<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-6959
MITCHELL ENERGY & DEVELOPMENT CORP.
(Exact name of registrant as specified in charter)
TEXAS 74-1032912
(State of incorporation) (I.R.S. Employer Identification No.)
2001 TIMBERLOCH PLACE
THE WOODLANDS, TEXAS 77380
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 377-5500
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Shares of common stock outstanding at May 31, 1998:
Class A..................... 22,321,142
Class B..................... 26,794,462
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Page
Part I - Financial Information Number
------
<S> <C>
Item 1. Financial Statements
Representation................................................... 1
Consolidated Balance Sheets...................................... 2
Unaudited Consolidated Statements of Earnings.................... 3
Unaudited Consolidated Statement of Stockholders' Equity......... 4
Unaudited Condensed Consolidated Statements of Cash Flows........ 5
Notes to Unaudited Consolidated Financial Statements............. 6
Item 2. Management's Discussion and Analysis of
Financial Position and Results of Operations..................... 12
Part II - Other Information
Item 1. Legal Proceedings.......................................... 17
Item 6. Exhibits and Reports on Form 8-K........................... 17
</TABLE>
DEFINITIONS. As used herein, "MMBtu" means million British thermal units, "Mcf"
means thousand cubic feet, "MMcf" means million cubic feet, "Bcf" means billion
cubic feet, "Bbl" means barrel, "MMBbls" means million barrels, "NGL" or "NGLs"
means natural gas liquids, "fiscal 1998" and "fiscal 1999" refer, respectively,
to the 12-month periods ended January 31, 1998 and 1999 and "DD&A" means
depreciation, depletion and amortization. Pipeline throughput volumes are based
on average energy content of 1,000 Btu per cubic foot. Where applicable, NGL
volume, price and reserve information includes equity partnership interests.
<PAGE> 3
Part I - Financial Information
ITEM 1. FINANCIAL STATEMENTS
REPRESENTATION. The consolidated financial statements of Mitchell Energy &
Development Corp. and subsidiaries (the "Company") and related notes included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to those rules and regulations, although the Company believes
that the disclosures included herein are adequate to make the information
presented not misleading. In the opinion of the Company's management, all
adjustments - which include only normal and recurring adjustments - necessary
for a fair presentation of the financial position and results of operations for
the periods presented have been made. These financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's Fiscal 1998 Annual Report and with the Management's Discussion
and Analysis of Financial Position and Results of Operations sections of that
and this report.
-1-
<PAGE> 4
MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
<TABLE>
<CAPTION>
APRIL 30, January 31,
1998 1998
----------- -----------
ASSETS (unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents ..................................................... $ 26,545 $ 105,309
Trade receivables ............................................................. 96,978 113,285
Inventories ................................................................... 12,365 14,479
Net assets of discontinued real estate operations (Note 2) .................... 13,697 26,056
Other ......................................................................... 7,571 8,591
----------- -----------
Total current assets ..................................................... 157,156 267,720
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation, depletion
and amortization of $1,353,799 and $1,331,139
Exploration and production
Oil and gas properties ...................................................... 668,872 613,565
Support equipment and facilities ............................................ 18,211 18,407
Gas services (including investments in equity partnerships) (Note 3)
Natural gas processing ...................................................... 117,249 106,464
Natural gas gathering ....................................................... 137,402 134,779
Other ....................................................................... 74,071 73,689
Corporate ..................................................................... 7,528 7,763
----------- -----------
1,023,333 954,667
----------- -----------
LONG-TERM INVESTMENTS AND OTHER ASSETS ........................................ 30,090 29,586
----------- -----------
$ 1,210,579 $ 1,251,973
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Oil and gas proceeds payable .................................................. $ 76,772 $ 94,661
Accounts payable .............................................................. 49,388 55,119
Accrued liabilities ........................................................... 41,621 48,969
----------- -----------
Total current liabilities ................................................ 167,781 198,749
----------- -----------
LONG-TERM DEBT (Note 4) ....................................................... 426,267 414,267
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes ......................................................... 159,582 167,903
Retirement obligations and other .............................................. 57,449 58,128
----------- -----------
217,031 226,031
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 6)
STOCKHOLDERS' EQUITY
Preferred stock, $.10 par value (authorized 10,000,000 shares; none issued)
Common stock, $.10 par value
(authorized 100,000,000 Class A and 100,000,000 Class B shares) ............. 5,386 5,386
Additional paid-in capital .................................................... 143,303 143,525
Retained earnings ............................................................. 354,998 361,905
Treasury stock, at cost ....................................................... (104,187) (97,890)
----------- -----------
399,500 412,926
----------- -----------
$ 1,210,579 $ 1,251,973
=========== ===========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 5
MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended
April 30
----------------------------
1998 1997
------------- ------------
(Note 2)
REVENUES
<S> <C> <C>
Exploration and production .............................................. $ 58,996 $ 60,311
Gas services ............................................................ 113,396 109,420
--------- ---------
172,392 169,731
--------- ---------
OPERATING COSTS AND EXPENSES
Exploration and production, including water well litigation
provision (reversal) of ($3,000) in 1998 and $7,000 in 1997 .......... 54,388 51,084
Gas services ............................................................ 100,561 92,388
--------- ---------
154,949 143,472
--------- ---------
SEGMENT OPERATING EARNINGS (Note 7) ..................................... 17,443 26,259
General and administrative expense ...................................... 8,205 7,250
--------- ---------
TOTAL OPERATING EARNINGS ................................................ 9,238 19,009
--------- ---------
OTHER EXPENSE
Interest expense
Total ................................................................ 7,649 12,108
Attributable to discontinued operations .............................. -- (7,578)
--------- ---------
Attributable to continuing operations ................................ 7,649 4,530
Interest income ......................................................... (618) (884)
Other, net .............................................................. (1,414) (1,042)
--------- ---------
5,617 2,604
--------- ---------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ................. 3,621 16,405
INCOME TAXES (Note 5) ................................................... 1,326 5,684
--------- ---------
EARNINGS FROM CONTINUING OPERATIONS ..................................... 2,295 10,721
DISCONTINUED REAL ESTATE OPERATIONS (Note 2)
Earnings from operations, net of income taxes of $3,118 ................. -- 5,756
Adjustment to loss on sale, net of income taxes of $1,750 ............... 3,250 --
--------- ---------
NET EARNINGS ............................................................ $ 5,545 $ 16,477
========= =========
BASIC AND DILUTED EARNINGS PER SHARE (Note 9)
Class A - Earnings from continuing operations...........................$ .05 $ .20
Net earnings .................................................. .11 .31
Class B - Earnings from continuing operations ........................... .05 .21
Net earnings .................................................. .12 .32
AVERAGE COMMON SHARES OUTSTANDING (Basic) - Class A ..................... 22,321 23,056
Class B ..................... 26,757 28,790
</TABLE>
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 6
\
MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended April 30,1998
(dollar amounts in thousands)
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
DOLLAR AMOUNTS Stock Capital Earnings Stock Total
- -------------- --------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1998 ............................... $ 5,386 $ 143,525 $ 361,905 $ (97,890) $ 412,926
Net earnings ............................................ -- -- 5,545 -- 5,545
Cash dividends declared (24 cents per share on
Class A and 26.5 cents per share on Class B) ......... -- -- (12,452) -- (12,452)
Treasury stock purchases (including
$7,458 adjustment payment on fiscal
1998 accelerated stock purchase transaction) ......... -- -- -- (9,217) (9,217)
Exercises of stock options .............................. -- (222) -- 2,920 2,698
--------- --------- ---------- --------- ---------
BALANCE, APRIL 30, 1998 ................................. $ 5,386 $ 143,303 $ 354,998 $(104,187) $ 399,500
========= ========= ========= ========= =========
</TABLE>
===============================================
<TABLE>
<CAPTION>
Common Stock Issued Treasury Stock Outstanding Shares
------------------------------ --------------------------- --------------------------
SHARE AMOUNTS Class A Class B Class A Class B Class A Class B
- ------------- ---------- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1998..... 23,978,081 29,878,081 1,656,937 3,153,817 22,321,144 26,724,264
Treasury stock purchases ..... -- -- -- 65,000 -- (65,000)
Exercises of stock options.... -- -- -- (135,200) -- 135,200
Other ........................ (2) (2) -- -- (2) (2)
---------- ---------- --------- --------- ---------- ----------
BALANCE, APRIL 30, 1998 ...... 23,978,079 29,878,079 1,656,937 3,083,617 22,321,142 26,794,462
========== ========== ========= ========= ========== ==========
</TABLE>
- ------------------------------
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 7
MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
April 30
----------------------
1998 1997
--------- ---------
(Note 2)
OPERATING ACTIVITIES
<S> <C> <C>
Earnings from continuing operations ......................................... $ 2,295 $ 10,721
Adjustments to reconcile earnings from continuing
operations to cash provided by operating activities
Depreciation, depletion and amortization .............................. 28,325 24,843
Exploration expenses, including dry-hole costs ........................ 11,415 2,421
Deferred income taxes (benefits) ...................................... (218) 6,239
Distributions in excess of (less than) earnings of equity investees.... 4,821 (199)
Water well litigation provision (reversal) ............................ (3,000) 7,000
Gain from sale of contract drilling assets ............................ -- (2,382)
Other, net ............................................................ (1,387) (623)
--------- ---------
42,251 48,020
Changes in operating assets and liabilities ........................... (3,620) 87,629
--------- ---------
Cash provided by operating activities ................................. 38,631 135,649
--------- ---------
INVESTING ACTIVITIES
Capital and exploratory expenditures
Total on accrual basis ................................................... (113,817) (44,671)
Adjustment to cash basis ................................................. (9,162) (4,242)
--------- ---------
(122,979) (48,913)
Property, plant and equipment sales proceeds ................................ -- 4,419
Other ....................................................................... 820 993
--------- ---------
Cash used for investing activities .................................... (122,159) (43,501)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of debt .............................................. 12,000 --
Debt repayments ............................................................. -- (100,000)
Cash dividends .............................................................. (6,223) (6,581)
Treasury stock purchases .................................................... (9,217) --
Other ....................................................................... 2,698 (254)
--------- ---------
Cash used for financing activities .................................... (742) (106,835)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS
FROM CONTINUING OPERATIONS ............................................... (84,270) (14,687)
CASH PROVIDED BY (USED FOR) DISCONTINUED OPERATIONS ......................... 5,506 (14,126)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............................. 105,309 75,825
---------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD .................................... $ 26,545 $ 47,012
========= =========
</TABLE>
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 8
MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1998
(1) ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Mitchell Energy &
Development Corp. and its majority-owned subsidiaries (the "Company"). All
significant intercompany accounts and transactions are eliminated in
consolidation. The Company follows the equity method of accounting for
investments in 20%- to 50%-owned entities.
The Company's exploration and production activities are accounted for
using the "successful efforts" method. Impairment computations for proved oil
and gas properties are made on a field-by-field basis as conditions warrant.
There were no charges for such impairments during the three-month periods ended
April 30, 1998 and 1997.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) DISCONTINUED REAL ESTATE OPERATIONS
On June 12, 1997, the Company entered into an agreement to sell its real estate
subsidiary, The Woodlands Corporation (TWC), to a partnership of Crescent Real
Estate Equities Company and Morgan Stanley Real Estate Fund II, L.P. for
$543,000,000 in cash. The transaction was subsequently closed on July 31, 1997.
In connection with the sale, the parent company forgave intercompany debt
payable to it by TWC. After adjustment for certain net additional amounts
received pursuant to the contract and deductions for income taxes and
transaction costs incurred by the Company in connection with the sale, net cash
proceeds totaled approximately $481,000,000.
The Company decided to withdraw from the real estate business upon
entering into the definitive agreement to sell TWC on June 12, 1997, and
commenced reporting real estate activities as discontinued operations in its
financial statements effective that date. The Company's financial statements
were revised to segregate the net assets associated with discontinued
operations and to separately report their results of operations. Prior-period
financial statements were restated similarly. Interest expense attributable to
discontinued operations was determined in the same manner that historically had
been used to allocate such costs to the Company's real estate operations.
Excluded from the TWC sales transaction were real estate assets located
outside The Woodlands that had been held for disposal. A substantial portion of
those assets have now been disposed of, and it is expected that the remaining
holdings will be effectively liquidated by July 31, 1998.
During the first quarter of fiscal 1999, adjustments were recorded
reducing by $3,250,000 the $67,123,000 loss on disposition previously recorded
in connection with the discontinuance of real estate operations. This occurred
because actual realizations were higher than originally estimated and certain
contingent obligations were settled for less than the amounts accrued.
-6-
<PAGE> 9
(3) PARTNERSHIP INVESTMENTS
At April 30, 1998, the Company's principal partnership interests included the
following:
<TABLE>
<CAPTION>
Ownership
Percentage Nature of Operations
---------- --------------------
<S> <C> <C>
Austin Chalk Natural Gas Marketing Services 45 Natural gas marketing
Belvieu Environmental Fuels 33.33 Production of MTBE
C&L Processors Partnership 50 Natural gas processing
Ferguson-Burleson County Gas Gathering System 45 Natural gas gathering
Gulf Coast Fractionators 38.75 Fractionation of
natural gas liquids
Louisiana Chalk Gathering System 50 Natural gas gathering
U. P. Bryan Plant 45 Natural gas processing
</TABLE>
The Company's net investment in each of these entities is reported as property,
plant and equipment in the consolidated balance sheets under the gas services
caption. The Company's equity in their pretax earnings is reported as revenues
in the consolidated statements of earnings under the gas services caption.
A summary of the Company's net investments in partnerships at April 30,
1998 and January 31, 1998 and its equity in their pretax earnings (losses) for
the three-month periods ended April 30, 1998 and 1997 follows (in thousands):
<TABLE>
<CAPTION>
Equity in
Net Investment Pretax Earnings
----------------------- ---------------------
April 30, January 31, April 30, April 30,
1998 1998 1998 1997
-------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Austin Chalk Natural Gas Marketing Services................................. $ 619 $ 670 $ 849 $ (46)
Belvieu Environmental Fuels ................................................ 41,480 41,300 1,552 2,944
C&L Processors Partnership ................................................. 61,687 51,945 26 626
Ferguson-Burleson County Gas Gathering System .............................. 42,689 43,863 850 1,183
Gulf Coast Fractionators ................................................... 30,858 30,629 1,444 1,393
Louisiana Chalk Gathering System ........................................... 17,808 19,053 (221) --
U.P. Bryan Plant ........................................................... 6,649 6,738 424 1,335
Others ..................................................................... 143 138 3,496* --
-------- ----------- -------- --------
$201,933 $ 194,336 $ 8,420 $ 7,435
======== =========== ======== ========
</TABLE>
- ---------------------------------------------------------
*Consists principally of a $3,492 gain from the sale by
a partnership of the Brooks-Hidalgo gathering system.
Financial statement information is generally reported on a one-month lag
for entities accounted for on the equity method. Summarized earnings
information (on a 100% basis) for these entities for the three-month periods
ended April 30, 1998 and 1997 follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenues................................................................. $131,749 $215,422
Operating earnings....................................................... 12,982 21,911
Pretax earnings (before interest expense for those entities
whose activities are funded by capital contributions of the owners)... 8,861 17,065
</TABLE>
-7-
<PAGE> 10
(4) LONG-TERM DEBT
The Company's outstanding debt at April 30, 1998 consisted of $414,267,000 of
unsecured parent company senior notes, the proceeds of which have been advanced
to the operating subsidiaries, and $12,000,000 borrowed under a money market
facility.
The Company has a committed $150,000,000 bank revolving credit facility
under which nothing was borrowed at April 30, 1998. Any amounts then
outstanding under this agreement are payable in January 2003. Interest rates,
which generally are based on spreads over LIBOR, vary based on the highest of
the ratings given the Company's senior notes by two specified rating agencies.
The Company pays commitment fees on the unused portion of this facility.
(5) INCOME TAXES
Income taxes applicable to earnings from continuing operations for the
three-month periods ended April 30, 1998 and 1997 consist of the following (in
thousands):
<TABLE>
<CAPTION>
1998 1997
-------- -------
CURRENT
<S> <C> <C>
Federal.............................. $ 1,493 $ (817)
State................................ 51 262
-------- -------
1,544 (555)
-------- -------
DEFERRED
Federal.............................. (132) 5,842
State................................ (86) 397
-------- -------
(218) 6,239
-------- -------
$ 1,326 $ 5,684
======= =======
</TABLE>
Estimated annual tax rates of 36.6% and 34.6%, respectively, were used in
computing the income tax provisions for the three-month periods ended April 30,
1998 and 1997. The differences between these rates and the 35% statutory
Federal income tax rate were principally the result of the interplay of the
benefit of Federal tax credits and the impact of state income taxes.
(6) COMMITMENTS AND CONTINGENCIES
NORTH TEXAS WATER WELL LITIGATION. On March 1, 1996, in a trial known as the
Bartlett case, a judgment was entered against a wholly owned subsidiary of the
Company by a Wise County, Texas court. The judgment awarded $4,051,760 in
actual damages (consisting of $339,266 for economic damages and $3,712,494 for
pain, mental anguish, inconvenience, etc.) and $200,000,000 in exemplary
damages to eight plaintiff groups, who claimed that the natural gas operations
of the subsidiary had affected their water wells.
The Company appealed this judgment to the Second Court of Appeals in Fort
Worth, Texas, and in November 1997 the court's three-judge panel unanimously
reversed the previous decision, finding that the plaintiffs failed to prove
that the Company's actions were the cause of their alleged damages and that the
claims of most plaintiffs were time-barred by statutes of limitations. The
court subsequently denied the plaintiffs' request for a reconsideration of the
court's decision. The plaintiffs have requested that the Texas Supreme Court
review and overturn this decision. The Supreme Court has not indicated whether
it will review the Court of Appeals' judgment.
-8-
<PAGE> 11
In May 1997, in the Bailey case - which involved allegations similar to
those in the Bartlett case - another jury in the Wise County court found
unanimously on all counts that the Company was not responsible for damages
claimed by 17 other plaintiff groups (and that most of their claims were
time-barred by statutes of limitations, in any event). The court entered the
judgment on July 15, 1997. After their motion for a new trial was denied, the
plaintiffs appealed this decision to the Second Court of Appeals, which by law
must consider the case. This is the same court that earlier ruled favorably on
the Company's appeal of the Bartlett case.
In the Nelon case, which also involved allegations similar to those in
the Bartlett case, a judge in the Wise County court issued a summary judgment
in favor of the Company during January 1998, finding all the plaintiffs' claims
to be time-barred by statutes of limitations. The plaintiffs subsequently
appealed this case to the Second Court of Appeals, which by law must consider
the case.
Similar untried lawsuits (each claiming damages of more than $1,000,000)
brought by 26 other plaintiff groups remain outstanding. To date, there has
been only limited activity with respect to these cases although one of them
(the Maxey case) is scheduled for trial beginning October 19, 1998. Near the
end of fiscal 1999's first quarter, the number of remaining suits was reduced
to 26 when the district court in Wise County dismissed one suit because there
was no evidence submitted that the Company caused the alleged pollution and one
plaintiff chose not to pursue its case.
The Company believes that a number of its insurance carriers have
responsibilities for participating in the defense costs incurred by the Company
in connection with this litigation. Reimbursement agreements have been entered
into with three of these carriers: one in May 1997 and two in April 1998.
Discussions continue with additional insurance carriers regarding their
participation in the Company's defense costs.
The Company at least quarterly reviews the adequacy of its accrued
liability for this litigation and adjusts the accrued liability to its current
estimate of the costs to be incurred. Provisions were recorded in fiscal 1998,
1997 and 1996 totaling $32,000,000 (including $7,000,000 in April 1997). After
entering into the two reimbursement agreements in April 1998, the Company
recorded a reversal of $3,000,000 of the previous provisions. Costs incurred
which have consisted principally of estimated attorneys' fees and other defense
costs for the Bartlett and Bailey trials and costs of bonds, etc., related to
the appeal of the Bartlett judgment - are charged against the reserve.
Insurance reimbursements, which are credited to the accrued liability when
received, are included in the determination of the adequacy of the accrued
liability only after reimbursement agreements have been executed.
OTHER. The Company also is party to other claims and legal actions arising in
the ordinary course of its business and to recurring examinations performed by
the Internal Revenue Service and other regulatory agencies. While the outcome
of all such matters cannot be predicted with certainty, management expects that
losses, if any, resulting from the ultimate resolution of the matters discussed
in this footnote will not result in charges that are material to the Company's
financial position. It is possible, however, that charges could be required
that would be significant to the operating results of a particular period.
-9-
<PAGE> 12
(7) SEGMENT INFORMATION
Selected industry segment data for the three-month periods ended April 30, 1998
and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Segment Total
Outside Operating Operating
Revenues Earnings Earnings
----------------------- ----------------------- -----------------------
1998 1997 1998 1997 1998 1997
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
EXPLORATION AND PRODUCTION
Operations ....................... $ 58,996 $ 57,929 $ 1,608 $ 13,845 $ (1,362) $ 10,916
Water well litigation (provision)
reversal (see Note 6) .......... -- -- 3,000 (7,000) 3,000 (7,000)
Gain from sale of
contract drilling assets ....... -- 2,382 -- 2,382 -- 2,382
--------- --------- --------- --------- --------- ---------
58,996 60,311 4,608 9,227 1,638 6,298
--------- --------- --------- --------- --------- ---------
GAS SERVICES
Natural gas processing ........... 67,658 80,786 935 8,595 100 7,824
Natural gas gathering
and marketing .................. 42,742 24,297 9,210 4,454 8,223 3,545
Other ............................ 2,996 4,337 2,690 3,983 2,581 3,896
--------- --------- --------- --------- --------- ---------
113,396 109,420 12,835 17,032 $ 10,904 15,265
--------- --------- --------- --------- --------- ---------
CORPORATE ........................ -- -- -- -- (3,304)(b) (2,554)(b)
--------- --------- --------- --------- --------- ---------
$ 172,392 $ 169,731 $ 17,443 $ 26,259 $ 9,238 $ 19,009
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Capital
DD&A Expenditures(a)
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
EXPLORATION AND PRODUCTION
Operations ....................... $ 23,735 $ 21,845 $ 90,875 $ 33,308
Water well litigation (provision)
reversal (see Note 6) .......... -- -- -- --
Gain from sale of
contract drilling assets ....... -- -- -- --
--------- --------- --------- ---------
23,735 21,845 90,875 33,308
--------- --------- --------- ---------
GAS SERVICES
Natural gas processing ........... 961 898 14,460 1,550
Natural gas gathering
and marketing .................. 2,893 1,259 8,093 8,618
Other ............................ 27 27 134 2
--------- --------- --------- ---------
3,881 2,184 22,687 10,170
--------- --------- --------- ---------
CORPORATE ........................ 709 814 255 1,193
--------- --------- --------- ---------
$ 28,325 $ 24,843 $ 113,817 $ 44,671
========= ========= ========= =========
</TABLE>
- ----------------------------------
(a) On accrual basis, including exploratory expenses.
(b) General corporate expenses.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which the Company must implement by the end
of fiscal 1999. The Company does not expect that the adoption of this statement
will require it to make material changes in the information heretofore disclosed
concerning its operating segments.
Because of their unusual nature, and in accordance with Accounting
Principles Board Opinion No. 30, certain items are reported in the table above
as separate components of segment operating earnings.
Effective April 1, 1997, the Company sold its remaining contract drilling
assets for $3,500,000. A gain of $2,382,000 was recorded on this transaction.
(8) SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid, including amounts applicable to discontinued operations, totaled
$8,438,000 and $10,991,000 during the three-month periods ended April 30, 1998
and 1997. Income taxes paid during these periods, including amounts applicable
to discontinued operations, totaled $3,554,000 and $9,234,000. There were no
significant non-cash investing or financing activities during the three-month
periods ended April 30, 1998 and 1997.
(9) EARNINGS PER SHARE
The earnings per share computations included herein have been made in
accordance with Statement of Financial Accounting Standards No. 128, which the
Company adopted during the fourth quarter of fiscal 1998; prior period amounts
were restated. The Company is required to make separate earnings per share
computations for its Class A and Class B common stock since the shares are not
convertible into each other and different per share cash dividends are paid on
the separate classes. In these computations, earnings up to the amount of
dividends paid in a year are apportioned between the classes based on the
respective dividends paid, while earnings in excess of that amount are
apportioned on a pro rata per share basis.
-10-
<PAGE> 13
Accordingly, the differences in the per share earnings amounts occur because of
the higher cash dividends paid on the Class B shares. The following table sets
forth basic and diluted earnings per share information for the quarters ended
April 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
From continuing operations ............. $ .05 $ .05 $ .20 $ .21
------- ------- ------- -------
Discontinued real estate operations
Earnings from operations ........... -- -- .11 .11
Adjustment to loss on sale ......... .06 .07 -- --
------- ------- ------- -------
.06 .07 .11 .11
------- ------- ------- -------
Net earnings ........................... $ .11 $ .12 $ .31 $ .32
======= ======= ======= =======
</TABLE>
The basic and diluted earnings per share amounts were the same because
the earnings amounts for the diluted computations were no different than the
ones used in the basic computations, and - as shown in the table below - the
dilutive effect of stock options did not significantly increase the weighted
average shares outstanding. The following table reconciles the weighted average
shares outstanding used in the basic and diluted earnings per share
computations for the three-month periods ended April 30, 1998 and 1997 (in
thousands):
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
Class A Class B Class A Class B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Used in basic computations.............. 22,321 26,757 23,056 28,790
Dilutive effect of stock options........ 18 383 2 113
------ ------ ------ ------
Used in diluted computations............ 22,339 27,140 23,058 28,903
====== ====== ====== ======
</TABLE>
Excluded from these computations because their effect was antidilutive were
stock options covering 62,000 Class A and 602,490 Class B shares during the
period ended April 30, 1997. There were no antidilutive stock options in the
period ended April 30, 1998.
-11-
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
All statements included in this Form 10-Q, other than statements of historical
fact, are forward-looking statements. These include, but are not limited to,
strategies, goals and expectations set forth herein concerning exploration and
production and gas services operations and the discussions below concerning the
Company's liquidity and capital resources. Although the Company believes that
its expectations are based on reasonable assumptions, it can give no assurances
that its goals will be achieved. Important factors that could cause actual
results to differ materially from those in the forward-looking statements
include the timing and extent of changes in commodity prices for natural gas,
NGLs and crude oil; the attainment of forecasted operating levels, reserve
replacement and asset acquisitions; the impact of pending litigation against
the Company and related insurance recoveries; unexpected changes in competitive
and economic conditions, government regulations, technology and other factors.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW. As previously reported, the Company discontinued its real estate
activities during fiscal 1998 and realized $481 million of after-tax proceeds
from the sale of The Woodlands Corporation (TWC). During the first quarter of
fiscal 1999, the Company essentially completed the disposition of the
discontinued operations by selling most of the remaining properties outside The
Woodlands.
A balanced plan was implemented to reinvest the TWC sales proceeds as
quickly as practical, consistent with the Company's objective of growing its
core energy businesses in a prudent manner. This reinvestment program was
completed during fiscal 1999's first quarter, and the following table
summarizes the uses of those proceeds (in millions):
<TABLE>
<CAPTION>
Fiscal Fiscal
1999 1998 Total
------- ------- -------
<S> <C> <C> <C>
Acquisitions .......................................................... $ 64.7 $ 26.3 $ 91.0
Fiscal 1999 capital expenditures in excess of funds from operations.... 23.0 -- 23.0
Accelerated fiscal 1998 capital spending
(primarily for oil and gas exploratory activities) ................. -- 24.0 24.0
Common stock purchases
Accelerated buyback (700,000 Class A and 1,400,000 Class B shares)... 7.5 49.7 57.2
Open-market purchases (45,000 Class A and 884,200 Class B shares).... 1.8 22.7 24.5
Repurchase of 9 1/4% senior notes (including
$19.3 for tender offer costs and expenses) .......................... -- 205.0 205.0
Repayment of off-balance-sheet partnership indebtedness ............... -- 43.8 43.8
December 1997 special common stock dividends
(24 cents on Class A and 26 1/2 cents on Class B) ................... -- 12.5 12.5
------- ------- -------
$ 97.0 $ 384.0 $ 481.0
======= ======= =======
</TABLE>
The fiscal 1998 amounts were discussed in the Company's Fiscal 1998 Annual
Report, and the fiscal 1999 spending was directed almost exclusively towards
expanding the Company's core energy operations via acquisitions and a
stepped-up exploratory program.
-12-
<PAGE> 15
CAPITAL AND EXPLORATORY EXPENDITURES. A comparison of the Company's fiscal 1999
budget for capital and exploratory expenditures and its actual first quarter
spending follows (in millions):
<TABLE>
<CAPTION>
First
Annual Quarter
Budget Spending
-------- --------
<S> <C> <C>
Exploration and production
Capital .......................... $ 159.0 $ 44.2
Exploratory expenses ............. 29.0 11.4
Gas services ....................... 49.0 10.3
Corporate .......................... 4.0 .2
-------- --------
$ 241.0 66.1
========
Unbudgeted asset acquisitions
Oil and gas properties ........... 35.3
Gas services facilities .......... 12.4
--------
$ 113.8
========
</TABLE>
The fiscal 1999 budget calls for a continuation of the program begun last year
to accelerate drilling of the Company's substantial inventory of development
locations in its core areas. In addition, significant expenditures are included
for seismic work, exploratory acreage acquisitions and exploratory drilling.
A disproportionate share (more than half) of the budgeted fiscal 1999
spending for 3-D seismic surveys was incurred in the first quarter, as dry
weather and the availability of crews and equipment allowed an acceleration of
the planned schedule. While this cut into first quarter earnings, it should
permit drilling to commence this fall on some of these prospects. If
successful, this drilling - together with development of recent property
acquisitions - are expected to result in additions to production, reserves and
operating earnings by early next year.
As is its normal practice, the Company will reassess fiscal 1999 capital
spending plans at mid-year. With no apparent relief in sight from the current
depressed level of oil and NGL prices, planned capital spending may be reduced
at that time. However, the current expectation is that a shift in the spending
pattern is more likely. If implemented, this shift would move some North Texas
development drilling projects out of this year and replace them with drilling
and recompletion programs on recently acquired properties and exploratory
drilling on prospects identified by this year's 3- D seismic surveys.
While the TWC sales proceeds have now been reinvested and $12 million was
borrowed in April 1998, the Company has resources available to continue funding
its planned capital program. The Company has a $150 million committed bank
credit facility and currently is considering the possibility of requesting an
increase in its size to provide additional financial flexibility, including
another source of funds to retire $100 million of senior notes maturing in July
1999.
RECENT ENERGY PRICE TRENDS. Natural gas prices held up surprisingly well in
fiscal 1999's first quarter given the recent warm winter and relatively high
levels of gas in storage and the collapse of crude oil and NGL prices during
that period. Margins for NGLs were particularly depressed because the low NGL
sales prices were accompanied by relatively strong prices for natural gas
feedstock. The low NGL margins, coupled with the previously discussed high
level of expenses for exploratory activities, adversely impacted the Company's
first quarter earnings and cash flows. It is expected that these conditions
also will negatively impact the Company's results in the second quarter, and
possibly beyond.
Because the recent declines in crude oil and NGL prices have not changed
its longer-term price projections and since its reserves and production consist
largely of natural gas, the Company does not expect the current pricing
environment to result in significant property impairments in the near term.
However, the carrying amounts of a few small oil properties could be impaired
if the depressed-price environment were to continue for an extended time, and
the situation for other properties could change were energy prices to fall
significantly from current levels.
-13-
<PAGE> 16
NORTH TEXAS WATER WELL LITIGATION. As previously reported, three favorable
court decisions were rendered during fiscal 1998 in cases involving allegations
by land owners that the Company's North Texas oil and gas operations had harmed
their water wells. These decisions were generally based on findings that the
plaintiffs failed to prove the Company's operations were the cause of their
alleged damages and/or their claims were time-barred by statutes of
limitations. Plaintiffs' appeals of these decisions remain outstanding. The
number of remaining untried lawsuits declined from 28 to 26 recently as a judge
dismissed one case and another was dropped by the plaintiff. Defense cost
reimbursement agreements recently have been entered into with two more of the
Company's insurance carriers, and discussions are continuing with others. See
Note 6 of Notes to Unaudited Consolidated Financial Statements for additional
information concerning these matters.
OPERATING STATISTICS
Certain operating statistics (including, where applicable, proportional
interests in equity partnerships) for the three-month periods ended April 30,
1998 and 1997 follow:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
AVERAGE DAILY VOLUMES
Natural gas sales (Mcf) ................................................ 246,400 238,200
Crude oil and condensate sales (Bbls) .................................. 6,900 5,700
Natural gas liquids produced (Bbls) .................................... 45,500 46,600
Pipeline throughput (Mcf) .............................................. 542,000* 439,000
AVERAGE SALES PRICES
Natural gas (per Mcf) .................................................. $ 2.29 $ 2.23
Crude oil and condensate (per Bbl) ..................................... 13.93 19.99
Natural gas liquids produced (per Bbl) ................................. 11.44 13.46
</TABLE>
*Includes 182,500 Mcf per day for North Texas gathering
systems acquired effective January 1, 1998.
EARNINGS FROM CONTINUING OPERATIONS - THREE MONTHS ENDED APRIL 30, 1998
COMPARED WITH THREE MONTHS ENDED APRIL 30, 1997
Earnings from continuing operations for the three-month period ended April 30,
1998 - both before and after unusual items - are summarized in the table on the
following page. Earnings from continuing operations for fiscal 1999's first
quarter of $2.3 million were $8.4 million below those of the prior-year period
largely because of the impact of increased exploratory expenses associated with
3-D seismic surveys and lower prices for oil and condensate and NGLs. Excluding
the effects of the unusual items, such earnings totaled $.4 million during
fiscal 1999's first quarter, or $13.1 million below those of the prior-year's
comparable period.
-14-
<PAGE> 17
The following table and discussion identify and explain the major
increases (decreases) in earnings for the three-month periods (in millions):
<TABLE>
<CAPTION>
Segment Earnings from
Operating Earnings Continuing Operations
-------------------- ---------------------
Exploration Before
and Gas Income After
Production Services Other* Taxes Tax
---------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
FISCAL 1998 AMOUNTS AFTER UNUSUAL ITEMS .................... $ 9.3 $ 17.0 $ (9.9) $ 16.4 $ 10.7
------- ------- ------- ------- -------
ELIMINATE IMPACT OF FISCAL 1998 UNUSUAL ITEMS
Water well litigation provision (see page 8) ............... 7.0 -- -- 7.0 4.3
Gain from sale of remaining
contract drilling assets ................................ (2.4) -- -- (2.4) (1.5)
------- ------- ------- ------- -------
4.6 -- -- 4.6 2.8
------- ------- ------- ------- -------
FISCAL 1998 AMOUNTS BEFORE UNUSUAL ITEMS ................... 13.9 17.0 (9.9) 21.0 13.5
------- ------- ------- ------- -------
MAJOR INCREASES (DECREASES)
Lower oil and condensate sales price ....................... (3.4) -- -- (3.4) (2.2)
Higher oil and condensate sales volumes .................... 1.5 -- -- 1.5 1.0
Increased exploratory expenses ............................. (9.0) -- -- (9.0) (5.9)
Bridgeport plant contract change ........................... .9 (1.3) -- (.4) (.3)
Natural gas processing
Margin decreases resulting
from lower NGL prices ................................. -- (5.0) -- (5.0) (3.3)
Lower NGL production volumes ............................ -- (.6) -- (.6) (.4)
Gain from sale of Brooks-Hidalgo gathering system .......... -- 3.5 -- 3.5 2.3
Equity in earnings of MTBE plant partnership ............... -- (1.4) -- (1.4) (.9)
Increased interest expense
attributable to continuing operations ................... -- -- (3.1) (3.1) (2.0)
Performance unit expense accruals .......................... (.7) (.3) (.4) (1.4) (.9)
Other, net ................................................. (1.6) .9 (.4) (1.1) (.5)
------- ------- ------- ------- -------
(12.3) (4.2) (3.9) (20.4) (13.1)
------- ------- ------- ------- -------
FISCAL 1999 AMOUNTS BEFORE UNUSUAL ITEM .................... 1.6 12.8 (13.8) .6 .4
------- ------- ------- ------- -------
FISCAL 1999 UNUSUAL ITEM
Water well litigation provision reversal (see page 8) ...... 3.0 -- -- 3.0 1.9
------- ------- ------- ------- -------
FISCAL 1999 AMOUNTS AFTER UNUSUAL ITEM ..................... $ 4.6 $ 12.8 $ (13.8) $ 3.6 $ 2.3
======= ======= ======= ======= =======
</TABLE>
- ------------------------------------------------------
*Includes general and administrative expense and other expense.
EXPLORATION AND PRODUCTION OVERVIEW
Exclusive of unusual items, exploration and production segment operating
earnings of $1.6 million during fiscal 1999's first quarter were $12.3 million
below the $13.9 million of the prior-year period largely because of the
period's increased exploratory expenses and sharply lower prices for oil and
condensate.
LOWER OIL AND CONDENSATE SALES PRICE ($3.4 MILLION DECREASE). The Company's
sales price for oil and condensate averaged $13.93 per barrel during fiscal
1999's first quarter, down from $19.99 during the first quarter of the prior
year, reducing operating earnings by $3.4 million. The collapse in world oil
prices was largely the result of overproduction, very mild weather last winter
and the economic downturn in Southeast Asia.
HIGHER OIL AND CONDENSATE SALES VOLUMES ($1.5 MILLION INCREASE). Fiscal 1999's
production of oil and condensate increased 1,200 barrels per day (21%) to
6,900, increasing operating earnings by $1.5 million. This occurred largely
because of recent drilling and recompletion activity in Throckmorton County
(North Texas), the Lake Creek field (Southeast Texas) and Calcasieu Parish
(Southwest Louisiana), much of which resulted from 3-D seismic surveys
conducted in prior years.
-15-
<PAGE> 18
INCREASED EXPLORATORY EXPENSES ($9.0 MILLION DECREASE). As discussed elsewhere
in this Form 10-Q, the Company substantially increased its expenditures for 3-D
seismic surveys during fiscal 1999's first quarter. As a result, its
exploratory expenses totaled $11.4 million during that period, or $9.0 million
more than had been spent during the comparable prior-year period. While these
expenses cut into earnings, this spending should permit drilling to commence
this fall on prospects identified by these surveys. If successful, this is
expected to translate into additions to production, reserves and operating
earnings by early next year.
BRIDGEPORT PLANT CONTRACT CHANGE. Effective January 1, 1998, the Company began
operating under modified gas purchase and processing agreements for North Texas
gas production processed at the Bridgeport plant. Under this arrangement,
payments to producers (including the Company) include 82.5% of the value of
NGLs and residue gas, versus 45.6% and 100%, respectively, before the change.
As a result of the contract changes, exploration and production operating
earnings were increased by $.9 million while those of gas services were reduced
by $1.3 million.
GAS SERVICES OVERVIEW
Gas services operating earnings declined $4.2 million (to $12.8 million) during
the first quarter of fiscal 1999 largely because of price-related reductions in
gas processing margins and lower earnings from an MTBE plant partnership. The
negative impact of these items was partially offset by a $3.5 million gain from
a partnership's sale of the Brooks-Hidalgo gathering system.
NATURAL GAS PROCESSING - MARGIN DECREASES RESULTING FROM LOWER NGL PRICES ($5.0
MILLION DECREASE). The average price for NGLs produced during fiscal 1999's
first quarter of $11.44 per barrel was 15% below the prior-year period's
$13.46, reducing NGL revenues by $8.0 million. Because of the impact of the
lower NGL prices on producer payments, feedstock costs declined by $3.0
million, resulting in a net $5.0 million decrease in margins because of lower
NGL prices.
NATURAL GAS PROCESSING - LOWER NGL PRODUCTION VOLUMES ($.6 MILLION DECREASE).
NGL production volumes for the three months ended April 30, 1998 averaged
45,500 barrels per day, down 2% from the comparable period of the prior year,
reducing operating earnings by $.6 million. Improved volumes at the Company's
Bridgeport and other North Texas plants (resulting from increases in the
Company's North Texas natural gas production and the acquisition of a small
gathering system) were more than offset by decreases for plants serving the
45%-owned Ferguson Burleson rich-gas system because of natural production
declines for wells connected to that system.
EQUITY IN EARNINGS OF MTBE PLANT PARTNERSHIP ($1.4 MILLION DECREASE). This
unfavorable variance resulted primarily from increased downtime in fiscal 1999.
The plant was shut down on January 31, 1998 for planned maintenance and,
because of unexpected complications in repairing a turbine, remained down for
much of the month of February; the plant experienced no downtime during the
prior-year period.
OTHER
INTEREST EXPENSE ATTRIBUTABLE TO CONTINUING OPERATIONS ($3.1 MILLION DECREASE).
Total interest expense during fiscal 1999's first quarter was $4.5 million
below the $12.1 million incurred in the comparable prior-year period due
principally to the repurchase during fiscal 1998's third quarter of $185.7
million of 9 1/4% senior notes. However, $7.6 million of interest expense in
the prior-year period (versus none this year) was attributable to discontinued
operations, resulting in a net $3.1 million period-to-period increase in
interest expense attributable to continuing operations.
PERFORMANCE UNIT EXPENSE ACCRUALS ($1.4 MILLION DECREASE). In the fiscal 1999
period, expense accruals totaling $1.4 million were recorded applicable to a
plan adopted in December 1997 that awarded performance units to mid-level
managerial and professional employees. Individuals holding these units on March
31, 1999 are to receive cash compensation equal to the closing price of the
Company's Class B Common Stock on that date times the number of units awarded
them. Compensation expense is being accrued ratably over the life of the
outstanding units.
-16-
<PAGE> 19
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
See Note 6 of Notes to Unaudited Consolidated Financial Statements.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No exhibits are filed with this report.
(b) No reports were filed on Form 8-K during the three-month period
ended April 30, 1998.
-17-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MITCHELL ENERGY & DEVELOPMENT CORP.
-----------------------------------
(Registrant)
Dated: June 5, 1998 By: /s/ Philip S. Smith
--------------------------------
Philip S. Smith
Senior Vice President - Administration
and Chief Financial Officer
-18-
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
27 Financial Data Schedules
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS 6-MOS 3-MOS YEAR
<FISCAL-YEAR-END> JAN-31-1999 JAN-31-1998 JAN-31-1998 JAN-31-1998 JAN-31-1997
<PERIOD-END> APR-30-1998 OCT-31-1997 JUL-31-1997 APR-30-1997 JAN-31-1997
<CASH> 26,545 207,013 575,786 47,012 75,825
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 96,978 119,284 84,039 79,713 149,918
<ALLOWANCES> 0 0 0 333 333
<INVENTORY> 12,365 19,852 12,825 9,016 10,072
<CURRENT-ASSETS> 157,156 355,157 678,493 142,262 335,346
<PP&E> 2,377,132 2,166,994 2,145,455 2,140,949 2,112,970
<DEPRECIATION> 1,353,799 1,317,988 1,326,798 1,350,082 1,337,041
<TOTAL-ASSETS> 1,210,579 1,280,121 1,572,150 1,512,451 1,668,272
<CURRENT-LIABILITIES> 167,781 220,621 265,734 184,604 348,987
<BONDS> 426,267 414,267 600,000 600,000 600,000
0 0 0 0 0
0 0 0 0 0
<COMMON> 5,386 5,386 5,386 5,386 5,386
<OTHER-SE> 394,114 420,507 480,865 553,347 549,901
<TOTAL-LIABILITY-AND-EQUITY> 1,210,579 1,280,121 1,572,150 1,512,451 1,668,272
<SALES> 172,392 569,458 345,333 169,731 903,233
<TOTAL-REVENUES> 172,392 569,458 345,333 169,731 906,677
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 154,949 505,485 320,045 143,472 717,770
<OTHER-EXPENSES> 9,238 12,831 11,914 5,324 32,375
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 7,649 19,534 9,281 4,530 22,775
<INCOME-PRETAX> 3,621 31,608 4,093 16,405 133,757
<INCOME-TAX> 1,326 10,613 833 5,684 47,456
<INCOME-CONTINUING> 2,295 20,995 3,260 10,721 86,301
<DISCONTINUED> 3,250 (59,683) (59,683) 5,756 16,925
<EXTRAORDINARY> 0 (13,250) 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 5,545 (51,938) (56,423) 16,477 103,226
<EPS-PRIMARY> .11<F1> (1.02)<F1> (1.10)<F1> .31<F1> 1.96<F1>
<EPS-DILUTED> .11<F2> (1.02)<F2> (1.10)<F2> .31<F2> 1.96<F2>
<FN>
<F1>
CLASS A .11 (1.02) (1.10) .31 1.96
CLASS B .12 (.98) (1.08) .32 2.01
<F2>
CLASS A .11 (1.02) (1.10) .31 1.96
CLASS B .12 (.98) (1.08) .32 2.01
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS YEAR
<FISCAL-YEAR-END> JAN-31-1997 JAN-31-1997 JAN-31-1997 JAN-31-1996
<PERIOD-END> OCT-31-1996 JUL-31-1996 APR-30-1996 JAN-31-1996
<CASH> 57,597 49,998 43,467 17,867
<SECURITIES> 0 0 0 0
<RECEIVABLES> 87,638 84,170 90,370 88,494
<ALLOWANCES> 333 318 439 439
<INVENTORY> 10,480 10,497 8,918 10,956
<CURRENT-ASSETS> 256,051 237,244 235,482 219,163
<PP&E> 2,080,732 2,060,441 2,040,905 2,040,539
<DEPRECIATION> 1,334,408 1,337,684 1,327,056 1,321,004
<TOTAL-ASSETS> 1,581,782 1,556,749 1,561,084 1,599,183
<CURRENT-LIABILITIES> 316,697 303,461 281,678 182,752
<BONDS> 600,000 600,000 642,000 795,000
0 0 0 0
0 0 0 0
<COMMON> 5,386 5,386 5,386 5,386
<OTHER-SE> 515,887 503,495 490,064 476,517
<TOTAL-LIABILITY-AND-EQUITY> 1,581,782 1,556,749 1,561,084 1,599,183
<SALES> 591,574 392,564 195,637 902,919
<TOTAL-REVENUES> 595,018 396,008 199,081 902,919
<CGS> 0 0 0 0
<TOTAL-COSTS> 484,841 316,306 156,688 681,684
<OTHER-EXPENSES> 20,693 11,188 6,298 37,762
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 16,848 13,172 5,745 27,341
<INCOME-PRETAX> 72,636 55,342 30,350 156,132
<INCOME-TAX> 25,509 19,097 10,519 55,420
<INCOME-CONTINUING> 47,127 36,245 19,831 100,712
<DISCONTINUED> 15,839 7,798 3,418 (63,583)
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 62,966 44,043 23,249 37,129
<EPS-PRIMARY> 1.19<F1> .83<F1> .44<F1> .69<F1>
<EPS-DILUTED> 1.19<F2> .83<F2> .44<F2> .69<F2>
<FN>
<F1>
CLASS A 1.19 .83 .44 .69
CLASS B 1.23 .86 .45 .74
<F2>
CLASS A 1.19 .83 .44 .69
CLASS B 1.23 .86 .45 .74
</FN>
</TABLE>
