UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______
COMMISSION FILE NUMBER 1-3551
EQUITABLE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0464690
(State of incorporation or organization) (IRS Employer Identification No.)
420 BOULEVARD OF THE ALLIES, PITTSBURGH, PENNSYLVANIA 15219
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (412) 261-3000
------------
NONE
(Former name, former address and former fiscal year,
if changed since last report)
------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the close of the period covered by this report.
Outstanding at
Class March 31, 1998
Common stock, no par value 37,095,245 shares
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL STATEMENTS:
Statements of Consolidated Income for the Three
Months Ended March 31, 1998 and 1997 1
Statements of Condensed Consolidated Cash Flows
for the Three Months Ended March 31, 1998 and
1997 2
Consolidated Balance Sheets, March 31, 1998,
and December 31, 1997 3 - 4
Notes to Consolidated Financial Statements 5 - 6
Information by Business Segment 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 15
PART II. OTHER INFORMATION 16
SIGNATURE 17
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(Thousands except per share amounts)
Three Months Ended
March 31,
1998 1997
------------------------------
RESTATED
<S> <C> <C>
Operating revenues $ 299,367 $ 312,481
Cost of sales 167,539 175,909
----------- -----------
Net operating revenues 131,828 136,572
----------- -----------
OPERATING EXPENSES:
Operation 46,424 49,568
Maintenance 5,244 6,672
Depreciation, depletion and amortization 19,652 16,977
Taxes other than income 11,666 14,018
----------- -----------
Total operating expenses 82,986 87,235
----------- -----------
Operating income 48,842 49,337
Other income (76) 157
Interest charges 10,590 9,723
----------- -----------
Income before income taxes 38,176 39,771
Income taxes 13,524 14,533
----------- -----------
INCOME FROM CONTINUING OPERATIONS 24,652 25,238
Income (loss) from discontinued operations after taxes (4,604) 2,552
----------- -----------
NET INCOME $ 20,048 $ 27,790
=========== ===========
Average common shares outstanding 36,934 35,462
=========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK - BASIC/DILUTED
Continuing operations $ 0.66 $ 0.71
Discontinued operations (0.12) 0.07
----------- -----------
Net income $ 0.54 $ 0.78
=========== ===========
DIVIDENDS PER SHARE OF COMMON STOCK $ 0.59 $ 0.59
=========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
(Thousands)
Three Months Ended
March 31,
1998 1997
-------------------------------
RESTATED
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES $ 47,656 $ 58,095
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (25,656) (18,682)
Proceeds from sale of property - 216
Net noncurrent assets held for sale (4,011) (1,150)
------------ ------------
Net cash used in investing activities (29,667) (19,616)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt (5,000) -
Increase (decrease) in short-term loans (28,790) 15,432
Dividends paid (21,878) (20,600)
Proceeds from issuance of common stock 1,405 40
------------ ------------
Net cash used in financing activities (54,263) (5,128)
------------ ------------
Net increase (decrease) in cash and cash equivalents (36,274) 33,351
Cash and cash equivalents at beginning of period 69,442 14,737
------------ ------------
Cash and cash equivalents at end of period $ 33,168 $ 48,088
============ ============
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest (net of amount capitalized) $ 16,850 $ 12,679
============ ============
Income taxes $ 1,509 $ (5,227)
============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31,
ASSETS March 31, December 31,
1998 1997
----------------------------------
(Thousands)
----------------------------------
RESTATED
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 33,168 $ 69,442
Accounts receivable 323,964 360,713
Unbilled revenues 21,133 25,935
Inventory 21,181 37,156
Deferred purchased gas cost 34,829 44,053
Derivative commodity instruments, at fair value 81,782 82,912
Prepaid expenses and other 69,467 64,523
------------ --------------
Total current assets 585,524 684,734
------------ --------------
PROPERTY, PLANT AND EQUIPMENT 1,878,647 1,862,412
Less accumulated depreciation and depletion 692,219 675,410
------------ --------------
Net property, plant and equipment 1,186,428 1,187,002
------------ --------------
NET ASSETS OF DISCONTINUED OPERATIONS 240,544 238,182
------------ --------------
OTHER ASSETS 225,289 218,133
------------ --------------
Total $2,237,785 $2,328,051
============ ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS EQUITY March 31, December 31,
1997 1997
----------------------------------
(Thousands)
----------------------------------
RESTATED
<S> <C> <C>
CURRENT LIABILITIES:
Short-term loans $ 252,654 $ 286,444
Accounts payable 232,969 288,192
Derivative commodity instruments, at fair value 79,065 79,012
Other current liabilities 120,039 92,053
------------ --------------
Total current liabilities 684,727 745,701
------------ --------------
LONG-TERM DEBT 417,809 417,564
Deferred and other credits 308,333 341,266
Commitments and contingencies - -
CAPITALIZATION:
Common stockholders' equity:
Common stock, no par value, authorized 80,000
shares; shares issued March 31,1998, 37,095;
December 31, 1997, 36,929 275,105 269,878
Retained earnings 553,415 555,246
Treasury stock, shares at cost March 31, 1998,
56; December 31, 1997, 56 (1,551) (1,551)
Accumulated other comprehensive income (53) (53)
------------ --------------
Total common stockholders' equity 826,916 823,520
------------ --------------
Total $2,237,785 $2,328,051
============ ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</TABLE>
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. The accompanying financial statements should be read in conjunction with
the Company's 1997 Annual Report and Form 10-K.
B. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position as of March 31, 1998 and 1997, and
the results of operations and cash flows for the three months then ended.
All adjustments are of a normal, recurring nature unless otherwise
indicated.
C. The results of operations for the three month periods ended March 31,
1998 and 1997, are not indicative of results for a full year because of
the seasonal nature of the Company's natural gas distribution operations.
D. In April 1998 management adopted a formal plan to sell the Company's
natural gas midstream operations. The operations include an integrated
gas gathering, processing and storage system in Louisiana and a natural
gas and electricity marketing business based in Houston. The condensed
consolidated financial statements have been restated to classify these as
discontinued operations, in accordance with generally accepted accounting
principles. Management believes that the operations may be sold as early
as the third quarter of 1998.
Selected financial information for the midstream operations for the three
months ended March 31 is shown below:
(thousands) 1998 1997
---- ----
Revenues 389,347 273,863
Operating income (loss) (5,444) 5,143
Proceeds from the sale of the midstream operations are expected to be
adequate to exceed future estimated losses from operations and costs of
disposal; therefore, no additional loss on disposal has been recognized
in conjunction with the discontinued operations. Interest expense
allocated to the income (losses) from discontinued operations was $1.8
million in the first quarter of 1998 and $1.6 million in the first
quarter of 1997.
<PAGE>
Results from discontinued operations were reported net of income tax
expense (benefit) of $(2.3) million and $1.5 million in the three months
ended March 31, 1998 and 1997, respectively. The net assets of
discontinued operations are summarized as follows:
March 31, 1998 December 31, 1997
------------------------------------
(millions)
Property, plant and equipment $ 322.9 $ 319.5
Less: Deferred tax liabilities 82.4 81.3
------------ ------------
$ 240.5 $ 238.2
============ ============
E. In April 1998 $125 million of 7.35% Trust Preferred Capital Securities
were issued. The capital securities were issued through a subsidiary,
Equitable Resources Capital Trust I, established for the purpose of
issuing the capital securities and investing the proceeds in 7.35% Junior
Subordinated Debentures issued by the Company. The capital securities
have a mandatory redemption date of April 15, 2038; however, at the
Company's option, the securities may be redeemed on or after April 23,
2003. Proceeds were used to reduce short-term debt outstanding.
F. Comprehensive Income
In June 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130 Reporting Comprehensive
Income. Statement 130 established new rules for the reporting and display
of comprehensive income and its components; however, the adoption of this
Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity,
to be reported as other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of
Statement 130.
During the first quarter of 1998 and 1997, total comprehensive income
(which includes net income) amounted to $20,048 and $28,114,
respectively.
G. Software Costs
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1) requires the
capitalization of certain costs incurred in connection with developing or
obtaining software for internal use. Qualifying software costs are
capitalized and amortized over the estimated useful life of the software.
The adoption of SOP 98-1 did not have a material impact on the Company's
financial position or results of operations.
H. Segment Disclosure
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131),
establishes new standards for reporting information about operating
segments in interim and annual financial statements. This statement is
effective for 1998 year-end financial statements. Management does not
anticipate that the adoption of this statement will have a significant
effect on the Company's reported segments.
I. At March 31, 1998, 8,977,000 shares of Common Stock were reserved as
follows: 460,000 shares for issuance under the Key Employee Restricted
Stock Option and Stock Appreciation Rights Incentive Compensation Plan,
1,726,000 shares for issuance under the Long-Term Incentive Plan, 76,000
shares for issuance under the Nonemployee Directors' Stock Incentive
Plan, 38,000 shares for issuance under the Company's Dividend
Reinvestment and Stock Purchase Plan, and 6,677,000 shares for possible
use in connection with future acquisitions.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
INFORMATION BY BUSINESS SEGMENT
Three Months Ended
March 31,
------------------------------------------
1998 1997
------------------------------------------
(Thousands)
------------------------------------------
RESTATED
<S> <C> <C>
OPERATING REVENUES (CONTINUING OPERATIONS):
Supply and logistics $ 44,542 $ 48,084
Utilities 158,670 194,096
Services 117,801 108,602
Sales between segments (21,646) (38,301)
-------------- --------------
Total $299,367 $312,481
============== ==============
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS:
Supply and logistics $ 13,445 $ 11,030
Utilities 37,173 39,273
Services (1,776) (966)
-------------- --------------
Total $ 48,842 $ 49,337
============== ==============
CAPITAL EXPENDITURES (CONTINUING OPERATIONS):
Supply and logistics $ 17,207 $ 9,970
Utilities 8,013 8,383
Services 436 329
-------------- --------------
Total $ 25,656 $ 18,682
============== ==============
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
THREE MONTHS ENDED MARCH 31, 1998
VS. THREE MONTHS ENDED MARCH 31, 1997
Equitable's consolidated net income for the quarter ended March 31, 1998
was $20.0 million, or $0.54 per share, compared with net income of $27.8
million, or $0.78 per share, for the quarter ended March 31, 1997.
In April 1998 the Company adopted a formal plan to sell it's natural gas
midstream operations. The operations include an integrated gas gathering,
processing and storage system in Louisiana and a natural gas and electricity
marketing business based in Houston. The condensed consolidated financial
statements have been restated to classify these as discontinued operations, in
accordance with generally accepted accounting principles. Management believes
that the operations may be sold as early as the third quarter of 1998.
Equitable's income from continuing operations for the three months ended
March 31 1998, was $24.7 million, or $0.66 per share, compared to $25.2 million,
or $0.71 per share for the three months ended March 31, 1997. Overall, the
current period results were adversely impacted by weather in the Company's
service territory that was 15 percent warmer than 1997 and 19 percent warmer
than normal. The latest quarter's results were also affected by lower revenues
from crude oil sales and lower margins on marketed natural gas. The negative
impact of the weather was mitigated by a new retail rate design and base rate
increase implemented by the Company's distribution division in the fourth
quarter of 1997. Results for the current quarter also benefited from higher
revenues from produced natural gas, due to an improved net hedge position and
slightly higher sales volumes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
SUPPLY AND LOGISTICS
Supply and Logistics' continuing operations are comprised of the
exploration and production of natural gas and crude oil and the processing and
sale of natural gas liquids through operations focused in the offshore Louisiana
Gulf Coast and Appalachian regions.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
SUPPLY AND LOGISTICS 1998 1997
- ------------------------------------------------------------------------------------
(Thousands)
------------------------------
RESTATED
<S> <C> <C>
CONTINUING OPERATIONS
Operating Revenues
Produced Natural Gas $ 32,169 $ 28,785
Produced Natural Gas Liquids 5,829 5,547
Crude Oil 4,166 7,488
Other 2,378 6,264
----------- -----------
Total Revenues 44,542 48,084
Cost of Energy Purchased 3,794 4,056
----------- -----------
Net Operating Revenues 40,748 44,028
Operating Expenses:
Production 7,065 8,866
Exploration 1,309 1,693
Gas Processing 1,252 1,320
Other 6,421 11,000
Depreciation, Depletion and Amortization 11,256 10,119
----------- -----------
Total Operating Expenses 27,303 32,998
----------- -----------
Operating Income from Continuing Operations $ 13,445 $ 11,030
=========== ===========
Sales Quantities:
Produced Natural Gas (MMcf) 12,994 12,728
Crude Oil (MBls) 264 411
Natural Gas Liquids (thousands of gallons) 18,211 12,152
DISCONTINUED OPERATIONS
Operating Revenues 389,347 273,863
Operating Income (loss) (5,444) 5,143
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998
VS. THREE MONTHS ENDED MARCH 31, 1997
Net operating revenues for the three months ended March 31, 1998,
decreased $3.3 million, due to the sale of the Company's Union Drilling division
in the fourth quarter of 1997 ($3.3 million), and a decline in crude oil prices
($1.3 million) and volumes ($2.0 million). These factors were partially offset
by increased revenues from a 0.3 billion cubic feet (Bcf) increase in natural
gas production ($0.5 million) and a 10% increase in the net effective sales
price ($2.8 million) due to improved overall hedged position. In addition, the
revenues lost due to the sale of the Union Drilling division were more than
offset by related operating expense declines of $3.7 million.
The natural gas production increases for 1998 compared to 1997 result
from a 0.4 Bcf increase in the Company's Appalachian region (4%), and a 1.7 Bcf
increase in offshore Gulf production (108%), which together more than offset the
1.8 Bcf decrease due to the third quarter 1997 sale of the Company's western
properties.
The decline in crude oil production reflects the 1997 sale of the
Company's western properties, which held the majority of the Company's oil
reserves. The increase in natural gas liquids production is due to a full three
months operations in the current year compared to 1997 when the Company's
processing plant was idle for a month of scheduled maintenance.
In addition to the $3.7 million operating expense savings in the first
quarter of 1998 due to the sale of Union Drilling, the current quarter benefited
from more than $4 million savings compared to the first quarter of 1997 due to
the sale of the western properties. This decrease includes a $2 million
reduction in production expenses, and $2 million reduction in G & A expenses.
These savings are partially offset by a $1 million increase in production
expenses in the Gulf due to increased activities and a $1.2 million increase in
depreciation, depletion, and amortization expenses due to higher depletion rates
associated with Gulf production compared to the rates for western production in
1997.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
UTILITIES
Utilities operations are comprised of the sale and transportation of
natural gas to retail customers at state-regulated rates, interstate
transportation and storage of natural gas subject to federal regulation and the
marketing of natural gas.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
UTILITIES 1998 1997
- --------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
OPERATING REVENUES
Residential Gas Sales $104,801 $131,609
Commercial Gas Sales 10,650 16,776
Industrial and Utility Gas Sales 11,612 16,933
Marketed Gas Sales 4,556 6,218
Transportation Service 22,617 18,485
Storage Service 2,445 1,908
Other 1,989 2,167
----------- -----------
Total Revenues 158,670 194,096
COST OF ENERGY PURCHASED 75,228 105,786
----------- -----------
Net Operating Revenues 83,442 88,310
OPERATING EXPENSES:
Operations and Maintenance 39,255 42,390
Depreciation, Depletion and Amortization 7,014 6,647
----------- -----------
Total Operating Expenses 46,269 49,037
----------- -----------
OPERATING INCOME $ 37,173 $ 39,273
=========== ===========
SALES QUANTITIES (MMCF):
Residential Gas Sales 10,670 12,896
Commercial Gas Sales 1,112 1,673
Industrial and Utility Gas Sales 4,618 5,431
Marketed Gas Sales 2,204 1,965
Transportation Deliveries 18,660 20,489
HEATING DEGREE DAYS 2,310 2,723
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998
VS. THREE MONTHS ENDED MARCH 31, 1997
Net operating revenues for the quarter ended March 31, 1998, decreased
5.5% to $83.4 million, primarily as a result of weather 15% warmer than last
year in the Company's western Pennsylvania, area distribution operations. The
effect of the weather on net operating revenues ($9 million) was substantially
mitigated by the effect of the base rate increases for Pennsylvania residential
and commercial customers and new rate design put in place by the Company in
October 1997 ($5.1 million benefit).
Approximately $1 million of the increase in transportation revenues
compared to 1997 also results from a base rate increase in 1997, with the
balance attributable to the movement of commercial and industrial customers from
sales to transportation service with minimal impact on the Company's margins.
The decrease in transportation volumes compared to 1997 occurred in the
Company's interstate pipeline operations. Increases and decreases in pipeline
volumes have little impact on operating results, as operating margins in these
operations are derived from fixed capacity charges for pipeline availability.
Marketed gas revenues declined 27% in the current period, as natural
gas commodity price decreases of 35% offset volume increases of 12% compared to
1997. Taken together, these factors resulted in a $0.4 million decline in net
operating revenues in 1998.
Operating expenses in the current period reflect the benefit of a mild
winter, as lower sales revenues are offset by savings in gross receipts tax
($1.7 million), uncollectible accounts and customer assistance programs ($1.0
million, combined).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SERVICES
Services' operations are comprised of two business lines: (1) marketing
of natural gas and (2) comprehensive energy services provided to industrial,
commercial, institutional and governmental customers. Energy services includes
the development, implementation, financing and management of energy and water
efficiency programs through the use of performance-based contracting activities,
the development and construction of cogeneration and independent power
production facilities and central plant facilities management. Beginning in
1995, this business segment was built through internal development and a series
of acquisitions of private energy performance and facilities management
contractors.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
SERVICES 1998 1997
- -------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C>
Operating Revenues
Marketed Natural Gas $ 98,869 $105,719
Energy Service Contracting 18,932 2,883
----------- ------------
Total Revenues 117,801 108,602
Cost of Energy Purchased 97,161 102,583
Energy Service Contract Costs 12,143 1,313
----------- ------------
Net Operating Revenues 8,497 4,706
Operating Expenses:
Other 8,892 5,462
Depreciation, Depletion and Amortization 1,381 210
----------- ------------
Total Operating Expenses 10,273 5,672
----------- ------------
Operating Income (Loss) $ (1,776) $ (966)
=========== ============
Sales Quantities:
Marketed Natural Gas (MMcf) 35,930 30,562
</TABLE>
Net operating revenues increased 81% for the quarter ended March 31
1998, compared to the same period in 1997. This segment's energy management and
performance contracting operations experienced substantial growth in revenues,
due to the acquisition of NORESCO and internally generated growth, as operations
have moved forward from contract awards to construction projects over the past
12 months.
This segment's energy marketing business experienced a $1.4 million
reduction in margin in the first quarter of 1998, as energy prices fell and
competition increased for the more profitable commercial customers.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
SERVICES (CONTINUED)
Operating expenses for this group increased $4.6 million, primarily in
the energy management and performance contracting businesses, due to the
acquisition of NORESCO ($2.0 million), and the start-up of the energy marketing
operations of Equitable Energy, a new unregulated retail marketing group in the
Company's southwestern Pennsylvania distribution area ($0.5 million).
Depreciation, depletion, and amortization also increased due to $0.8 million
amortization of goodwill associated with NORESCO.
CAPITAL RESOURCES AND LIQUIDITY
CASH FLOWS
Cash required for operations is impacted primarily by the seasonal
nature of ERI's natural gas distribution operations and the volatility of oil
and gas commodity prices. Short-term loans used to support working capital
requirements during the summer months are repaid as gas is sold during the
heating season.
The Company's performance contracting business requires substantial
initial working capital investments which are recovered in revenues as the
related energy savings are realized or when the contract is assigned.
Cash flows from operating activities totaled $48 million in the three
months ended March 31, 1998, compared to $58 million in the 1997 period. Cash
flows from operations decreased in 1998 primarily as a result of decreased
earnings.
ERI's financial objectives require ongoing capital expenditures for
growth projects in continuing operations of the Supply & Logistics and segments,
as well as replacements, improvements and additions to plant assets in the
Utilities segments. Such capital expenditures during the 1998 quarter were
approximately $26 million, including $12 million for new exploration and
production projects in the Gulf of Mexico. In addition, ongoing capital projects
in the Company's discontinued operations accounted for an additional $4 million
use of cash in 1998. A total of $168.7 million has been authorized for the 1998
capital expenditure program. The Company expects to finance its authorized 1998
capital expenditure program with cash generated from operations and with
short-term loans.
In the first quarter of 1998, financing activities used $54 million of
cash, as a result of net repayments of $29 million in short-term loans and $5
million of long-term debt and dividends paid of $21 million. The dividends paid
in both years represent $0.295 per share, at the current annual rate of $1.18
per share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
CAPITAL RESOURCES
ERI has adequate borrowing capacity to meet its financing requirements.
Bank loans and commercial paper, supported by available credit, are used to meet
short-term financing requirements. Interest rates on these short-term loans
averaged 5.6% during the first quarter of 1998. ERI maintains a revolving credit
agreement with a group of banks providing $500 million of available credit.
Adequate credit is expected to continue to be available in the future.
In April 1998 $125 million of 7.35% Trust Preferred Capital Securities
were issued. The capital securities were issued through a subsidiary, Equitable
Resources Capital Trust I, established for the purpose of issuing the capital
securities and investing the proceeds in 7.35% Junior Subordinated Debentures
issued by the Company. The capital securities have a mandatory redemption date
of April 15, 2038; however, at the Company's option, the securities may be
redeemed on or after April 23, 2003. Proceeds were used to reduce short-term
debt outstanding
INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Disclosures in this report may include forward-looking statements
related to such matters as anticipated financial performance, business
prospects, capital projects, new products and operational matters. The Company
notes that a variety of factors could cause the Company's actual results to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the Company
business include, but are not limited to, the following: weather conditions, the
pace of deregulation of retail natural gas and electricity markets, the timing
and extent of changes in commodity prices for gas and oil, changes in interest
rates, the timing and extent of the Company's success in acquiring gas and oil
properties and in discovering, developing and producing reserves, delays in
obtaining necessary governmental approvals and the impact of competitive factors
on profit margins in various markets in which the Company competes.
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Equitable Resources, Inc. By-Laws as Amended through
March 19, 1998.
(b) Reports on Form 8-K during the quarter ended March 31, 1998:
Form 8-K dated March 3, 1998, announcing earnings for the
fourth quarter and year ended December 31, 1997.
Form 8-K dated March 20, 1998, announcing Board of
Directors' approval for management to develop a plan to
sell its natural gas midstream operations located in
Louisiana and Texas.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EQUITABLE RESOURCES, INC.
(Registrant)
/s/ Jeffrey C. Swoveland
Jeffrey C. Swoveland
Vice President - Finance and Treasurer
and Interim Chief Financial Officer
Date: May 15, 1998
EQUITABLE RESOURCES, INC.
BY-LAWS
(Amended through March 19, 1998)
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.01 All meetings of the shareholders shall be held at the
principal office of the Company or such other places, either within or without
the Commonwealth of Pennsylvania, as the Board of Directors may from time to
time determine.
SECTION 1.02 An annual meeting of shareholders shall be held in each
calendar year at such time and place as the Board of Directors shall determine.
If the annual meeting shall not be called and held during such calendar year,
any shareholder may call such meeting at any time thereafter.
SECTION 1.03 At each such annual meeting, the class of Directors then being
elected shall be elected to hold office for a term of three (3) years, and until
their successors shall have been elected and qualified. All elections of
Directors shall be conducted by three (3) Judges of Election, who need not be
shareholders, appointed by the Board of Directors. If any such appointees are
not present, the vacancy shall be filled by the presiding officer of the
meeting. The President of the Company shall preside and the Secretary shall take
the minutes at all meetings of the shareholders. In the absence of the
President, the Chairman of the Executive Committee shall preside. In the absence
of both, the presiding officer shall be designated by the Board of Directors or,
if not so designated, by the shareholders of the Company, and if the Secretary
is unable to do so, the presiding officer shall designate any person to take the
minutes of the meeting.
<PAGE>
SECTION 1.04 The presence, in person or by proxy, of the holders of a
majority of the voting power of all shareholders shall constitute a quorum
except as otherwise provided by law or by the Restated Articles of the Company.
If a meeting is not organized because a quorum is not present, the shareholders
present may adjourn the meeting to such time and place as they may determine,
except that any meeting at which Directors are to be elected shall be adjourned
only from day to day, or for such longer periods not exceeding fifteen (15) days
each, as may be directed by a majority of the voting stock present.
SECTION 1.05 Shareholders entitled to vote on any matter shall be entitled
to one (1) vote for each share of capital stock standing in their respective
names upon the books of the Company to be voted by the shareholder in person or
by his or her duly authorized proxy or attorney. The validity of every unrevoked
proxy shall cease eleven (11) months after the date of its execution unless some
other definite period of validity shall be expressly provided therein, but in no
event shall a proxy, unless coupled with an interest, be voted on after three
(3) years from the date of its execution. All questions shall be decided by the
vote of shareholders entitled to cast at least a majority of the votes which all
shareholders present and voting (excluding abstentions) are entitled to cast on
the matter, unless otherwise expressly provided by law or by the Restated
Articles of the Company.
SECTION 1.06 Special meetings of shareholders may be called by the Board of
Directors or by the President.
<PAGE>
SECTION 1.07 Notice of the annual meeting and of all special meetings of
shareholders shall be given by sending a written or printed notice thereof by
mail, specifying the place, day, and hour of the meeting and, in the case of a
special meeting of shareholders, the general nature of the business to be
transacted, to each shareholder at the address appearing on the books of the
Company, or the address supplied by such shareholder to the Company for the
purpose of notice, at least five (5) days before the day named for the meeting,
unless such shareholders shall waive notice or be in attendance at the meeting.
ARTICLE II
GENERAL PROVISIONS
SECTION 2.01 The principal office of the Company shall be in the City of
Pittsburgh, Pennsylvania, and shall be kept open during business hours every day
except Saturdays, Sundays, and legal holidays, unless otherwise ordered by the
Board of Directors or the President.
SECTION 2.02 The Company shall have a corporate seal which shall contain
within a circle the following words: "Equitable Resources, Inc., Pittsburgh,
Pennsylvania" and in an inner circle the words "Corporate Seal."
SECTION 2.03 The fiscal year of the Company shall begin with January 1 and
end with December 31 of the same calendar year.
SECTION 2.04 The Board of Directors shall fix a time, not more than seventy
(70) days prior to the date of any meeting of shareholders, or the date fixed
for the payment of any dividend or distribution, or the date for any allotment
of rights, or the date when any change or conversion or exchange of shares will
be made or go into effect, as a record date for the determination of the
shareholders entitled to notice of, or to vote at, any such meeting, or entitled
to receive payment of any such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion, or exchange of shares.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01 Regular meetings of the Board of Directors shall be held at
least six (6) times each year, immediately after the annual meeting of
shareholders and at such other times and places as the Board of Directors shall
from time to time designate by resolution of the Board. Notice need not be given
of regular meetings of the Board held at the times and places fixed by
resolution of the Board.
If the Board shall fail to designate the specific time and place of any
regular meeting, such regular meeting shall be held at such time and place as
designated by the President and, in such case, oral, telegraphic or written
notice shall be duly served or sent or mailed by the Secretary to each Director
not less than five (5) days before the meeting.
SECTION 3.02 Special meetings may be held at any time upon the call of the
President, or the Chairman of the Executive Committee in the absence of the
President, at such time and place as he may deem necessary, or by the Secretary
at the request of any two (2) members of the Board, by oral, telegraphic or
written notice duly served or sent or mailed to each Director not less than
twenty-four (24) hours before the meeting.
SECTION 3.03 Fifty percent (50%) of the Directors at the time in office
shall constitute a quorum for the transaction of business. Vacancies in the
Board of Directors, including vacancies resulting from an increase in the number
of Directors, shall be filled only by a majority vote of the remaining Directors
then in office, though less than a quorum, except that vacancies resulting from
removal from office by a vote of the shareholders may be filled by the
shareholders at the same meeting at which such removal occurs. All Directors
elected to fill vacancies shall hold office for a term expiring at the annual
meeting of shareholders at which the term of the class to which they have been
elected expires.
<PAGE>
SECTION 3.04 One (1) or more Directors may participate in a meeting of the
Board or of a committee of the Board by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and all Directors so participating shall be deemed
present at the meeting.
SECTION 3.05 The full Board of Directors shall consist of not less than
five (5) nor more than twelve (12) persons, the exact number to be fixed from
time to time by the Board of Directors pursuant to a resolution adopted by a
majority vote of the Directors then in office.
SECTION 3.06 The Board of Directors may elect one (1) of its members (who
shall not be an officer of the Company during his tenure) as its Chairman, if
the By-Laws of the Company do not then provide for the election of a Chairman of
the Board who shall be the Chief Executive Officer of the Company. A Chairman so
elected shall confer with the President as to the content of agendas for such
meetings and shall consult with the President as to matters affecting or
relating to the Board of Directors. The Chairman so elected shall serve until
the first meeting of the Board following the next annual meeting of the
shareholders. The Board shall also fix the annual rate of compensation to be
paid to the Chairman in addition to compensation paid to all non-officer members
of the Board. The Chairman, or in the absence of the Chairman, the President,
shall preside at all meetings of the Board, preserve order, and regulate debate
according to the usual parliamentary rules. In the absence of the Chairman or
the President, a Chairman pro tem may be appointed by the Board.
<PAGE>
SECTION 3.07 Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nomination for
election to the Board of Directors of the Company at a meeting of shareholders
may be made by the Board of Directors or by any shareholder of the Company
entitled to vote for the election of directors at such meeting who complies with
the notice procedures set forth in this Section 3.07. Such nominations, other
than those made by or on behalf of the Board of Directors, shall be made by
notice in writing delivered or mailed by first class United States mail, postage
prepaid, to the Secretary, and received not less than 60 days nor more than 90
days prior to such meeting; provided, however, that if less than 70 days' notice
or prior public disclosure of the date of the meeting is given to shareholders,
such nomination shall have been mailed or delivered to the Secretary not later
than the close of business on the 10th day following the day on which the notice
of the meeting was mailed or such public disclosure was made, whichever occurs
first. Such notice shall set forth (a) as to each proposed nominee (i) the name,
age, business address and, if known, residence address of each such nominee,
(ii) the principal occupation or employment of each such nominee, (iii) the
number of shares of stock of the Company which are beneficially owned by each
such nominee, and (iv) any other information concerning the nominee that must be
disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (including such person's written
consent to be named as a nominee and to serve as a director if elected); and (b)
as to the shareholder giving the notice (i) the name and address, as they appear
on the Company's books, of such shareholder and (ii) the class and number of
shares of the Company which are beneficially owned by such shareholder. The
Company may require any proposed nominee to furnish such other information as
may reasonably be required by the Company to determine the eligibility of such
proposed nominee to serve as a director of the Company.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
<PAGE>
SECTION 3.08 No Director of this Company shall be permitted to serve in
that capacity after the date of the annual meeting of shareholders next
following his or her seventy-fourth (74th) birthday. No person who is an
employee or officer of the Company, except the Chief Executive Officer, shall be
eligible to serve as a Director of the Company after he or she has retried from
service as an employee or officer.
SECTION 3.09 No Director shall be personally liable for monetary damages as
such (except to the extent otherwise provided by law) for any action taken, or
any failure to take any action, unless such Director has breached or failed to
perform the duties of his or her office under Title 42, Chapter 83, Subchapter F
of the Pennsylvania Consolidated Statutes (or any successor statute relating to
Directors' standard of care and justifiable reliance); and the breach or failure
to perform constitutes self-dealing, willful misconduct or recklessness.
If the Pennsylvania Consolidated Statutes are amended after May 22, 1987,
the date this section received shareholder approval, to further eliminate or
limit the personal liability of Directors, then a Director shall not be liable,
in addition to the circumstances set forth in this section, to the fullest
extent permitted by the Pennsylvania Consolidated Statutes, as so amended.
The provisions of this section shall not apply to any actions filed prior
to January 27, 1987, nor to any breach of performance of duty, or any failure of
performance of duty, by any Director occurring prior to January 27, 1987.
<PAGE>
ARTICLE IV
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 4.01 Directors, officers, agents, and employees of the Company
shall be indemnified as of right to the fullest extent not prohibited by law in
connection with any actual or threatened action, suit or proceeding, civil,
criminal, administrative, investigative or other (whether brought by or in the
right of the Company or otherwise) arising out of their service to the Company
or to another enterprise at the request of the Company. The Company may purchase
and maintain insurance to protect itself and any such Director, officer, agent
or employee against any liability asserted against and incurred by him or her in
respect of such service, whether or not the Company would have the power to
indemnify him or her against such liability by law or under the provisions of
this section. The provisions of this section shall be applicable to persons who
have ceased to be Directors, officers, agents, and employees and shall inure to
the benefit of the heirs, executors, and administrators of persons entitled to
indemnity hereunder.
Indemnification under this section shall include the right to be paid
expenses incurred in advance of the final disposition of any action, suit or
proceeding for which indemnification is provided, upon receipt of an undertaking
by or on behalf of the indemnified person to repay such amount if it ultimately
shall be determined that he or she is not entitled to be indemnified by the
Company. The indemnification rights granted herein are not intended to be
exclusive of any other rights to which those seeking indemnification may be
entitled and the Company may enter into contractual agreements with any
Director, officer, agent or employee to provide such individual with
indemnification rights as set forth in such agreement or agreements, which
rights shall be in addition to the rights set forth in this section.
The provisions of this section shall be applicable to actions, suits or
proceedings commenced after the adoption hereof, whether arising from acts or
omissions occurring before or after the adoption hereof.
<PAGE>
ARTICLE V
STANDING COMMITTEES
SECTION 5.01 The Board of Directors shall have authority to appoint an
Executive Committee, a Finance Committee, an Audit Committee, and such other
committees as it deems advisable, each to consist of two (2) or more Directors,
and from time to time to define the duties and fix the number of members of each
committee. In the absence or disqualification of any member of any such
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another Director or Directors to act at the meeting in the place of any
such absent or disqualified member or members.
ARTICLE VI
OFFICERS
SECTION 6.01 The officers of the Company shall be chosen by the Board of
Directors and shall be a President, a Secretary, and a Treasurer. The Board of
Directors may also choose such Vice Presidents, including one (1) or more
Executive Vice Presidents and Senior Vice Presidents, and one (1) or more
Assistant Secretaries and Assistant Treasurers as it may determine.
SECTION 6.02 The Board of Directors shall, at the first meeting of the
Board after its election, elect the principal officers of the Company, and may
elect additional officers at that or any subsequent meeting. All officers
elected by the Board of Directors shall hold office at the pleasure of the
Board.
<PAGE>
SECTION 6.03 At the discretion of the Board of Directors, any two (2) of
the offices mentioned in Section 6.01 hereof may be held by the same person
except the offices of President and Secretary.
SECTION 6.04 The salaries of all officers of the Company, other than
Assistant Secretaries and Assistant Treasurers, shall be fixed by the Board of
Directors.
SECTION 6.05 The officers of the Company shall hold office until the next
annual meeting of the Board and until their successors are chosen and qualify in
their stead or until their earlier resignation or removal. Any officer or agent
may be removed by the Board of Directors whenever in its judgment the best
interests of the Company will be served thereby. Such removal, however, shall be
without prejudice to the contract rights of the person so removed. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
PRESIDENT
SECTION 6.06 The President shall be the Chief Executive Officer of the
Company; shall preside at all meetings of the shareholders and at all meetings
of the Board of Directors; shall have general and active management of the
business of the Company; and shall see that all orders and resolutions of the
Board of Directors are carried into effect. In addition to any specific powers
conferred upon the President by these By-Laws, he shall have and exercise such
further powers and duties as from time to time may be conferred upon or assigned
to him by the Board of Directors.
<PAGE>
SECRETARY
SECTION 6.07 The Secretary shall attend all meetings of the shareholders
and Board of Directors; shall record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for all committees of the Board, if so designated by the Board. The Secretary
shall keep in safe custody the seal of the Company and when authorized by the
Board of Directors, affix the seal of the Company to any instrument requiring it
and, when so affixed, it shall be attested by the signature of the Secretary or
by the signature of the Treasurer or an Assistant Secretary. The Secretary shall
have custody of all contracts, leases, assignments, and all other valuable
instruments unless the Board of Directors or the President shall otherwise
direct. The Secretary shall give, or cause to be given, notice of all annual
meetings of the shareholders and any other meetings of the shareholders and,
when required, notice of the meetings of the Board of Directors; and, in
general, shall perform all duties incident to the office of a secretary of a
corporation, and such other duties as may be prescribed by the Board of
Directors or the President.
SECTION 6.08 The Board of Directors may elect one (1) or more Assistant
Secretaries who shall perform the duties of the Secretary in the event of the
Secretary's absence or inability to act, as well as such other duties as the
Board of Directors, the President, or the Secretary may from time to time
designate.
<PAGE>
TREASURER
SECTION 6.09 The Treasurer shall have charge of all moneys and securities
belonging to the Company subject to the direction and control of the Board of
Directors. The Treasurer shall deposit all moneys received by the Company in the
name and to the credit of the Company in such bank or other place or places of
deposit as the Board of Directors shall designate; and for that purpose the
Treasurer shall have power to endorse for collection or payment all checks or
other negotiable instruments drawn payable to the Treasurer's order or to the
order of the Company. The Treasurer shall disburse the moneys of the Company
upon properly drawn checks which shall bear the signature of the Treasurer or of
any Assistant Treasurer or of the Cashier (who shall be appointed by the
Assistant Treasurer with the approval of the Treasurer). All checks shall be
covered by vouchers which shall be certified by the Controller or the Auditor of
Disbursements or such other employee of the Company (other than the Cashier) as
may be designated by the Treasurer from time to time. The Treasurer may create,
from time to time, such special imprest funds as may, in the Treasurer's
discretion, be deemed advisable and necessary, and may open accounts with such
bank or banks as may be deemed advisable for the deposit therein of such special
imprest funds, and may authorize disbursements therefrom by checks drawn against
such accounts by the Treasurer, any Assistant Treasurer, or such other employee
of the Company as may be designated by the Treasurer from time to time. The
Treasurer shall perform such other duties as may be assigned from time to time
by the Board of Directors, the President or the Chief Financial Officer.
SECTION 6.10 No notes or similar obligations shall be made except jointly
by the President or the Chief Financial Officer and the Treasurer or an
Assistant Treasurer, except as otherwise authorized by the Board of Directors.
SECTION 6.11 The Board of Directors may elect one (1) or more Assistant
Treasurers who shall perform the duties of the Treasurer in the event of the
Treasurer's absence or inability to act, as well as such other duties as the
Board of Directors, the President, the Chief Financial Officer or the Treasurer
may from time to time designate.
<PAGE>
VICE PRESIDENTS
SECTION 6.12 Vice Presidents shall perform such duties as may be assigned
to them from time to time by the Board of Directors or the President as their
positions are established or changed. During the absence or inability of the
President to serve, an Executive Vice President or Senior Vice President so
designated by the Board of Directors shall have all the powers and perform the
duties of the President.
GENERAL
SECTION 6.13 Fidelity bond coverage shall be obtained on such officers and
employees of the Company, and of such type and in such amounts as may, in the
discretion of the Board of Directors, be deemed proper and advisable.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 7.01 The shares of the capital stock of the Company shall be
represented by certificates of stock signed by the President or a Vice
President, and countersigned by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer, and sealed with the corporate seal of the
Company. Said certificates shall be in such form as the Board of Directors may
from time to time prescribe. The Board of Directors may from time to time
appoint an incorporated company or companies to act as Transfer Agent and
Registrar of the stock certificates of the Company, and in the case of the
appointment of such Transfer Agent, the officers of the Company shall sign and
seal stock certificates in blank and place them with the transfer books in the
custody and control of such Transfer Agent. If any stock certificate is signed
by a Transfer Agent or Registrar, the signature of any such officer and the
corporate seal upon any such certificate may be a facsimile, engraved or
printed.
SECTION 7.02 New certificates for shares of stock may be issued to replace
certificates lost, stolen, destroyed or mutilated upon such terms and conditions
as the Board may from time to time determine.
<PAGE>
ARTICLE VIII
AMENDMENTS
SECTION 8.01 (a) The Board of Directors may make, amend, and repeal the
By-Laws with respect to those matters which are not, by statute, reserved
exclusively to the shareholders, subject always to the power of the shareholders
to change such action as provided herein. No By-Law may be made, amended or
repealed by the shareholders unless such action is approved by the affirmative
vote of the holders of not less than eighty percent (80%) of the voting power of
the then outstanding shares of capital stock of the Company entitled to vote in
an annual election of Directors, voting together as a single class, unless such
action has been previously approved by a two-thirds vote of the whole Board of
Directors, in which event (unless otherwise expressly provided in the Articles
or the By-Laws) the affirmative vote of not less than a majority of the votes
which all shareholders are entitled to cast thereupon shall be required.
(b) Unless otherwise provided by a By-Law, by the Restated
Articles or by law, any By-Law may be amended, altered or repealed, and new
By-Laws may be adopted, by vote of a majority of the Directors present at any
regular or special meeting duly convened, but only if notice of the specific
sections to be amended, altered, repealed or added is included in the notice of
meeting. No provision of the By-Laws shall vest any property or contract right
in any shareholder.
ARTICLE IX
PENNSYLVANIA CORPORATION LAW
SECTION 9.01 Subchapter G--Control Share Acquisitions--and Subchapter
H--Disgorgement by Certain Controlling Shareholders Following Attempts to
Acquire Control--of Title 15, Chapter 25, of the Pennsylvania Consolidated
Statutes, shall not be applicable to the Company.
(Amended through March 19, 1998)
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