<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(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, 1994
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 1-6446
K N ENERGY, INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Kansas 48-0290000
_______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
370 Van Gordon Street
P.O. Box 281304, Lakewood, Colorado 80228-8304
_________________________________________ ___________________
(Address of principal executive offices) (Zip Code)
(303) 989-1740
_______________________________________________________________________________
(Registrant's telephone number, including area code)
_______________________________________________________________________________
(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 the issuer's classes of
common stock, as of the latest practicable date.
Common stock, $5 par value; authorized 25,000,000 shares; outstanding
15,308,462 shares as of April 30, 1994.
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Form 10-Q
K N ENERGY, INC. AND SUBSIDIARIES
FORM 10-Q/A
QUARTER ENDED MARCH 31, 1994
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Consolidated Balance Sheets (Unaudited) . . . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Income (Unaudited) . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 8-9
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
2
<PAGE> 3
Form 10-Q
CONSOLIDATED BALANCE SHEETS
K N Energy, Inc. and Subsidiaries
<TABLE>
<CAPTION>
MARCH DECEMBER
31, 1994 31, 1993
-------- --------
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 10,453 $ 4,760
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 92,405 88,491
Contract Demand Receivables . . . . . . . . . . . . . . . . . . . . . . -- 38,732
Material and Supplies, at Average Cost . . . . . . . . . . . . . . . . 9,097 8,603
Gas in Underground Storage . . . . . . . . . . . . . . . . . . . . . . 2,073 5,836
Prepaid Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,485 11,689
Exchange Gas and Other . . . . . . . . . . . . . . . . . . . . . . . . 27,121 28,707
---------- ----------
153,634 186,818
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Gas Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857,221 842,638
Gas and Oil Production . . . . . . . . . . . . . . . . . . . . . . . . 63,248 34,381
---------- ----------
920,469 877,019
Less-Accumulated Depreciation, Deple-
tion and Amortization . . . . . . . . . . . . . . . . . . . . . . . 377,730 369,957
---------- ----------
542,739 507,062
---------- ----------
DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . 27,583 37,389
---------- ----------
$ 723,956 $ 731,269
========== ==========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
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<PAGE> 4
Form 10-Q
CONSOLIDATED BALANCE SHEETS
K N Energy, Inc. and Subsidiaries
<TABLE>
<CAPTION>
MARCH DECEMBER
31, 1994 31, 1993
-------- --------
(Unaudited)
(Dollars in Thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Preferred Stock and Long-Term Debt . . . . . . . . . . . . $ 6,071 $ 3,500
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,000 47,000
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,022 73,713
Accrued Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,322 10,299
Exchange Gas and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,679 27,447
---------- ----------
142,094 161,959
---------- ----------
DEFERRED LIABILITIES, CREDITS AND RESERVES:
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,708 60,444
Deferred Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,270 43,692
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,148 21,879
---------- ----------
133,126 126,015
---------- ----------
LONG-TERM DEBT:
Sinking Fund Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,550 99,543
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,341 132,338
---------- ----------
226,891 231,881
---------- ----------
Preferred Stock Subject to Mandatory Redemption . . . . . . . . . . . . . . . . . 2,286 2,858
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock-
Authorized - Class A, 200,000 Shares; Class B, 2,000,000 Shares,
All Without Par Value
Redeemable Solely at Option of Company at $105 Per Share-
Class A, $5.00 Cumulative Series; 70,000 Shares . . . . . . . . . . . . . . 7,000 7,000
---------- ----------
Common Stock-
Authorized - 25,000,000 Shares, Par Value $5 Per Share,
Outstanding 15,278,661 and 15,035,031 Shares, Respectively . . . . . . . . . 76,393 75,177
Additional Paid-In Capital . . . . . . . . . . . . . . . . . . . . . . . . . . 32,995 28,907
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,334 97,472
---------- ----------
212,722 201,556
Treasury Stock, at Cost (6,800 and 0 shares, Respectively) . . . . . . . . . . (163) --
---------- ----------
Total Common Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . 212,559 201,556
---------- ----------
219,559 208,556
---------- ----------
$ 723,956 $ 731,269
========== ==========
</TABLE>
4
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Form 10-Q
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
K N Energy, Inc. and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1994 1993
---- ----
(Dollars in Thousands
Except Per Share Amounts)
<S> <C> <C>
OPERATING REVENUES:
Gas Services . . . . . . . . . . . . . . . . . . . . . . . . $ 186,429 $ 150,223
Gas and Oil Production . . . . . . . . . . . . . . . . . . . 2,943 1,043
---------- ----------
Total Operating Revenues . . . . . . . . . . . . . . . . . . 189,372 151,266
---------- ----------
OPERATING COSTS AND EXPENSES:
Gas Purchases . . . . . . . . . . . . . . . . . . . . . . . . 122,795 81,701
Operations and Maintenance . . . . . . . . . . . . . . . . . 35,557 33,351
Depreciation, Depletion and Amortization . . . . . . . . . . 7,691 6,219
Taxes, Other Than Income Taxes . . . . . . . . . . . . . . . 3,091 2,975
---------- ----------
Total Operating Costs and Expenses . . . . . . . . . . . . . 169,134 124,246
---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . 20,238 27,020
---------- ----------
OTHER INCOME AND (DEDUCTIONS):
Interest Expense . . . . . . . . . . . . . . . . . . . . . . (5,251) (5,642)
Other, Net . . . . . . . . . . . . . . . . . . . . . . . . . 96 (91)
---------- ----------
Total Other Income and (Deductions) . . . . . . . . . . . . . (5,155) (5,733)
---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . 15,083 21,287
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . 5,398 7,981
---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . 9,685 13,306
Less-Preferred Stock Dividends . . . . . . . . . . . . . . . 157 203
---------- ----------
NET INCOME AVAILABLE FOR COMMON STOCK . . . . . . . . . . . . $ 9,528 $ 13,103
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (IN THOUSANDS) . . . . . . 15,193 14,757
========== ==========
EARNINGS PER COMMON SHARE . . . . . . . . . . . . . . . . . . $ 0.63 $ 0.88
========== ==========
DIVIDENDS PER COMMON SHARE . . . . . . . . . . . . . . . . . $ 0.24 $ 0.22
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
K N ENERGY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1994 1993
---- ----
(Dollars in Thousands
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,685 $ 13,306
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation, Depletion and Amortization . . . . . . . . . . . . . . . . . 7,691 6,219
Provisions for Losses on Accounts Receivable . . . . . . . . . . . . . . . 274 476
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 207 921
Deferred Purchased Gas Costs . . . . . . . . . . . . . . . . . . . . . . . 6,579 1,428
Other Funds Used During Construction . . . . . . . . . . . . . . . . . . . (73) (33)
Changes in Other Working Capital Items . . . . . . . . . . . . . . . . . . . 54,567 7,662
Changes in Non-Current Gas in Underground Storage . . . . . . . . . . . . . . -- 15,352
Changes in Other Assets and Liabilities . . . . . . . . . . . . . . . . . . . 6,681 2,881
---------- ----------
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . 85,611 48,212
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,653) (12,761)
Other Funds Used During Construction . . . . . . . . . . . . . . . . . . . . 73 33
Proceeds from Sale of Facilities . . . . . . . . . . . . . . . . . . . . . . 73 80
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 (27)
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,730) (18,644)
---------- ----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . (40,234) (31,319)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-Term Debt (Net) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,000) (2,000)
Long-Term Debt - Retired . . . . . . . . . . . . . . . . . . . . . . . . . . (3,000) (4,015)
Common Stock Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,304 3,417
Treasury Stock - Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . 254 --
- Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . (417) --
Cash Dividends - Common . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,666) (3,265)
- Preferred . . . . . . . . . . . . . . . . . . . . . . . . . . (157) (203)
Premium on Debt Reacquisition and Issue Costs . . . . . . . . . . . . . . . . (2) (77)
---------- ----------
NET CASH FLOWS USED IN FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . (39,684) (6,143)
---------- ----------
Net Increase in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . 5,693 10,750
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . 4,760 7,962
---------- ----------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . $ 10,453 $ 18,712
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
Form 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
K N ENERGY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1994 1993
---- ----
(Dollars in Thousands
<S> <C> <C>
CHANGES IN OTHER WORKING CAPITAL ITEMS SUMMARY:
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . $ (4,188) $ 8,838
Contract Demand Receivables . . . . . . . . . . . . . . . . . . . 38,732 --
Material and Supplies . . . . . . . . . . . . . . . . . . . . . . (494) (978)
Gas in Underground Storage . . . . . . . . . . . . . . . . . . . 3,763 (624)
Accounts Payable, Accrued Taxes and Other Current Liabilities . . 16,480 305
Exchange Gas, Net . . . . . . . . . . . . . . . . . . . . . . . . (511) (975)
Other Current Assets . . . . . . . . . . . . . . . . . . . . . . 785 1,096
---------- ----------
$ 54,567 $ 7,662
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest (Net of Amount Capitalized) . . . . . . . . . . . . . $ 8,197 $ 8,823
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $ 2,262
</TABLE>
7
<PAGE> 8
Form 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
In the opinion of management, all adjustments necessary for a fair statement of
the results for the unaudited interim periods have been made. These adjustments
consist only of normal recurring accruals.
2. Reclassification of 1993 Amounts
Certain 1993 amounts have been reclassified to conform to the 1994
presentation.
3. Regulatory Matters
On March 11, 1994, Rocky Mountain Natural Gas Division of K N Energy, Inc.
("RMNGD") filed an application for a "make whole" rate increase of $2.5 million
on an annual basis with the Colorado Public Utilities Commission ("CPUC"). The
CPUC approved interim rate relief of $1.5 million which became effective,
subject to refund, on April 2, 1994. Pursuant to the request of the CPUC, on
April 28, 1994, RMNGD filed a continuation of the March 11, 1994 application,
supplementing its request for the $2.5 million "make whole" rate increase.
4. Restructuring and Reorganization
As reported in the Company's 1993 Annual Report on Form 10-K, on April 8, 1992,
the Federal Energy Regulatory Commission ("FERC") issued Order No. 636 ("Order
636") which requires a fundamental restructuring of interstate natural gas
pipelines. K N implemented Order 636 restructured services on October 1, 1993.
As a result of Order 636, K N requested, and subsequently received FERC
approval to transfer substantially all of its gathering and processing
facilities to K N Gas Gathering, Inc., a nonjurisdictional wholly-owned
subsidiary of K N. The transfer was effective January 1, 1994.
5. Merger
On March 24, 1994, K N announced that it had executed a definitive merger
agreement with American Oil and Gas Corporation ("AOG"). Under the terms of
the merger agreement, 0.47 of a share of K N common stock would be exchanged
tax-free for each outstanding share of AOG common stock. The proposed merger
is expected to be accounted for as a pooling of interests, and will require
certain approvals by the shareholders of both companies, as well as specific
regulatory and lender approvals. Closing is anticipated within 90 to 120 days
of the date of the announcement.
The Preliminary Form S-4, Joint Proxy Statement/Prospectus was filed by K N
with the Securities and Exchange Commission on April 25, 1994. Early
termination of the waiting period required under the Hart-Scott-Rodino
Antitrust Improvements Act was received by K N and AOG on April 26, 1994.
8
<PAGE> 9
Form 10-Q
6. Acquisition
On February 1, 1994, the Company's gas and oil development subsidiaries, K N
Production Company and GASCO, Inc., acquired gas reserves and production
properties located near existing K N operations in western Colorado and in the
Moxa Arch region of southwestern Wyoming for a total purchase price of
approximately $30 million. The acquired properties have total net reserves of
approximately 50 billion cubic feet equivalent of natural gas. On April 20,
1994, the Company entered into a letter of intent to sell a 50 percent interest
in substantially all the acquired properties.
7. Deferred Revenues
In January 1994, contract demand receivables with a face amount of $41 million
were sold to a financial institution. No gain or loss was recorded on the
sale. The Company is deferring revenues from certain gas sales agreements
associated with these receivables pending final disposition of related gas
purchase contracts.
8. Postemployment Benefits
In November 1992, FASB issued SFAS 112, which establishes standards of
financial accounting and reporting for the estimated cost of benefits provided
by an employer to former or inactive employees after employment but before
retirement. The Company adopted SFAS 112 on January 1, 1994. Implementation
of SFAS 112 had no material effect on the Company's financial position or
results of operations.
9. Commitments and Contingent Liabilities
See Notes 5, 8 and 11 of Notes to Consolidated Financial Statements on Pages
41-43, 46, 47 and 51 of the 1993 Annual Report on Form 10-K. There have been no
material changes to these disclosures except as disclosed in Part II of this
report and Notes 5 and 6, above.
9
<PAGE> 10
Form 10-Q
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.
K N ENERGY, INC.
(Registrant)
June 9, 1994 /s/ E. Wayne Lundhagen
---------------------------------------
E. Wayne Lundhagen
Vice President - Finance and Accounting
(On Behalf of the Registrant and as
Principal Financial and Accounting Officer)
10
