carrying costs associated with Missouri Gas Energy's investment in
the Missouri Safety Program as approved by the MPSC. The Company
has deferred approximately $1,197,000 and $2,766,000 related to
depreciation, property taxes and associated carrying costs on its
investment in this program for the three- and nine- month periods,
respectively, ended March 31, 1995.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The continuation of the Missouri Safety Program will result in
significant levels of future capital expenditures. The Company
estimates incurring capital expenditures of approximately
$26,000,000 in fiscal 1995 related to this program.
COMMITMENTS AND CONTINGENCIES
The following is a summary and current status of certain legal
proceedings involving Southern Union and its subsidiaries.
On November 30, 1992, Southern Union was named as a potentially
responsible party in a special notice letter from the Environmental
Protection Agency ("EPA") with respect to remediation costs for a
former manufactured gas plant site in Burlington, Vermont. The
Company has denied liability for any such costs for various
reasons, including the fact that it is not a successor to any
entity that owned or operated the site in question. The Company
does not believe the outcome of this matter will have a material
adverse effect on its financial position, results of operations or
cash flows.
Southern Union and Western Resources entered into an Environmental
Liability Agreement (the "Environmental Liability Agreement") at
the closing of the Missouri Acquisition. Subject to the accuracy
of certain representations made by Western Resources in the
Missouri Asset Purchase Agreement, the Environmental Liability
Agreement provides for a tiered approach to the allocation of
substantially all liabilities under environmental laws that may
exist or arise with respect to Missouri Gas Energy. At the present
time and based upon information available to management, the
Company believes that the costs of any remediation efforts that may
be required for these sites for which it may ultimately have
responsibility will not exceed the aggregate amount subject to
substantial sharing by Western Resources.
On June 1, 1994, Southern Union filed two lawsuits in the United
States District Court for the Western District of Missouri, one
against The Bishop Group, the other against both The Bishop Group
and Western Resources. The litigation against The Bishop Group was
dismissed February 24, 1995 as a result of its settlement with
Southern Union with no material adverse effect on the Company's
financial position, results of operation or cash flows. The
litigation against Western Resources continues, although the
portion of that lawsuit dealing with disputed purchase price items
under the Missouri Asset Purchase Agreement (the "Purchase
Agreement") has been resolved by court-ordered arbitration.
Pursuant to the arbitrator's decision on April 17, 1995, Southern
Union has made an additional payment of $3,300,000 plus interest in
final payment of the purchase price. The Company anticipates that
the remaining issues in this lawsuit - its damage claims against
Western Resources - will be adjudicated by trial in November 1995.
Southern Union and its subsidiaries are parties to other legal
proceedings that its management considers to be the normal kinds of
actions to which an enterprise of its size and nature might be
subject, and not to be material to the Company's overall business
or financial condition, results of operations or cash flows.
Pursuant to the terms of the Purchase Agreement, the Company agreed
to assume the Missouri portion of certain obligations of Western
Resources related to a 1990 settlement of a Wyoming Tight Sands
anti-trust litigation. To secure the refund of the settlement
proceeds, the MPSC authorized the establishment of an independently
administered trust to collect cash receipts under the Tight Sands
settlement and repay credit-facility borrowings used for the lump
sum payment. In the event the trust does not receive cash payments
from the gas suppliers as provided by the Tight Sands settlement
agreement, the Company is committed to pay its applicable portion
of the amount owed the lender of the credit-facility borrowings.
The Company's unpaid applicable portion of the amount the trust
owes the lender at March 31, 1995 was approximately $8,600,000.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the order of the U. S. Federal Energy Regulatory Commission
("FERC") docket Nos. RP 94-296 and PR 95-3, Williams Natural Gas
Company, the primary pipeline providing gas to Missouri Gas Energy,
is seeking recovery of certain unrecovered deferred gas costs of
approximately $29,600,000. These costs were related to gas
deliveries prior to April 30, 1994. Missouri Gas Energy has filed
a proposed mechanism to recover these costs under case GR 95-33
with the MPSC. The MPSC has issued a final order regarding the
recovery of these costs and the Company believes that these costs
will be fully recovered from its Missouri customers. The
receivable and liability associated with these costs have been
recorded as a deferred charge and a deferred liability,
respectively, on the balance sheet as of March 31, 1995.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Southern Union Company is engaged in various activities in the
distribution of natural gas to residential, commercial, industrial,
agricultural and other customers in communities throughout Texas,
western Missouri and the Oklahoma panhandle. The Company's
principal line of business is the distribution of natural gas as a
public utility through Southern Union Gas Company and Missouri Gas
Energy, each of which is a division of the Company. In addition,
the Company operates interstate and intrastate natural gas pipeline
systems, markets natural gas to end-users, holds investments in
real estate, and markets and sells natural gas for natural gas
vehicles. Several of these business activities are subject to
regulation by federal, state or local authorities where the Company
operates. Thus, the Company's financial condition and results of
operations have been and will continue to be dependent upon the
receipt of adequate and timely adjustments in rates. In addition,
the Company's business is affected by seasonal weather impacts,
competitive factors within the energy industry and economic
development and residential growth in its service areas.
On January 31, 1994, Southern Union completed the acquisition of
Missouri Gas Energy (the "Missouri Acquisition"). As of March 31,
1995, Missouri Gas Energy served approximately 478,000 customers in
147 communities in central and western Missouri, including Kansas
City, St. Joseph, Joplin and Monett. In addition, on September 30,
1993, the Company completed the acquisition of Rio Grande Valley
Gas Company (the "Rio Grande Acquisition") which serves
approximately 82,000 customers in south Texas. These acquisitions
were accounted for as purchases and, accordingly, the operating
results of the acquired companies have been included in the
consolidated operating results after the respective dates of
acquisition. See "Acquisitions" in the Notes to Consolidated
Financial Statements for the three months ended March 31, 1995,
included herein. In addition, since the majority of Missouri Gas
Energy's operating margin is earned during the winter heating
season, the results of operations for the three-, nine- and twelve-
month periods ended March 31, 1995 are not indicative of results
that would necessarily be achieved for a full year. For these
reasons, the results of operations of the Company for the periods
subsequent to those acquisitions are not comparable to those
periods prior to the acquisitions nor are the 1995 results of
operations comparable with prior periods.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995 and 1994
The Company recorded net earnings available for common stock of
$16,153,000 for the three-month period ended March 31, 1995, an
increase of 62%, compared with net earnings of $9,954,000 for the
same period in 1994. Net earnings per common share, based on
weighted average shares outstanding during the period, were $1.41
in 1995 compared with net earnings per common share of $.87 in
1994.
Operating revenues were $181,370,000 for the three-month period
ended March 31, 1995, an increase of 3%, compared with operating
revenues of $175,454,000 in 1994. Gas purchase costs for the
three-month period ended March 31, 1995 were $99,749,000, a
decrease of 7%, compared with $107,760,000 in 1994. The Company's
operating revenues are affected by the level of sales volumes and
by the pass-through of increases or decreases in the Company's gas
purchase costs through its purchased gas adjustment clauses. The
increase in operating revenues between periods was primarily the
result of a 31% increase in gas sales volume to 44,930 MMcf in 1995
from 34,364 Mmcf in 1994. Missouri Gas Energy contributed 11,200
Mmcf of the increase while the remaining operations of the Company
resulted in a gas sales volume decrease of 634 Mmcf. Volume
decreases for the three-month period ended March 31, 1995 were
impacted by warmer than normal weather for Southern Union's
operations in Texas and Oklahoma which comprise 51% of the
Company's customer base. Weather for these operations for the
three-month period ended March 31, 1995 was 78% of normal compared
to 82% normal in 1994.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Missouri Gas Energy's service territories experienced 89% of normal
weather for the three months ended March 31, 1995 compared to 88%
of normal in 1994, Missouri Gas Energy was consolidated with the
operations of the company after January 31, 1994. Gas purchase
costs were effected by the decrease in gas sales volumes as well as
a decrease in the average cost of gas from $2.76 per Mcf in 1994 to
$2.18 per Mcf in 1995. Decreases in average spot market gas prices
throughout the Company's distribution system were the result of the
warmer than normal winter. Missouri Gas Energy contributed
approximately $22,395,000 to the overall increase in operating
revenues and approximately $6,325,000 in additional gas purchase
costs. The remaining operations of the Company were responsible
for an operating revenue decrease of $16,479,000 and gas purchase
cost decreases of $14,336,000, both as a result of decreased
volumes and lower average cost of gas, discussed above.
Operating margin (operating revenues less gas purchase costs) for
the three-month period ended March 31, 1995 was $81,621,000
compared to $67,694,000 in 1994. The increase in operating margin
is the result of the Missouri Acquisition which contributed
approximately $16,070,000 to the overall increase, while the
remaining operations of the company were responsible for the
decrease of approximately $2,143,000 as a result of volume
decreases, previously discussed. Missouri Gas Energy's rate
structure collects a greater percentage of its operating margin in
the winter heating season, of which January has historically
contributed approximately 17% of its annual operating margin.
Operating expenses, which include operating, maintenance and
general expenses, taxes other than on income, and depreciation and
amortization, were $47,059,000 for the three-month period ended
March 31, 1995, an increase of 6%, compared with $44,217,000 in
1994. The increase was primarily attributable to the net
additional operating expenses, net of the operating efficiencies
since acquisition, associated with the Missouri Acquisition of
approximately $4,700,000. This increase was partially offset by
less than expected employee overtime payroll costs, as a result of
the warmer than normal winter, and less than expected employee
medical costs than were actually incurred.
Interest expense on long-term debt was $9,365,000 for the three-
month period ended March 31, 1995, an increase of 16%, compared to
$8,088,000 in 1994. The increase in interest expense is due to the
net increase in total long-term debt which included the sale of the
$475,000,000 of Senior Debt Securities, completed on January 31,
1994 and net of the retirement of $105,000,000 in long-term debt.
The net proceeds from the sale of the Senior Debt Securities,
together with the net proceeds from the $50,000,000 Rights Offering
and working capital from operations, was used to fund the Missouri
and Rio Grande Acquisitions, and refinance certain short-term and
long-term debt. See "Capitalization" in the Notes to the Con-
solidated Financial Statements for the three months ended March 31,
1995 included herein.
Other interest expense was $530,000 for the three-month period
ended March 31, 1995, an increase of 109%, compared to $254,000 in
1994. The increase in other interest expense is due to an increase
in borrowings under the revolving credit facility for seasonal
working capital needs of the Company.
Other income for the three-month period ended March 31, 1995 was
$1,750,000 compared to $960,000 in 1994. Other income for the
three-month period ended March 31, 1995 consists of: approximately
$740,000 related to the deferral of interest expense associated
with the Missouri Gas Energy Safety Program; rental income from
Lavaca Realty Company ("Lavaca Realty"), the Company's real estate
subsidiary, of approximately $659,000; approximately $135,000 from
gains on equipment sales; and investment interest and interest on
notes receivable of
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
approximately $78,000. Other income for 1994 included: rental
income from Lavaca Realty of approximately $574,000; investment
interest and interest on notes receivable of approximately
$165,000; approximately $111,000 from gas appliance merchandising;
and approximately $81,000 related to the deferral of interest
expense associated with the Missouri Gas Energy Safety Program.
The three-month period ended March 31, is generally the Company's
most profitable quarter. Because Missouri Gas Energy's rate
structure collects a greater percentage of its margin in the winter
heating season months, losses are expected during the upcoming
quarters ended June 30 and September 30, 1995. In recent years,
Southern Union Gas has worked with its regulators to minimize
summer earnings deficits by increasing the customer's monthly
minimum bill.
Nine Months Ended March 31, 1995 and 1994
The Company recorded net earnings available for common stock of
$16,542,000 for the nine-month period ended March 31, 1995 compared
to net earnings of $13,441,000 for the nine-month period ended
March 31, 1994. Net earnings per common share, based on weighted
average shares outstanding during the periods, were $1.44 in both
1995 and 1994. Earnings per common share remained flat compared
with prior year due to an increase in the average number of shares
outstanding after a Rights Offering in December, 1993.
Operating revenues were $395,981,000 for the nine-month period
ended March 31, 1995, an increase of 41%, compared with operating
revenues of $281,055,000 in 1994. Gas purchase costs for the nine-
month period ended March 31, 1995 were $206,208,000, an increase of
25%, compared with $164,614,000 in 1994. Operating revenues
increased in the nine-month period ended March 31, 1995 as a result
of a 56% increase in gas sales volume from 56,122 MMcf in 1994 to
87,479 MMcf in 1995. Gas purchase costs were effected by this
increase in sales volume as well as a decrease in the average cost
of gas to $2.69 per Mcf in 1995 from $2.76 per Mcf in 1994,
discussed above. The increase in volumes is principally due to a
63% increase in the average customer base to approximately 958,000
customers for the nine months ended March 31, 1995 compared with
approximately 587,000 in 1994. The increase in the customer base
is the result of both the Missouri and Rio Grande Acquisitions.
Operating revenues and gas purchase costs were also impacted by
warmer than normal weather for Southern Union's operations in Texas
and Oklahoma which comprise 51% of the Company's customer base for
the nine-month period ended March 31, 1995. Weather for these
operations for the nine-month period ended March 31, 1995 was 76%
of normal compared to 90% of normal weather in 1994. Missouri Gas
Energy's service territories experienced 87% of normal weather for
the nine months ended March 31, 1995. The Missouri and Rio Grande
Acquisitions contributed approximately $136,796,000 and $5,959,000,
respectively, to the overall increase in operating revenues and
approximately $67,261,000 and $1,652,000, respectively, in gas
purchase costs for the nine months ended March 31, 1995. The
remaining operations of the Company were responsible for the
operating revenue decrease of $27,829,000 and gas purchase cost
decreases of $27,319,000, primarily due to the warmer than normal
weather and a decrease in the average cost per Mcf of gas, both
previously discussed above.
Operating margin for the nine-month period ended March 31, 1995 was
$189,773,000 compared to $116,441,000 in 1994. The increase in
operating margin resulted from the Missouri and Rio Grande
Acquisitions which contributed approximately $73,842,000 to the
overall increase.
Operating expenses, which include operating, maintenance and
general expenses, taxes other than on income, and depreciation and
amortization, were $136,706,000 for the nine-month period ended
March 31, 1995, an increase of 61%, compared with $85,095,000 in
1994. The increase was primarily attributable to the net
additional operating expenses, net of the operating efficiencies
since acquisition associated with the Missouri and Rio Grande
Acquisitions of approximately $52,537,000 and $2,749,000,
respectively. The remaining operation of the Company
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
were responsible for the decrease of approximately $3,675,000 as a
result of the Company's efforts to reduce costs and improve
operating efficiencies, as a result of the warmer than anticipated
weather.
Interest expense on long-term debt was $28,100,000 for the nine-
month period ended March 31, 1995, an increase of 103%, compared to
$13,820,000 in 1994. The increase in interest expense is due to
the net increase in total long-term debt which included the sale of
the $475,000,000 of Senior Debt Securities, discussed above. See
"Capitalization" in the Notes to the Consolidated Financial
Statements for the three months ended March 31, 1995 included
herein.
Other income for the nine-month period ended March 31, 1995 was
$4,085,000 compared to $5,780,000 in 1994. Other income for the
nine-month period ended March 31, 1995 consists of: rental income
from Lavaca Realty of approximately $1,951,000; approximately
$1,716,000 related to the deferral of interest expense associated
with the Missouri Gas Energy Safety Program; investment interest
and interest on notes receivable of approximately $272,000;
approximately $262,000 from gas appliance merchandising; and
approximately $136,000 from gains on equipment sales. This was
partially offset by approximately $750,000 for the write-down to
estimated fair market value of certain Lavaca Realty real estate
held for sale. Other income for 1994 included: non-recurring
accounting adjustments of approximately $2,245,000 related to the
amendment of prior year federal income tax returns and the
reversal of a tax reserve upon the completion of prior period
federal income tax audits; rental income from Lavaca Realty of
approximately $1,540,000; investment interest and interest on notes
receivable of approximately $577,000; a pre-tax gain of
approximately $494,000 on the sale of undeveloped real estate;
approximately $308,000 from gas appliance merchandising; and
approximately $81,000 related to the deferral of interest expense
associated with the Missouri Gas Energy Safety Program.
Weighted average shares of common stock outstanding were 11,465,296
for the nine-month period ended March 31, 1995 compared to
9,341,397 in 1994. The increase is a result of the Rights Offering
completed on December 31, 1993 to existing stockholders to
subscribe for and purchase 2,000,000 pre-split and pre-dividend
shares of the Company's common stock, par value $1.00 per share, at
a pre-split and pre-dividend price of $25.00 per share for net
proceeds of $49,351,000. The proceeds from the Rights Offering,
together with the proceeds from the sale of the Senior Debt
Securities, were used to fund the Missouri and Rio Grande
Acquisitions, and to retire or refinance certain outstanding debt.
Twelve Months Ended March 31, 1995 and 1994
The Company recorded net earnings available for common stock of
$11,478,000 for the twelve-month period ended March 31, 1995
compared with net earnings of $12,268,000 in 1994. Net earnings
per common share, based on 11,460,347 weighted average shares
outstanding during the period, were $1.00 in 1995 compared with net
earnings per common share of $1.35, based on 9,070,933 weighted
average shares outstanding, in 1994. Earnings per common share
remained flat compared with prior year due to an increase in the
average number of shares outstanding after a Rights Offering in
December, 1993.
Operating revenues were $489,490,000 for the twelve-month period
ended March 31, 1995, an increase of 54%, compared with operating
revenues of $317,482,000 in 1994. Gas purchase costs for the
twelve-month period ended March 31, 1995 were $252,722,000, an
increase of 39%, compared with gas purchase costs of $182,213,000
in 1994. The increase in both operating revenues and gas purchase
costs between periods was primarily the result of a 63% increase in
gas sales volume to 103,579 MMcf in 1995 from 63,513 MMcf in 1994
and an increase in the average cost of gas to $2.78 per Mcf in 1995
from $2.65 per Mcf in 1994. The increase in volume is primarily
attributable to growth in the average customer base previously
discussed above. The increase in the Company's
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
average cost per Mcf of gas is the result of certain previously
negotiated fixed price gas supply contracts with certain
suppliers to the Missouri operations assigned to the Company in the
Missouri Acquisition which were partially offset by decreases in
average spot market gas prices throughout the Company's
distribution system. Partially offsetting the overall increase in
operating revenues and gas purchase costs was warmer than normal
weather for the twelve months ended March 31, 1995. Weather in the
Company's service territories in Missouri, Texas and Oklahoma was
84% of normal for the twelve months ended March 31, 1995 compared
to 90% of normal in 1994. The Missouri and Rio Grande Acquisitions
contributed approximately $186,858,000 and $12,482,000,
respectively, to the overall increase in operating revenues and
approximately $93,150,000 and $5,010,000, respectively, in
additional gas purchase costs. The remaining operations of the
Company were responsible for the operating revenue decrease of
$27,332,000 and gas purchase cost decreases of $27,651,000,
primarily due to the warmer than normal weather and a decrease in
the average cost per Mcf of gas, both previously discussed above.
Operating margin for the twelve-month period ended March 31, 1995
was $236,768,000 compared to $135,269,000 in 1994. The increase
in operating margin resulted primarily from the Missouri and Rio
Grande Acquisitions which contributed approximately $101,180,000 to
the overall increase. The Company's operating margin for the
twelve-month period ended March 31, 1995 was also favorably
impacted by several rate increases effective during the past year
including a $1,948,000 annualized increase in Austin effected July
1, 1993 and a $463,000 annualized increase in El Paso, Texas
effective November 1, 1993. In addition, effective October 15,
1993, the MPSC increased Missouri Gas Energy's natural gas rates by
$9,750,000 annually.
Operating expenses, which include operating, maintenance and
general expenses, taxes other than on income and depreciation and
amortization, were $182,966,000 for the twelve-month period ended
March 31, 1995, an increase of 77%, compared with operating
expenses of $103,232,000 in 1994. The increase in these expenses
is principally due to the overall increase in operating expenses,
net of the operating efficiencies since acquisition, associated
with the Missouri and Rio Grande Acquisitions of approximately
$78,770,000 and $5,254,000, respectively. The remaining operations
of the Company were responsible for the decrease in operating
expenses of approximately $4,290,000 as a result of the Company's
efforts to reduce costs and improve operating efficiencies.
Total other expenses were $34,720,000 for the twelve-month period
ended March 31, 1995, an increase of 191%, compared with other
expenses of $11,933,000 in 1994. The increase is due principally
to the increase in interest expense. Interest expense on long-term
debt was $37,848,000 for the twelve-month period ended March 31,
1995, an increase of approximately 124%, compared with interest
expense of $16,895,000 in 1994 which is due to the increase in
long-term debt, previously discussed. Other net income for the
twelve-month period ended March 31, 1995 included: rental income
from Lavaca Realty of approximately $2,570,000 ; approximately
$1,912,000 related to the deferral of interest expense associated
with the Missouri Gas Energy Safety Program; investment interest
and interest on notes receivable of approximately $646,000; and
approximately $305,000 from gas appliance merchandising. This was
partially offset by other expense of $750,000 to record the write-
down of certain real estate, as discussed above. Other net income
for the twelve-month period ended March 31, 1994 included: non-
recurring accounting adjustments of approximately $2,245,000 as
previously discussed; rental income from Lavaca Realty of
approximately $1,989,000; investment interest and interest on notes
receivable of approximately $849,000; $500,000 from gas appliance
merchandising; a pre-tax gain of approximately $494,000 on the sale
of undeveloped real estate; and approximately $81,000 related to
the deferral of interest expense associated with the Missouri Gas
Energy Safety Program.
Net earnings in 1995 were favorably impacted by the elimination of
$249,000 in preferred dividends as the remaining shares of
cumulative preferred stock were retired in June 1993.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain information regarding the
Company's gas utility operations for the three- and twelve-month
periods ended March 31, 1995 and 1994:
Three Months Twelve Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
-------- -------- -------- --------
Average number of gas
sales customers
served:
Residential. . . . 878,493 727,749 866,525 480,071
Commercial . . . . 92,328 70,328 88,042 37,648
Industrial and
irrigation. . . 717 955 697 822
Public authorities
and other . . . 2,854 2,640 2,748 2,417
Pipeline and
marketing . . . 343 251 432 218
-------- -------- -------- --------
Total average
customers
served . . . 974,735 801,923 958,444 521,176
======== ======== ======== ========
Gas sales in millions
of cubic feet (MMcf)
Residential. . . . 31,543 25,497 62,776 37,615
Commercial . . . . 13,475 10,616 28,806 16,546
Industrial and
irrigation. . . 638 351 2,364 2,431
Public authorities
and other . . . 1,268 1,295 2,713 2,820
Pipeline and
marketing . . . 1,766 1,688 7,670 7,081
-------- -------- -------- --------
Gas sales
billed . . . 48,690 39,447 104,329 66,493
Net change in
unbilled gas
sales . . . . . (3,760) (5,083) (750) (2,980)
-------- -------- -------- --------
Total gas
sales. . . . 44,930 34,364 103,579 63,513
======== ======== ======== ========
Gas sales revenues
(thousands of
dollars):
Residential. . . . $130,429 $132,152 $303,671 $204,621
Commercial . . . . 52,669 52,945 117,801 79,479
Industrial and
irrigation. . . 2,390 2,065 8,511 9,362
Public authorities
and other . . . 3,980 4,954 9,031 10,595
Pipeline and
marketing . . . 3,613 3,951 17,298 16,616
-------- -------- -------- --------
Gas revenues
billed . . . 193,081 196,067 456,312 320,673
Net change in
unbilled gas
sales revenues. (20,025) (25,788) (9,423) (15,461)
-------- -------- -------- --------
Total gas sales
revenues . . $173,056 $170,279 $446,889 $305,212
======== ======== ======== ========
Gas sales margin
(thousands of
dollars). . . . . . . $ 73,307 $ 62,519 $194,167 $122,999
======== ======== ======== ========
Gas sales revenue per
thousand cubic feet
(Mcf) billed:
Residential. . . . $ 4.135 $ 5.183 $ 4.837 $ 5.440
Commercial . . . . 3.909 4.987 4.089 4.804
Industrial and
irrigation. . . 3.746 5.883 3.601 3.851
Public authorities
and other . . . 3.140 3.825 3.329 3.757
Pipeline and
marketing . . . 2.046 2.341 2.255 2.347
Weather effect:
Degree days . . . . . 1,682 1,110 3,019 1,737
Percent of normal,
based on 30-year
average. . . . . . 87% 85% 84% 90%
Gas transported in
millions of cubic
feet (MMcf) . . . . . 17,289 12,144 61,188 29,438
Gas transportation
revenues (thousands
of dollars) . . . . . $ 5,422 $ 3,579 $ 16,142 $ 8,241
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's gas utility operations are seasonal in nature with a
significant percentage of the annual revenues and earnings
occurring in the traditional heating-load months. This seasonality
results in a high level of cash flow needs during the peak winter
heating season months, resulting from the required payments to
natural gas suppliers in advance of the receipt of cash payments
from the Company's customers. The Company has historically used
its revolving loan and credit facilities and internally generated
funds to provide funding for its seasonal working capital,
continuing construction and maintenance programs and operational
requirements.
The principal source of funds during the three-month period ended
March 31, 1995 included approximately $48,500,000 in cash flow from
operations. This source provided funds for additions to property,
plant and equipment of approximately $13,800,000, payments of
$26,000,000 on the Company's credit facility and other working
capital needs of the Company.
The principal sources of funds during the nine-month period ended
March 31, 1995 included approximately $37,700,000 in cash flow from
operations and $18,000,000 from the Company's available credit
facility. These sources provided funds for additions to property,
plant and equipment of approximately $50,400,000 and other seasonal
working capital needs of the Company.
The effective interest rate under the Company's current debt
structure is approximately 7.74% (including interest and the
amortization of debt issuance costs and redemption premiums on
refinanced debt). The effective rate of interest on debt
outstanding for the three-month period ended March 31, 1994 was
approximately 8.18%.
The Company has availability under a revolving credit facility with
a three year term (the "Revolving Credit Facility") underwritten by
Texas Commerce Bank, N.A. and syndicated to five additional banks
(see below). Borrowings under the Revolving Credit Facility are
available for Southern Union's working capital, letter of credit
requirements and other general corporate purposes. At June 30,
1994 the outstanding balance under the Revolving Credit Facility
was zero. The amount outstanding under the Revolving Credit
Facility at March 31, 1995 and April 27, 1995 was approximately
$18,000,000 and $7,000,000, respectively.
On April 28, 1995, Southern Union entered into an amendment to
their existing revolving credit facility (the "facility"). The
facility was increased from $100,000,000 to $125,000,000. The
increase of $25,000,000 (the "bridge") may only be used for certain
restricted purposes. The amended facility contains substantially
the same covenants and is uncollateralized. There are no
borrowing base limitations as long as the Company's Senior Debt
Securities meet certain rating criteria. The interest rate on
borrowings is calculated based on a formula using the LIBOR and
prime interest rates.
On March 29, 1995, Southern Union filed a Registration Statement
with the Securities and Exchange Commission to sell a combination
of preferred securities of financing trusts and senior or
subordinated debt securities of the Company of up to $300,000,000
from time to time, at prices determined at the time of any
offering.
SOUTHERN UNION COMPANY AND SUBSIDIARIES
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 May 1, 1995 By RONALD J. ENDRES
---------------- -------------------------
Ronald J. Endres
Senior Vice President of
Administration, and
Chief Financial Officer
Date May 1, 1995 By DAVID J. KVAPIL
---------------- -------------------------
David J. Kvapil
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
THIRD AMENDMENT TO
REVOLVING CREDIT AGREEMENT
THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (the
"Third Amendment") is made effective as of April 28, 1995, by and
among SOUTHERN UNION COMPANY, a Delaware corporation (the
"Borrower"), the financial institutions listed on the signature
pages hereof (individually the "Bank" and collectively the
"Banks") and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national
banking corporation ("TCB"), in its capacity as agent (the
"Agent") for the Banks.
RECITALS
WHEREAS, the Borrower, the Banks and the Agent have executed
a certain Revolving Credit Agreement dated September 30, 1993
(the "Original Agreement"); and
WHEREAS, the Borrower, the Banks and the Agent have executed
a certain First Amendment to Revolving Credit Agreement,
Revolving Note and Loan Documents (the "First Amendment") and a
Second Amendment to Revolving Credit Agreement dated as of August
31, 1994 and July 1, 1994 (the "Second Amendment") (the Original
Agreement as amended by the First Amendment and the Second
Amendment is referred to herein as the "Agreement"); and
WHEREAS, the Banks, the Agent and the Borrower desire to
further amend the Agreement.
NOW, THEREFORE, in consideration of ten dollars ($10.00) and
other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. AMENDMENTS TO SECTION 1. Section 1 of the Agreement is
amended as follows:
1.1 DELETIONS. The following definitions (or portions
of definitions) are deleted from Section 1 of the Agreement:
"Adjusted Consolidated Capital Expenditures"
"Collateral"
"Collateralization Event"
Paragraph (g) of "Eligible Accounts Receivable"
Paragraphs (a) and (d) of "Eligible Inventory"
Paragraph (g) of "Eligible Marketing Accounts"
Paragraph (g) of "Eligible PGA Receivables"
Paragraph (f) of "Eligible Unbilled Accounts"
"Pledgor Subsidiaries and Pledgor Subsidiary"
"Security Agreement"
"Security Documents"
"Subsidiary Security Agreement"
1.2 "ADJUSTED EBDIT". The definition of "Adjusted
EBDIT" is deleted in its entirety and the following definition
substituted therefor:
"Adjusted EBDIT" shall mean for any period the sum
______________
of consolidated net earnings for the Borrower and its
Subsidiaries (excluding for all purposes hereof all extraordinary
items) plus each of the following to the extent actually deducted
____
in deriving net earnings: (a) depreciation and amortization
expense; (b) interest expense; and (c) federal and state income
taxes, in each case before adjustment for extraordinary items, as
shown in the financial statements of the Borrower and its
Subsidiaries referred to in Section 7.1 hereof (excluding for all
purposes hereof all extraordinary items), and determined in
accordance with GAAP, less (x) all federal and state income taxes
____
paid in cash during such period (before adjustment for
extraordinary items to the extent that cash received in such
period in respect of such extraordinary items has been used to
discharge any such tax liability arising by reason of
extraordinary items); and (y) all cash dividends paid on any of
the Borrower's capital stock during such period except cash
dividends or interest paid on or with respect to Structured
Securities.
1.3 "BORROWING BASE". The definition of "Borrowing
Base" is deleted in its entirety and the following definition
substituted therefor:
"Borrowing Base" shall mean, as of any time of
______________
determination when the Borrower's Senior Funded Debt is rated
Baa3 or higher by Moody's Investor Service, Inc. or BBB- or
higher by Standard and Poor's Corporation, the amount of
$100,000,000.00 and, as of any other time of determination,
without duplication, an amount equal to the sum of: (a) 95% of
Eligible Accounts Receivable; plus (b) 75% of Eligible Unbilled
Accounts of the Borrower; plus (c) 100% of all Cash and the face
value of all Cash Equivalents (other than the Accounts); plus
(d) 50% of Eligible Inventory; plus (e) 95% of Eligible PGA
Receivables; plus (f) 75% of Eligible Marketing Accounts
(provided that the amount of Eligible Marketing Accounts to be
________
used in the determination of the Borrowing Base shall never
exceed $12,000,000.00), in each case as reflected on the books of
the Borrower as of the time at which the Borrowing Base is being
determined; provided, however, that if (and for so long as)
Borrower's Senior Funded Debt is rated equal to or lower than Ba2
by Moody's Investor Service, Inc. or BB by Standard and Poor's
Corporation, the maximum amount of Cash and Cash Equivalents
included in the Borrowing Base shall be $5,000,000.00.
1.4 "BRIDGE ADVANCE AMOUNT". The definition of "Bridge
Advance Amount" is deleted in its entirety and the following
definition substituted therefor:
"Bridge Advance Amount" shall mean, for any day prior
_____________________
to the Bridge Expiration Date, the amount by which the
outstanding principal amount of Loans exceeds the Borrowing Base,
but not to exceed $25,000,000.00 and is used for the purposes set
forth in Section 6.1(d); and, for any day on or after the Bridge
Expiration Date, zero ($0).
1.5 "BRIDGE EXPIRATION DATE". The definition of "Bridge
Expiration Date" is deleted in its entirety and the following
definition substituted therefor:
"Bridge Expiration Date" shall mean the earlier to
______________________
occur of: the issuance of the Borrower's Structured Securities or
December 31, 1995.
1.6 "CASH INTEREST EXPENSE". The definition of "Cash
Interest Expense" is deleted in its entirety and the following
definition substituted therefor:
"Cash Interest Expense" shall mean, for any period,
_____________________
total interest expense to the extent paid in cash (including the
interest component of Capitalized Lease Obligations and
capitalized interest and all dividends and interest paid on or
with respect to Borrower's Structured Securities) of the Borrower
and any Subsidiary for such period all as determined in
conformity with GAAP.
1.7 "CONSOLIDATED NET WORTH". The definition of
"Consolidated Net Worth" is deleted in its entirety and the
following definition substituted therefor:
"Consolidated Net Worth" shall mean, for any period for
______________________
the Borrower and all Subsidiaries, the consolidated stockholders'
equity of the Borrower and its Subsidiaries and preferred
securities of the Borrower's Subsidiaries, all determined in
accordance with GAAP, less the sum of the following consolidated
items, without duplication: the book amount of any deferred
charges (including, but not limited to, unamortized debt discount
and expenses, organization expenses, experimental and development
expenses, but excluding prepaid expenses) that are not permitted
to be recovered by the Borrower under rates permitted under rate
tariffs.
1.8 "DEBT". The definition of "Debt" is deleted in its
entirety and the following definition substituted therefor:
"Debt" means (without duplication), for any Person
____
indebtedness for money borrowed determined in accordance with
GAAP but in any event including, (a) indebtedness of such Person
for borrowed money or arising out of any extension of credit to
or for the account of such Person (including, without limitation,
extensions of credit in the form of reimbursement or payment
obligations of such Person relating to letters of credit issued
for the account of such Person) or for the deferred purchase
price of property or services, except indebtedness which is owing
to trade creditors in the ordinary course of business and which
is due within thirty (30) days after the original invoice date;
(b) indebtedness of the kind described in clause (a) of this
definition which is secured by (or for which the holder of such
Debt has any existing right, contingent or otherwise, to be
secured by) any Lien upon or in Property (including, without
limitation, accounts and contract rights) owned by such Person,
whether or not such Person has assumed or become liable for the
payment of such indebtedness or obligations; (c) Capitalized
Lease Obligations of such Person; (d) obligations under direct or
indirect Guaranties other than Guaranties issued by the Borrower
covering obligations of the Southern Union Trusts under the
Structured Securities.
1.9 "EURODOLLAR RATE". The definition of "Eurodollar
Rate" is deleted in its entirety and the following definition
substituted therefor:
"Eurodollar Rate" shall mean with respect to the
_______________
applicable Rate Period in effect for each Eurodollar Rate Loan,
the sum of (a) the quotient obtained by dividing (i) the annual
rate of interest determined by the Agent, at or before 11:00 a.m.
Houston time (or as soon thereafter as practicable), on the
second Business Day prior to the first day of such Rate Period,
to be the annual rate of interest at which deposits of Dollars
are offered to the Agent by prime banks in whatever eurodollar
interbank market may be selected by the Agent in its sole
discretion, acting in good faith, at the time of determination
and in accordance with then existing practice in such market for
delivery on the first day of such Rate Period in immediately
available funds and having a maturity equal to such Rate Period
in an amount substantially equal to the amount of such Eurodollar
Rate Loan by (ii) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Rate Period, plus (b) an
additional percentage per annum, for all periods through June 30,
1995 equal to 0.625% and, thereafter, a percentage per annum
changing with the rating of the Borrower's Senior Funded Debt,
and the ratio of Consolidated Total Indebtedness to Consolidated
Total Capitalization, and determined in accordance with the
following grid:
_________________________________________________________________
When the rating
of the Borrower's When the Ratio of Consolidated
Senior Funded Total Indebtedness to
Debt is: Consolidated Total Capitalization is:
_________________________________________________________________
Greater
than or
equal to Greater
Less 57.5% than or
than but less equal
57.5% than 70% to 70%
_________________________________________________________________
Greater than Baal by
Moody's Investor 0.375% 0.375% 0.375%
Service, Inc. and
greater than BBB+ by
Standard and Poor's
Corporation
_________________________________________________________________
Greater than Bal but
less than or equal to
Baal by Moody's 0.500% 0.625% 0.750%
Investor Service, Inc.
and greater than BB+
but less than or equal
to BBB+ by Standard
and Poor's Corporation
_________________________________________________________________
Equal to or less than
Bal by Moody's 1.250% 1.250% 1.250%
Investor Service, Inc.
or equal to or less than
BB+ by Standard and
Poor's Corporation
_________________________________________________________________
1.10 "FACILITY LETTER OF CREDIT FEE PERCENTAGE". The
definition of "Facility Letter of Credit Fee Percentage" is
deleted in its entirety and the following definition substituted
therefor:
"Facility Letter of Credit Fee Percentage" shall mean a
________________________________________
fee expressed as a percent per annum for all periods through
June 30, 1995 equal to 0.625% and, thereafter, a percentage per
annum changing with the rating of the Borrower's Senior Funded Debt
and the ratio of Consolidated Total Indebtedness to Consolidated
Total Capitalization, and determined in accordance with the
following grid:
_________________________________________________________________
When the rating
of the Borrower's When the Ratio of Consolidated
Senior Funded Total Indebtedness to
Debt is: Consolidated Total Capitalization is:
_________________________________________________________________
Greater
than or
equal to Greater
Less 57.5% than or
than but less equal
57.5% than 70% to 70%
_________________________________________________________________
Greater than Baal by
Moody's Investor 0.375% 0.375% 0.375%
Service, Inc. and
greater than BBB+ by
Standard and Poor's
Corporation
_________________________________________________________________
Greater than Bal but
less than or equal to
Baal by Moody's 0.500% 0.625% 0.750%
Investor Service, Inc.
and greater than BB+
but less than or equal
to BBB+ by Standard
and Poor's Corporation
_________________________________________________________________
Equal to or less than
Bal by Moody's 1.250% 1.250% 1.250%
Investor Service, Inc.
or equal to or less than
BB+ by Standard and
Poor's Corporation
_________________________________________________________________
1.11 "LOAN DOCUMENT". The definition of "Loan Document"
is deleted in its entirety and the following definition
substituted therefor:
"Loan Document" shall mean this Agreement, any Note, or
_____________
any other document, agreement or instrument now or hereafter
executed and delivered by the Borrower or any other Person in
connection with any of the transactions contemplated by any of
the foregoing, as any of the foregoing may hereafter be amended,
modified, or supplemented, and "Loan Documents" shall mean,
______________
collectively, each of the foregoing.
1.12 "RESTRICTED PAYMENT". The definition of
"Restricted Payment" is deleted in its entirety and the following
definition substituted therefor:
"Restricted Payment" shall mean the Borrower's
__________________
declaration or payment of any dividend on, or purchase or
agreement to purchase any of, or making of any other distribution
with respect to, any of its capital stock, except any such
dividend, purchase or distribution consisting solely of capital
stock of the Borrower, and except any dividend or interest paid
on or with respect to the Borrower's Structured Securities to the
extent that such amounts are included in Cash Interest Expense.
1.13 "STRUCTURED SECURITIES". A definition of
"Structured Securities" is added to read as follows:
"Structured Securities" shall mean collectively the
_____________________
Subordinated Debt Securities, the Guarantees and the Common
Securities and Preferred Securities of the Southern Union Trusts
all as described and defined in the Registration Statement on
Form S-3 filed by the Borrower with the Securities and Exchange
Commission on March 25, 1995. For all purposes of this Agreement
the amounts payable by Southern Union Trusts under the Preferred
Securities and Common Securities and the amounts payable by the
Borrower under the Subordinated Debt Securities or the Guarantees
shall be treated without duplication, it being recognized that
the amounts payable by Southern Union Trusts are funded with
payments made or to be made by the Borrower to Southern Union
Trusts and are also guaranteed by the Borrower under the
Guarantees described in the S-3 mentioned above.
1.14 "SOUTHERN UNION TRUST". A definition of "Southern
Union Trust" is added to read as follows:
A "Southern Union Trust" means any of those certain
____________________
Delaware business trusts organized for the sole purpose of
purchasing Subordinated Debt Securities and issuing the Preferred
Securities and Common Securities constituting a portion of, and
described in the definition of, Structured Securities, and
holding no assets other than the Borrower's Subordinated Debt
Securities (also constituting a portion of, and described in the
definition of, Structured Securities), the Guarantees and the
proceeds thereof. Southern Union Trusts shall be considered to
be Subsidiaries for purposes hereof so long as their affairs are
consolidated under generally accepted accounting principles and
for federal income tax purposes with the affairs of the Borrower.
2. AMENDMENTS TO SECTION 2.1(C). The text of Section 2.1(c)
is deleted in its entirety and the following provisions
substituted therefor:
(c) Each Loan shall be: (i) in the case of any
Eurodollar Rate Loan, in an amount of not less than $1,000,000.00
or an integral multiple of $1,000,000.00 in excess thereof;
(ii) in the case of any CD Rate Loan, in an amount of not less
than $1,000,000.00 or an integral multiple of $1,000,000.00 in
excess thereof; or (iii) in the case of any Alternate Base Rate
Loan, in an amount of not less than $500,000.00 or an integral
multiple of $100,000.00 in excess thereof and, at the option of
the Borrower, any borrowing under this Section 2.1(c) may be
comprised of two or more such Loans bearing different rates of
interest. Each such borrowing shall be made upon prior notice
from the Borrower to the Agent in the form attached hereto as
Exhibit B (the "Notice of Borrowing") delivered to the Agent not
_________
later than 11:00 a.m. (Houston time): (i) on the third Business
Day prior to the Borrowing Date, if such borrowing consists of
Eurodollar Rate Loans; (ii) on the Business Day prior to the
Borrowing Date, if such borrowing consists of CD Rate Loans; and
(iii) on the Borrowing Date, if such borrowing consists of
Alternate Base Rate Loans. Each Notice of Borrowing shall be
irrevocable and shall specify: (i) the amount of the proposed
borrowing and of each Loan comprising a part thereof; (ii) the
Borrowing Date; (iii) the rate of interest that each such Loan
shall bear; (iv) the Rate Period with respect to each such Loan
and the Expiration Date of each such Rate Period; and (v) the
demand deposit account of the Borrower at Texas Commerce Bank --
Austin, National Association into which the proceeds of the
borrowing are to be deposited by the Agent. The Borrower may
give the Agent telephonic notice by the required time of any
proposed borrowing under this Section 2.1(c); provided that such
_____________
telephonic notice shall be confirmed in writing by delivery to
the Agent promptly (but in no event later than the Borrowing Date
relating to any such borrowing) of a Notice of Borrowing.
Neither the Agent nor any Bank shall incur any liability to the
Borrower in acting upon any telephonic notice referred to above
which the Agent believes in good faith to have been given by the
Borrower, or for otherwise acting in good faith under this
Section 2.1(c).
3. AMENDMENTS TO SECTION 2.2. The text of Section 2.2(b) is
deleted in its entirety and the following provisions substituted
therefor:
(b) In addition to the interest accruing under
Section 2.3(a), the Loans (or portions thereof) that are
outstanding from time to time prior to the Bridge Expiration
Date, in excess of the Borrowing Base shall bear additional
interest at a rate per annum equal to 3/8 of 1 percent (3/8%)
during the period commencing on September 30, 1995 and continuing
through (and ending on) the Bridge Expiration Date.
4. AMENDMENTS TO SECTION 3.2. The text of Section 3.2(d) is
deleted in its entirety.
5. AMENDMENTS TO SECTION 5.1. The text of Section 5.1 is
deleted in its entirety and the following provisions substituted
therefor:
COMMITMENT FEE. The Borrower agrees to pay to the Agent for
the account of each Bank a commitment fee based on a year of 360
days, from the date of the first Loans to, but not including, the
Maturity Date (or such earlier date as of which all Commitments
shall have terminated), on the daily average unused amount of
each Bank's Commitment, such commitment fee to be payable
quarterly in arrears on (a) the last day of each March, June,
September, and December, commencing on June 30, 1995 and (b) the
Maturity Date, at a rate per annum changing with the rating of
the Borrower's Senior Funded Debt and the ratio of Consolidated
Total Indebtedness to Consolidated Total Capitalization, and
determined in accordance with the following grid:
_________________________________________________________________
When the rating
of the Borrower's When the Ratio of Consolidated
Senior Funded Total Indebtedness to
Debt is: Consolidated Total Capitalization is:
_________________________________________________________________
Greater
than or
equal to Greater
Less 57.5% than or
than but less equal
57.5% than 70% to 70%
_________________________________________________________________
Greater than Baal by
Moody's Investor 0.125% 0.1500% 0.1875%
Service, Inc. and
greater than BBB+ by
Standard and Poor's
Corporation
_________________________________________________________________
Greater than Bal but
less than or equal to
Baal by Moody's 0.1500% 0.1875% 0.2000
Investor Service, Inc.
and greater than BB+
but less than or equal
to BBB+ by Standard
and Poor's Corporation
_________________________________________________________________
Equal to or less than
Bal by Moody's 0.2500% 0.2500% 0.2500%
Investor Service, Inc.
or equal to or less than
BB+ by Standard and
Poor's Corporation
_________________________________________________________________
6. AMENDMENTS TO SECTION 6.1. A new Section 6.1(d) is added
to read as follows:
(d) to finance the Borrower's open market acquisition
of its own 7.60% Senior Notes Due 2024; provided, however, that
_________________
such use shall be limited to an aggregate amount advanced to
$100,000,000.
7. AMENDMENTS TO SECTION 7.1. The text of Section 7.1 is
deleted in its entirety and the following provisions substituted
therefor:
7.1. ORGANIZATION AND QUALIFICATION. The Borrower
and each Subsidiary are corporations duly organized, validly
existing, and in good standing under the laws of their respective
states of incorporation; have the corporate or organizational
power to own their respective properties and to carry on their
respective businesses as now conducted; and are duly qualified
as foreign corporations (or, in the case of any Southern Union
Trust, trusts) to do business and are in good standing in every
jurisdiction where such qualification is necessary except when
the failure to so qualify would not or does not have a Material
Adverse Effect. The Borrower is a corporation organized under
the laws of Delaware and has the following Subsidiaries and no
others: Lavaca Realty Company, a Delaware corporation; KellAir
Aviation Company, a Delaware corporation; Western Gas Interstate
Company, a Delaware corporation; Mercado Gas Services, Inc., a
Delaware corporation; Southern Union Econofuel Company, a
Delaware corporation; Southern Transmission Company, a Delaware
corporation; Southern Union Gas Company, Inc., a Delaware
corporation; Southern Union Gas Company, Inc., a Texas
corporation, Southern Union Energy Products and Services Company,
a Delaware corporation; Southern Union Energy International,
Inc., a Delaware corporation and the Southern Union Trusts.
Neither Subsidiary named Southern Union Gas Company, Inc. nor
Western Utilities, Inc., a Delaware corporation; conducts or will
conduct any business and neither has any assets other than
minimum legal capitalization.
8. AMENDMENTS TO SECTION 7.17. The text of Section 7.17 is
deleted in its entirety.
9. AMENDMENTS TO SECTION 8.5. The text of Section 8.5 is
deleted in its entirety.
10. AMENDMENTS TO SECTION 8.6. The text of Section 8.6 is
deleted in its entirety and the following provisions substituted
therefor:
8.6. OFFICER'S CERTIFICATE AND OTHER DOCUMENTS. On
each Borrowing Date, the Banks shall have received (a) an
Officer's Certificate from the Borrower dated the particular
Borrowing Date to the effects set forth in Sections 8.1, 8.2,
8.3, and 8.4; (b) a Notice of Borrowing; and (c) such other
documents and certificates relating to the transactions herein
contemplated as the Banks may reasonably request.
11. AMENDMENTS TO SECTION 9.1(C). The text of Section 9.1(c)
is deleted in its entirety and the following provisions
substituted therefor:
(c) within thirty (30) days after the end of each
month for which the rating of the Borrower's Senior Funded Debt
is lower than BBB-- by Standard and Poor's Corporation and lower
than Baa3 by Moody's Investor Service, Inc.: (i) a list of the
Eligible Accounts Receivable, Cash, Cash Equivalents and
Inventory of the Borrower as at the end of the preceding month,
such list to be in the form attached hereto as Annex 1 to
_______
Exhibit H and to contain such information and detail as the Banks
___________
may request, including, without limiting the generality of the
foregoing, aging of Accounts in the customary manner;
(ii) certification by the Borrower of its PGA Receivables and
Eligible Unbilled Accounts as of the end of the preceding month;
and (iii) a Borrowing Base certificate for such month in the form
attached hereto as Exhibit H; provided, however, that the
____________________________
Borrower may deliver the Borrowing Base reports for the last
month of any fiscal year and the Borrowing Base reports for the
first two months of the succeeding fiscal year no later than 90
days following the commencement of such succeeding fiscal year.
12. AMENDMENTS TO SECTION 9.4. The text of Section 9.4 is
deleted in its entirety, and the following provisions substituted
therefor:
9.4. INSURANCE. Maintain, and cause each
Subsidiary to maintain, insurance with financially sound,
responsible and reputable companies in such types and amounts and
against such casualties, risks and contingencies as is
customarily carried by owners of similar businesses and
properties, and furnish to the Banks, together with each delivery
of annual financial statements under Section 9.1(a), an Officer's
Certificate containing full information as to the insurance
carried.
13. AMENDMENTS TO SECTION 9.5. The text of Section 9.5 is
deleted in its entirety.
14. AMENDMENTS TO SECTION 9.9. The text of Section 9.9 is
deleted in its entirety and the following provisions substituted
therefor:
9.9. NOTICE OF CERTAIN MATTERS. Notify the Agent Bank
immediately upon acquiring knowledge of the occurrence of any of
the following events: (a) the institution or threatened
institution of any lawsuit or administrative proceeding affecting
the Borrower or any Subsidiary that is not covered by insurance
(less applicable deductible amounts) and which, if determined
adversely to the Borrower or such Subsidiary, could reasonably be
expected to have a Material Adverse Effect; (b) the occurrence of
any material adverse change, or of any event that in the good
faith opinion of the Borrower is likely to result in a material
adverse change, in the assets, liabilities, financial condition,
business or affairs of the Borrower or any Subsidiary; (c) the
occurrence of a Default or an Event of Default; or (d) a change
by Moody's Investors Service, Inc. or by Standard and Poor's
Corporation in the rating of the Borrower's Funded Debt.
15. AMENDMENTS TO SECTION 10.1. The text of Section 10.1(d)
is deleted in its entirety.
16. AMENDMENTS TO SECTION 10.2. The text of Section 10.2(f)
is deleted in its entirety.
17. AMENDMENTS TO SECTION 10.3. The text of Section 10.3(h)
is hereby deleted and the following provisions substituted
therefor:
(h) additional Debt of the Borrower and Structured
Securities of the Borrower and the Southern Union Trusts provided
that after giving effect to the issuance thereof there shall
exist no Default or Event of Default; and: (i) the ratio of
Consolidated Total Indebtedness to Consolidated Total
Capitalization shall be no greater than 0.65 to 1.00; (ii) the
ratio of Adjusted EBDIT to pro forma Cash Interest Expense shall
be no less than 2.25 to 1.00; and (iii) such Debt and Structured
Securities shall have a final maturity or redemption date, as the
case may be, no earlier than the Maturity Date (as the same may
be extended pursuant to Section 2.4) and shall mature or be
subject to redemption or defeasance no earlier than the Maturity
Date (as so extended) and shall be subject to no mandatory
redemption or "put" to the Borrower or any Southern Union Trust
exercisable, or sinking fund or other similar mandatory principal
payment provisions that require payments to be made toward
principal, prior to such Maturity Date (as so extended).
18. AMENDMENTS TO SECTION 10.4.
18.1 SECTION 10.4A. The text of Section 10.4(a) is deleted
and the following provisions substituted therefor:
(a) stock of (i) the Subsidiaries named in
Section 7.1; (ii) Rio Grande Valley Gas Company, a Delaware
corporation; and (iii) other entities that are acquired by the
Borrower or any Subsidiary but that are promptly merged with and
into the Borrower;
18.2 SECTION 10.4(G). The text of Section 10.4(g) is
deleted and the following provisions substituted therefor:
(b) stock or securities of or equity interests in,
any Person provided that, after giving effect to the acquisition
and ownership thereof, the Borrower is in compliance with the
provisions of Section 10.1(c) of this Agreement;
19. AMENDMENTS TO SECTION 10.5. The text of Section 10.5 is
deleted and the following provisions substituted therefor:
10.5 STOCK AND DEBT OF SUBSIDIARIES. The Borrower
will not, and will not permit any Subsidiary to, sell or
otherwise dispose of any shares of stock or Debt of any
Subsidiary, or permit any Subsidiary to issue or dispose of its
stock (other than directors' qualifying shares) except to the
Borrower or another Subsidiary and except that Southern Union
Trusts may issue preferred beneficial interests in public
offerings of the Borrower's Structured Securities.
20. AMENDMENTS TO SECTION 10.8. The text of Section 10.8 is
deleted and the following provisions substituted therefor:
10.8. SALE OR OTHER DISPOSITION OF ASSETS. The
Borrower will not, and will not permit any Subsidiary to, except
as permitted under this Section 10.8, sell, assign, lease, or
otherwise dispose of (whether in one transaction or in a series
of transactions) all or any part of its Property (whether now
owned or hereafter acquired); provided, however, that (i) the
_________________
Borrower or any Subsidiary may in the ordinary course of business
dispose of Property consisting of Inventory; and Property
consisting of goods or equipment that are, in the opinion of the
Borrower or any Subsidiary, obsolete or unproductive, but if in
the good faith judgment of the Borrower or any Subsidiary such
disposition without replacement thereof would have a Material
Adverse Effect, such goods and equipment shall be replaced, or
their utility and function substituted, by new or existing goods
or equipment; (ii) Lavaca Realty Company may dispose of its
Property on the terms set forth in Section 10.6(c); (iii) the
Borrower may transfer or dispose of any of its Significant
Property (in any transaction or series of transactions) to any
Subsidiary or Subsidiaries only if such Property has a net book
value of not more than $5,000,000.00 in the aggregate; (iv) the
Borrower and Lavaca Realty Company may dispose of their real
property in one or more sale/leaseback transactions, provided
that any Debt incurred in connection with such transaction does
not create a Default as defined herein; (v) a Southern Union
Trust may distribute the Borrower's subordinated debt securities
constituting a portion of the Structured Securities, on the terms
and under the conditions set out in the registration statement
therefor filed with the Securities and Exchange Commission on
March 25, 1995; and (vi) the Borrower or any Subsidiary may
dispose of real property or tangible personal property other than
Inventory (in consideration of such amount as in the good faith
judgment of the Borrower or such Subsidiary represents a fair
consideration therefor) provided that the aggregate value of such
property disposed of (determined after depreciation and in
accordance with generally accepted accounting principles
consistently applied) does not exceed 10% of the aggregate value
of all of the Borrower's and its Subsidiaries' real property and
tangible personal property other than Inventory considered on a
consolidated basis and determined after depreciation and in
accordance with generally accepted accounting principles
consistently applied, as of April 28, 1995.
21. AMENDMENTS TO SECTION 10.16. A new Section 10.16 is
hereby added to read in its entirety as follows:
10.16 LIMITATIONS ON PAYMENTS ON SUBORDINATED DEBT.
The Borrower will not, and will not permit any Subsidiary to,
make any payment in respect of interest on, principal of, or
otherwise relating to, the Borrower's subordinated debt
securities issued in connection with the Structured Securities
if, after giving effect to such payment, a Default or Event of
Default would exist.
22. AMENDMENTS TO SECTION 11.3. The text of Section 11.3 is
deleted in its entirety.
23. The COMMITMENTS are revised to be consistent with the
amendments set opposite the Banks' respective names on the
signature pages hereto.
24. Exhibit A to the Agreement is replaced by Exhibit A
attached hereto.
25. Exhibits (h) and (i) are deleted from the Agreement.
26. USURY. All agreements between the Borrower and the
Banks, whether now existing or hereafter arising and whether
written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand
being made on one or more of the Notes or otherwise, shall the
amount paid, or agreed to be paid, to one or more of the Banks
for the use, forbearance, or detention of the money to be loaned
under the Agreement and evidenced by the applicable Note(s) or
otherwise or for the payment or performance of any covenant or
obligation contained in the Agreement or any of the applicable
Note(s) exceed the amount permissible at the Highest Lawful Rate.
If, as a result of any circumstances whatsoever, fulfillment of
any provision of the applicable Note(s) or of the Agreement, at
the time performance of such provision shall be due, shall
involve transcending the limit of validity prescribed by
applicable usury law, then ipso facto, the obligation to be
__________
fulfilled shall be reduced to the limit of such validity, and if,
from any such circumstance, any one or more the Banks shall ever
receive interest or anything which might be deemed interest under
applicable law which would exceed the amount permissible at the
Highest Lawful Rate, such amount which would be excessive
interest shall be applied to the reduction or the principal
amount owing on account of the applicable Note(s) or the amount
owing on other obligations of the Borrower to the applicable
Bank(s) under the Agreement and not to the payment of interest,
or if such excessive interest exceeds the unpaid principal
balance of the applicable Note(s) and the amounts owing on other
obligations of the Borrower to the applicable Bank(s) under the
Agreement, as the case may, such excess shall be refunded to the
Borrower. In determining whether or not the interest paid or
payable under any specific contingencies exceeds the Highest
Lawful Rate, the Borrower and the Banks shall, to the maximum
extent permitted under applicable law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as
interest; (b) exclude voluntary prepayments and the effects
thereof; and (c) amortize, prorate, allocate and spread in equal
parts during the period of the full stated term of the applicable
Note(s), all interest at any time contracted for, charged,
received or reserved in connection with the indebtedness
evidenced by the applicable Note(s).
27. OTHER SECTIONS. Except as expressly amended by this
Third Amendment, the provisions of the Agreement and the Note(s)
shall remain in full force and effect, and the Borrower
acknowledges and reaffirms its liability to the Banks thereunder.
In the event of any inconsistency between this Third Amendment
and the terms of the Agreement or the Note(s), this Third
Amendment shall govern.
28. MISCELLANEOUS.
(a) The Banks do not, by their execution of this Amendment,
waive any rights they may have against any person not a party
hereto.
(b) This Third Amendment may be executed in multiple
counterparts, each of which shall constitute an original
instrument, but all of which shall constitute one and the same
Agreement.
(c) All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the
Agreement.
(d) The invalidity of any one or more covenants, phrases,
clauses, sentences or paragraphs of this Third Amendment shall
not affect the remaining portions of this Third Amendment, or any
part thereof, and in case of an such invalidity, this Third
Amendment shall be construed as if such invalid covenants,
phrases, clauses, sentences or paragraphs had not been inserted.
The section headings in this Third Amendment are for convenience
only and shall not limit or in any way affect the meaning of the
terms and provisions of this Third Amendment.
(e) THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS AND THE UNITED
STATES OF AMERICA; provided, however, that Chapter 15 of
-----------------
Subtitle 3, Title 79, Revise Civil Statutes of Texas, 1925, as
amended (Articles 5069-15.01 through 5069.15.11, Vernon's Texas
Civil Statutes, as amended) shall not apply to this Third
Amendment.
THIS WRITTEN THIRD AMENDMENT, TOGETHER WITH THE AGREEMENT
AND THE NOTES, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AN MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENT OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this
Third Amendment on the dates set forth below, to be effective
April 28, 1995.
SOUTHERN UNION COMPANY
Date: ______________________ By: RONALD J. ENDRES
_______________________
Ronald J. Endres,
Senior Vice President
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Date: ______________________ By: ___________________
COMMITMENT:
$29,750,000.00
THE BANK OF NOVA SCOTIA
Date: _______________________ By: ____________________
COMMITMENT:
$29,750,000.00
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
Date: ______________________ By: ____________________
COMMITMENT:
$29,750,000.00
BOATMEN'S FIRST NATIONAL BANK
Date: ______________________ By: ____________________
COMMITMENT:
$17,000,000.00
BANK OF MONTREAL
Date: ______________________ By: ___________________
COMMITMENT:
$18,750,000.00
EXHIBIT
REVOLVING NOTE
$_____________ _______________, 19__
FOR VALUE RECEIVED, the undersigned, SOUTHERN UNION
COMPANY, a corporation organized under the laws of Delaware (the
"Borrower"), HEREBY PROMISES TO PAY to the order of
______________________________________ (the "Bank"), on or
before December 31, 1997 (the "Maturity Date"), the principal sum
of ___________________ Million and No/100ths Dollars
($___,000,000.00) in accordance with the terms and provisions of
that certain Revolving Credit Agreement dated September 30, 1993,
by and among the Borrower, the Bank, the other banks named on the
signature pages thereof, and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Agent (the "Agreement"), as amended by that
certain First Amendment to Revolving Credit Agreement, Revolving
Note and Loan Documents dated of even date with this Note, by an
among the Borrower, the Banks and the Agent (the "First
Amendment"; the Agreement as amended by the First Amendment, the
"Credit Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms
in the Credit Agreement.
The outstanding principal balance of this Revolving
Note shall be payable at the Maturity Date. The Borrower
promises to pay interest on the unpaid principal balance of this
Revolving Note from the date of any Loan evidenced by this
Revolving Note until the principal balance thereof is paid in
full. Interest shall accrue on the outstanding principal balance
of this Revolving Note from and including the date of any Loan
evidenced by this Revolving Note to but not including the
Maturity Date at the rate or rates, and shall be due and payable
on the dates, set forth in the Credit Agreement. Any amount not
paid when due with respect to principal (whether at stated
maturity, by acceleration or otherwise), costs or expenses, or,
to the extent permitted by applicable law, interest, shall bear
interest from the date when due to and excluding the date the
same is paid in full, payable on demand, at the rate provided for
in Section 2.2(c) of the Credit Agreement.
Payments of principal and interest, and all amounts due
with respect to costs and expenses, shall be made in lawful money
of the United States of America in immediately available funds,
without deduction, set-off or counterclaim to the account of the
Agent at the principal office of Texas Commerce Bank National
Association in Houston, Texas (or such other address as the Agent
under the Credit Agreement may specify) not later than noon
(Houston time) on the dates on which such payments shall become
due pursuant to the terms and provisions set forth in the Credit
Agreement.
If any payment of interest or principal herein provided
for is not paid when due, then the owner or holder of this
Revolving Note may at its option, by notice to the Borrower,
declare the unpaid principal balance of this Revolving Note, all
accrued and unpaid interest thereon and all other amounts payable
under this Revolving Note to be forthwith due and payable,
whereupon this Revolving Note, all such interest and all such
amounts shall become and be forthwith due and payable in full,
without presentment, demand, protest, notice of intent to
accelerate, notice of actual acceleration or further notice of
any kind, all of which are hereby expressly waived by the
Borrower.
If any payment of principal or interest on this
Revolving Note shall become due on a Saturday, Sunday, or public
holiday on which the Agent is not open for business, such payment
shall be made on the next succeeding Business Day and such
extension of time shall in such case be included in computing
interest in connection with such payment.
In addition to all principal and accrued interest on
this Revolving Note, the Borrower agrees to pay all reasonable
costs and expenses incurred by the Agent and all owners and
holders of this Revolving Note in collecting this Revolving Note
through any probate, reorganization, bankruptcy or any other
proceeding and reasonable attorneys' fees when and if this
Revolving Note is placed in the hands of an attorney for
collection after default.
All agreements between the Borrower and the Bank,
whether now existing or hereafter arising and whether written or
oral, are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of demand being made on this
Revolving Note or otherwise, shall the amount paid, or agreed to
be paid, to the Bank for the use, forbearance, or detention of
the money to be loaned under the Credit Agreement and evidenced
by this Revolving Note or otherwise or for the payment or
performance of any covenant or obligation contained in the Credit
Agreement or this Revolving Note exceed the amount permissible at
Highest Lawful Rate. If, as a result of any circumstances
whatsoever, fulfillment of any provision hereof or of the Credit
Agreement, at the time performance of such provision shall be
due, shall involve transcending the limit of validity prescribed
by applicable usury law, then, ipso facto, the obligation to be
__________
fulfilled shall be reduced to the limit of such validity, and if,
from any such circumstance, the Bank shall ever receive interest
or anything which might be deemed interest under applicable law
which would exceed the amount permissible at the Highest Lawful
Rate, such amount which would be excessive interest shall be
applied to the reduction of the principal amount owing on account
of this Revolving Note or the amounts owing on other obligations
of the Borrower to the Bank under the Credit Agreement and not to
the payment of interest, or if such excessive interest exceeds
the unpaid principal balance of this Revolving Note and the
amounts owing on other obligations of the Borrower to the Bank
under the Credit Agreement, as the case may be, such excess shall
be refunded to the Borrower. In determining whether or not the
interest paid or payable under any specific contingencies exceeds
the Highest Lawful Rate, the Borrower and the Bank shall, to the
maximum extent permitted under applicable law, (a) characterize
any nonprincipal payment as an expense, fee or premium rather
than as interest; (b) exclude voluntary prepayments and the
effects thereof; and (c) amortize, prorate, allocate and spread
in equal parts during the period of the full stated term of this
Revolving Note, all interest at any time contracted for, charged,
received or reserved in connection with the indebtedness
evidenced by this Revolving Note.
This Revolving Note is one of the Notes provided for
in, and is entitled to the benefits of, the Credit Agreement,
which Credit Agreement, among other things, contains provisions
for acceleration of the maturity hereof upon the happening of
certain stated events, for prepayments on account of principal
hereof prior to the maturity hereof upon the terms and conditions
and with the effect therein specified, and provisions to the
effect that no provision of the Credit Agreement or this
Revolving Note shall require the payment or permit the collection
of interest in excess of the Highest Lawful Rate. It is
contemplated that by reason of prepayments or repayments hereon
prior to the Maturity Date, there may be times when no
indebtedness is owing hereunder prior to such date; but
notwithstanding such occurrences, this Revolving Note shall
remain valid and shall be in full force and effect as to Loans
made pursuant to the Credit Agreement subsequent to each such
occurrence.
Except as otherwise specifically provided for in the
Credit Agreement, the Borrower and any and all endorsers,
guarantors and sureties severally waive grace, demand,
presentment for payment, notice of dishonor or default, protest,
notice of protest, notice of intent to accelerate, notice of
acceleration and diligence in collecting and bringing of suit
against any party hereto, and agree to all renewals, extensions
or partial payments hereon and to any release or substitution of
security hereof, in whole or in part, with or without notice,
before or after maturity.
THIS REVOLVING NOTE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
FEDERAL LAW.
IN WITNESS WHEREOF, the Borrower has caused this
Revolving Note to be executed and delivered by its officer
thereunto duly authorized effective as of the date first above
written.
SOUTHERN UNION COMPANY
By: ___________________________________________________
Name: ___________________________________________________
Title: ___________________________________________________
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS Exhibit 11
Three Six Twelve
Months Ended Months Ended Months Ended
March 31, March 31, March 31,
--------------- --------------- ---------------
1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- -------
(in thousands of dollars,
except per share amounts)
Net earnings
available
for common
stock. . . .. $16,153 $ 9,954 $16,542 $13,441 $11,478 $12,268
======= ======= ======= ======= ======= =======
Primary earnings
per share:
Average
shares out-
standing . 11,492 11,431 11,465 9,341 11,461 9,071
Stock options
issued or
granted. . 242 159 258 270 260 246
------- ------- ------- ------- ------- -------
Average
shares out-
standing . 11,734 11,590 11,723 9,611 11,721 9,317
======= ======= ======= ======= ======= =======
Primary
earnings
per share.$ 1.38 $ 0.86 $ 1.40 $ 1.40 $ 0.98 $ 1.32
======= ======= ======= ======= ======= =======
Fully diluted
earnings per
share:
Average
shares out-
standing . 11,492 11,431 11,465 9,341 11,461 9,071
Stock options
issued or
granted. . 248 159 258 288 260 288
------- ------- ------- ------- ------- -------
Average
shares out-
standing . 11,740 11,590 11,723 9,629 11,721 9,359
======= ======= ======= ======= ======= =======
Fully
diluted
earnings
per share.$ 1.38 $ 0.86 $ 1.40 $ 1.40 $ 0.98 $ 1.31
======= ======= ======= ======= ======= =======
- - ---------------------------------
Note: All periods have been adjusted for the 5% stock dividend
distributed on June 30, 1994 and the three-for-two stock
split distributed in the form of a 50% stock dividend on
March 9, 1994.
<PAGE>
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> DEC-31-1994
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $744,429,000
<OTHER-PROPERTY-AND-INVEST> $ 10,803,000
<TOTAL-CURRENT-ASSETS> $ 97,191,000
<TOTAL-DEFERRED-CHARGES> $110,296,000
<OTHER-ASSETS> $ 2,540,000
<TOTAL-ASSETS> $965,259,000
<COMMON> $ 11,570,000
<CAPITAL-SURPLUS-PAID-IN> $198,818,000
<RETAINED-EARNINGS> $ 16,542,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $226,136,000
$ 0
$ 0
<LONG-TERM-DEBT-NET> $478,062,000
<SHORT-TERM-NOTES> $ 18,000,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 956,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $242,105,000
<TOT-CAPITALIZATION-AND-LIAB> $965,259,000
<GROSS-OPERATING-REVENUE> $181,370,000
<INCOME-TAX-EXPENSE> $ 10,264,000
<OTHER-OPERATING-EXPENSES> $ 23,966,000
<TOTAL-OPERATING-EXPENSES> $ 47,059,000
<OPERATING-INCOME-LOSS> $ 34,562,000
<OTHER-INCOME-NET> $ 1,750,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 26,048,000
<TOTAL-INTEREST-EXPENSE> $ 9,895,000
<NET-INCOME> $ 16,153,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 16,153,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 48,513,000
<EPS-PRIMARY> $ 1.38
<EPS-DILUTED> $ 1.38
</TABLE>
