<PAGE>
- --------------------------------------------------------------------------------
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 N/A to N/A
Commission File Number 1-13515
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
New York 25-0484900
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 Broadway
Suite 2200
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 812-1400
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 / /
Number of Shares
Outstanding
Title of Class of Common Stock April 30, 1998
- ------------------------------ ----------------
Common Stock, Par Value $.10 Per Share 37,320,644
- --------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
FOREST OIL CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,770 18,191
Accounts receivable 50,243 65,720
Other current assets 5,539 4,649
--------- --------
Total current assets 61,552 88,560
Net property and equipment, at cost 760,723 521,293
Goodwill and other intangible assets, net 25,947 26,243
Other assets 13,606 11,686
--------- --------
$ 861,828 647,782
--------- --------
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,435 59,719
Accrued interest 3,158 4,152
Other current liabilities 2,927 2,627
--------- --------
Total current liabilities 49,520 66,498
Long-term debt 472,922 254,760
Other liabilities 16,973 17,020
Deferred income taxes 34,176 34,767
Minority interest 12,927 12,910
Shareholders' equity:
Common stock 3,732 3,632
Capital surplus 503,058 488,908
Accumulated deficit (224,463) (223,460)
Accumulated other comprehensive loss (7,017) (7,253)
--------- --------
Total shareholders' equity 275,310 261,827
--------- --------
$ 861,828 647,782
--------- --------
--------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Production and Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, March 31,
1998 1997
--------------- ---------------
(In Thousands Except Production
and Per Share Amounts)
<S> <C> <C>
PRODUCTION
Natural gas (mmcf) 13,665 11,815
--------- -------
--------- -------
Oil, condensate and natural gas liquids (thousands of barrels) 975 689
--------- -------
--------- -------
STATEMENTS OF CONSOLIDATED OPERATIONS
Revenue:
Marketing and processing $ 35,003 53,462
Oil and gas sales:
Gas 27,607 26,046
Oil, condensate and natural gas liquids 12,886 13,555
--------- -------
Total oil and gas sales 40,493 39,601
--------- -------
Total revenue 75,496 93,063
Expenses:
Marketing and processing 33,168 50,908
Oil and gas production 8,842 9,645
General and administrative 4,255 3,466
Depreciation and depletion 23,333 18,437
--------- -------
Total operating expenses 69,598 82,456
--------- -------
Earnings from operations 5,898 10,607
Other income and expense:
Other (income) expense, net 2 (843)
Interest expense 8,506 4,774
Minority interest in earnings (loss) of subsidiary (80) 102
Translation gain on subordinated debt (1,024) -
--------- -------
Total other income and expense 7,404 4,033
--------- -------
Earnings (loss) before income taxes (1,506) 6,574
Income tax expense (benefit):
Current 346 1,365
Deferred (849) 687
--------- -------
(503) 2,052
--------- -------
Net earnings (loss) $ (1,003) 4,522
--------- -------
--------- -------
Earnings (loss) attributable to common stock $ (1,003) 4,333
--------- -------
--------- -------
Weighted average number of common shares outstanding 36,975 31,756
--------- -------
--------- -------
Basic earnings (loss) per common share $ (.03) .14
--------- -------
--------- -------
Diluted earnings (loss) per common share $ (.03) .13
--------- -------
--------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FOREST OIL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, March 31,
1998 1997
--------------- ---------------
(In Thousands)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,003) 4,522
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and depletion 23,333 18,437
Translation gain on subordinated debt (1,024) -
Amortization of deferred debt costs 185 181
Deferred income tax expense (benefit) (849) 687
Minority interest in net earnings (loss) of subsidiary (80) 102
Other, net 18 4
Decrease in accounts receivable 18,236 11,484
Increase in other current assets (3,419) (457)
Decrease in accounts payable (17,678) (12,246)
Increase (decrease) in accrued interest and other current liabilities 272 (4,535)
Settlement of volumetric production payment obligation - (904)
--------- --------
Net cash provided by operating activities 17,991 17,275
Cash flows from investing activities:
Capital expenditures for property and equipment (260,628) (43,038)
Less: stock issued for acquisition 14,219 -
--------- --------
(246,409) (43,038)
Proceeds from sales of assets - 1,476
Increase in other assets, net (1,604) (26)
--------- --------
Net cash used by investing activities (248,013) (41,588)
Cash flows from financing activities:
Proceeds from bank borrowings 338,309 57,381
Repayments of bank borrowings (195,449) (31,584)
Repayments of production payment obligation (38) (1,272)
Issuance of 8 3/4% senior subordinated notes, net of issuance costs 74,812 -
Proceeds from exercise of options - 1,219
Costs of preferred stock conversion - (800)
Payment of preferred stock dividends - (540)
Decrease in other liabilities, net (103) (2,110)
--------- --------
Net cash provided by financing activities 217,531 22,294
Effect of exchange rate changes on cash 70 (27)
--------- --------
Net increase in cash and cash equivalents (12,421) (2,046)
Cash and cash equivalents at beginning of period 18,191 8,626
--------- --------
Cash and cash equivalents at end of period $ 5,770 6,580
--------- --------
--------- --------
Cash paid during the period for:
Interest $ 9,168 7,193
Income taxes $ 647 3,685
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FOREST OIL CORPORATION
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 1998 and 1997
(Unaudited)
(1) Basis of Presentation
The condensed consolidated financial statements included herein are
unaudited. In the opinion of management, all adjustments, consisting of
normal recurring accruals, have been made which are necessary for a
fair presentation of the financial position of the Company at March 31,
1998 and the results of operations for the three month periods ended
March 31, 1998 and 1997. Quarterly results are not necessarily
indicative of expected annual results because of the impact of
fluctuations in prices received for liquids (oil, condensate and
natural gas liquids) and natural gas and other factors. For a more
complete understanding of the Company's operations and financial
position, reference is made to the consolidated financial statements of
the Company, and related notes thereto, filed with the Company's annual
report on Form 10-K for the year ended December 31, 1997, previously
filed with the Securities and Exchange Commission.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (Statement No. 130), effective for years
beginning after December 15, 1997. Statement No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
Company adopted Statement No. 130 effective January 1, 1998 and,
accordingly, has reported accumulated other comprehensive loss as a
separate line item in the shareholders' equity section of its
condensed consolidated balance sheets at March 31, 1998 and December
31, 1997. The components of total comprehensive income (loss) for
the periods are as follows:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, December 31,
1998 1997
--------- ------------
(In Thousands)
<S> <C> <C>
Net earnings (loss) $ (1,003) 4,522
Other comprehensive income (loss) 236 (2,082)
-------- -------
Total comprehensive income (loss) $ (767) 2,440
-------- -------
-------- -------
</TABLE>
(2) Acquisitions
On February 3, 1998 the Company purchased 13 oil and gas properties
located onshore Louisiana (the Louisiana Acquisition) for total
consideration of approximately $230,776,000. The consideration
consisted of 1,000,000 shares of the Company's Common Stock and
approximately $216,557,000 in cash, funded primarily from the Company's
bank credit facility and the issuance of $75,000,000 principal amount
of 8 3/4% subordinated notes (See Note 6). Estimated proved reserves
acquired in the Louisiana Acquisition were approximately 186 BCFE.
The Company also has an agreement with The Anschutz Corporation
(Anschutz) whereby the Company will issue to Anschutz 5,950,000 shares
of the Company's Common Stock in exchange for certain oil and gas
assets (the Anschutz Transaction). Consummation of the Anschutz
Transaction is subject to approval of the transaction by the Company's
shareholders, other than Anschutz, at the Company's annual
shareholders' meeting currently expected to be held in June 1998. The
oil and gas assets to be acquired include Anschutz' interest in the
Anschutz Ranch East Field, certain Canadian properties and other
international projects. There are approximately 80 BCFE of estimated
proved reserves associated with the Anschutz Transaction.
<PAGE>
(3) Subsidiaries
Saxon Petroleum Inc.:
On December 20, 1995 the Company purchased a 56% economic (49%
voting) interest in Saxon Petroleum Inc. (Saxon) for approximately
$22,000,000. Saxon is a Canadian exploration and production company
with headquarters in Calgary, Alberta and operations concentrated in
western Alberta. Since Forest has majority voting control over Saxon as
a result of the voting common shares that it owns and proxies that it
holds, it has accounted for Saxon as a consolidated subsidiary from the
date of its acquisition.
During 1997 Forest converted preferred shares of Saxon into
common shares and acquired additional common shares of Saxon
pursuant to an equity participation agreement. These
transactions increased Forest's ownership in Saxon to
a 65% economic (49% voting) interest.
In 1997, the board of directors of Saxon created a special committee of
independent directors which engaged a third party to assess the asset
base of Saxon and to determine strategic alternatives to maximize
shareholder value. In April 1998 the Company put forward a
proposal to acquire all of the issued and outstanding shares of Saxon
on the basis of one share of Forest Common Stock for every 48.07 shares
of Saxon.
Forest's proposal is subject to the following conditions: the
completion of a formal valuation; the consideration being offered by
Forest being at or above the midpoint of the valuation range determined
in the formal valuation; approval of the proposed transaction by the
Saxon special committee and the recommendation of the transaction by
Saxon's board to its shareholders; and the execution of
agreements between Forest and each of the directors and officers of
Saxon wherein such directors and officers will agree to dispose of
their Saxon shares or vote such shares in favor of the transaction.
Canadian Forest
On January 31, 1996 the Company acquired ATCOR Resources Ltd. of
Calgary, Alberta for approximately $136,000,000. The exploration and
production business of ATCOR was renamed Canadian Forest Oil Ltd.
(Canadian Forest). As part of the Canadian Forest acquisition,
Forest also acquired ATCOR's natural gas marketing business, which
was renamed Producers Marketing Ltd. (ProMark).
<PAGE>
The Company has not presented separate financial statements and other
disclosures concerning Canadian Forest because management has
determined that such information is not material to holders of the
8-3/4% Notes issued by Canadian Forest. However, the following
summarized consolidated financial information is being provided
for Canadian Forest as of March 31, 1998 and 1997 and for the
three months ended March 31, 1998 and 1997:
<TABLE>
1998 1997
---------- ----------
(In Thousands)
<S> <C> <C>
Summarized Consolidated Balance Sheet Information:
ASSETS
Current assets $ 25,245 25,608
Note receivable from parent 75,060 -
Net property and equipment 123,215 137,583
Goodwill and other intangible assets, net 25,948 28,630
Other assets 3,728 -
----------- --------
$ 253,196 191,821
----------- --------
----------- --------
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities $ 21,675 27,348
Intercompany payable - 33,605
8 3/4% Senior Subordinated Notes 199,974 -
Other liabilities 367 534
Deferred income taxes 35,113 32,919
Shareholder's equity (3,933) 97,415
----------- --------
$ 253,196 191,821
----------- --------
----------- --------
Summarized Consolidated Statements of Operations:
Revenue $ 40,022 64,545
----------- --------
----------- --------
Earnings (loss) before income taxes $ (2,169) 3,256
----------- --------
----------- --------
Net earnings (loss) $ (1,046) 1,507
----------- --------
----------- --------
</TABLE>
<PAGE>
(4) Net Property and Equipment
Components of net property and equipment are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In Thousands)
<S> <C> <C>
Oil and gas properties $ 1,856,918 1,594,443
Buildings, transportation and
other equipment 11,362 11,157
------------ ----------
1,868,280 1,605,600
Less accumulated depreciation,
depletion and valuation allowance (1,107,557) (1,084,307)
------------ ----------
$ 760,723 521,293
------------ ----------
------------ ----------
</TABLE>
(5) Goodwill and Other Intangible Assets
Goodwill and other intangible assets recorded in the acquisition of
ProMark consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In Thousands)
<S> <C> <C>
Goodwill $ 16,151 16,029
Gas marketing contracts 14,090 13,986
--------- ------
30,241 30,015
Less accumulated amortization (4,294) (3,772)
--------- ------
$ 25,947 26,243
--------- ------
--------- ------
</TABLE>
Goodwill is being amortized on a straight line basis over 20 years. The
amount attributed to the value of gas marketing contracts acquired is
being amortized on a straight line basis over the average life of such
contracts of 12 years.
(6) Long-term Debt
Components of long-term debt are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
----------- ------------
(In Thousands)
<S> <C> <C>
U.S. Credit Facility $ 227,300 85,550
Canadian Credit Facility - -
Saxon Credit Facility 27,157 25,840
Production payment obligation 9,966 10,004
11 1/4% Senior Subordinated Notes 8,676 8,676
8 3/4% Senior Subordinated Notes 199,974 124,690
----------- ---------
473,073 254,760
Less current portion (151) -
----------- ---------
Long-term debt $ 472,922 254,760
----------- ---------
----------- ---------
</TABLE>
<PAGE>
On September 29, 1997 Canadian Forest completed an offering of
$125,000,000 of 8 3/4% Senior Subordinated Notes due 2007
(the 8 3/4% Notes) which were sold at 99.745% and which are
guaranteed on a senior subordinated basis by the Company. A portion of
the proceeds was used to fund a tender offer pursuant to which
$90,233,000 aggregate principal amount of 11 1/4% Senior Subordinated
Notes was tendered by the holders. A portion of the proceeds was used
to repay the outstanding balance under the Canadian Credit Facility and
the remainder was used for working capital and to fund capital
expenditures. The remaining outstanding principal amount of 11 1/4%
Notes is callable on or after September 1, 1998 at 105.688% of the
principal amount.
On February 2, 1998 Canadian Forest issued $75,000,000 principal amount
of 8 3/4% subordinated notes. The notes issued in 1998 will be
subsequently exchanged for notes of the same series of 8 3/4%
Notes that were issued in September 1997. The Company received
net proceeds of approximately $75,000,000 which were used to
provide funds for the Louisiana Acquisition.
The Company is required to recognize foreign currency translation
gains or losses related to its 8 3/4% Notes because the debt is
denominated in U.S. dollars and the functional currency of Canadian
Forest is the Canadian dollar. As a result of the increase in the value
of the Canadian dollar relative to the U.S. dollar during the first
quarter of 1998, the Company reported a noncash translation gain of
approximately $1,024,000.
(7) Earnings (Loss) Per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share
(Statement No. 128) effective for periods ending after December 15,
1997. Statement No. 128 changed the computation, presentation and
disclosure requirements for earnings per share for entities with
publicly held common stock or potential common stock. Under such
requirements the Company is required to present both basic earnings per
share and diluted earnings per share. Basic earnings (loss) per share
is computed by dividing net earnings (loss) attributable to common
stock by the weighted average number of common shares outstanding
during each period, excluding treasury shares.
Diluted earnings (loss) per share is computed by adjusting the average
number of common shares outstanding for the dilutive effect, if any, of
convertible preferred stock, stock options and warrants. The effect of
potentially dilutive securities is based on earnings (loss) before
extraordinary items.
The Company adopted the provisions of Statement No. 128 as of
December 31, 1997. As prescribed by Statement No. 128, the Company
has restated prior periods' earnings per share of common stock,
including interim earnings per share of common stock.
<PAGE>
The following sets forth the calculation of basic and diluted earnings
(loss) per share:
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1998 1997
-------- --------
(In Thousands Except
Per Share Amounts)
<S> <C> <C>
Basic earnings (loss) per share:
Net earnings (loss) $ (1,003) 4,522
Less: Preferred stock dividends -- 189
---------- ------
Earnings (loss) available to common stockholders $ (1,003) 4,333
---------- ------
---------- ------
Weighted average common shares outstanding 36,975 31,756
Basic earnings (loss) per share $ (.03) .14
---------- ------
---------- ------
Diluted earnings (loss) per share:
Weighted average common shares outstanding 36,975 31,756
Add dilutive effects of:
$.75 Convertible preferred stock -- 1,320
Employee options -- 254
Anschutz warrants -- 1,166
---------- ------
Weighted average common shares outstanding
including the effects of dilutive securities 36,975 34,496
---------- ------
Diluted earnings (loss) per share $ (.03) .13
---------- ------
---------- ------
</TABLE>
Options to purchase 1,900,000 shares of common stock at prices ranging from
$11.25 to $25.00 per share were outstanding at March 31, 1998, but were not
included in the computation of diluted loss per share because the effect of
the assumed exercise of these stock options as of the beginning of the period
was antidilutive. These options expire at various dates through 2008. At
March 31, 1997, options to purchase 68,000 shares of common stock at prices
ranging from $16.50 to $25.00 per share were outstanding, but were not
included in the computation of diluted earnings per share because the
exercise prices were greater than the average market price of the common
shares. These options expire at various dates from 2002 and 2007.
RECLASSIFICATIONS - Certain amounts in prior years' financial statements have
been reclassified to conform to the 1998 financial statement presentation.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and Notes thereto.
FORWARD-LOOKING STATEMENTS
Certain of the statements set forth in this Form 10-Q, such as the
statements regarding planned capital expenditures and the availability of
capital resources to fund capital expenditures, are forward-looking and are
based upon the Company's current belief as to the outcome and timing of such
future events. There are numerous risks and uncertainties that can affect the
outcome and timing of such events, including many factors which are beyond
the control of the Company. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, the
Company's actual results and plans for 1998 and beyond could differ
materially from those expressed in the forward-looking statements. For a
description of risks affecting the Company's business, see "Item 1 - Business
- - Forward-Looking Statements and Risk Factors" in the Company's 1997 Annual
Report on Form 10-K.
RESULTS OF OPERATIONS FOR THE FIRST QUARTER OF 1998
The net loss for the first quarter of 1998 was $1,003,000 or $.03
per basic and diluted common share compared to net earnings of $4,522,000 or
$.14 per basic common share and $.13 per diluted common share in the first
quarter of 1997. Higher production in the 1998 period was more than offset by
lower natural gas and liquids prices, increased interest expense and higher
depletion expense. The 1998 period also included a noncash gain on currency
translation of $1,024,000 related to subordinated debt issued by Canadian
Forest.
The Company's marketing and processing revenue decreased by 35% to
$35,003,000 in the first quarter of 1998 from $53,462,000 in the first
quarter of 1997 and the related marketing and processing expense also
decreased by 35% to $33,168,000 in the 1998 quarter from $50,908,000 in the
previous year. The gross margin reported for marketing and processing
activities decreased to $1,835,000 in the first quarter of 1998 from
$2,554,000 in the first quarter of 1997, due primarily to lower prices and
lower third party contract processing volumes.
The Company's oil and gas sales revenue was $40,493,000 in the first
quarter of 1998 compared to $39,601,000 in the first quarter of 1997.
Production volumes for natural gas in the first quarter of 1998 increased 16%
from the comparable 1997 period while production volumes for liquids
(consisting of oil, condensate and natural gas liquids) were 42% higher in
the first quarter of 1998 than in the first quarter of 1997. The increases in
production are due primarily to discoveries in the Gulf of Mexico being
brought on production and two months of production attributable to properties
purchased in the Louisiana Acquisition. The average sales price received for
natural gas in the first quarter of 1998 decreased 8% compared to the average
sales price received in the corresponding 1997 period. The average sales
price received by the Company for its liquids production during the first
quarter of 1998 decreased 33% compared to the average sales price received
during the comparable 1997 period. These decreases in sales prices received
by the Company correspond to industry-wide trends.
Oil and gas production expense of $8,842,000 in the first quarter of
1998 decreased 8% from $9,645,000 in the comparable period of 1997 due
primarily to the cost of workovers in the 1997 period. On an MCFE basis (MCFE
means thousands of cubic feet of natural gas equivalents, using conversion
ratio of one barrel of oil to six MCF of natural gas), production expense
decreased to $.45 per MCFE in the first quarter of 1998 from $.60 per MCFE in
the first quarter of 1997 due primarily to lower production expense and to
the production expense being spread over a larger production base.
<PAGE>
The following tables set forth production volumes, average sales prices and
production expenses during the periods as follows:
<TABLE>
Three Months Ended March 31, 1998
----------------------------------------------------------
Offshore Onshore
Gulf of Gulf Total Total
Mexico Coast Western U.S. Canada Company
------ ------ ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS
Production (MMCF) 6,210 2,686 922 9,818 3,847 13,665
Sales price received (per MCF) $ 2.22 2.18 2.06 2.19 1.24 1.93
Effects of energy swaps (per MCF) (1) .19 .04 -- .13 .01 .09
------- ------- ------ ------ ------ ------
Average sales price (per MCF) $ 2.41 2.22 2.06 2.32 1.25 2.02
LIQUIDS
Oil and condensate:
Production (MBBLS) 244 147 28 419 385 804
Sales price received (per BBL) $ 12.87 14.24 14.21 13.44 13.51 13.48
Effects of energy swaps (per BBL)(1) .84 -- -- .49 1.11 .78
------- ------- ------ ------ ------ ------
Average sales price (per BBL) $ 13.71 14.24 14.21 13.93 14.62 14.26
Natural gas liquids:
Production (MBBLS) -- 39 3 42 129 171
Average sales price (per BBL) $ -- 7.54 7.67 7.55 8.54 8.30
Total liquids production (MBBLS) 244 186 31 461 514 975
Average liquids sales price (per BBL) $ 13.71 12.83 13.58 13.35 13.10 13.22
TOTAL PRODUCTION
Production volumes (MMCFE) 7,674 3,802 1,108 12,584 6,931 19,515
Average sales price (per MCFE) $ 2.38 2.20 2.09 2.31 1.66 2.07
Operating expense (per MCFE) .41 .49 .78 .47 .43 .45
------- ------- ------ ------ ------ ------
Netback (per MCFE) $ 1.97 1.71 1.31 1.84 1.23 1.62
------- ------- ------ ------ ------ ------
------- ------- ------ ------ ------ ------
</TABLE>
(1) Energy swaps were entered into to hedge the price of spot market
volumes against price fluctuations. Hedged natural gas volumes were
4,400 MMCF in the three months ended March 31, 1998. Hedged oil and
condensate volumes were 180,000 barrels in the three months ended
March 31, 1998. The aggregate net gain under energy swap agreements was
$1,912,000 for the period and was accounted for as an increase to oil
and gas sales.
<PAGE>
<TABLE>
Three Months Ended March 31, 1997
----------------------------------------------------------
Offshore Onshore
Gulf of Gulf Total Total
Mexico Coast Western U.S. Canada Company
------ ------ ------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
NATURAL GAS
Production (MMCF) 6,603 1,278 617 8,498 3,317 11,815
Sales price received (per MCF) $ 2.77 2.36 2.60 2.70 1.93 2.47
Effects of energy swaps (per MCF) (1) (.47) -- -- (.37) (.04) (.27)
------- ----- ----- ------ ------ ------
Average sales price (per MCF) $ 2.30 2.36 2.60 2.33 1.89 2.20
LIQUIDS
Oil and condensate:
Production (MBBLS) 198 22 29 249 336 585
Sales price received (per BBL) $ 20.95 23.18 22.28 21.30 20.99 21.13
Effects of energy swaps (per BBL)(1) (1.57) -- -- (1.25) (.79) (.99)
------- ----- ----- ------ ------ ------
Average sales price (per BBL) $ 19.38 23.18 22.28 20.05 20.20 20.14
Natural gas liquids:
Production (MBBLS) -- 11 2 13 91 104
Average sales price (per BBL) $ -- 13.36 16.00 14.00 17.52 17.08
Total liquids production (MBBLS) 198 33 31 262 427 689
Average liquids sales price (per BBL) $ 19.39 19.91 21.87 19.75 19.63 19.67
TOTAL PRODUCTION
Production volumes (MMCFE) 7,791 1,476 803 10,070 5,879 15,949
Average sales price (per MCFE) $ 2.44 2.48 2.84 2.48 2.49 2.48
Operating expense (per MCFE) .46 .77 1.12 .56 .68 .60
------- ----- ----- ------ ------ ------
Netback (per MCFE) $ 1.98 1.71 1.72 1.92 1.81 1.88
------- ----- ----- ------ ------ ------
------- ----- ----- ------ ------ ------
</TABLE>
(1) Energy swaps were entered into to hedge the price of spot market
volumes against price fluctuations. Hedged natural gas volumes were
2,809 MMCF in the three months ended March 31, 1997. Hedged oil and
condensate volumes were 204,000 barrels in the three months ended March
31, 1997. The aggregate net loss under energy swap agreements was
$3,801,000 for the period and was accounted for as a reduction to oil
and gas sales.
General and administrative expense was $4,255,000 in the first
quarter of 1998 compared to $3,466,000 in the comparable period of 1997.
Total overhead costs (capitalized and expensed general and administrative
costs) were $6,164,000 in the first quarter of 1998 compared to $5,650,000 in
the comparable period of 1997. The increase in total overhead costs is
attributable primarily to higher employee related costs in the 1998 period as
a result of increased headcount, and also includes nonrecurring expenses
incurred by Saxon as a result of its decision to investigate strategic
alternatives.
<PAGE>
The following table summarizes the total overhead costs incurred
during the periods:
<TABLE>
Three Months Ended
------------------------
March 31, March 31,
1998 1997
--------- ---------
(In Thousands)
<S> <C> <C>
Overhead costs capitalized $1,909 2,184
General and administrative costs expensed (1) 4,255 3,466
------ -----
Total overhead costs $6,164 5,650
------ -----
------ -----
</TABLE>
(1) Includes $747,000 and $711,000 related to marketing and processing
operations for the three month periods ended March 31, 1998 and 1997.
Depreciation and depletion expense increased 27% to $23,333,000 in
the first quarter of 1998 from $18,437,000 in the first quarter of 1997 due
to increased production and a higher per-unit rate. On a per-unit basis,
depletion expense was approximately $1.15 per MCFE in the first quarter of
1998 compared to $1.09 per MCFE in the corresponding 1997 period. The
increase in per-unit depletion expense results primarily from higher
development costs in the U.S. due to increased costs for services. At March
31, 1998 the Company had undeveloped properties with a cost basis of
approximately $89,000,000 which were excluded from depletion, compared to
approximately $48,000,000 at March 31, 1997. The increase is attributable
primarily to undeveloped acreage associated with the Louisiana Acquisition
properties.
The Company was not required to record a writedown of the carrying
value of its United States or Canadian oil and gas properties in the first
three months of 1998 or 1997. Writedowns of the full cost pools in the United
States and Canada may be required, however, if prices decline, undeveloped
property values decrease, estimated proved reserve volumes are revised
downward or costs incurred in exploration, development, or acquisition
activities in the respective full cost pools exceed the discounted future net
cash flows from the additional reserves, if any, attributable to each of the
cost pools.
Interest expense increased 78% to $8,506,000 in the first quarter of
1998 compared to $4,774,000 in the corresponding 1997 period, due primarily
to increased bank credit facility balances and interest on the 8 3/4% Notes,
offset by decreased interest on the aggregate outstanding principal amount of
11 1/4% Notes.
Translation gain on subordinated debt of $1,024,000 in the first
quarter of 1998 relates to translation of the 8 3/4% Notes issued by Canadian
Forest in September 1997 and February 1998, and is attributable to the
increase in the value of the Canadian dollar relative to the U.S. dollar
during the first quarter of 1998. The Company is required to recognize the
noncash foreign currency translation gains or losses related to the 8 3/4%
Notes because the debt is denominated in U.S. dollars and the functional
currency of Canadian Forest is the Canadian dollar.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically addressed its long-term liquidity needs
through the issuance of debt and equity securities, when market conditions
permit, and through the use of bank credit facilities and cash provided by
operating activities.
In 1997 and early 1998, the Company completed several transactions
that improved its financial position.
On February 7, 1997 the Company called for redemption all 2,877,673
shares of its $.75 Convertible Preferred Stock. In response to its call for
redemption, 2,783,945 shares or 96.7% of the shares outstanding were tendered
for conversion into Common Stock and the remaining 93,728 preferred shares
were redeemed by the Company at the redemption price of $10.06 per share.
This conversion and redemption eliminated all outstanding preferred stock
from the Company's capital structure and eliminated approximately $2,200,000
of annual preferred dividend payments.
<PAGE>
On August 28, 1997 Anschutz acquired 3,500,000 shares of Common
Stock through the exercise of a warrant for $8.60 per share resulting in cash
proceeds to Forest of $30,100,000. The original exercise price was $10.50 per
share. The reduction in the exercise price offered to Anschutz reflected an
approximate 10% present value discount computed to the warrant's expiration
date of July 27, 1999. Proceeds from the exercise were used to reduce
borrowings under the Company's bank credit facilities.
On September 29, 1997, pursuant to a tender offer, $90,233,000 of
the Company's outstanding $100,000,000 aggregate principal amount of 11 1/4%
Notes was purchased by the Company. Also on September 29, 1997 Canadian
Forest completed an offering of $125,000,000 of 8 3/4% Notes, which were sold
at 99.745% of par and guaranteed on a senior subordinated basis by the
Company. A portion of the proceeds was used to fund the tender offer
described above, a portion was used to repay the outstanding balance under
the Canadian credit facility and the remainder was used for working capital
and to fund capital expenditures. The effects of the tender and new offering
are expected to result in estimated annual cash savings of approximately
$5,000,000 to $6,000,000 related to interest and income taxes.
On February 2, 1998 Canadian Forest issued $75,000,000 principal
amount of 8 3/4% Notes, an add-on to the Company's $125,000,000 principal
amount of 8 3/4% Notes that were issued in September 1997. The Company
received net proceeds of approximately $75,000,000, which were used to
provide funds for the Louisiana Acquisition described below.
On February 3, 1998 the Company purchased 13 oil and gas properties
located onshore Louisiana for total consideration of approximately
$230,776,000. The consideration consisted of 1,000,000 shares of the
Company's Common Stock and approximately $216,557,000 in cash, funded
primarily from the Company's bank credit facility and the issuance of
$75,000,000 principal amount of 8 3/4% Notes. Estimated proved reserves
acquired in the Louisiana Acquisition were approximately 186 BCFE.
The Company also has an agreement with Anschutz whereby the Company
will issue to Anschutz 5,950,000 shares of the Company's Common Stock in
exchange for certain oil and gas assets. Consummation of the Anschutz
Transaction is subject to approval of the transaction by the Company's
shareholders, other than Anschutz, at the Company's annual shareholders'
meeting currently expected to be held in June 1998. The oil and gas assets to
be acquired include Anschutz's interest in the Anschutz Ranch East Field,
certain Canadian properties and other international projects. There are
approximately 80 BCFE of proved reserves associated with the Anschutz
Transaction.
Many of the factors which may affect the Company's future operating
performance and long-term liquidity are beyond the Company's control
including, but not limited to, oil and natural gas prices, governmental
actions and taxes, the availability and attractiveness of properties for
acquisition, the adequacy and attractiveness of financing and operational
results. The Company continues to examine alternative sources of long-term
capital, including bank borrowings, the issuance of debt instruments, the
sale of common stock, preferred stock or other equity securities of the
Company, the issuance of net profits interests, sales of non-strategic
assets, prospects and technical information, or joint venture financing.
Availability of these sources of capital and, therefore, the Company's
ability to execute its operating strategy will depend upon a number of
factors, some of which are beyond the control of the Company. In addition,
the prices the Company receives for its future oil and natural gas production
and the level of the Company's production will significantly impact future
operating cash flows. No prediction can be made as to the prices the Company
will receive for its future oil and gas production. At May 1, 1998 the
Company had 2 offshore Gulf of Mexico wells whose combined production
represents approximately 18% of the Company's consolidated daily
deliverability. The Company's production, revenue and cash flow could be
adversely affected if production from these properties decreases to a
significant degree.
BANK CREDIT FACILITIES. At December 31, 1997 the Company and its
subsidiaries, Canadian Forest and ProMark, had a $250,000,000 global credit
facility (the Global Credit Facility) which provided for a global borrowing
base of $130,000,000 through a syndicate of banks led by The Chase Manhattan
Bank and The Chase Manhattan Bank of Canada. The borrowing base is subject to
semi-annual redeterminations. Under the Global Credit Facility, the Company
can allocate the global borrowing base between the United States and Canada,
subject to specified limitations. Funds borrowed under the Global Credit
Facility can be used for general corporate purposes. Under the terms of the
Global Credit Facility, the Company, Canadian Forest and ProMark are subject
to certain covenants and financial tests, including restrictions or
requirements with respect to working capital, cash flow, additional debt,
liens, asset sales, investments, mergers, cash dividends and reporting
responsibilities.
<PAGE>
The Global Credit Facility is secured by a lien on, and a security
interest in, a portion of the Company's U.S. proved oil and gas properties,
related assets, pledges of accounts receivable, and a pledge of 66% of the
capital stock of Canadian Forest. The Global Credit Facility is also
indirectly secured by substantially all of the assets of Canadian Forest.
On February 3, 1998, the Company amended the Global Credit Facility.
The primary purpose of the amendment was to increase the credit facility to
$300,000,000 and the borrowing base to $260,000,000 in order to finance the
Louisiana Acquisition. Under the amended Global Credit Facility, the maximum
credit facility allocations in the United States and Canada are $275,000,000
and $25,000,000, respectively. The global borrowing base is currently
allocated $250,000,000 to the United States and $10,000,000 to Canada.
At April 30, 1998, the outstanding borrowings under the Global
Credit Facility were $232,600,000 in the U.S. and there were no outstanding
borrowings in Canada. The Company has used the Global Credit Facility for
Letters of Credit in the amount of $233,000 in the U.S. and $3,022,000 CDN in
Canada.
In addition to the credit facilities described above, Saxon has a
credit facility with a borrowing base of $39,800,000 CDN. The loan is subject
to semi-annual review and has demand features; however, repayments are not
required provided that borrowings are not in excess of the borrowing base and
Saxon complies with other existing covenants. At April 30, 1998 the
outstanding balance under this facility was $38,198,000 CDN.
WORKING CAPITAL. The Company had a working capital surplus of
approximately $12,032,000 at March 31, 1998 compared to approximately
$22,062,000 at December 31, 1997. The decrease in the surplus is due
primarily to cash used in the first quarter of 1998 to fund capital
expenditures in Canada.
In the U.S., the Company periodically reports working capital
deficits at the end of a period. Such working capital deficits are
principally the result of accounts payable for capitalized exploration and
development costs. Settlement of these payables is funded by cash flow from
the Company's operations or, if necessary, by drawdowns on the Company's
long-term bank credit facilities. For cash management purposes, drawdowns on
the credit facilities are not made until the due dates of the payables.
CASH FLOW. Historically, one of the Company's primary sources of
capital has been net cash provided by operating activities. Net cash provided
by operating activities increased to $17,991,000 in the first quarter of 1998
compared to $17,275,000 in the first quarter of 1997. Higher production
volumes in the 1998 period were primarily offset by lower natural gas and
liquids prices, which resulted in equivalent cash provided by operations in
both periods. The Company used $248,013,000 for investing activities in the
first quarter of 1998 compared to $41,588,000 in the first quarter of 1997.
The increased use in the 1998 period is due primarily to the Louisiana
Acquisition. Cash provided by financing activities in the first quarter of
1998 was $217,531,000 compared to $22,294,000 in 1997. The 1998 period
included approximately $75,000,000 of proceeds from the issuance of the
8-3/4% Notes as well as net drawdowns on the credit facilities of
approximately $143,000,000.
<PAGE>
CAPITAL EXPENDITURES. The Company's expenditures for property
acquisition, exploration and development for the first three months of 1998
and 1997 were as follows:
<TABLE>
Three Months Ended
----------------------------
March 31, March 31,
1998 1997
--------- ---------
(In Thousands)
<S> <C> <C>
Property acquisition costs:
Proved properties $ 202,176 2,050
Undeveloped properties 30,033 2,363
--------- ------
232,209 4,413
Exploration costs:
Direct costs 17,030 19,582
Overhead capitalized 896 928
--------- ------
17,926 20,510
Development costs:
Direct costs 9,204 17,933
Overhead capitalized 1,013 1,256
--------- ------
10,217 19,189
--------- ------
$ 260,352 44,112
--------- ------
--------- ------
</TABLE>
The Company's budgeted 1998 expenditures for exploration and
development (exclusive of property acquisition costs) are approximately
$130,000,000. The Company intends to meet its 1998 capital expenditure
financing requirements using cash flows generated by operations, sales of
non-strategic assets and borrowings under existing lines of credit. There can
be no assurance, however, that the Company will have access to sufficient
capital to meet its capital requirements. The planned levels of capital
expenditures could be reduced if the Company experiences lower than
anticipated net cash provided by operations or other liquidity needs or could
be increased if the Company experiences increased cash flow or accesses
additional sources of capital.
In addition, while the Company intends to continue a strategy of
acquiring reserves that meet its investment criteria, no assurance can be
given that the Company can locate or finance any property acquisitions.
INVESTMENT IN SAXON PETROLEUM INC. In 1997, the board of directors
of Saxon created a special committee of independent directors which engaged a
third party to assess the asset base of Saxon and to determine strategic
alternatives to maximize shareholder value. In April 1998 the Company put
forward a proposal to acquire all of the issued and outstanding shares of
Saxon on the basis of one share of Forest Common Stock for every 48.07 shares
of Saxon.
Forest's proposal is subject to the following conditions: the
completion of a formal valuation; the consideration being offered by Forest
being at or above the midpoint of the valuation range determined in the formal
valuation; approval of the proposed transaction by the Saxon special
committee and the recommendation of the transaction by Saxon's board to its
shareholders; and the execution of agreements between Forest and each of
the directors and officers of Saxon wherein such directors and officers will
agree to dispose of their Saxon shares or vote such shares in favor of the
transaction.
LONG-TERM SALES CONTRACTS. A significant portion of Canadian
Forest's natural gas production is sold through the ProMark Netback Pool. At
March 31, 1998 the ProMark Netback Pool had entered into fixed price
contracts to sell approximately 13.6 BCF of natural gas in 1998 at an average
price of $1.83 CDN per MCF and approximately 5.4 BCF of natural gas in 1999
at an average price of approximately $2.16 CDN per MCF. Canadian Forest, as
one of the producers in the ProMark Netback Pool, is obligated to deliver a
portion of this gas. In 1997 Canadian Forest supplied 27% of the gas for the
Netback Pool.
HEDGING PROGRAM. In addition to the volumes of natural gas and oil
sold under long-term sales contracts, the Company also uses energy swaps and
other financial agreements to hedge against the effects of fluctuations in
the sales prices for oil and natural gas produced. In a typical swap
agreement, the Company receives the difference between a fixed price per unit
of production and a price based on an agreed upon third-party index if the
index price is lower. If the index price is higher, the Company pays the
difference. The Company's current swaps are settled on a monthly basis. At
March 31, 1998 the Company had natural gas swaps for an aggregate of
approximately 63 BBTU
<PAGE>
(billion British Thermal Units) per day of natural gas during the remainder
of 1998 at fixed prices ranging from $1.10 per MMBTU (million British Thermal
Units) on an Alberta Energy Company "C" (AECO "C", U.S. $ basis) to $2.62 per
MMBTU on a New York Mercantile Exchange (NYMEX) basis and an aggregate of
approximately 12 BBTU per day of natural gas during 1999 at fixed prices
ranging from $1.63 per MMBTU (AECO "C", U.S. $ basis) to $2.71 per MMBTU
(NYMEX basis). The weighted average hedged price for natural gas under such
agreements is $2.18 and $1.93 per MMBTU in 1998 and 1999, respectively. At
March 31, 1998 the Company had oil swaps for an aggregate of 1,101 barrels
per day of oil during the remainder of 1998 at fixed prices ranging from
$20.00 to $20.62 per barrel (NYMEX basis). The weighted average hedged price
for oil under such agreements is $20.54 per barrel.
Subsequent to March 31, 1998, the Company settled two long term
natural gas swaps for $80,000. One covered approximately 898 MMBTU per day
from June 1998 to December 1999 at fixed prices ranging from $2.42 to $2.54
per MMBTU (NYMEX basis) and the other covered approximately 156 MMBTU per
day from June 1998 to December 2002 at fixed prices ranging from $2.33 to
$3.00 per MMBTU (NYMEX basis). The amounts received to settle the swaps have
been deferred and will be recorded in earnings over the original term of the
swaps.
YEAR 2000 ISSUES. In 1996, the Company commenced a year 2000 date
conversion project. The project addresses the effects the year 2000 will have
on the Company's software applications and analyzes upgrades and purchases
that may be required. The Company has completed its analysis of its land,
accounting and oil and gas reserves applications and expects to complete
analysis of its other applications by June 1998. The estimated cost of
hardware and software upgrades and purchases that may be required and the
time required for implementation are expected to be determined at that time.
Based upon the findings through May 1, 1998, the estimated costs of upgrades
and purchases are not expected to be significant.
RECENT ACCOUNTING PRONOUNCEMENTS. 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
(Statement No. 131), effective for years beginning after December 15, 1997.
Statement No. 131 establishes standards for reporting information about
operating segments and the methods by which such segments were determined.
The Company has not yet adopted Statement No. 131.
In February 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 132, Employers'
Disclosures about Pensions and Other Postretirement Benefits (Statement No.
132), effective for years beginning after December 15, 1997. Statement No.
132 revises employers' disclosures about pension and other postretirement
benefit plans. It does not change the measurement of recognition of those
plans. The Company will comply with the reporting and display requirements of
these statements when required.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2c. RECENT SALE OF UNREGISTERED SECURITIES
On February 2, 1998 Canadian Forest issued in a private placement
$75,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes
due 2007 at a price of $100.375. Proceeds received were approximately
$75,000,000. The payment of these notes is unconditionally guaranteed on a
senior subordinated basis by the Company.
The initial purchaser was Morgan Stanley Dean Witter. The aggregate
price to investors was $75,281,250 and the aggregate discount to the initial
purchasers was $246,750. This issuance was exempt from registration under the
Securities Act of 1933 (the 33 Act) pursuant to Section 4(2) of the 33 Act.
-18-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<PAGE>
Exhibit 10 Purchase and Sales Agreement by and between Forest Oil
Corporation and The Anschutz Corporation dated
April 6, 1998, incorporated herein by reference to
Exhibit 92.1 to Form 8-K for Forest Oil Corporation
dated April 8, 1998 (File No. 0-4597).
* Exhibit 27 Financial Data Schedule.
* Filed with this report.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by Forest during the first
quarter of 1998:
Date of Report Item Reported Financial Statements Filed
- -------------- ------------- --------------------------
January 7, 1998 Item 5,7 None.
January 12, 1998 Item 5,7 None.
January 28, 1998 Item 5,7 None.
February 3, 1998 Item 2,7 The following financial statements
required to be filed as exhibits to
this Form 8-K were filed with Form
8-K/A filed on April 10, 1998.
(a) Audited Statement of Oil and Gas
Revenue and Direct Operating and
Production Expenses of the acquired
properties for the year ended
December 31,1997.
(b) Condensed pro forma combined
financial statements of Forest
Oil Corporation at December 31,
1997 and for the year ended
December 31, 1997.
<PAGE>
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.
FOREST OIL CORPORATION
(Registrant)
Date: May 15, 1998 /s/ Daniel L. McNamara
--------------------------------------
Daniel L. McNamara
Corporate Counsel and Secretary
(Signed on behalf of the registrant)
/s/ David H. Keyte
--------------------------------------
David H. Keyte
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ON PAGES 1
THROUGH 7 OF THE COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDING MARCH 31,
1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 5,770
<SECURITIES> 0
<RECEIVABLES> 50,243
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,552
<PP&E> 1,868,280
<DEPRECIATION> 1,107,557
<TOTAL-ASSETS> 861,828
<CURRENT-LIABILITIES> 49,520
<BONDS> 472,922
0
0
<COMMON> 3,732
<OTHER-SE> 271,578
<TOTAL-LIABILITY-AND-EQUITY> 861,828
<SALES> 75,496
<TOTAL-REVENUES> 75,496
<CGS> 42,010
<TOTAL-COSTS> 46,265
<OTHER-EXPENSES> 23,333
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,506
<INCOME-PRETAX> (1,506)
<INCOME-TAX> (503)
<INCOME-CONTINUING> (1,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,003)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
