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, 1996
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, 1996
-------------------------- -------------------------------
Common Stock, $1.00 par value 4,941,871
This report contains 13 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, 1996 and 1995 3
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
<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,
1996 1995 1996 1995
---- ---- ---- ----
(In thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Revenues $208,521 $172,972 $554,958 $494,256
-------- -------- -------- --------
Cost and expenses:
Products including operating expenses 201,183 165,955 533,731 474,522
Selling, general and administrative expenses 2,839 3,077 8,589 9,019
-------- -------- -------- --------
204,022 169,032 542,320 483,541
-------- -------- -------- --------
Other income (expense):
Interest expense (1,827) (2,134) (5,666) (5,029)
Interest income 34 40 73 152
Other-net - (134) 4 (121)
-------- -------- -------- --------
(1,793) (2,228) (5,589) (4,998)
-------- -------- -------- --------
Earnings before income taxes 2,706 1,712 7,049 5,717
Provision for income taxes 1,016 627 2,615 2,043
-------- -------- -------- --------
Net earnings $ 1,690 $ 1,085 $ 4,434 $ 3,674
======== ======== ======== ========
Net earnings per common share $ .22 $ .10 $ .53 $ .38
======== ======== ======== ========
Cash dividends per common share $ .04 $ .04 $ .12 $ .12
======== ======== ======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Howell Corporation and Subsidiaries
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(In thousands)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 4,110 $ 3,742
Trade accounts receivable, less allowance for doubtful
accounts of $251,000 in 1996 and $239,000 in 1995 77,178 65,288
Inventories 5,476 5,428
Other current assets 1,699 1,712
-------- --------
Total current assets 88,463 76,170
-------- --------
Property, plant and equipment:
Oil and gas properties, utilizing the full-cost
method of accounting 278,594 278,505
Mineral fee interests 18,188 18,188
Other 112,179 107,735
Less accumulated depreciation, depletion and amortization (218,719) (209,087)
-------- --------
Net property and equipment 190,242 195,341
-------- --------
Other assets 1,944 1,815
-------- --------
Total assets $280,649 $273,326
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 14,362 $ 8,068
Accounts payable 70,655 61,771
Accrued liabilities 8,589 7,141
-------- --------
Total current liabilities 93,606 76,980
-------- --------
Deferred income taxes 21,659 20,971
-------- --------
Other liabilities 459 150
-------- --------
Long-term debt 83,805 96,205
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par value; 690,000 shares issued and
outstanding, liquidation value $34,500,000 690 690
Common stock, $1 par value; 4,939,871 shares issued and
outstanding in 1996; and 4,933,446 shares issued and
outstanding, in 1995 4,940 4,933
Additional paid-in capital 34,453 34,390
Retained earnings 41,037 39,007
-------- --------
Total shareholders' equity 81,120 79,020
-------- --------
Total liabilities and shareholders' equity $280,649 $273,326
======== ========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Howell Corporation and Subsidiaries
<CAPTION>
Nine Months Ended September 30,
1996 1995
------ ------
(In thousands)
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 4,434 $ 3,674
Adjustments for noncash items:
Depreciation, depletion and amortization 12,462 11,992
Deferred income taxes 688 1,054
Gain on sales of assets (80) (22)
Changes in components of working capital from operations:
Increase in trade accounts receivable (11,890) (11,921)
Increase in inventories (48) (649)
Decrease (increase) in other current assets 13 (870)
Increase in accounts payable 8,884 7,892
Increase in accrued and other liabilities 1,757 5,116
-------- --------
Cash provided by operating activities 16,220 16,266
-------- --------
INVESTING ACTIVITIES:
Proceeds from the disposition of property 995 1,166
Additions to property, plant and equipment (8,224) (84,611)
Other, net (183) 728
-------- --------
Cash utilized in investing activities (7,412) (82,717)
-------- --------
FINANCING ACTIVITIES:
Long-term debt:
Borrowings under revolving credit agreement 450 14,800
(Repayments) borrowings under term loan agreement, net (6,518) 56,063
Other repayments, net (38) (35)
Cash dividends:
Common stock (593) (581)
Preferred stock (1,811) (1,811)
Issuance of common stock 70 869
-------- --------
Cash (utilized in) provided by financing activities (8,440) 69,305
-------- --------
NET INCREASE IN CASH BALANCE $ 368 $ 2,854
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Net cash paid for:
Interest $ 5,375 $ 3,830
======== ========
Income taxes $ 1,891 $ 843
======== ========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Howell Corporation and Subsidiaries
September 30, 1996 and 1995
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, 1996 and September 30, 1995. 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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Adoption of New Accounting Standards
Impairment of Long-Lived Assets
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed of" ("Statement 121"). Statement 121 contains provisions
for recording impairment of long-lived assets that are not expected to produce
net cash flows in the future sufficient to fully recover the remaining cost of
the related assets. The Company was not required to record impairment of any of
its assets as a result of adopting Statement 121.
Stock-Based Compensation
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123") was issued.
Statement 123 permits, but does not require, a fair value based method of
accounting for employee stock option plans which results in compensation expense
being recognized in the results of operations when stock options are granted.
Statement 123 is effective for the Company in the first quarter of 1996. The
Company will continue the use of its current intrinsic value based method of
accounting for such plans where no compensation expense is recognized. However,
as required by Statement 123, the Company will provide pro forma disclosure of
net income and earnings per share in the notes to the consolidated financial
statements of its 1996 annual report as if the fair value based method of
accounting had been applied.
Note 3 - Inventories
The components of inventories at the balance sheet dates are as follows:
September 30, December 31,
1996 1995
----------- -----------
(In thousands)
Refined products $1,721 $1,494
Crude oil 3,171 2,140
Chemicals 484 1,695
Other materials and supplieS 100 99
------ ------
$5,476 $5,428
====== ======
Note 4 - Financial Instruments and Hedging Activities
In order to mitigate the effects of future price fluctuations, the Company uses
a limited program of hedging its crude oil inventories. Crude oil futures and
options contracts are used as the hedging tools. Changes in the market value of
the futures transactions are deferred until the gain or loss is recognized on
the hedged transactions.
In 1995, the Company purchased a put option and sold a call option covering
100,000 barrels per month of oil production for an eighteen month period
beginning March 1, 1995. The option strike prices were based on the average
price of crude oil on the organized exchange, with monthly settlement. The
strike prices were $17 per barrel for the put option and $20 per barrel for the
call option. The premiums for the options were amortized over the option
period.
In July 1996, the Company purchased a put option and sold a call option covering
100,000 barrels per month of oil production for a six month period beginning
upon the expiration of the options discussed above. The strike prices are
$16.50 per barrel for the put option and $21.10 per barrel for the call option.
There was no net premium cost of these options.
During the nine months ended September 30, 1996, the monthly average price of
crude oil on the organized exchange exceeded the strike price of the call
options in seven months. The payments required in 1996 under the call options
and the premium amortized in 1996 totaled $1.5 million and were recorded as a
reduction of revenues.
Note 5 - 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 6 - Income Taxes
The effective tax rate for the first nine months of 1996 and 1995 was 37% and
36%, respectively.
Note 7 - Commitments and Contingencies
Donna Refinery Partners, Ltd. v. Howell Crude Oil Company and Howell
Corporation; District Court of Harris County, Texas; No. 89-033634. The suit
alleged the Company is in breach of a crude oil supply contract. In December
1993, a jury verdict of $1.9 million was rendered against the Company which was
subsequently reduced by the judge to approximately $675,000. The Company
believes the judgment is in error. The Company filed a motion for a new trial
that was denied, so the Company appealed the decision. The plaintiff has filed
an appeal to increase the recovery by $1.25 million. On June 6, 1996, the
Fourteenth Court of Appeals affirmed the judgment of the lower court. The
Company is currently perfecting its rights to appeal this case to the Texas
Supreme Court. The Company does not believe that the ultimate resolution of
this matter will have a material adverse effect on the financial position,
results of operations or cash flows of the Company.
Mobile Mineral Corporation, et al, v. Howell Crude Oil Company, et al; Circuit
Court of Mobile County, Alabama; CV-95-1564. This lawsuit was filed as a class
action in May 1995 by one working interest owner and two royalty owners in the
North Frisco City Field alleging breach of contracts by not paying the
plaintiffs " . . . the highest available price for oil". Damages claimed by the
plaintiffs are approximately $3.8 million and are based on numerous damage
theories including, but not limited to, allegations of breach of contract and
fraud. The complaint also seeks punitive damages. The Company filed an answer
denying all charges. On June 28, 1996, the Court entered an order denying class
certification.
Related to this matter, the Company, on July 11, 1995, received a demand letter
from the working interest owners in the North Frisco City Field and in the North
Rome Field indicating the Company had not paid according to the terms of a "call
on production".
The Company was granted a call on a portion of this production but has never
exercised the call. Accordingly, the Company has filed petitions for
declaratory judgment to that effect in cases styled Howell Petroleum
Corporation, et al, vs. Shore Oil Company, et al, District Court of Harris
County, Texas; No. 95-037180 and Howell Petroleum Corporation, et al, vs
Tenexco, Inc., et al, District Court of Harris County, Texas; No. 95-037970.
The defendants in this action have counterclaimed against the Company. These
claims are similar in nature to the Alabama litigation. One of the defendants,
John Faulkinberry, has filed a counterclaim against the Company seeking actual
damages of $75,000 and punitive damages of $100,000,000. The Company does not
believe that the ultimate resolution of these matters will have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.
In January 1995, an Agreed Order with the Texas Natural Resource Conservation
Commission was signed by the Company with respect to alleged violations of rules
regarding the permitting and storage of hazardous wastes at a facility that was
previously owned by the Company. Penalties totaling $26,000 were assessed and
paid by the Company. Additional testing and monitoring of the groundwater and
formal approval of the remediation work is still required. The Company has
completed the remediation work related to hazardous waste storage rule
violations. The new owner of the facility has accepted responsibility for the
first $100,000 of costs related to additional testing, monitoring and
remediation, if necessary, of the groundwater. The costs of these activities
have exceeded $100,000; therefore, the Company could be responsible for some
portion of the additional costs. The Company does not believe that this matter
will have a material adverse effect on the financial condition or results of
operations of the Company.
The Company's Channelview facility, utilized by its technical fuels and chemical
processing segment, is discharging wastewater pursuant to a state wastewater
discharge permit. Industries located in the state of Texas are required to
obtain wastewater discharge permits from the state and from the Environmental
Protection Agency ("EPA"). When the Company purchased the Channelview facility
in 1988, it requested and obtained a transfer of these permits. In 1990, the
Company applied for a renewal of both the federal and the state wastewater
permits. The state permit was reissued in 1992. During 1993, the Company
determined that the federal wastewater discharge permit may have expired prior
to the EPA's transfer of the permit to the Company. The EPA has been contacted
to resolve this issue, and the Company will be negotiating to obtain a renewed
permit. Penalties may potentially be imposed upon the Company as a result of
this matter; however, until this matter is resolved, the amount of such
penalties, if any, cannot be quantified. While penalties may be material and
the actions of regulatory bodies are not subject to accurate prediction, based
on information currently available to the Company and on the circumstances
present at its Channelview facility (including the existence of the state
permit, the Company's compliance with the more stringent state permit and the
ability, if required, to operate the Channelview facility utilizing holding
tanks and offsite third party treatment facilities in the absence of a permit),
the Company does not believe that this matter will have a material adverse
effect on the financial condition or results of operations of the Company.
The Company is subject to various environmental regulations and laws.
Procedures exist within the Company to monitor compliance and assess the
potential environmental exposure of the Company. The Company believes that such
exposure is not material to its financial position, results of operations or
cash flows.
The Company has indemnified Exxon Pipeline Company ("EPC") for certain
environmental claims that may be made in the future attributable to the time
when EPC owned the crude oil pipelines that the Company acquired from EPC.
Management does not believe the indemnification of EPC for these environmental
liabilities will have a material impact on the financial position, results of
operations or cash flows of the Company.
On October 31, 1996, an explosion of a tank occurred at the Company's
Channelview facility that is used for its technical fuels and chemical
processing activities. An employee of a contractor died and two others were
hospitalized with injuries. There was no release into the environment and no
impact on the surrounding community. Damage was confined to the tank where the
explosion occurred and the impact on operations was minimal. Investigation into
the cause of the explosion is continuing.
There are various other lawsuits and claims against the Company, none of which,
in the opinion of management, will have a material adverse effect on the
Company.
Note 8. Letters of Intent
On May 29, 1996, the Company announced that it had signed a Letter of Intent to
sell the assets of its technical fuels and chemical processing subsidiary to
Schenectady International, Inc. On October 4, 1996, the Company announced that
the Letter of Intent had expired and no further negotiations are expected
between the parties.
On July 18, 1996, the Company announced that it had signed a Letter of Intent
with Basis Petroleum, Inc. ("Basis"), a wholly-owned subsidiary of Salomon Inc,
covering the contributions by the Company and Basis of their respective crude
oil gathering, marketing and transportation activities to form a Master Limited
Partnership ("MLP"). Later in 1996, interests in the MLP will be offered for
sale to the public pursuant to a prospectus. The prospectus is in the process
of preparation and regulatory review.
The assets that the Company will contribute include its crude oil gathering,
marketing and pipeline assets, as well as the crude oil trucking portion of its
transportation segment. Proceeds from the public offering attributable to the
Company's interest in the MLP will be used to reduce debt and to support the
growth of the Company's oil and gas exploration and production operations.
After the public offering, the Company will own 46% of the General Partner and a
subordinated interest in the MLP. The Company expects the transaction to close
during the fourth quarter of 1996.
On July 23, 1996, the Company announced that it had signed a Letter of Intent
with an investor group led by the current management of its subsidiary, Howell
Transportation Services, Inc., to sell the stock of that entity to the investor
group. This transaction will transfer the remaining transportation and
logistics assets that would be left after the formation of the MLP. The Letter
of Intent is subject to the negotiation of a Definitive Agreement, customary due
diligence and the successful formation of the MLP. The Company expects the
transaction to close during the fourth quarter of 1996.
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, 1996 and September 30, 1995 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.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
(In thousands)
Revenues
<S> <C> <C> <C> <C>
Oil and gas exploration and production $ 8,318 $ 7,907 $ 25,388 $ 23,642
Crude oil marketing 195,510 161,497 515,500 457,949
Technical fuels and chemical processing 7,987 6,729 23,174 21,470
Transportation 3,901 4,133 12,071 11,982
Intersegment sales (7,195) (7,294) (21,175) (20,787)
-------- -------- -------- --------
$208,521 $172,972 $554,958 $494,256
======== ======== ======== ========
Earnings
Oil and gas exploration and production $ 2,349 $ 1,494 $ 6,662 $ 5,471
Crude oil marketing 2,468 2,830 7,869 6,477
Technical fuels and chemical processing 423 226 311 851
Transportation 121 289 366 802
Other (32) (17) (96) (140)
-------- -------- -------- --------
Operating profit 5,329 4,822 15,112 13,461
General corporate expenses (830) (882) (2,474) (2,746)
Other income (expense) (1,793) (2,228) (5,589) (4,998)
-------- -------- -------- --------
Earnings before taxes 2,706 1,712 7,049 5,717
Provision for income taxes 1,016 627 2,615 2,043
-------- -------- -------- --------
Net earnings $ 1,690 $ 1,085 $ 4,434 $ 3,674
======== ======== ======== ========
</TABLE>
Oil & Gas Exploration and Production
Revenues of the oil and gas exploration and production segment for the three
months ended September 30, 1996 and 1995 were as follows:
Three Months Ended September 30,
1996 1995
(In thousands)
Revenues
Sales of oil and natural gas $6,992 $6,728
Sales of LaBarge other products 348 477
Gas marketing 782 606
Minerals leasing and other 196 96
------ ------
Total revenues $8,318 $7,907
====== ======
Production and sales data for the three months ended September 30, 1996 and 1995
were as follows:
Three Months Ended September 30,
1996 1995
---- ----
Production:
Crude oil (bbls per day) 3,108 3,723
Natural gas (Mcf per day) 8,254 9,514
Natural gas liquids (bbls per day) 212 213
Sales prices:
Crude oil (per bbl) $17.86 $15.42
Natural gas (per Mcf) 2.00 1.38
Natural gas liquids (per bbl) 12.67 9.81
Operating profit of the oil and gas exploration and production segment increased
$0.9 million in the third quarter of 1996 when compared to the same quarter in
1995. Increased sales prices for the Company's crude oil and natural gas
production were the primary reasons for the improved operating profit.
Offsetting the effects of the improved prices were declines in crude oil and
natural gas production volumes. These declines in production were primarily a
result of natural production decline curves.
Also contributing to the increase in operating profit were a decrease in
depreciation, depletion and amortization (DD&A) expense of $0.3 million and a
decline in production costs of $0.4 million. These declines were primarily due
to the lower production volumes, as DD&A per equivalent barrel increased $0.26
to $5.61 in the 1996 quarter and production costs per equivalent barrel were
flat in the 1996 period when compared to the 1995 quarter.
In the fourth quarter of 1996, operating results for the oil and gas exploration
and production segment are expected to be negatively impacted by the shut-in of
Main Pass Block 64 for 16 days due to a severe tropical storm and damage to the
pipeline that transports the crude oil to markets onshore.
Crude Oil Marketing
Operating profit of the crude oil marketing segment was $2.5 million in the 1996
third quarter, a decrease of $0.4 million from the prior year period. The
decrease in operating profit is attributable primarily to changes in the
relationships of prices for crude oil in various markets and increased U.S.
crude oil inventories as compared to the prior year quarter.
Technical Fuels and Chemical Processing
In the third quarter of 1996, the technical fuels and chemical processing
segment experienced an increase in operating profit of $0.2 million. Revenues
from chemical toll processing and terminalling activities rose 50% contributing
to the improved operating profit. This improvement was offset by the effects of
a decline of 5% in the volumes of reference fuels sold and an increase in the
costs of the raw materials used to produce the technical fuels. The combination
of these factors resulted in the operating profit improvement.
Transportation
Operating profit of the transportation segment for the quarter ended September
30, 1996 was $0.2 million less than the 1995 period. Production difficulties of
one of the Company's largest customers for its transportation services reduced
the revenues of the Company in the 1996 quarter.
Other Income (Expense)
Interest expense for the three months ended September 30, 1996 decreased $0.3
million when compared to the same period in 1995. In the 1996 quarter, market
interest rates as represented by the prime rate were 0.5% lower than the rate
for the 1995 period. In addition, the Company reduced its outstanding debt from
$107 million at September 30, 1995 to $98 million at September 30, 1996.
Provision for Income Taxes
For the first nine months of 1996 and 1995 the provision for income taxes was
calculated at rates of 37% and 36%, respectively. The variance from the
statutory rate was due to the effect of the percentage depletion deduction,
offset by state income tax expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operating activities in the first nine months of
1996 of $16.2 million. During this period, the Company utilized the cash flow
generated from operations to invest $8.2 million in additions to property, plant
and equipment, to pay a total of $2.4 million of cash dividends to its common
and preferred shareholders, to repay debt of $6.1 million and to increase its
cash balances by $0.4 million.
On May 29, 1996, the Company announced that it had signed a Letter of Intent to
sell the assets of its technical fuels and chemical processing subsidiary to
Schenectady International, Inc. On October 4, 1996, the Company announced that
the Letter of Intent had expired and no further negotiations are expected
between the parties.
On July 18, 1996, the Company announced that it had signed a Letter of Intent
with Basis Petroleum, Inc. ("Basis"), a wholly-owned subsidiary of Salomon Inc,
covering the contributions by the Company and Basis of their respective crude
oil gathering, marketing and transportation activities to form a Master Limited
Partnership ("MLP"). Later in 1996, interests in the MLP will be offered for
sale to the public pursuant to a prospectus. The prospectus is in the process
of preparation and regulatory review.
The assets that the Company will contribute include its crude oil gathering,
marketing and pipeline assets, as well as the crude oil trucking portion of its
transportation segment. Proceeds from the public offering attributable to the
Company's interest in the MLP will be used to reduce debt and to support the
growth of the Company's oil and gas exploration and production operations.
After the public offering, the Company will own 46% of the General Partner and a
subordinated interest in the MLP. The Company expects the transaction to close
during the fourth quarter of 1996.
On July 23, 1995, the Company announced that it had signed a Letter of Intent
with an investor group led by the current management of its subsidiary, Howell
Transportation Services, Inc., to sell the stock of that entity to the investor
group. This transaction will transfer the remaining transportation and
logistics assets that would be left after the formation of the MLP. The Letter
of Intent is subject to the negotiation of a Definitive Agreement, customary due
diligence and the successful formation of the MLP. The Company expects the
transaction to close during the fourth quarter of 1996.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, through its subsidiaries, is involved from time to time in various
claims, lawsuits and administrative proceedings incidental to its business. In
the opinion of management, the ultimate liability thereunder, if any, will not
have a material adverse effect on the financial condition, results of operations
or cash flows of the Company. See Note 8 of Notes to Consolidated Financial
Statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
11 Computation of Earnings per Share
(b) Reports on Form 8-K
A report on Form 8-K dated July 18, 1996 was filed to announce
that the Registrant and Basis Petroleum, Inc. ("Basis") had signed a letter
of intent covering the contributions by the Registrant and Basis of their
respective crude oil gathering, marketing and transportation activities to
form a Master Limited Partnership. The Registrant also announced that it
had signed a Letter of Intent with an investor group led by the current
management of its subsidiary, Howell Transportation Services, Inc., to sell
the stock of that entity to the investor group.
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: November 11, 1996 /s/ Allyn R. Skelton, II
-------------------------------
Allyn R. Skelton, II
Sr. Vice President
(Principal Financial and Accounting Officer)
EXHIBIT 11
<TABLE>
HOWELL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
(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 $1,690 $1,085 $4,434 $3,674
Subtract - Dividend to preferred shareholders 603 603 1,811 1,811
------ ------ ------ ------
Net earnings, as adjusted $1,087 $ 482 $2,623 $1,863
====== ====== ====== ======
Weighted average number of common shares
outstanding 4,938 4,867 4,936 4,849
====== ====== ====== ======
Earnings per share - assuming no dilution <F1> $ .22 $ .10 $ .53 $ .38
====== ====== ====== ======
Additional Primary Computation
Net earnings, as adjusted per primary
computation above $1,087 $ 482 $2,623 $1,863
====== ====== ====== ======
Adjustment to weighted average number of
shares outstanding:
Weighted average number of shares outstanding
per primary computation above 4,938 4,867 4,936 4,849
Add - Dilutive effect of outstanding options
(as determined by application of the treasury
stock method) 103 150 100 117
Weighted average number of shares outstanding,
as adjusted 5,041 5,017 5,036 4,966
====== ====== ====== ======
Primary earnings per share, as adjusted <F2> $ .22 $ .10 $ .52 $ .38
====== ====== ====== ======
FULLY DILUTED EARNINGS PER SHARE
Computation for Statement of Earnings
Net earnings, as adjusted per
primary computation above $1,087 $ 482 $2,623 $1,863
====== ====== ====== ======
Weighted average number of common shares
outstanding, per primary computation above 4,938 4,867 4,936 4,849
====== ====== ====== ======
Earnings per share - assuming full
dilution <F1> $ .22 $ .10 $ .53 $ .38
====== ====== ====== ======
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 $1,087 $ 482 $2,623 $1,863
Add - Dividend to preferred shareholders 603 603 1,811 1,811
------ ------ ------ ------
Net earnings, as adjusted $1,690 $1,085 $4,434 $3,674
====== ====== ====== ======
Additional adjustment to weighted average number
of shares outstanding:
Weighted average number of shares outstanding,
per fully diluted computation above 4,938 4,867 4,936 4,849
Add - Dilutive effect of outstanding options
(as determined by the application of the treasury
stock method) 125 152 107 131
Shares issuable from assumed exercise of
convertible preferred stock 2,091 2,091 2,091 2,091
Weighted average number of common shares,
as adjusted 7,154 7,110 7,134 7,071
====== ====== ====== ======
Fully diluted earnings per share <F3> $ .24 $ .15 $ .62 $ .52
====== ====== ====== ======
<FN>
<F1>
These amounts agree with the reported amounts on the statements of earnings.
<F2>
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%.
<F3>
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.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL STATEMENT INFORMATION FROM THE FORM 10-Q OF
HOWELL CORPORATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 4110
<SECURITIES> 0
<RECEIVABLES> 77178
<ALLOWANCES> 251
<INVENTORY> 5476
<CURRENT-ASSETS> 88463
<PP&E> 408961
<DEPRECIATION> 218719
<TOTAL-ASSETS> 280649
<CURRENT-LIABILITIES> 93606
<BONDS> 83805
0
690
<COMMON> 4940
<OTHER-SE> 75490
<TOTAL-LIABILITY-AND-EQUITY> 280649
<SALES> 554958
<TOTAL-REVENUES> 554958
<CGS> 533731
<TOTAL-COSTS> 533731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5666
<INCOME-PRETAX> 7049
<INCOME-TAX> 2615
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4434
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
