SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------- -----------------
Commission file number 1-4300
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APACHE CORPORATION
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 41-0747868
- ---------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 100, One Post Oak Central
2000 Post Oak Boulevard, Houston, TX 77056-4400
- ---------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (713) 296-6000
--------------
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 of Apache Corporation common stock, $1.25 par value,
outstanding as of September 30, 1997 90,442,804
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
(In thousands, except per share data) For the Quarter For the Nine Months
Ended September 30, Ended September 30,
------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
REVENUES:
<S> <C> <C> <C> <C>
Oil and gas production revenues $ 233,068 $ 211,115 $ 714,196 $ 574,470
Gathering, processing and marketing revenues 45,181 31,123 144,600 96,399
Other revenues (1,501) 146 (1,379) 1,641
-------- -------- -------- --------
276,748 242,384 857,417 672,510
-------- -------- -------- --------
OPERATING EXPENSES:
Depreciation, depletion and amortization 98,170 81,384 280,969 229,564
Operating costs 54,866 56,636 172,577 163,508
Gathering, processing and marketing costs 44,542 30,071 142,806 92,366
Administrative, selling and other 8,707 8,920 26,790 26,049
Financing costs:
Interest expense 26,551 22,768 75,014 64,758
Amortization of deferred loan costs 1,919 1,186 4,497 3,515
Capitalized interest (9,103) (9,165) (26,901) (21,704)
Interest income (420) (157) (1,562) (1,575)
-------- -------- -------- --------
225,232 191,643 674,190 556,481
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 51,516 50,741 183,227 116,029
Provision for income taxes 20,731 20,604 73,819 45,800
-------- -------- -------- --------
NET INCOME $ 30,785 $ 30,137 $ 109,408 $ 70,229
======== ======== ======== ========
Primary net income per common share $ .34 $ .34 $ 1.19 $ .83
Fully diluted net income per common share .33 .34 1.17 .83
Pro forma net income per share data (See Note 1)
Basic net income per common share $ .34 $ .34 $ 1.21 $ .83
Diluted net income per common share .33 .33 1.17 .83
Weighted average common shares outstanding 90,396 89,860 90,276 84,360
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
1
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
(In thousands) For the Nine Months
Ended September 30,
-------------------------
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 109,408 $ 70,229
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation, depletion and amortization 280,969 229,564
Amortization of deferred loan costs 4,497 3,515
Provision for deferred income taxes 47,912 37,406
Other 1,565 (770)
Changes in operating assets and liabilities:
(Increase) decrease in receivables 13,660 (3,810)
Increase in advances to oil and gas ventures and other (4,794) (10,643)
(Increase) decrease in other assets 740 (461)
Increase (decrease) in payables (26,710) 14,767
Increase (decrease) in accrued expenses 13,609 (38)
Increase (decrease) in advance from gas purchaser 107,144 (6,310)
Increase (decrease) in deferred credits and
other noncurrent liabilities (8,344) 10,369
--------- ---------
Net cash provided by operating activities 539,656 343,818
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development expenditures (496,695) (331,265)
Acquisition of oil and gas properties (32,840) (83,717)
Gathering, transmission and processing expenditures (32,162) (18,103)
Non-cash portion of net oil and gas property additions (12,579) (3,453)
Acquisition of Phoenix, net of cash acquired -- (43,294)
Investment in Producers Energy Marketing, LLC, net (19) (4,445)
Proceeds from sale of oil and gas properties 5,789 3,739
Proceeds from sale of stock held for investment 1,183 7,193
Purchase of stock held for investment (1,170) --
Other capital expenditures, net (5,933) (6,456)
Inventories and other, net (15,770) (5,923)
--------- ---------
Net cash used in investing activities (590,196) (485,724)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings 577,066 522,208
Payments on long-term debt (501,177) (366,990)
Proceeds from issuance of common stock, net 8,949 7,262
Treasury stock activity, net (365) 57
Dividends paid (18,944) (17,128)
Cost of debt and equity transactions (2,554) (3,901)
--------- ---------
Net cash provided by financing activities 62,975 141,508
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,435 (398)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,161 13,633
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 25,596 $ 13,235
========= =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
2
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
(In thousands) September 30, December 31,
1997 1996
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 25,596 $ 13,161
Receivables 220,820 234,646
Inventories 30,191 13,963
Advances to oil and gas ventures and other 11,191 6,386
----------- ------------
287,798 268,156
----------- ------------
PROPERTY AND EQUIPMENT:
Oil and gas, on the basis of full cost accounting:
Proved properties 5,209,761 4,713,113
Unproved properties and properties
under development, not being amortized 420,572 388,872
International concession rights, not being amortized 89,000 99,000
Gas gathering, transmission and processing facilities 153,608 121,446
Other 64,160 58,882
----------- ------------
5,937,101 5,381,313
Less: Accumulated depreciation, depletion and amortization (2,554,317) (2,281,252)
----------- ------------
3,382,784 3,100,061
----------- ------------
OTHER ASSETS:
Deferred charges and other 55,832 64,213
----------- -----------
$ 3,726,414 $ 3,432,430
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
3
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
(In thousands) September 30, December 31,
1997 1996
----------- -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Current maturities of long-term debt $ 1,000 $ 2,000
Accounts payable 148,192 174,941
Accrued operating expense 25,045 17,263
Accrued exploration and development 63,799 76,465
Accrued compensation and benefits 12,837 12,262
Other accrued expenses 31,978 26,726
---------- ----------
282,851 309,657
---------- ----------
LONG-TERM DEBT 1,312,595 1,235,706
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT
LIABILITIES:
Income taxes 301,685 254,789
Advance from gas purchaser 158,942 51,798
Other 54,280 61,964
---------- ----------
514,907 368,551
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock, $1.25 par, 215,000,000
shares authorized, 91,617,854 and
91,224,028 shares issued, respectively 114,522 114,030
Paid-in capital 1,010,997 1,002,540
Retained earnings 523,025 432,588
Treasury stock, at cost, 1,175,050 and
1,165,231 shares, respectively (15,517) (15,152)
Currency translation adjustment (16,966) (15,490)
---------- ----------
1,616,061 1,518,516
---------- ----------
$ 3,726,414 $ 3,432,430
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
4
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED RETAINED EARNINGS
(Unaudited)
<TABLE>
(In thousands) For the Quarter
Ended September 30,
---------------------------
1997 1996
---------- -----------
<S> <C> <C>
RETAINED EARNINGS, beginning of period $ 498,571 $ 363,851
Net income 30,785 30,137
Dividends declared:
Common stock, $.07 per share (6,331) (6,292)
---------- ----------
RETAINED EARNINGS, end of period $ 523,025 $ 387,696
========== ==========
For the Nine Months
Ended September 30,
---------------------------
1997 1996
---------- -----------
RETAINED EARNINGS, beginning of year $ 432,588 $ 335,470
Net income 109,408 70,229
Dividends declared:
Common stock, $.21 per share (18,971) (18,003)
---------- ----------
RETAINED EARNINGS, end of period $ 523,025 $ 387,696
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
5
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
These financial statements have been prepared by Apache Corporation
(Apache or the Company) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and reflect all
adjustments which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods, on a basis consistent
with the annual audited financial statements. All such adjustments are of
a normal recurring nature. Certain information, accounting policies, and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with
the financial statements and the summary of significant accounting policies
and notes thereto included in the Company's most recent annual report on
Form 10-K.
1. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share". The new standard simplifies the computation of earnings per share
(EPS) and increases comparability to international standards. Under SFAS
No. 128, primary EPS is replaced by "Basic" EPS, which excludes dilution
and is computed by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for the period.
"Diluted" EPS, which is computed similarly to fully diluted EPS, reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
The Company is required to adopt the new standard in its year-end 1997
financial statements. All prior-period EPS information (including interim
EPS) is required to be restated at that time. Early adoption is not
permitted. Pro forma net income per common share, as if the Company
adopted SFAS No. 128 on January 1 of each period presented, is as follows:
<TABLE>
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
-------------- ------------------
1997 1996 1997 1996
------- ------- --------- ---------
<S> <C> <C> <C> <C>
Basic net income per common share $ .34 $ .34 $ 1.21 $ .83
Diluted net income per common share .33 .33 1.17 .83
</TABLE>
2. HEDGING ACTIVITIES
Apache periodically enters into commodity derivatives contracts and
fixed-price physical contracts to manage its exposure to oil and gas price
volatility. Commodity derivatives contracts, which are usually placed with
major financial institutions that the Company believes are minimal credit
risks, may take the form of futures contracts, swaps or options. The oil
and gas reference prices upon which these commodity derivatives contracts
are based reflect various market indices that have a high degree of
historical correlation with actual prices received by the Company. The
Company accounts for its commodity derivatives contracts using the hedge
(or deferral) method of accounting. Under this method, realized gains and
losses from the Company's price risk management activities are recognized
in oil and gas production revenues when the associated production occurs
and the resulting cash flows are reported as cash flows from operating
activities. Gains and losses on commodity derivatives contracts that are
closed before the hedged production occurs are deferred until the
production month originally hedged. In the event of a loss of correlation
between changes in oil and gas reference prices under a commodity
derivatives contract and actual oil and gas prices, a gain or loss is
recognized currently to the extent the commodity derivatives contract has
not offset changes in actual oil and gas prices.
6
<PAGE>
3. ACQUISITIONS
On May 20, 1996, Apache acquired The Phoenix Resource Companies, Inc.
(Phoenix), an oil and gas company operating primarily in the Arab Republic
of Egypt. The merger (Merger) resulted in Phoenix becoming a wholly owned
subsidiary of Apache and was accounted for using the purchase method of
accounting. The financial results of Phoenix have been included in the
financial statements of the Company since the date of the acquisition.
Pursuant to the Merger agreement, shares of Phoenix common stock then
outstanding and outstanding Phoenix stock options (which were assumed by
Apache) were converted into the right to receive (a) .75 shares of Apache
common stock with any fractional shares paid in cash, without interest, and
(b) $4.00 in cash. As a result, 12.2 million shares of Apache common stock
were issued in exchange for outstanding Phoenix stock.
The following unaudited pro forma financial information shows the
effect on the Company's consolidated results of operations as if the Merger
occurred on January 1, 1996. The pro forma data is based on numerous
assumptions and is not necessarily indicative of future results of
operations.
<TABLE>
For the Nine Months
Ended September 30, 1996
-----------------------------
(In thousands, except per share data) As Reported Pro Forma
----------- ---------
<S> <C> <C>
Revenues $ 672,510 $ 687,436
Net income $ 70,229 $ 73,842
Primary net income per common share $ .83 $ .82
Weighted average common shares outstanding 84,360 89,777
</TABLE>
In October, the Company entered into three share purchase agreements
with subsidiaries of Mobil Exploration & Producing Australia Pty Ltd for
the purchase by Apache and/or Apache Energy Limited of all of the capital
stock of Ampolex (A.O.E.) Pty Limited, Ampolex (Western Australia) Inc.
and Ampolex Varanus Pty Limited for a total of $425 million AUD
(approximately $310 million U.S.) in cash, subject to certain
adjustments. The consummation of the transactions, which are subject to
certain conditions including U.S. and Australian government approvals,
will increase Apache's interest from (a) current 22.5 percent in the
Harriet area to 47.5 percent, which includes the Varanus Island pipeline,
processing and production complex and eight existing oil and gas fields,
and (b) from 20 percent in the East Spar gas and condensate field to 55
percent, which produces through the Varanus facilities.
4. NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents. These
investments are carried at cost, which approximates market.
The following table provides supplemental disclosure of cash flow
information:
<TABLE>
(In thousands) For the Nine Months
Ended September 30,
-----------------------------
1997 1996
----------- -----------
Cash paid during the period for:
<S> <C> <C>
Interest (net of amounts capitalized) $ 41,610 $ 31,367
Income taxes (net of refunds) 25,902 5,465
</TABLE>
5. DEBT
In January 1997, the Company established a $300 million commercial
paper program which allows Apache to borrow funds for up to 270 days at
competitive interest rates. The commercial paper program is supported by
availability under the United States portion of Apache's global corporate
credit facility. In June 1997, the Company expanded its commercial paper
program to $700 million from $300 million to provide access to additional
low-cost, short-term funds. Since its inception in January 1997, the
commercial paper program has been rated A-2, Prime-2 and D-1- (D-One-Minus)
by Standard & Poor's, Moody's and Duff and Phelps, respectively.
7
<PAGE>
Also in January 1997, Standard & Poor's upgraded the Company's senior
long-term debt rating from BBB to BBB+ and subordinated debt from BBB- to
BBB.
In June 1997, the Company replaced its $1 billion global borrowing-base
credit facility with a new billion-dollar global corporate credit facility
that provides Apache with greater borrowing capacity, increased financial
flexibility and less restrictive covenants, while lowering its all-in
borrowing costs by 7-1/2 basis points.
The global corporate credit facility consists of three separate bank
facilities: a $700 million credit commitment in the United States; a $175
million facility in Australia; and a $125 million credit line in Canada.
The new global corporate credit facility enables Apache to draw on its full
$1 billion credit line without restrictions tied to periodic revaluation of
the Company's oil and gas reserves.
Under the financial covenants of the global corporate credit facility,
the Company must (i) maintain a minimum tangible net worth of $1.028
billion as of September 30, 1997, which is adjusted quarterly for
subsequent earnings, as defined, and (ii) maintain a ratio of debt to
capitalization of not greater than 60 percent at the end of any fiscal
quarter. The financial covenant under the previous global borrowing-base
credit facility requiring the Company to maintain a ratio of (a) earnings
before interest, taxes, depreciation, depletion and amortization to (b)
consolidated interest expense of not less than 3.7:1 has been eliminated.
The Company was in compliance with all financial covenants at September 30,
1997.
In August 1997, Apache offered $150 million principal amount, $148
million net of discount, of senior unsecured 7.375-percent debentures
maturing on August 15, 2047. The debentures are not redeemable prior to
maturity, however, Apache has the right to advance maturity, under certain
conditions. These debentures are governed by the same indenture that
governs certain of the Company's other senior unsecured notes which imposes
restrictions on the Company, including limits on Apache's ability to incur
debt secured by certain liens and its ability to enter into certain sale
and leaseback transactions.
In October 1997, the Company provided funds to two of its Egyptian
subsidiaries to repay $55 million outstanding under two secured credit
facilities with the International Finance Corporation, which were
terminated.
On October 30, 1997, three of the Company's Egyptian subsidiaries
entered into a secured, revolving credit facility that will become
effective upon receipt of Egyptian government acknowledgment of the
lender's security interest in the concession agreements. The facility
provides total commitments of $250 million, with availability determined by
a borrowing base formula. The initial borrowing base will be $150 million
and will be redetermined semi-annually. The total amount of commitments
under the facility is scheduled to reduce by set increments every six
months, beginning two and one-half years after the effective date of the
facility. The facility is presently secured solely by assets associated
with the Company's Qarun and Khalda Concessions and shares of stock of the
subsidiaries holding said concessions, with provisions that will permit the
inclusion of other Egyptian subsidiaries of the Company as borrowers with
security interest on such subsidiaries' assets and shares of stock.
Interest is assessed at LIBOR plus a margin of .375 percent, which is
scheduled to increase to .625 percent on the third anniversary of the
facility unless the facility is extended. If the facility is extended, the
rate increase would occur two years from the end of the facility's extended
term. A fee of .375 percent is payable on the available portion of the
commitments, while a fee of .1875 percent is payable on the difference
between the borrowing base and the total amount of commitments under the
facility. The facility is scheduled to mature on January 3, 2003.
8
<PAGE>
6. ADVANCE FROM GAS PURCHASER
In August 1997, Apache received $115.2 million from a purchaser as an
advance for future natural gas deliveries of 20,000 MMBtu per day over a
ten-year period commencing September 1997. As a condition of the
arrangement with the purchaser, Apache entered into two gas price swap
contracts with third parties under which Apache became a fixed price payor
at identical volumes and at prices starting at $2.22 and $2.17 per MMBtu
through September 2007. In addition, the purchaser pays to Apache a
monthly fee of $.07 per MMBtu on the contracted volumes. The net result of
these related transactions is that gas delivered to the purchaser is
reported as revenue at prevailing spot prices with Apache realizing a small
premium associated with the monthly fee paid by the purchaser. The
Company, through its marketing subsidiaries, may purchase gas from third
parties to satisfy gas delivery requirements of this arrangement.
The payment from the purchaser has been classified as an advance on the
balance sheet as of September 30, 1997 and is being reduced as gas is
delivered to the purchaser under the terms of the contract. Gas volumes
delivered to the purchaser are reported as revenue at prices used to
calculate the amount advanced, before imputed interest, minus or plus
amounts paid or received by Apache applicable to the price swap agreements.
Interest expense is recorded based on an eight-percent rate.
9
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Apache's results of operations and financial position for the first
nine months of 1997 were significantly impacted by the following:
Operations - Daily oil production increased 26 percent and 21 percent
for the nine months and third quarter when compared to the same periods
last year. The increases favorably impacted revenues by $69.9 million and
$20.1 million, respectively. Daily gas production rose nine percent for
the first nine months and 11 percent for the quarter when compared to the
same periods last year, increasing revenues by $29.7 million and $11.2
million. In addition to increasing production, third quarter earnings were
positively impacted by a $1.8 million, or three percent, decrease in
operating costs over the third quarter of 1996.
Commodity Prices - Apache's average realized price for natural gas
increased $.29 per thousand cubic feet (Mcf) from $1.90 per Mcf in the
first nine months of 1996 to $2.19 per Mcf in the same period of 1997,
favorably impacting revenues by $45.0 million. The average realized oil
price decreased $.44 per barrel from $19.86 per barrel to $19.42 per
barrel, reducing revenues by $6.1 million.
RESULTS OF OPERATIONS
Apache reported 1997 third quarter net income of $30.8 million versus
$30.1 million in the prior year. Pro forma basic net income per common
share of $.34 for the third quarter was consistent with the comparable
period in 1996. Higher production and gas prices along with reduced
operating costs compared to the same period in 1996 favorably impacted
earnings, but were mitigated by lower oil prices, higher depreciation,
depletion and amortization (DD&A) expense and higher financing costs.
For the year, net income of $109.4 million, or $1.21 pro forma basic
net income per common share, increased from $70.2 million, or $.83 per
share, in the comparable 1996 period. Higher production and gas prices
compared to a year ago favorably impacted earnings, but were mitigated by
lower oil prices, higher DD&A expense and higher financing costs.
For the third quarter of 1997, revenues increased 14 percent to $276.7
million as compared to $242.4 million for the same period in 1996. Crude
oil and natural gas production revenues increased 10 percent over the same
period in 1996, with crude oil contributing 49 percent, natural gas
contributing 50 percent and natural gas liquids (NGLS) contributing one
percent of total oil and gas production revenues.
For the first nine months of 1997, revenues increased 27 percent to
$857.4 million as compared to $672.5 million for the same period in 1996.
Revenues from crude oil and natural gas production increased 24 percent
over the same period in 1996, with crude oil contributing 48 percent,
natural gas contributing 51 percent and NGLs contributing one percent of
total oil and gas production revenues.
10
<PAGE>
Volume and price information for the Company's 1997 and 1996 third
quarter and first nine months oil and gas production is summarized in the
following table:
<TABLE>
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
Increase Increase
1997 1996 (Decrease) 1997 1996 (Decrease)
-------- --------- --------- -------- -------- ---------
Gas Volume - Mcf per day:
<S> <C> <C> <C> <C> <C> <C>
U.S. 505,981 468,583 8% 497,043 469,126 6%
Canada 93,310 78,161 19% 86,368 73,147 18%
Egypt 726 434 67% 547 243 125%
Australia 20,238 13,520 50% 21,137 10,944 93%
-------- -------- -------- --------
Total 620,255 560,698 11% 605,095 553,460 9%
======== ======== ======== ========
Average Gas Price - Per Mcf:
U.S. $ 2.23 $ 2.11 6% $ 2.37 $ 2.04 16%
Canada 1.12 .98 14% 1.28 .99 29%
Egypt 2.76 2.79 (1%) 2.79 2.87 (3%)
Australia 1.80 2.01 (10%) 1.84 2.00 (8%)
Total 2.05 1.95 5% 2.19 1.90 15%
Oil Volume - Barrels per day:
U.S. 40,746 40,399 1% 40,664 40,674 --
Canada 2,289 1,993 15% 2,032 1,949 4%
Egypt 20,223 10,761 88% 18,728 6,375 194%
Australia 3,786 2,093 81% 3,205 2,269 41%
-------- -------- -------- --------
Total 67,044 55,246 21% 64,629 51,267 26%
======== ======== ======== ========
Average Oil Price - Per barrel:
U.S. $ 18.43 $ 21.33 (14%) $ 19.60 $ 19.77 (1%)
Canada 18.36 21.11 (13%) 19.38 20.05 (3%)
Egypt 18.39 20.88 (12%) 18.76 19.92 (6%)
Australia 19.66 21.65 (9%) 21.08 21.10 --
Total 18.48 21.25 (13%) 19.42 19.86 (2%)
NGL Volume - Barrels per day:
U.S. 1,347 1,172 15% 1,677 1,382 21%
Canada 546 592 (8%) 607 617 (2%)
-------- -------- -------- --------
Total 1,893 1,764 7% 2,284 1,999 14%
======== ======== ======== ========
NGL Price - Per barrel:
U.S. $ 11.66 $ 16.81 (31%) $ 15.23 $ 15.51 (2%)
Canada 10.82 13.14 (18%) 13.63 12.15 12%
Total 11.42 15.58 (27%) 14.80 14.47 2%
</TABLE>
Third Quarter 1997 Compared to Third Quarter 1996
Natural gas sales for the third quarter of 1997 totaled $117.1 million,
16-percent higher than those recorded in the third quarter of 1996.
Production increased 59.6 million cubic feet per day (MMcf/d), or 11
percent, on a worldwide basis, favorably impacting revenue by $11.2
million. In the U.S. and Canada, the increase in natural gas production
was principally due to the benefit from development and tactical
acquisition activity. Australian increases resulted from East Spar
production, which came on line in November 1996. In addition, 1996 third
quarter production was negatively impacted by the Company's primary
Australian gas purchaser taking less volume under its take-or-pay contract.
Nominations were at normal levels during the third quarter of 1997.
Average realized natural gas prices increased five percent, favorably
impacting revenue by $5.2 million. The majority of this increase, and the
resulting impact on natural gas sales, was realized in the U.S. where the
Company sold 82 percent of its worldwide gas production at an average price
of $2.23 per Mcf, $.12 per Mcf higher than 1996. In addition, the
Companys natural gas sales were favorably impacted by higher spot prices
in Canada where the Company sold 15 percent of its worldwide gas production
at an average price of $1.12 per Mcf, compared to $.98 per Mcf in 1996.
The Company periodically engages in hedging activities, including fixed
price physical and financial contracts. The net result of these activities
offset each other and had no impact on the Company's realized price during
the third quarter of 1997 and decreased realized prices by $.02 in the
third quarter of 1996.
The Company's crude oil sales for the third quarter of 1997 totaled
$114.0 million, a six-percent increase from the third quarter of 1996, due
to production increases which were partially offset by lower average
realized prices.
11
<PAGE>
Oil production increased 21 percent compared to the prior year third
quarter primarily as a result of production facility enhancements at the
Company's Qarun Concession in the Western Desert of Egypt. Egyptian oil
production accounted for 30 percent of the Company's worldwide oil
production, compared to 19 percent in the third quarter of 1996, resulting
in an increase in revenues of $16.0 million. In addition to the favorable
impact of Egyptian production, Australian oil production increased 81
percent due to natural gas liquids production associated with new gas wells
in East Spar that came on-line in November 1996 and initial sales from
drilling activity in the Agincourt and Chervil fields.
The Company's realized price for sales of crude oil in the third
quarter of 1997 decreased $2.77 per barrel, or 13 percent, resulting in a
decrease in revenue of $14.1 million compared to the same period in 1996.
Revenue from the sale of natural gas liquids totaled $2.0 million for
the third quarter of 1997, as compared to $2.5 million for the same period
in 1996. Production increases of seven percent were more than offset by a
27-percent decline in realized prices.
Year-to-Date 1997 Compared to Year-to-Date 1996
Natural gas sales for the first nine months of 1997 of $362.2 million
increased $74.7 million, or 26 percent, when compared to the same period in
1996, as a result of favorable natural gas prices and increased gas
production. A $.33 per Mcf increase in U.S. realized natural gas prices,
which accounted for 82 percent of worldwide gas production, contributed
$42.4 million to the increase in sales. Natural gas sales were also
favorably impacted by a six-percent increase in U.S. production, which
contributed $16.9 million to the increase over the first nine months of the
prior year. Canadian and Australian gas sales contributed $10.5 million and
$5.1 million, respectively, to the increase in revenue as a result of
higher realized prices in Canada and increased production in both
countries. The Company's net hedging activity increased realized gas
prices by $.02 per Mcf during the first nine months of 1997 compared to a
$.10 per Mcf reduction in realized prices during the comparable period in
1996.
For the first nine months of 1997, oil sales increased 23 percent to
$342.7 million compared to $279.0 million for the same period in 1996,
primarily due to increases in production during 1997 as a result of
drilling activity and completion of production facilities at the Qarun
Concession in Egypt. Egyptian oil sales, which account for 29 percent of
Apache's worldwide oil production, contributed $61.1 million, or 96
percent, of the increase in oil sales compared to the first nine months of
1996. Australian oil sales were favorably impacted by a 41-percent
increase in production, which contributed $5.3 million to the increase in
revenue compared to the same period in 1996. Mitigating the impact of
increased production in Egypt and Australia were decreases in worldwide
realized oil prices which reduced sales revenue by $6.1 million.
Natural gas liquid revenue increased 16 percent to $9.2 million for the
first nine months of 1997. Compared to the prior year, production
increased 14 percent, contributing $1.1 million to the increase in
revenues, and higher realized prices added another $.2 million.
OTHER REVENUES AND OPERATING EXPENSES
During the third quarter and first nine months of 1997, Apache's gas
gathering, processing and marketing revenues increased 45 percent and 50
percent, respectively, to $45.2 million and $144.6 million, due primarily
to higher volumes compared to the prior year. Although revenues have
increased with respect to these activities, there was a corresponding
increase in gas gathering, processing and marketing costs of 48 percent and
55 percent and lower margins were realized for the quarter and nine months
compared to the same periods in 1996. Margins were lower in both periods
due to lower crude oil trading margins and lower pipeline gathering fees.
12
<PAGE>
Other revenues for the first nine months of 1997 consisted primarily of
equity in loss of an affiliate ($1.4 million), foreign currency
translation losses related to Canadian exchange rate fluctuations ($1.2
million) and currency transaction losses related to Australian exchange
rate fluctuations ($.8 million). These losses were partially offset by
legal settlement proceeds ($.8 million) and Canadian royalty credits ($.8
million). Other revenue for the first nine months of 1996 included a gain
on the sale of stock held for investment ($.8 million) and Canadian royalty
credits ($.8 million).
The Company's DD&A expense for the third quarter and first nine months
of 1997 totaled $98.2 million and $281.0 million, respectively, compared to
$81.4 million and $229.6 million for the comparable periods in 1996. On an
equivalent barrel (boe) basis, full cost DD&A expense increased $.33 per
boe, from $5.51 per boe to $5.84 per boe, in the third quarter of 1997
compared to the same period in 1996. For the nine months ended September
30, 1997, the full cost DD&A rate totaled $5.78 per boe compared to $5.43
in 1996. The increase is a function of downward reserve revisions primarily
due to price declines in 1997 and costs added to domestic proved oil and
gas property.
Operating costs, including lease operating expense and severance taxes,
decreased three percent from $56.6 million in the third quarter of 1996, to
$54.9 million for the same period in 1997. For the first nine months of
1997, operating costs totaled $172.6 million, an increase of $9.1 million,
or six percent, over the same period in 1996. For the third quarter and
first nine months of 1997, lease operating expense, excluding severance
taxes, totaled $45.2 million and $143.1 million, respectively, compared to
$47.5 million and $136.9 million for the comparable periods in 1996. On an
equivalent barrel basis, lease operating expense for the third quarter
declined from $3.43 per boe in 1996 to $2.85 per boe in 1997. North
American cost reductions and a decrease in Egyptian expenses, as a result
of transporting oil production by pipeline as opposed to trucking, combined
with production increases, were major factors behind the decline.
Additionally, Australian per unit costs were less than last year due to
incremental production from East Spar being added with minimal expense
increases impacting not only the third quarter but also the year-to-date
costs. For the first nine months of 1997, lease operating expense averaged
$3.12 per boe, a nine-percent decrease from $3.43 per boe for the same
period in 1996.
Administrative, selling and other costs (G&A) in the third quarter of
1997 decreased $.2 million, or two percent, from a year ago, while costs
for the first nine months of 1997 increased $.7 million, or three percent.
On an equivalent barrel basis, general and administrative expenses declined
10 percent, to $.58 per boe, for the first nine months of 1997 as compared
to $.65 per boe for the same period in 1996 as production increases were
not met with rising administrative costs. G&A continues at low levels as a
result of the Company's cost cutting efforts initiated in the first quarter
of 1996.
Net financing costs for the third quarter increased $4.3 million, or
29 percent, from the prior year due to higher gross interest expense and
higher amortization of deferred loan costs. Gross interest expense
increased $3.8 million due to a higher average outstanding debt balance
and a higher weighted average interest rate.
Net financing costs increased 13 percent from $45.0 million in the
first nine months of 1996 to $51.0 million in the comparable 1997 period
due to higher gross interest expense and higher amortization of deferred
financing costs, mitigated by an increase in capitalized interest. Gross
interest expense increased $10.3 million as a result of higher average
outstanding debt and a higher weighted average interest rate. Capitalized
interest, which is based on the carrying value of unproved properties,
increased $5.2 million due to increased international activity and the
resulting increase to the unproved property base.
CASH FLOW, LIQUIDITY AND CAPITAL RESOURCES
Capital Commitments
Apache's primary cash needs are for exploration, development and
acquisition of oil and gas properties, repayment of principal and
interest on outstanding debt, and payment of dividends. The Company
generally funds its exploration and development activities through
internally generated cash flow. Apache budgets capital expenditures
based upon projected cash flow and routinely adjusts its capital
expenditures in response to changes in oil and natural gas prices and
corresponding changes in cash flow. The Company is not in a position to
predict future product prices.
13
<PAGE>
Capital Expenditures - A summary of oil and gas capital expenditures
during the first nine months of 1997 and 1996 is presented below (in
millions):
<TABLE>
1997 1996
------- -------
Exploration and Development:
<S> <C> <C>
United States $ 288.1 $ 205.8
Canada 42.2 39.3
Egypt 102.9 32.1
Australia 43.4 32.9
Other International 20.1 21.2
------- ------
Total $ 496.7 $ 331.3
======= ========
Acquisition of Oil and Gas Properties $ 32.8 $ 415.0
======= ========
</TABLE>
In North America, Apache completed 242 producing wells out of 299 wells
drilled during the first nine months of 1997, while internationally the
Company discovered 24 new producers of 46 wells drilled. Worldwide, the
Company was drilling or completing an additional 86 wells as of September
30, 1997. In addition, Apache completed 252 production enhancement
projects, including 154 recompletions, during the first nine months of
1997.
Property acquisitions totaled $32.8 million in the first nine months of
1997, primarily representing tactical acquisitions of properties in the
Company's existing focus areas.
In October, the Company entered into three share purchase agreements
with subsidiaries of Mobil Exploration & Producing Australia Pty Ltd for
the purchase by Apache and/or Apache Energy Limited of all of the capital
stock of Ampolex (A.O.E.) Pty Limited, Ampolex (Western Australia) Inc. and
Ampolex Varanus Pty Limited for a total of $425 million AUD (approximately
$310 million U.S.) in cash, subject to certain adjustments. The
consummation of the transactions, which are subject to certain conditions
including U.S. and Australian government approvals, will increase Apache's
interest from (a) current 22.5 percent in the Harriet area to 47.5 percent,
which includes the Varanus Island pipeline, processing and production
complex and eight existing oil and gas fields, and (b) from 20 percent in
the East Spar gas and condensate field to 55 percent, which produces
through the Varanus facilities. The acquisitions will be funded with one
or more of Apache's existing global corporate credit facility, commercial
paper program and/or a debt offering by a wholly-owned indirect finance
subsidiary of Apache. Any such debt offering would be fully and
unconditionally guaranteed by Apache.
Capital Resources and Liquidity
Net Cash Provided by Operating Activities - Apache's net cash provided
by operating activities during the first nine months of 1997 totaled $539.7
million, an increase of 57 percent from $343.8 million in 1996. This
increase was due primarily to receipt of $115.2 million from a purchaser
for an advance payment for future natural gas deliveries and higher product
prices and production as compared to last year.
Long-Term Borrowings - In January 1997, the Company established a $300
million commercial paper program which allows Apache to borrow funds for
up to 270 days at competitive interest rates. The commercial paper
program is supported by availability under the United States portion of
Apache's global corporate credit facility. In June 1997, the Company
expanded its commercial paper program to $700 million from $300 million to
provide access to additional low-cost, short-term funds. Since its
inception in January 1997, the commercial paper program has been rated A-2,
Prime-2 and D-1- (D-One-Minus) by Standard & Poor's, Moody's and Duff and
Phelps, respectively.
Also in January 1997, Standard & Poor's upgraded the Company's senior
long-term debt rating from BBB to BBB+ and subordinated debt from BBB- to
BBB.
In June 1997, the Company replaced its $1 billion global borrowing-base
credit facility with a new billion-dollar global corporate credit facility
that provides Apache with greater borrowing capacity, increased financial
flexibility and less restrictive covenants, while lowering its all-in
borrowing costs by 7-1/2 basis points.
14
<PAGE>
The global corporate credit facility consists of three separate bank
facilities: a $700 million credit commitment in the United States; a $175
million facility in Australia; and a $125 million credit line in Canada.
The new global corporate credit facility enables Apache to draw on its full
$1 billion credit line without restrictions tied to periodic revaluation of
the Company's oil and gas reserves.
In August 1997, Apache offered $150 million principal amount, $148
million net of discount, of senior unsecured 7.375-percent debentures due
August 15, 2047. The proceeds from this issuance were used to reduce the
Company's commercial paper and for general corporate purposes.
The Company terminated its existing Egyptian project financing with the
International Finance Corporation in October 1997, and is replacing it with
a $250 million revolving credit facility arranged by The Chase Manhattan Bank.
Liquidity - The Company had $25.6 million in cash and cash equivalents
on hand at September 30, 1997, up from the $13.2 million at December 31,
1996. Apache's ratio of current assets to current liabilities at
September 30, 1997 was 1.02:1 compared to .87:1 at December 31, 1996.
Apache believes that cash on hand, net cash generated from operations
and unused committed borrowing capacity under its global corporate credit
facility will be adequate to satisfy the Company's financial obligations
to meet future liquidity needs for at least the next two fiscal years.
As of September 30, 1997, Apache's available borrowing capacity under its
global corporate credit facility was $693 million.
FUTURE TRENDS
Apache's growth strategy is to increase oil and gas reserves,
production, cash flow and earnings through a combination of exploratory
drilling, development of its inventory of existing projects and
acquisitions. The Company's drilling program emphasizes economic reserve
additions through exploratory drilling primarily on its international
interests, and moderate-risk drilling primarily on its North American
interests. The Company also emphasizes reducing operating costs per unit
produced and selling marginal and non-strategic properties in order to
increase its profit margins.
Apache's international investments and operations are an increasingly
important component of its long-term growth strategy. Although
international exploration is recognized as higher-risk than most of
Apache's North American activities, it offers potential for greater rewards
and significant reserve additions. Apache will direct its international
efforts over the next year toward development of discoveries offshore
Western Australia, in Egypt's Western Desert and the People's Republic of
China and toward further exploration efforts on its concessions in
Australia, Egypt, China, Poland, offshore the Ivory Coast of western Africa
and in Indonesia.
Acquisitions of producing properties are also an important element of
Apache's growth strategy. With competition for acquisitions increasing,
Apache seeks properties in and around its existing properties where
operatorship, experience and/or economies of scale may provide the Company
an advantage over others in the industry. In the acquisition of Australian
assets from Mobil, for example, Apache has considerable familiarity with
the properties as the Company operates all of the fields and extensive oil
and gas pipeline, storage and production facilities being acquired. This
transaction more than doubles Apache's interest in these assets as well as
in prospects which the Company plans to begin drilling in 1998. Apache
prefers to operate its properties so that it can best influence their
development. As a result, the Company operates properties accounting for
over 75 percent of its production.
In 1997, Apache expects North American exploration and development
outlays to increase from 1996 levels as the Company focuses on increasing
reserves, production and cash flow through exploratory drilling and
development of its existing inventory. Internationally, the Company
projects capital expenditures for exploration and development to double
1996 levels as Apache continues to exploit its concessions in Egypt,
Western Australia, the People's Republic of China, Poland, offshore the
Ivory Coast of western Africa and in Indonesia. Proposed exploration and
development expenditures in 1997 will be reviewed at least every quarter in
light of fluctuating product prices and Apache's objective to fund
operations through internally generated cash flow.
15
<PAGE>
On May 1, 1997, Apache's shareholders approved the 1996 Share Price
Appreciation Plan, which provides for awards denominated in shares of
Apache common stock to be paid to the Company's employees following
attainment of share price goals of $50 and $60, respectively, before
January 1, 2000. Generally, any payments will be made in three
installments over 36 months. Between 30 and 50 percent of the award will be
paid in cash based on the market value of Apache common stock on the dates
of payment, and the balance of the award (up to a total of 2,000,000 shares
in the aggregate) will be issued in Apache common stock.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 ("PSLRA")
Certain forward-looking information contained in this report is being
provided in reliance upon the "safe harbor" provisions of the PSLRA as set
forth in Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such information
includes, without limitation, discussions as to estimates, expectations,
beliefs, plans, strategies and objectives concerning the Company's future
financial and operating performance. Such forward-looking information is
subject to assumptions and beliefs based on current information known to
the Company and factors that could yield actual results differing
materially from those anticipated. Such factors include, without
limitation, the prices received for the Company's oil and natural gas
production, the costs of acquiring, finding, developing and producing
reserves, the rates of production of the Company's hydrocarbon reserves,
the Company's success in acquiring or finding additional reserves,
unforeseen operational hazards, significant changes in tax or regulatory
environments, and the political and economic uncertainties of foreign
operations.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The information set forth in Note 10 to the Consolidated
Financial Statements contained in the Company's Form 10-K for the
year ended December 31, 1996 (filed with the Securities and
Exchange Commission on March 28, 1997) is incorporated herein by
reference.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 - Computation of Earnings per Share.
27.1 - Financial Data Table.
(b) Reports filed on Form 8-K.
The following current report on Form 8-K was filed during the
fiscal quarter ended September 30, 1997:
August 8, 1997 - Item 5. Other Events.
Offering to the public of $150 million principal amount of
Apache's 7.375 percent debentures due 2047, issuable under an
indenture dated February 15, 1996, and supplemented November 5,
1996, and registered pursuant to Apache's Registration Statement
on Form S-3 (File No. 33-12669).
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
APACHE CORPORATION
Dated: November 14, 1997 /s/ Roger B. Plank
---------------------------------------
Roger B. Plank
Vice President and Chief Financial Officer
Dated: November 14, 1997 /s/ Thomas L. Mitchell
---------------------------------------
Thomas L. Mitchell
Vice President and Controller
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000006769
<NAME> ART.5 FDS FOR 1997 THIRD QUARTER 10-Q
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1,000
<CASH> 25,596
<SECURITIES> 0
<RECEIVABLES> 220,820
<ALLOWANCES> 0
<INVENTORY> 30,191
<CURRENT-ASSETS> 287,798
<PP&E> 5,937,101
<DEPRECIATION> 2,554,317
<TOTAL-ASSETS> 3,726,414
<CURRENT-LIABILITIES> 282,851
<BONDS> 1,312,595
0
0
<COMMON> 114,522
<OTHER-SE> 1,501,539
<TOTAL-LIABILITY-AND-EQUITY> 3,726,414
<SALES> 714,196
<TOTAL-REVENUES> 857,417
<CGS> 596,352
<TOTAL-COSTS> 596,352
<OTHER-EXPENSES> 26,790
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,048
<INCOME-PRETAX> 183,227
<INCOME-TAX> 73,819
<INCOME-CONTINUING> 109,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,408
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.17
</TABLE>
EXHIBIT 11.1
APACHE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
<TABLE>
For the Quarter Ended For the Nine Months
September 30, September 30,
-------------------- ---------------------
1997 1996 1997 1996
-------- -------- ------- --------
Weighted Average Calculation:
- -----------------------------
<S> <C> <C> <C> <C>
Net income $ 30,785 $ 30,137 $ 109,408 $ 70,229
======== ======== ======== ========
Weighted average common shares outstanding 90,396 89,860 90,276 84,360
======== ======== ======== ========
Net income per share,
based on weighted average
common shares outstanding $ .34 $ .34 $ 1.21 $ .83
======== ======== ======== ========
Primary Calculation:
- --------------------
Net income $ 30,785 $ 30,137 $ 109,408 $ 70,229
Assumed conversion of
3.93-percent convertible notes 531 531 1,568 1,583
-------- -------- -------- --------
Net income, as adjusted $ 31,316 $ 30,668 $ 110,976 $ 71,812
======== ======== ======== ========
Common Stock Equivalents:
Weighted average common shares outstanding 90,396 89,860 90,276 84,360
Stock options, using the treasury stock
method 929 712 544 451
Assumed conversion of 3.93-percent
convertible notes 2,778 2,778 2,778 2,778
-------- -------- -------- --------
94,103 93,350 93,598 87,589
======== ======== ======== ========
Primary net income per common share $ .33* $ .33* $ 1.19 $ .82*
======== ======== ======== ========
</TABLE>
<PAGE>
APACHE CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
EXHIBIT 11.1
(Continued)
<TABLE>
For the Quarter Ended For the Nine Months Ended
September 30, September 30,
------------------ -------------------
1997 1996 1997 1996
------- ------- ------- -------
Fully-Diluted Calculation:
- --------------------------
<S> <C> <C> <C> <C>
Net income $ 30,785 $ 30,137 $ 109,408 $ 70,229
Assumed conversion of:
3.93-percent convertible notes 531 531 1,568 1,583
6-percent convertible
subordinated debentures 1,738 1,738 5,125 --
------- -------- -------- --------
Net income, as adjusted $ 33,054 $ 32,406 $ 116,101 $ 71,812
======== ======== ======== ========
Common Stock Equivalents:
Weighted average common
shares outstanding 90,396 89,860 90,276 84,360
Stock options, using the treasury
stock method 1,299 712 958 494
Assumed conversion of 3.93-percent
convertible notes 2,778 2,778 2,778 2,778
Assumed conversion of six-percent
convertible subordinated debentures 5,623 5,623 5,623 --
-------- -------- -------- --------
100,096 98,973 99,635 87,632
========= ======== ======== ========
Fully diluted net income per
common share $ .33 $ .33* $ 1.17 $ .82*
======= ======== ======== ========
</TABLE>
Note: The assumed conversion of the six-percent convertible subordinated
debentures was anti-dilutive for the nine month period ended September 30,
1996.
* The primary and fully diluted net per common share amounts for the indicated
periods reflect dilution of less than three percent. As a result, the amounts
reported in the consolidated statement of income are based upon weighted
average shares outstanding.