UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-8704
HOWELL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1223027
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1111 Fannin, Suite 1500, Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 658-4000
(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 (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 on each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 1, 1994
Common Stock, $1.00 par value 4,836,876
This report contains 10 pages
<PAGE>
HOWELL CORPORATION AND SUBSIDIARIES
Form 10-Q
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Statements of Earnings --
Three and nine months ended September 30, 1994 and 1993 3
Consolidated Balance Sheets --
September 30, 1994 and December 31, 1993 4
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
PAGE 2
<PAGE>
PART I. FINANCIAL INFORMATION
(ITEM 1)
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Howell Corporation and Subsidiaries
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Revenues $120,530 $98,119 $317,217 $320,905
Cost and expenses:
Products including operating expenses 115,951 94,119 304,315 309,617
Selling, general and administrative expenses 2,729 2,310 8,220 7,310
118,680 96,429 312,535 316,927
Other income (expense):
Interest expense (578) (402) (1,622) (1,353)
Interest income 11 65 42 282
Other-net 26 (16) 42 (31)
(541) (353) (1,538) (1,102)
Earnings before income taxes 1,309 1,337 3,144 2,876
Provision for income taxes 433 395 1,011 856
Net earnings $876 $942 $2,133 $2,020
Net earnings per common share $.06 $.07 $.07 $.20
Cash dividends per common share $.04 $.04 $.12 $.12
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
PAGE 3
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Howell Corporation and Subsidiaries
<CAPTION>
September 30, December 31,
1994 1993
(In thousands)
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $2,399 $3,337
Trade accounts receivable, less allowance for
doubtful accounts of $209,000 in 1994
and $201,000 in 1993 43,498 30,352
Inventories 3,210 2,573
Other current assets 2,001 1,998
Total current assets 51,108 38,260
Property, plant and equipment:
Oil and gas properties, utilizing the full-cost
method of accounting 262,114 256,227
Mineral fee interests 18,228 18,260
Other 34,507 32,516
Less accumulated depreciation, depletion
and amortization (189,615) (181,890)
Net property and equipment 125,234 125,113
Other assets 1,486 1,169
Total assets $177,828 $164,542
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $1,594 $2,055
Accounts payable 40,980 27,521
Accrued liabilities 6,348 4,496
Total current liabilities 48,922 34,072
Deferred income taxes 18,958 18,216
Other liabilities 150 150
Long-term debt 33,832 35,879
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par; 690,000 shares issued
and outstanding 690 690
Common stock, $1 par; 4,836,876 shares issued
and outstanding 4,837 4,837
Additional paid-in capital 33,518 33,518
Retained earnings 36,921 37,180
Total shareholders' equity 75,966 76,225
Total liabilities and shareholders' equity $177,828 $164,542
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
PAGE 4
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Howell Corporation and Subsidiaries
<CAPTION>
Nine Months Ended September 30,
1994 1993
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $2,133 $2,020
Adjustments for noncash items:
Depreciation, depletion and amortization 9,181 7,890
Deferred income taxes 742 725
Gain on sales of assets (23) (11)
Changes in components of working capital from
operations:
(Increase) decrease in trade accounts receivable (13,146) 16,348
(Increase) decrease in inventories (637) 133
Increase in other current assets (3) (940)
Increase (decrease) in accounts payable 13,459 (15,867)
Increase in accrued and other liabilities 1,852 650
Cash provided by operating activities 13,558 10,948
INVESTING ACTIVITIES:
Proceeds from the disposition of property 1,444 193
Additions to property, plant and equipment (10,723) (35,627)
Other, net (317) 25
Cash utilized in investing activities (9,596) (35,409)
FINANCING ACTIVITIES:
Long-term debt:
Repayments under revolving credit agreement (1,700) (8,550)
Other repayments, net (808) (356)
Cash dividends:
Common stock (581) (579)
Preferred stock (1,811) (1,054)
Issuance of convertible preferred stock - 32,860
Issuance of common stock - 63
Cash (utilized in) provided by financing
activities (4,900) 22,384
NET DECREASE IN CASH BALANCE $(938) $(2,077)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Net cash paid for:
Interest $1,014 $576
Income taxes $84 $74
See accompanying Notes to Consolidated Financial Statements
</TABLE>
PAGE 5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Howell Corporation and Subsidiaries
September 30, 1994 and 1993
Note 1 - Basis of Financial
Statement Preparation
The consolidated financial statements included herein have been prepared by
Howell Corporation (the Company) without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance
with generally accepted accounting principles. In the opinion of management,
all adjustments (all of which are normal and recurring) have been made
which are necessary to a fair statement of the results of operations for
the three and nine months ended September 30, 1994 and September 30, 1993.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
Form 10-K.
Note 2 - Inventories
The components of inventories at the balance sheet dates are as follows:
September 30, December 31,
1994 1993
(In thousands)
Refined products $1,415 $1,265
Crude oil 849 924
Other materials and supplies 946 384
$3,210 $2,573
Note 3 - Earnings Per Share
Earnings per common share has been computed by dividing net earnings, after
reduction for preferred stock dividends, by the weighted average number of
common shares outstanding. Shares issuable in connection with stock
options are not included in the per share computations since their dilutive
effect is less than 3%. Earnings per share assuming full dilution does not
result in a difference from earnings per share assuming no dilution.
The common shares issuable upon conversion of the convertible preferred
stock are anti-dilutive, and the common shares issuable in connection with stock
options result in a dilutive effect of less than 3%.
Note 4 - Income Taxes
The effective tax rate for the first nine months of 1994 and 1993 was 32% and
29%, respectively.
Note 5 - Commitments and Contingent Liabilities
Information about the Company's commitments and contingent liabilities is
included in Notes 8 and 9 to the consolidated financial statements contained
in the Company's 1993 Annual Report on Form 10-K. There were no
significant changes to such information during the first three quarters of 1994.
PAGE 6
<PAGE>
PART I. FINANCIAL INFORMATION
(ITEM 2)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company's principal business segments are oil and gas exploration and
production, crude oil marketing, technical fuels and chemical processing, and
transportation. Results of operations by segment for the three and nine months
ended September 30, 1994 and September 30, 1993 are presented below and
discussed in the following sections. The "Other" segment includes primarily
depreciation and amortization of certain assets not directly related
to those segments identified above. Selling, general and administrative
expenses incurred by each business segment are included in the determination of
the operating profit (loss) for that business segment. General corporate
expenses comprise the balance of selling, general and administrative expenses.
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In thousands)
Revenues
Oil and gas exploration and production $7,442 $8,075 $21,855 $23,480
Crude oil marketing 109,282 86,867 283,066 288,660
Technical fuels and chemical processing 7,021 6,831 22,098 19,098
Transportation 3,244 2,331 8,627 6,889
Other - - 16 -
Intersegment sales (6,459) (5,985) (18,445) (17,222)
$120,530 $98,119 $317,217 $320,905
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In thousands)
Earnings
Oil and gas exploration and production $1,826 $1,815 $4,793 $5,489
Crude oil marketing 540 276 1,458 479
Technical fuels and chemical processing 132 286 556 237
Transportation 309 147 881 361
Other (77) (15) (257) (47)
Operating profit 2,730 2,509 7,431 6,519
General corporate expenses (880) (819) (2,749) (2,541)
Other income (expense) (541) (353) (1,538) (1,102)
Earnings before taxes 1,309 1,337 3,144 2,876
Provision for income taxes 433 395 1,011 856
Net earnings $876 $942 $2,133 $2,020
PAGE 7
<PAGE>
Oil & Gas Exploration and Production
Revenues of the oil and gas exploration and production segment for the three
months ended September 30, 1994 and 1993 were as follows:
Three Months Ended September 30,
1994 1993
(In thousands)
Revenues
Sales of oil and natural gas $6,374 $7,009
Sales of LaBarge other products 526 510
Gas marketing 357 408
Minerals leasing and other 185 148
Total revenues $7,442 $8,075
Production and sales data for the three months ended September 30, 1994 and 1993
were as follows:
Three Months Ended September 30,
1994 1993
Production:
Crude oil (bbls per day) 3,359 3,412
Natural gas (Mcf per day) 8,642 9,782
Natural gas liquids (bbls per day) 223 195
Sales prices:
Crude oil (per bbl) $15.82 $15.46
Natural gas (per Mcf) 1.72 1.85
Natural gas liquids (per bbl) 8.90 9.61
Despite a $0.6 million decrease in revenues of the oil and gas exploration and
production segment in the third quarter of 1994 when compared to the same
quarter in 1993, operating profit remained flat. Lease operating costs were
$0.6 million lower between the periods. On an equivalent barrel basis, lease
operating expenses fell $1.20 from the 1993 amount of $5.58. The acquisition
in August 1993 of mineral properties with royalty production and minimal lease
operating costs contributed to this reduction.
The decrease in revenues is attributable primarily to crude oil and natural gas
production declines and lower average gas sales prices.
Crude Oil Marketing
Operating profit of the crude oil marketing segment for the nine months ended
September 30, 1994 increased $1.0 million when compared to the nine months ended
September 30, 1993. The increase in operating profit in 1994 can be
attributed to improved profit margins, larger volumes of crude oil
marketed and the use by the Company of hedging techniques to reduce the
impact of price fluctuations on its margins. These hedging activities began in
the third quarter of 1993.
Technical Fuels and Chemical Processing
For the nine month period, the technical fuels and chemicals processing segment
showed an improvement in operating results of $0.3 million on increased
revenues of $3.0 million. Volumes of research and reference fuels sold
increased by 24%. Product and operating cost improvements also
contributed to the improved nine month result.
PAGE 8
<PAGE>
Transportation
The transportation segment reported an operating profit of $0.9 million for the
nine months ended September 30, 1994, more than double its 1993 result. The
improvement can be attributed to a 25% increase in revenues with only a 19%
increase in operating costs. In late August 1994, this segment contracted with
Lyondell Petrochemical Company to handle a significant portion of its
transportation needs for the next year, resulting in increased revenues for the
third quarter of 1994.
Other Income (Expense)
Interest expense for the nine months ended September 30, 1994 increased $0.3
million or 20% when compared to the same period in 1993. The proceeds from the
Company's convertible preferred stock offering, which were received April
23, 1993, were used to repay the outstanding balance on the Company's Credit
Facility. While the Company did borrow under its Credit Facility in the third
quarter to fund the acquisition of the mineral properties, the Company did
not have a balance outstanding under its Credit Facility for approximately
three months during 1993, resulting in less interest expense in 1993. Interest
expense also increased in 1994 due to higher market interest rates as reflected
in the rise of the prime interest rate from 6.0% at December 31, 1993 to 7.75%
at September 30, 1994.
Interest income for the 1994 period was less than the 1993 period. The proceeds
from the preferred stock offering discussed above exceeded the outstanding
balance on the Credit Facility, and the excess was invested in short-term
investments for approximately three months in 1993, resulting in the
higher 1993 amount.
Provision for Income Taxes
For the first nine months of 1994 and 1993 the provision for income taxes was
calculated at rates of 32% and 29%, respectively. The variance from the
statutory rate of 34% was due to the effect of the percentage depletion
deduction, offset slightly in 1994 by higher state income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operating activities in the first nine months of
1994 of $13.6 million. During this period, the Company utilized the cash
flow generated from operations to reduce the outstanding balance under
its Credit Facility by $1.7 million, to invest $10.7 million in exploration and
development activities and other additions to property, plant and equipment
and to pay a total of $2.4 million of cash dividends to its common and preferred
shareholders.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
11 Computation of Earnings per Share
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of 1994.
PAGE 9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Howell Corporation
(Registrant)
Date: October 31, 1994 /s/ Allyn R. Skelton, II
Allyn R. Skelton, II
Senior Vice President & Chief Financial Officer
(Principal Financial and Accounting Officer)
PAGE 10
<PAGE>
<TABLE>
EXHIBIT 11
HOWELL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(In thousands, except per share amounts)
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Computation for Statement of Earnings
Reconciliation of net income per statement of
earnings to amount used in calculation of earnings
per share - assuming no dilution:
Net earnings $876 $942 $2,133 $2,020
Subtract - Dividend to preferred shareholders 603 604 1,811 1,054
Net earnings, as adjusted $273 $338 $322 $966
Weighted average number of common shares
outstanding 4,837 4,825 4,837 4,821
Earnings per share - assuming no dilution (a) $.06 $.07 $.07 $.20
Additional Primary Computation
Net earnings, as adjusted per primary
computation above $273 $338 $322 $966
Adjustment to weighted average number of
shares outstanding:
Weighted average number of shares outstanding
per primary computation above 4,837 4,825 4,837 4,821
Add - Dilutive effect of outstanding options
(as determined by application of the treasury
stock method) 49 55 52 65
Weighted average number of shares outstanding,
as adjusted 4,886 4,880 4,889 4,886
Primary earnings per share, as adjusted (b) $.06 $.07 $.07 $.20
<PAGE>
FULLY DILUTED EARNINGS PER SHARE
Computation for Statement of Earnings
Net earnings, as adjusted per
primary computation above $273 $338 $322 $966
Weighted average number of common shares
outstanding, per primary computation above 4,837 4,825 4,837 4,821
Earnings per share - assuming full
dilution (a) $.06 $.07 $.07 $.20
Additional Fully Diluted Computation
Additional adjustment to net earnings,
as adjusted per fully diluted computation above:
Net earnings, as adjusted per fully
diluted computation above $273 $338 $322 $966
Add - Dividend to preferred shareholders 603 604 1,811 1,054
Net earnings, as adjusted $876 $942 $2,133 $2,020
Additional adjustment to weighted average number
of shares outstanding:
Weighted average number of shares outstanding,
per fully diluted computation above 4,837 4,825 4,837 4,821
Add - Dilutive effect of outstanding options
(as determined by the application of the treasury
stock method) 42 55 40 67
Shares issuable from assumed exercise of
convertible preferred stock 2,091 2,091 2,091 1,340
Weighted average number of common shares,
as adjusted 6,970 6,971 6,968 6,228
Fully diluted earnings per share (c) $.13 $.14 $.31 $.32
</TABLE>
(a) These amounts agree with the reported amounts on the statements of
earnings.
(b) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB Opinion
No. 15 because it results in dilution of less than 3%.
(c) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because
it produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994 OF HOWELL CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 2,399
<SECURITIES> 0
<RECEIVABLES> 43,707
<ALLOWANCES> 209
<INVENTORY> 3,210
<CURRENT-ASSETS> 51,108
<PP&E> 314,849
<DEPRECIATION> 189,615
<TOTAL-ASSETS> 177,828
<CURRENT-LIABILITIES> 48,922
<BONDS> 0
<COMMON> 4,837
0
690
<OTHER-SE> 70,439
<TOTAL-LIABILITY-AND-EQUITY> 177,828
<SALES> 317,217
<TOTAL-REVENUES> 317,217
<CGS> 304,315
<TOTAL-COSTS> 312,535
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,622
<INCOME-PRETAX> 3,144
<INCOME-TAX> 1,011
<INCOME-CONTINUING> 2,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,133
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
