<PAGE> 1
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 QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______
Commission file number: 333-29001-01
ENERGY CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
WEST VIRGINIA 84-1235822
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4643 SOUTH ULSTER STREET, SUITE 1100
DENVER, COLORADO 80237
(Address of principal executive offices and zip code)
(303) 694-2667
(Registrant's telephone number, including area code)
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 Registrant became subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934 on August 13, 1997.
The number of shares of the Registrant's common stock, par value $1.00 per
share, outstanding at September 30, 1997 was 662,902 shares.
<PAGE> 2
ENERGY CORPORATION OF AMERICA
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1997 (unaudited) and June 30, 1997 ..................................................3
Unaudited Condensed Consolidated Statements of Operations
For the three months ended September 30, 1997 and 1996 ............................................5
Unaudited Condensed Consolidated Statements of Cash Flows
For the three months ended September 30, 1997 and 1996 ............................................6
Notes to Unaudited Condensed Consolidated Financial Statements .........................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation ................................................................8
PART II OTHER INFORMATION
Item 1. Legal Proceedings ..................................................................................10
Item 2. Changes In Securities ..............................................................................10
Item 3. Defaults Upon Senior Securities ....................................................................10
Item 4. Submission of Matters to a Vote of Security Holders ................................................10
Item 5. Other Information ..................................................................................10
Item 6. Exhibits and Reports on Form 8-K ...................................................................10
Signatures .................................................................................................11
</TABLE>
-2-
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENERGY CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
(UNAUDITED) *
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 25,177 $ 20,814
Accounts receivable, net of allowance for doubtful accounts of
$1,005 and $1,660, respectively 30,593 37,923
Gas in storage, at average cost 26,323 12,810
Prepaid and other current assets 9,405 8,646
-------- --------
Total current assets 91,498 80,193
-------- --------
Property, plant and equipment, net of accumulated depreciation
depletion and amortization of $92,939 and $89,492, respectively 315,009 313,971
-------- --------
OTHER ASSETS:
Deferred financing costs, net of accumulated amortization of
$697 and $452, respectively 9,957 9,956
Deferred utility charges 19,321 18,259
Other 11,415 12,378
-------- --------
Total other assets 40,693 40,593
TOTAL $447,200 $434,757
======== ========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements
-3-
<PAGE> 4
ENERGY CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1997 1997
(UNAUDITED) *
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 41,291 $ 31,046
Short-term debt 34,765 15,724
Accrued taxes, other than income 7,074 7,774
Overrecovered gas costs 8,910 9,650
Other current liabilities 12,738 15,469
--------- ---------
Total current liabilities 104,778 79,663
LONG-TERM OBLIGATIONS, LESS CURRENT PORTION:
Long-term debt 260,078 260,089
Gas delivery obligation and deferred trust revenue 17,934 18,580
Deferred income taxes 27,687 32,018
Other long-term obligations 13,897 14,000
--------- ---------
Total liabilities 424,374 404,350
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 1,662 1,809
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, par value $1.00; 2,000 shares authorized;
714 and 711 shares issued in 1997 and 1996, respectively 714 714
Additional paid-in capital 4,221 4,221
Retained earnings 19,986 27,249
Treasury stock and notes receivable arising from issuance
of common stock (3,656) (3,435)
Cumulative foreign currency translation adjustment (101) (151)
--------- ---------
Total Stockholders' equity 21,164 28,598
--------- ---------
TOTAL $ 447,200 $ 434,757
========= =========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these condensed financial
statements
-4-
<PAGE> 5
ENERGY CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
REVENUES:
Utility gas sales and transportation $ 15,068 $ 15,373
Oil and gas related sales and other 47,773 53,924
-------- --------
62,841 69,297
-------- --------
COSTS AND EXPENSES:
Utility gas purchased 9,808 12,294
Oil and gas related costs 42,009 45,135
Utility operations and maintenance 5,222 5,137
General and administrative 4,076 4,238
Depreciation, depletion and amortization 3,671 3,797
Other operating expenses 3,419 2,211
-------- --------
68,205 72,812
-------- --------
Loss from operations (5,364) (3,515)
OTHER (INCOME) AND EXPENSE:
Interest 6,528 5,671
Other (236) (102)
-------- --------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (11,656) (9,084)
PROVISION (BENEFIT) FOR INCOME TAXES (4,403) (3,540)
-------- --------
LOSS BEFORE MINORITY INTEREST (7,253) (5,544)
MINORITY INTEREST 10 79
-------- --------
NET LOSS $ (7,263) $ (5,623)
======== ========
NET LOSS PER COMMON SHARE $ (10.91) $ (8.26)
======== ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 666 680
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
-5-
<PAGE> 6
ENERGY CORPORATION OF AMERICA AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (7,263) $ (5,623)
-------- --------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion, depreciation and amortization 3,671 3,858
Other, net (4,977) (2,150)
-------- --------
(8,569) (3,915)
CHANGES IN ASSETS AND LIABILITIES:
Accounts receivable 8,650 15,581
Gas in storage (13,513) (15,127)
Other assets (1,210) (11,809)
Accounts payable and other current liabilities 11,645 237
Taxes payable (2,149) (208)
Overrecovered gas costs (740) (784)
Other (2,607) (3,106)
-------- --------
Net cash provided (used) by operating activities (8,493) (19,131)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (5,920) (7,885)
Other investing activities 213 821
-------- --------
Net cash used in investing activities (5,707) (7,064)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 37,400
Principal payments on long-term debt (48,440)
Short-term borrowings, net 19,041 27,408
Other financing activities (478) (704)
-------- --------
Net cash provided by (used in) financing activities 18,563 15,664
-------- --------
Net increase (decrease) in cash and cash equivalents 4,363 (10,531)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,814 14,197
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 25,177 $ 3,666
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements
-6-
<PAGE> 7
ENERGY CORPORATION OF AMERICA
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. Nature of Organization
Energy Corporation of America (the "Company") was formed in June 1993
through an exchange of shares with the common stockholders of Eastern
American Energy Corporation. The Company is an independent integrated
energy company that, through its subsidiaries, is primarily engaged in
operating a natural gas distribution system in West Virginia and oil
and gas operations in West Virginia and Pennsylvania. The Company also
is engaged in the exploration and production of oil and natural gas in
other parts of the United States, primarily in the Rocky Mountains, and
New Zealand. All references to the "Company" include Energy Corporation
of America and its consolidated subsidiaries.
2. Accounting Policies
Reference is hereby made to the Company's Annual Report on Form 10-K
for 1997, which contains a summary of major accounting policies
followed in preparation of its consolidated financial statements. These
policies were also followed in preparing the quarterly report included
herein.
The management of the Company believes that all adjustments (consisting
of only normal recurring accruals) necessary for a fair presentation of
the results of such interim periods, included herein, have been made.
The results of operations for the three months ended September 30, 1997
are not necessarily indicative of the results to be expected for the
full year.
3. Contingencies
The Company is involved in various legal actions and claims arising in
the ordinary course of business. Management does not expect these
matters to have a material adverse effect on the Company's financial
position.
4. Long-Term Debt
At September 30, 1997, June 30, 1997 and September 30, 1996 long-term
debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30 June 30 September
1997 1997 1996
<C> <S> <S> <S>
ECA senior subordinate notes, interest at 9.5% payable
semi-annually, due May 15, 2007 $ 200,000 $ 200,000
Eastern revolving credit facility $ 140,017
Westside revolving facility 18,500
ESC senior secured note, interest at 10.75% payable
quarterly, due October 1, 2005 35,000
Mountaineer unsecured senior notes, interest at 7.59%
payable semi-annually, due October 1, 2010 60,000 60,000 60,000
Installment notes payable, collateralized by deeds of trust,
at interest rates ranging from 7% to 8%, respectively 133 144 144
---------- ---------- ---------
260,133 260,144 253,661
Less current position (55) (55) (55)
---------- ---------- ---------
260,078 260,089 253,606
========== ========== =========
</TABLE>
-7-
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------
Management's discussion and analysis of changes in the Company's
financial condition, including results of operations and liquidity and capital
resources during the three-month periods ended September 30, 1997 and 1996,
respectively, are presented below.
RESULTS OF OPERATIONS
NET INCOME. The Company recorded a net loss of $7,263,000 for the
three months ending September 30, 1997, compared to a net loss of $5,623,000
for the same period in 1996. The increase in net loss for the periods is
primarily attributable to a $6,456,000 decrease in revenue partially offset by a
$4,607,000 decrease in costs and expenses.
REVENUES. Total revenues decreased $6,456,000 or 9.32% during the
periods. The decrease was due to a 1.98% decrease in utility gas sales and
transportation, a 9.44% decrease in gas marketing and pipeline sales and a
29.96% decrease in oil and gas sales. Revenues from utility gas sales and
transportation decreased 1.98% from $15,373,000 during the quarter ending
September 30, 1996 to $15,068,000 in the quarter ending September 30, 1997. The
decrease is primarily attributable to lower gas sales to industrial customers as
well as lower transportation revenues resulting from lower gas usage by
commercial customers and a decrease in the amount of firm capacity reservation
fees by transportation customers. Revenues from gas marketing and pipeline sales
decreased 9.44% from $41,493,000 during the quarter ending September 30, 1996 to
$37,577,000 in the quarter ending September 30, 1997. The decrease in revenue is
primarily attributable to a 9.58% decline in marketed volumes from 16.7 Bcfe at
September 30, 1996 to 15.1 Bcfe at September 30, 1997. Revenues from oil and gas
sales decreased 29.96% from $8,706,000 at September 30, 1996 to $6,359,000 at
September 30, 1997. The decrease in revenue is primarily attributable to a
26.47% decline in Mcfe units sold from 3.4 Bcfe at September 30, 1996 to 2.5
Bcfe at September 30, 1997, as well as, a 3.08% decline in average unit sales
price from $2.60 per Mcfe to $2.52 per Mcfe for the respective periods. The
26.47% decline in units sold in the two periods was as a result of the sale of
the Company's limited partnership interests in Westside Operating Partners
Limited Partnership. The sale occurred in March 1997. For the quarter ending
September 30, 1996 approximately .9 Bcfe and $2,496,000 in oil and gas revenue
was attributable to the limited partnership interests sold.
COSTS AND EXPENSES. The Company's costs and expenses decreased
$4,607,000 or 6.33% during this period primarily as the result of a $2,486,000
decline in the cost of utility gas purchased, a $1,523,000 decline in gas
marketing costs and a $1,599,000 decline in the field and lease operating
expense partially offset by a $965,000 impairment and exploratory charge to
current period operations. The decline in the cost of utility gas purchased was
the result of a $2,840,000 decrease in demand charges resulting from a rate
settlement with Columbia Gas Transmission in April 1997, partially offset by an
increase in commodity gas purchase costs of $355,000 or $.38/Mcf sold. The
decline in gas marketing and pipeline costs was the result of an 8.09% decline
in marketed volumes partially offset by a 5.83% increase in per unit gas costs.
The $1,599,000 decline in field and lease operating expense was primarily the
result of the reduction in operating costs of $1,138,000 associated with the
sale of the limited partnership interests previously discussed. General and
administrative and operations and
-8-
<PAGE> 9
maintenance expenses were comparable between the two periods. Depreciation and
amortization related to non-depleting assets totaled $1,533,000 for the quarter
ending September 30, 1997 and $1,460,000 for the quarter ending September 30,
1996. Depletion of oil and gas properties total $2,138,000 and $2,337,000
respectively for the periods. Impairment and exploratory costs increased
$964,000 for the current period as a result of the abandonment of certain
exploratory prospects, impairment of certain leasehold positions and dry hole
costs associated with two drilling prospects.
INTEREST EXPENSE. Interest expense increased 15.11% from $5,671,000 to
$6,528,000 in the current year. The increase was due to higher average balance
of short-term borrowings outstanding during the current period and higher
short-term interest rates, as well as higher effective interest rates and
greater outstanding long-term debt balances between the two periods.
INCOME TAX BENEFIT. The provision for income taxes (benefit) increased
$863,000 as a result of an increase in pre-tax book operating loss.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS. Net cash provided by operating activities is primarily
affected by oil and gas prices, seasonality, heating degree days, utility rate
regulation, marketing margins and the Company's success in drilling activities.
The Company used approximately $8,493,000 in net cash for operations for the
three month period ending September 30, 1997. The seasonality of the Company's
utility operation accounted for the major portion of this usage. Additionally
the Company invested approximately $3,600,000 in oil and gas exploration
activities and $2,300,000 in utility plant improvements. The net cash used in
operations and the net cash invested in asset additions were funded primarily
through short-term borrowings. The Company plans to continue to pursue capital
investment opportunities both domestically and internationally. Management
believes that the Company has adequate capital resource to meet its operating
requirements and to pursue capital investment opportunities.
CREDIT FACILITIES. The Company and its operating subsidiaries of the
Company have (i) a $50 million secured, revolving credit facility under which no
amounts were outstanding at September 30, 1997 and (ii) $73 million in
unsecured, revolving bank lines of credit, under which approximately $35 million
was drawn at September 30, 1997.
-9-
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any legal actions that would materially
affect the Company's operations or financial statements.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter
ended September 30, 1997.
-10-
<PAGE> 11
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, in the City of Denver, State of
Colorado, on the ____ day of November, 1997.
ENERGY CORPORATION OF AMERICA
By: /s/ JOHN MORK
-----------------------------------
John Mork
Chief Executive Officer and Director
By: /s/ JOSEPH E. CASABONA
-----------------------------------
Joseph E. Casabona
Executive Vice President and Director
By: /s/ J. MICHAEL FORBES
-----------------------------------
J. Michael Forbes
Vice President and Treasurer
-11-
<PAGE> 12
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS ON PAGES 2 - 5 OF THE COMPANY'S
SEPTEMBER 30, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 25,177
<SECURITIES> 0
<RECEIVABLES> 31,598
<ALLOWANCES> (1,005)
<INVENTORY> 26,323
<CURRENT-ASSETS> 102,261
<PP&E> 407,948
<DEPRECIATION> 92,939
<TOTAL-ASSETS> 462,964
<CURRENT-LIABILITIES> 109,478
<BONDS> 260,078
0
0
<COMMON> 714
<OTHER-SE> 20,450
<TOTAL-LIABILITY-AND-EQUITY> 462,964
<SALES> 62,841
<TOTAL-REVENUES> 63,077
<CGS> 51,817
<TOTAL-COSTS> 68,205
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,528
<INCOME-PRETAX> (11,656)
<INCOME-TAX> (4,403)
<INCOME-CONTINUING> (7,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,263)
<EPS-PRIMARY> (10.93)
<EPS-DILUTED> 0.00
</TABLE>
