<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 ending June 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8567-2
MAXUS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1891531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
717 North Harwood Street, Dallas, Texas 75201-6594
(Address of principal executive offices) (Zip Code)
(214) 953-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to the filing
requirements for the past 90 days.
YES (X) NO ( )
Shares of Common Stock outstanding at June 30, 1994: 134,600,995
<PAGE>
PART I. FINANCIAL INFORMATION
The accompanying consolidated financial statements have not been examined by
independent accountants, but in the opinion of the management of Maxus Energy
Corporation (the "Company"), all adjustments (consisting only of normal
accruals) necessary for a fair presentation of the consolidated results of
operations, consolidated balance sheet and consolidated cash flows at the date
and for the periods indicated have been included.
2
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited) (in millions, except per share)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------
Period Ended June 30, Three Months Six Months
1994 1993 1994 1993
---------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales and operating revenues $167.5 $204.2 $354.5 $396.2
Settlement of litigation 6.8 6.8
Other revenues, net (5.1) 5.1 0.2 10.5
- - --------------------------------------------------------------------------------------------------
162.4 216.1 354.8 413.5
---------------------------------------
COSTS AND EXPENSES
Operating expenses 55.8 61.9 117.9 121.5
Gas purchase costs 32.4 44.9 75.9 75.3
Exploration, including exploratory dry holes 7.7 11.4 17.0 24.1
Depreciation, depletion and amortization 35.2 37.1 73.4 74.3
General and administrative expenses 8.5 9.2 16.7 17.7
Taxes other than income taxes 2.7 4.4 7.0 8.4
Interest and debt expenses 24.9 22.6 47.4 44.5
Restructuring:
Gain on sale of assets (201.9) (201.9)
Restructuring costs 100.9 100.9
- - --------------------------------------------------------------------------------------------------
66.2 191.5 254.3 365.8
---------------------------------------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 96.2 24.6 100.5 47.7
INCOME TAXES 66.1 28.5 81.6 51.4
- - --------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 30.1 (3.9) 18.9 (3.7)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (4.4)
- - --------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 30.1 (3.9) 18.9 (8.1)
Dividend requirement on preferred stock (12.1) (10.4) (24.4) (20.8)
- - --------------------------------------------------------------------------------------------------
INCOME (LOSS) APPLICABLE TO COMMON SHARES $ 18.0 $(14.3) $ (5.5) $(28.9)
==================================================================================================
Income (Loss) before cumulative effect of change in
accounting principle $ 0.13 $(0.11) $(0.04) $(0.18)
Cumulative effect of change in accounting principle (0.03)
- - --------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE $ 0.13 $(0.11) $(0.04) $(0.21)
==================================================================================================
AVERAGE COMMON SHARES OUTSTANDING (IN MILLIONS) 134.7 133.8 134.6 133.6
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
3
<PAGE>
<TABLE>
<CAPTION>
MAXUS ENERGY CORPORATION
CONSOLIDATED BALANCE SHEET
(in millions, except shares)
- - ------------------------------------------------------------------------------
June 30, December 31,
1994 1993
-------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 114.3 $ 128.7
Short-term investments 84.9 33.6
Receivables, less doubtful receivables 134.7 156.8
Inventories 29.1 24.1
Restricted cash 45.9 38.4
Deferred income taxes 2.1 2.1
Prepaids and other current assets 18.0 21.0
- - ------------------------------------------------------------------------------
Total Current Assets 429.0 404.7
Properties and equipment, less accumulated
depreciation and depletion of $1,677.2;
$2,063.2 in 1993 1,103.2 1,305.6
Investments and long-term receivables 111.6 94.2
Restricted cash 101.1 121.8
Intangible assets, less accumulated
amortization of $13.5; $12.9 in
1993 36.5 37.1
Deferred charges 21.9 24.0
- - ------------------------------------------------------------------------------
TOTAL ASSETS $1,803.3 $1,987.4
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Long-term debt $23.9 $39.7
Securities sold under repurchase agreements
Accounts payable 50.4 99.9
Accrued liabilities 111.2 107.7
Taxes payable 34.2 16.1
- - ------------------------------------------------------------------------------
Total Current Liabilities 219.7 263.4
Long-term debt 981.3 1,015.4
Deferred income taxes 225.0 198.3
Other liabilities and deferred credits 106.9 112.4
Redeemable Preferred Stock, $1.00 par value
Authorized and issued shares--1,250,000
and 2,500,000 125.0 250.0
Stockholders' Equity
$2.50 Preferred Stock, $1.00 par value
Authorized shares--5,000,000
Issues shares--3,500,000 3.5 3.5
$4.00 Preferred Stock, $1.00 par value
Issued shares--4,358,658 4.4 4.4
Common Stock, $1.00 par value
Authorized shares--300,000,000
Issued shares--134,840,644 and
134,373,523 134.8 134.4
Paid-in capital 1,005.0 1,026.2
Accumulated deficit (974.8) (993.7)
Minimum pension liability (24.4) (24.4)
Common Treasury Stock, at cost--239,649
and 173,963 shares (3.1) (2.5)
- - ------------------------------------------------------------------------------
Total Stockholders' Equity 145.4 147.9
- - ------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,803.3 $1,987.4
==============================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited). The Company uses the
successful efforts method to account for its oil and gas producing activities.
4
<PAGE>
MAXUS ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited) (in millions)
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------
Period Ended June 30,
1994 1993
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 18.9 $ (8.1)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Cumulative effect of change in accounting principle 4.4
Depreciation, depletion and amortization 73.4 74.3
Dry hole costs 0.3 0.1
Income taxes 26.8 11.3
Gain or loss on sale of assets (179.3) 4.5
Restructuring costs 91.0
Other 21.6 1.7
Changes in components of working capital:
Receivables 10.7 (22.6)
Inventories, prepaids and other current assets (2.8) (4.8)
Accounts and taxes payable (18.9) (10.8)
Accrued liabilities (6.3) (4.8)
--------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 35.4 45.2
- - ----------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for properties and equipment--including
dry hole costs (98.3) (158.3)
Expenditures for investments (20.1) (10.1)
Proceeds from sale of assets 312.8 4.7
Proceeds from sale/maturity of short-term investments 4.2 122.2
Purchases of short-term investments (55.5) (51.7)
Restricted cash 13.2 0.3
Other (6.7)
--------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 149.6 (92.9)
- - ----------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from joint venture partners (4.4)
Proceeds from issuance of short-term debt 27.5
Repayment of short-term debt (67.1) (0.1)
Proceeds from issuance of long-term debt 61.3 101.2
Repayment of long-term debt (67.3) (30.2)
Proceeds from issuance of common stock
Redemption of preferred stock (125.0)
Dividends paid (24.4) (20.8)
--------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (199.4) 50.1
- - ----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14.4) 2.4
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 128.7 6.8
- - ----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 114.3 $ 9.2
==============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
5
<PAGE>
MAXUS ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOND QUARTER 1994
(UNAUDITED)
RESTRUCTURING
- - --------------
A) ASSET SALES
On April 25, 1994, Diamond Shamrock Offshore Partners Limited Partnership
("DSP") sold its interests in Main Pass Blocks 72, 73 and 74 to Pogo Producing
Company. On April 26, 1994, Maxus and its subsidiaries sold all of their
partnership interests in DSP to affiliates of Burlington Resources Inc. On
June 22, 1994, Maxus also sold the McFarlan Field and Grand Isle Block 25, both
producing oil and gas properties, to affiliates of Burlington Resources Inc.
In total, the Company received $324.6 million of proceeds and recorded a net
gain of $201.9 million from these transactions.
B) RESTRUCTURING COSTS
In the second quarter of 1994, the Company recorded a $100.9 million
restructuring charge. The charge included a $69.8 million write-off associated
with undeveloped Alaska coal leases, the development of which does not fit
within the Company's revised strategy to commit funds only to oil and gas
exploration and production in core and emerging areas. The charge also
included costs associated with staff reductions and the write-off of non-
producing assets outside the Company's core areas.
ENVIRONMENTAL
- - -------------
During the second quarter of 1994, the Company increased by $11.5 million its
reserve for future environmental costs. The charge was recorded in other
revenues, net.
LONG-TERM DEBT
- - --------------
On January 10, 1994, the Company issued $60.0 million of 9 3/8% notes due 2003
pursuant to a shelf registration statement which became effective in May 1993.
The proceeds from these debt securities were used to redeem $29.0 million of
long-term debt maturing in 1994, and for general corporate purposes.
During the second quarter of 1994, the Company repaid $36.6 million of
outstanding medium-term notes maturing in 1994 and $37.7 million of outstanding
medium-term notes maturing in 1995 and 1996 from the proceeds of asset sales.
SHORT-TERM DEBT
- - ---------------
In the second quarter of 1994, the Company repaid $25.0 million outstanding at
the end of the first quarter of 1994 under the terms of a purchase and sale
agreement for crude oil.
PREFERRED STOCK
- - ---------------
On February 1, 1994, the Company redeemed the 625,000 shares of its $9.75
Cumulative Convertible Preferred Stock which were subject to mandatory
redemption provisions for $62.5 million. On June 15, 1994, the Company redeemed
an additional 625,000 shares of its $9.75 Cumulative Convertible Preferred Stock
for $63.5 million, which fulfilled an obligation otherwise due in February 1995.
6
<PAGE>
MAXUS ENERGY CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
SECOND QUARTER 1994
RESULTS OF OPERATIONS
Maxus reported second quarter 1994 net income of $30 million or, after preferred
dividends, income of 13 cents per common share, compared to a net loss of $4
million or, after preferred dividends, a loss of 11 cents per common share,
reported in the second quarter of 1993. For year-to-date 1994, Maxus reported
net income of $19 million or, after payment of preferred dividends, a loss of
four cents per common share, compared to a net loss of $8 million or, after
payment of preferred dividends, a loss of 21 cents per common share in 1993.
The second quarter 1994 results reflect a $101 million pre-tax net benefit from
the Company's restructuring activities, which included the sale of Maxus'
interest in Diamond Shamrock Offshore Partners Limited Partnership ("DSP") and
certain domestic oil and gas properties, resulting in a pre-tax gain of $202
million. This gain was partially offset by restructuring costs, including a $70
million write-off associated with the Company's undeveloped Alaska coal leases,
the development of which does not fit within the Company's revised strategy to
commit funds only to oil and gas exploration and production in core and emerging
areas. The restructuring also included costs associated with staff reductions
and the write-off of non-producing assets outside the Company's core areas. As
a result of the restructuring, Maxus expects annualized cost savings of
approximately $35 million due to lower administrative costs and exploration
expenditures.
During the second quarter, revised cost estimates for engineering studies and
remediation of certain sites resulted in Maxus increasing its reserve for future
environmental costs by $12 million. The second quarter 1993 results included a
$7 million gain as a result of partial payment of an agreed judgment against
Ivan Boesky in a lawsuit arising out of transactions related to the Natomas
Company acquisition in 1983. This gain was recorded in "Settlement of
litigation."
Sales and operating revenues for the second quarter of 1994 were $168 million,
compared to $204 million for the same period a year ago. A decrease of $17
million was attributable to a loss of production from properties sold. In
addition, lower oil prices (down $4.03 per barrel) negatively impacted second
quarter 1994 sales by $23 million. Year-to-date 1994 sales and operating
revenues were $355 million, compared to $396 million for the same period a year
ago. The decrease of $41 million was also primarily attributable to the loss of
production from properties sold and lower oil prices.
Net worldwide crude production remained flat at 63 thousand barrels per day
("mbpd") in second quarter 1994 and 1993. U.S. natural gas sales for the second
quarter of 1994 were 297 million cubic feet per day ("mmcfpd"), a decrease of 72
mmcfpd over the second quarter 1993. The decline was largely due to the loss of
production from properties sold as well as lower quantities of gas purchased for
processing and resale. ($12 million decrease in revenues). The average gas
price received in the United States was $2.01 per thousand cubic feet ("mcf") in
the second quarter 1994 as compared to $2.22 per mcf a year ago.
Natural gas liquids sales in the United States were 17 mbpd for second quarter
1994 and 1993. The average sales price for natural gas liquids in the second
quarter of 1994 was $9.78 per barrel, a decrease of $1.91 per barrel from 1993.
Operating expenses for both the quarter and six-month period ending June 30 were
lower than the same periods a year ago partially due to the elimination of
operating costs for the properties sold. Additionally, higher U.S. gathering
and processing costs were incurred in the first five months of 1993 during the
transition period from the old processing facility to the new Sunray gas plant.
7
<PAGE>
Gas purchase costs were $13 million lower in the second quarter of 1994 as
compared to second quarter 1993 due to the reduction in gas purchased for
processing and resale. Overall, exploration costs were lower in 1994 due to the
Company's revised strategy.
Income tax expense for both the quarter and six-month period ending June 30 was
higher than the same periods a year ago. The higher tax expense was recorded to
reflect the U.S. tax impact from the sale of DSP and oil and gas producing
properties in 1994.
The 1993 year-to-date results included a $4 million loss due to the adoption of
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Post employment Benefits," which requires an accrual method of recognizing post
employment benefits. This expense, which was recorded as a cumulative effect of
a change in accounting principle, primarily represents accrued medical benefits
for long-term disability recipients.
FINANCIAL CONDITION
The Company's net cash provided by operating activities was $35 million in the
first half of 1994 compared to $45 million in the first half of 1993. Net cash
from operating activities before working capital changes declined $36 million
during 1994. Cash flow from operations was negatively impacted by lower crude
oil prices, loss of production from U.S. properties sold and costs associated
with staff reductions, but was partially offset by additional gas volumes from
Northwest Java ($15 million). The 1993 cash flow from operations included the
$7 million litigation settlement from Ivan Boesky. Net working capital
requirements were $26 million lower in 1994 primarily because of the settlement
of Indonesian underlift receivables in the first quarter of this year.
The Company began 1994 with $129 million of cash and cash equivalents. For the
first six months of 1994, additional cash was provided by operations ($35
million), proceeds from the sale of assets ($313 million) and the release of $13
million in restricted cash. In 1994, the Company redeemed $125 million of its
$9.75 Cumulative Convertible Preferred Stock, which was subject to mandatory
redemption provisions in 1994 and 1995. The Company also purchased an
additional $56 million in short-term investments with a portion of the proceeds
from asset sales. After funding expenditures for properties and equipment of
$98 million, paying the preferred dividends of $24 million and repaying debt
($50 million net activity), a balance of $114 million in cash and cash
equivalents remained at June 30, 1994. In the first six months of 1993, cash
balances on hand of $7 million, cash provided by operations of $45 million, net
borrowings of $71 million and net proceeds from the sale/purchase of short term
investments ($71 million) were used to fund expenditures for properties and
equipment and preferred dividends.
Expenditures for properties and equipment, including dry hole costs, were $98
million for the first half of 1994 as compared to $158 million for the same
period last year. Approximately half of the 1994 spending was associated with
the Ecuador development project. Overall, spending declined as a result of
Maxus' reduced capital program for 1994, following the completion in 1993 of the
Sunray gas plant and the first phase of the Northwest Java gas project.
On April 25, 1994, DSP sold its interests in Main Pass Blocks 72, 73 and 74 to
Pogo Producing Company. On April 26, 1994, Maxus and its subsidiaries sold all
of their partnership interests in DSP to affiliates of Burlington Resources Inc.
As a result of the sale, Meridian Offshore Company, a Burlington Resources Inc.
affiliate, became the managing general partner of DSP. In second quarter 1994,
Maxus also sold the McFarlan Field and Grand Isle Block 25, both producing oil
and gas properties, to affiliates of Burlington Resources Inc. In total, the
Company received $325 million of proceeds and recorded a net gain of $202
million ($155 million net of tax) from these transactions. The proceeds from
these sales were used to reduce debt by $100 million and to redeem $63 million
of Prudential preferred stock due in February 1995. The remaining cash and
investment balances, which increased $76 million during the quarter, will
supplement cash flow from operations to fund program spending and repay maturing
debt obligations over the next two years.
During the second quarter of 1994 Maxus Bolivia, Inc., a subsidiary of Maxus,
signed an agreement to take BHP Petroleum as a partner in its Bolivian oil
development project. The Company received $10 million from BHP in exchange for a
50% interest in the project.
8
<PAGE>
In January 1994, the Company issued $60 million of 9 3/8% notes due in 2003.
The proceeds from these debt securities were used to redeem $29 million of long-
term debt maturing in 1994 and for general corporate purposes. During the
second quarter of 1994, the Company also repaid $74 million of outstanding
medium-term notes maturing in 1994, 1995 and 1996 from the proceeds from asset
sales.
Working capital (current assets less current liabilities) increased $68 million
from December 31, 1993, primarily from the sale of assets during the second
quarter of 1994. A portion of the sales proceeds was used to invest in short-
term investments and repay current maturities of long-term debt.
OTHER EVENTS
Oil production is averaging nearly 21 mbpd from 12 wells in Maxus Ecuador's
Tivacuno, Bogi and Capiron fields. Seven wells in Tivacuno, four in Bogi and
one in Capiron are currently on-stream. Total production for the year will be
less than previously anticipated because of delays in commencement of production
and because initial rates are below original expectations.
Northwest Java gas volumes during 1994 have been below planned volumes. While
deliverability is available at or above contract quantities, the purchaser is
taking approximately one-half the contract volume during the transition from
traditional sources of fuel to natural gas for electric power generation.
9
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of its stockholders was held on May 11, 1994.
The holders of common stock and $4.00 Cumulative Convertible Preferred
Stock voted as follows:
Election of Directors
---------------------
<TABLE>
<CAPTION>
Votes For Votes Withheld
----------- --------------
<S> <C> <C>
George L. Jackson 115,541,227 4,180,540
John T. Kimbell 115,391,828 4,329,939
Richard W. Murphy 112,462,986 7,258,781
Jose Maria Perez Arteta 115,733,913 3,987,854
</TABLE>
Ratification of Appointment of
Independent Accountants
------------------------------
Votes For Votes Against Abstentions
----------- ------------- -----------
117,975,127 1,046,565 700,074
Stockholder proposal requesting that the Company
prepare a report regarding the CERES Principles
------------------------------------------------
Votes For Votes Against Abstentions Broker Non-Votes
---------- ------------- ----------- ----------------
20,661,901 54,415,040 5,186,073 39,458,753
In addition, the holders of the $9.75 Cumulative Convertible Preferred
Stock unanimously elected Mr. R. A. Walker to the board of directors.
Item 5. Other Information.
The ratio of earnings to fixed charges and the ratio of earnings to
combined fixed charges and preferred stock dividends for the six-month period
ended June 30, 1994 have been computed on a consolidated basis to be 2.67 and
1.63, respectively. Before non-recurring transactions, earnings would have been
inadequate to cover fixed charges and combined fixed charges and preferred stock
dividends for such period by $2.9 million and $40.4 million, respectively.
10
<PAGE>
For the purposes of these computations, earnings consist of income before
income taxes and fixed charges (excluding interest capitalized, net of
amortization). Fixed charges represent interest incurred, amortization of debt
expense and that portion of rental expense deemed to be the equivalent of
interest.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
12.1 --Statement re Computation of Ratios.
(b) Reports on Form 8-K.
None.
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.
MAXUS ENERGY CORPORATION
By: G. R. Brown
G. R. Brown, Vice President
and Controller, on behalf of
the registrant and as its
chief accounting officer
August 11, 1994
11
<PAGE>
Exhibit Index
Exhibit Title Exhibit No.
Statement re Computation of Ratios 12.1
<PAGE>
Exhibit 12.1
MAXUS ENERGY CORPORATION
STATEMENT RE COMPUTATION OF RATIOS
(in millions, except ratios)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1994
----------
<S> <C>
Earnings
Net income ............................................................ $ 18.9
Add:
Provision for income taxes ...................................... 81.6
Interest and debt expenses ...................................... 47.4
Other fixed charges (a) ......................................... 1
Rentals (b) ..................................................... 8.1
----------
Total earnings ............................................... $157.0
==========
Fixed Charges:
Interest and debt expenses ......................................... $ 47.4
Rentals ............................................................ 8.1
Capitalized interest ............................................... 3.1
Proportionate share of fixed charges of
unconsolidated associated companies 50% owned ................... 0.3
----------
Total fixed charges .......................................... $ 58.9
----------
Preferred stock dividend requirement (c) ........................... 37.5
----------
Combined fixed charges and preferred stock dividends ......... $ 96.4
==========
Ratio of earnings to fixed charges (d) ................................ 2.67
Ratio of earnings to combined fixed charges and preferred
stock dividends (e) ................................................ 1.63
</TABLE>
(a) Other fixed charges include amortization of capitalized interest and the
proportionate share of fixed charges of unconsolidated associated companies
50% owned.
(b) The amount shown above for rentals represents that portion of rental expense
representative of the interest factor (which approximates 45%).
(c) The preferred stock dividend requirement was increased by the amount
representing pre-tax earnings which would be required to cover such dividend
requirement. Due to the mix of foreign and domestic income and losses, use
of the Company's effective tax rate per the consolidated financial
statements yielded meaningless results. Accordingly, the Company chose the
U.S. statutory federal income tax rate to better reflect the pre-tax
earnings necessary to cover the preferred stock dividend requirement.
(d) Without income in the amount of $101.0 million from restructuring activities
($201.9 million from gain on sale of assets, net of restructuring costs of
$100.9 million), the ratio of earnings to fixed charges would have been 0.95
for the six months ended June 30, 1994. Before non-recurring transactions,
earnings were inadequate to cover fixed charges for the six months ended
June 30, 1994 by $2.9 million.
(e) Before the non-recurring transactions referenced in (d), the ratio of
earnings to combined fixed charges and preferred dividends would have been
0.58 for the six months ended June 30, 1994 and earnings were inadequate to
cover combined fixed charges and preferred stock dividends for the six
months ended June 30, 1994 by $40.4 million.
