<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
- --------------------------------------------------------------------------------
For the quarter ended December 31, 1993 Commission file number 1-10008
A S S O C I A T E D N A T U R A L G A S C O R P O R A T I O N
(Exact name of registrant as specified in its charter)
Delaware 84-1006841
- --------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
370 17th Street, Suite 900
Denver, Colorado 80202
- --------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 595-3331
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
Class Outstanding at December 31, 1993
----------------------------- --------------------------------
Common Stock, $.10 par value 13,418,644 shares
================================================================================
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
FORM 10-Q
INDEX
-----
PART ITEM PAGE
- ---- ---- ----
I. FINANCIAL INFORMATION:
1. Financial Statements:
Consolidated Balance Sheets, December 31, 1993
and September 30, 1993 (Unaudited) . . . . . . . . . . 2
Consolidated Statements of Operations, Three Months
Ended December 31, 1993 and 1992 (Unaudited) . . . . . 4
Consolidated Statements of Cash Flows, Three Months
Ended December 31, 1993 and 1992 (Unaudited) . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . .10
II. OTHER INFORMATION - Items 1 through 6. . . . . . . . . . . . .14
1
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1993 1993
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 50,970,965 44,910,764
Accounts receivable, net of allowance 160,075,544 147,709,668
Natural gas, crude oil and petroleum
product inventories 24,278,558 27,312,207
Notes receivable 3,420,326 3,728,258
Income taxes receivable --- 1,236,271
Other 498,327 270,108
------------ -----------
Total current assets 239,243,720 225,167,276
------------ -----------
Property, plant, and equipment, at cost:
Natural gas processing facilities 88,644,305 86,531,133
Natural gas and crude oil pipelines 381,732,299 317,771,823
Construction in progress 14,721,398 16,485,662
Other equipment 19,032,186 16,626,726
------------ -----------
504,130,188 437,415,344
Less accumulated depreciation 98,314,660 92,581,123
------------ -----------
Total property, plant and equipment, net 405,815,528 344,834,221
Other assets:
Goodwill, net of applicable amortization of
$5,727,006 and $5,199,877, respectively 25,900,665 26,427,793
Gas contracts and other intangibles, net of
applicable amortization of $150,134 at
Dec. 31, 1993 8,872,428 650,000
Other 1,476,495 1,568,241
------------ -----------
Total other assets 36,249,588 28,646,034
------------ -----------
$681,308,836 598,647,531
============ ===========
</TABLE>
(Continued)
2
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1993
------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable:
Trade $185,738,784 171,562,416
Other 3,548,048 3,253,915
------------ -----------
189,286,832 174,816,331
Outstanding checks in excess of bank balances 30,223,472 26,697,341
Accrued interest expense 1,715,943 4,427,292
Income taxes payable 613,631 ---
Dividends payable 402,559 394,607
Current portion of long-term debt (note 5) 4,000,000 4,000,000
------------ -----------
Total current liabilities 226,242,437 210,335,571
------------ -----------
Deferred income taxes 39,709,000 37,956,000
Long-term debt (note 5) 203,000,000 153,000,000
------------ -----------
Total liabilities 468,951,437 401,291,571
------------ -----------
Stockholders' equity (note 4):
Common stock, $.10 par value. Authorized
20,000,000 shares; issued and outstanding
13,418,644 and 13,153,555 shares,
respectively 1,341,864 1,315,355
Additional paid-in capital 161,640,568 151,578,087
Unamortized restricted stock compensation
award (429,850) (548,668)
Retained earnings 49,804,817 45,011,186
------------ -----------
Total stockholders' equity 212,357,399 197,355,960
------------ -----------
$681,308,836 598,647,531
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(UNAUDITED)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Operating revenue:
Natural gas and petroleum products sales $418,764,727 360,581,225
Transportation 3,458,188 2,386,356
Other 3,024,415 1,441,435
------------ -----------
425,247,330 364,409,016
------------ -----------
Operating expenses:
Natural gas and petroleum products purchases 391,788,743 334,069,952
Operations 10,262,445 7,858,105
General and administrative 4,538,332 3,937,954
Depreciation and amortization 6,464,966 5,190,152
------------ -----------
413,054,486 351,056,163
------------ -----------
Income from operations 12,192,844 13,352,853
Other income (expense):
Interest expense (3,511,771) (3,229,587)
Interest income 185,872 155,166
Other, net 19,245 28,886
------------ -----------
(3,306,654) (3,045,535)
------------ -----------
Earnings before income taxes 8,886,190 10,307,318
Provision for income taxes expense:
Current 1,885,000 2,549,000
Deferred 1,805,000 1,585,000
------------ -----------
3,690,000 4,134,000
------------ -----------
NET EARNINGS $ 5,196,190 6,173,318
============ ===========
Net earnings per common share $.39 .48
============ ===========
Weighted average common shares
outstanding (note 6) 13,326,430 12,982,695
------------ -----------
Common stock dividends (note 4) $.03 .03
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(UNAUDITED)
<TABLE>
<CAPTION>
1993 1992
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,196,190 6,173,318
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 6,464,966 5,190,152
Amortization of deferred financing costs 41,367 34,978
Deferred income tax expense 1,805,000 1,585,000
Amortization of restricted stock award 118,818 99,804
Gain on disposition of assets (19,245) (28,886)
------------ -----------
13,607,096 13,054,366
Change in working capital items and other
4,048,608 (13,019,245)
Net cash provided by operating activities ------------ -----------
17,655,704 35,121
------------ -----------
Cash flows from investing activities:
Capital expenditures for property, plant and equipment (56,786,950) (23,803,514)
Capital expenditures for gas contracts and
other intangibles (8,372,562) ---
Notes receivable, net 307,932 (1,100,495)
Proceeds from disposition of assets 51,237 54,240
Changes in other assets 50,316 (25,654)
------------ -----------
Net cash used by investing activities (64,750,027) (24,875,423)
------------ -----------
Cash flows from financing activities:
Borrowings 68,000,000 17,000,000
Repayments of debt (18,000,000) ---
Net proceeds from issuance of common stock 23,000 42,400
Dividends paid (394,607) (389,443)
Increase in outstanding checks in excess of bank balances 3,526,131 10,967,266
------------ -----------
Net cash provided by financing activities 53,154,524 27,620,223
------------ -----------
Net increase in cash and cash equivalents 6,060,201 2,779,921
Cash and cash equivalents, beginning of period 44,910,764 40,026,549
------------ -----------
Cash and cash equivalents, end of period $ 50,970,965 42,806,470
============ ===========
</TABLE>
(continued on following page)
5
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1993 AND 1992
(UNAUDITED)
(continued from previous page)
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Change in working capital items and other:
Increase in accounts receivable (12,365,876) (29,849,577)
Decrease in natural gas, crude oil and
petroleum product inventories 3,033,649 6,232,141
Decrease in income taxes receivable 1,236,271 ---
(Increase) decrease in other current assets (228,219) 98,209
Increase in accounts payable 14,470,501 10,754,524
Decrease in accrued interest expense (2,711,349) (2,777,542)
Increase in current income tax payable 613,631 2,523,000
------------ -----------
$ 4,048,608 (13,019,245)
============ ===========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest, net of amount capitalized $ 3,951,403 6,007,127
============ ===========
Income taxes $ 35,098 26,000
============ ===========
Supplemental schedule of noncash investing
and financing activities:
Accrued common stock dividends $ 402,559 389,512
============ ===========
Issuance of common stock pursuant to
purchase of assets from Endevco $ 10,013,991 ---
============ ===========
Tax effect of stock option compensation $ 52,000 ---
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
ASSOCIATED NATURAL GAS CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
(UNAUDITED)
(1) UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements reflect all
adjustments, in the opinion of management, necessary to a fair statement of the
financial position and results of operations of Associated Natural Gas
Corporation and Subsidiaries (the Company) for the interim periods presented.
All adjustments, in the opinion of management, are of a normal recurring nature.
Certain amounts have been reclassified for comparability with the 1993
presentation.
(2) NATURE OF BUSINESS
The Company is engaged in the business of purchasing, gathering, transporting,
processing and marketing natural gas, natural gas liquids (NGLs) and crude oil
to industrial end users, local distribution companies, liquid petroleum gas
wholesalers and retailers and refiners. The Company currently owns and operates
a significant complex of crude oil, NGLs and natural gas gathering,
processing/fractionation and transportation facilities situated in major oil and
natural gas-producing basins in the Rocky Mountain, Mid Continent and Gulf Coast
Regions of the United States.
(3) ACQUISITIONS
Effective November 1, 1993, the Company purchased four natural gas
gathering/transportation pipeline systems and certain contractual gas storage
rights from the former noteholders of Endevco, Inc. ("Endevco") pursuant to
Endevco's Plan of Reorganization. The total purchase price consisted of
approximately $20.5 million in cash and 264,089 shares of the Company's common
stock. The acquisition included the 465 mile intrastate Mississippi Fuels gas
transportation system; the 63 mile Ada gas gathering system in Bienville and
Webster Parishes, Louisiana; the 7 mile Chalybeat Springs gas transportation
system in Claiborne Parish, Louisiana and Columbia County, Arkansas; the 12 mile
Leaf River gas transportation system in Perry and Forest Counties, Mississippi
and storage rights for up to 300,000 MMBTU in the Hattiesburg gas storage
facility in Mississippi. The Company transferred the assets of the Mississippi
Fuels gas transportation system to AIM Pipeline Company, a wholly-owned
subsidiary of Associated Natural Gas Corporation.
On November 9, 1993, the Company acquired from Dynamic Energy Resources, Inc.
("Dynamic") the right, title and interest in a Gas Sale and Purchase Agreement
and related transportation rights by and between Dynamic and Oklahoma Natural
Gas Company. In addition, the Company and Dynamic entered into a gas purchase
and processing agreement whereby the Company will be processing Dynamic's gas,
through the Company's Milfay and/or Glenpool natural gas processing plants,
pursuant to a percentage-of-proceeds contract.
On November 12, 1993, the Company, through its wholly-owned subsidiary ATTCO
NGL Pipeline Company, purchased for $22.5 million cash all of the outstanding
common stock of Dean Pipeline Company ("Dean"), an indirect wholly owned
subsidiary of Tenneco, Inc. The assets of Dean consist of approximately 264
miles of mainline NGLs transportation pipeline with approximately 54 miles of
supply laterals traversing the Gulf Coast of Texas. The pipeline has a current
throughput capacity of 21,000 barrels per day and interconnects with
7
<PAGE>
underground storage and fractionation facilities in Mont Belvieu, Texas. Dean
has subsequently been merged with and into ATTCO NGL Pipeline Company, the
surviving entity.
Effective December 1, 1993, the Company purchased JN Exploration and
Production Limited Partnership's natural gas gathering/transportation system
located in Covington, Jefferson Davis, Lawrence and Marion Counties,
Mississippi. This system consisted of approximately 49 miles of natural gas
gathering pipeline connected to approximately 19 wells and is interconnected
with the Company's AIM Pipeline gas transportation system acquired from Endevco.
(4) STOCK TRANSACTIONS
On November 1, 1993, the Company issued 264,089 shares of common stock (at a
price of $37.919) as partial consideration for the acquisition of four natural
gas gathering/transportation systems from the former noteholders of Endevco.
During the quarters ended December 31, 1992 and 1993, the Company received
$42,400 and $23,000 respectively, under option agreements with employees for the
acquisition of 2,300 and 1,000 shares, respectively, of common stock at various
prices. On December 7, 1993, the Company declared a $.03 per share cash
dividend on its common stock payable on January 15, 1994 to the common
shareholders of record on December 31, 1993.
(5) LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31, September 30,
1993 1993
---- ----
<S> <C> <C>
9.55% senior notes (a) $ 55,000,000 55,000,000
9.90% senior notes (a) 45,000,000 45,000,000
12.75% senior notes (b) 8,000,000 12,000,000
Revolving Credit Agreement (c) 99,000,000 45,000,000
------------ -----------
$207,000,000 157,000,000
Less: current portion of long-term debt (4,000,000) (4,000,000)
------------ -----------
$203,000,000 153,000,000
============ ===========
</TABLE>
(a) On May 8, 1991, the Company completed a private placement of $100 million
of senior unsecured notes with institutional investors. The 9.55% notes are
payable in four annual installments of $13,750,000 commencing April 30, 1996.
The 9.90% notes are payable in four annual installments of $11,250,000
commencing April 30, 2000. Interest is payable semi-annually on April 30 and
October 31 of each year.
(b) The Company has issued to The Prudential Insurance Company of America
senior notes in the aggregate principal amount of $12,000,000 bearing interest
at 12.75% payable semiannually. The principal of the senior notes is payable in
three annual installments of $4,000,000 commencing December 31, 1993.
(c) On January 13, 1994 the Company closed on an amendment effective December
31, 1993 to its Revolving Credit Agreement ("Agreement") dated June 1, 1992 with
certain commercial lending institutions and Continental Bank N.A., as agent.
The amendment expanded the committed amount of the Agreement from $100 million
to $150 million subject to certain limitations based upon the total debt of the
Company. The Agreement will become a three-year term loan, with quarterly
principal payments equal to one twelfth of the balance outstanding on May 1,
1996, due commencing on August 1, 1996 with a maturity date of May 1, 1999. The
outstanding principal under the facility and term loan bears interest at the
Agreement's applicable margin above the adjusted
8
<PAGE>
Eurodollar Rate or Base Rate (3.99% at December 31, 1993). A non-use fee,
currently 3/8 of one percent per annum, is charged on the unused portion of the
facility. The Agreement contains certain covenants, including covenants
regarding net worth; current ratio; fixed charge coverage ratio; dividends;
loans, advances and investments; permitted indebtedness; environmental
provisions and information requirements. At December 31, 1993, the Company was
in compliance with the terms of its debt agreements.
On February 10, 1994 the Company entered into a $20 million Line of Credit
with Continental Bank, N.A. which expires on December 30, 1994. Interest on
borrowings will be based on a quoted rate furnished by the bank for daily
periods of up to one week. The similar Line of Credit established November 15,
1993 was cancelled.
(6) EARNINGS PER COMMON SHARE
Earnings per common share is computed by dividing net earnings available to
common shares by the weighted average number of common shares outstanding
(13,326,430 and 12,982,695 for the three months ended December 31, 1993 and
1992, respectively). Outstanding options to purchase common stock did not have
a material dilutive effect on the calculation of earnings per share for any
period presented.
(7) SEASONALITY
The Company experiences significant seasonal changes in volumes, prices and
certain expenses; therefore, the results of operations for the three month
periods ended December 31, 1993 and 1992 are not necessarily indicative of the
results to be expected for the full year.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS & RESULTS
OF OPERATIONS
The following is a discussion of the Company's consolidated financial
condition, results of operations and capital resources. This discussion and
analysis should be read in conjunction with the Company's consolidated financial
statements and the notes thereto included elsewhere in this filing.
RESULTS OF OPERATIONS
The following tables reflect operating data and average daily natural gas
volumes for the Company for the three months ended December 31, 1993 and 1992:
<TABLE>
<CAPTION>
Three months ended
December 31, Percent
-------------------- Increase
1993 1992 (Decrease)
-------- -------- ----------
<S> <C> <C> <C>
(Dollars in thousands)
Operating revenue $425,247 364,409 16.7%
Net operating margin (1) 33,459 30,339 10.3
Earnings before income taxes 8,886 10,307 (13.8)
Net earnings available
to common stock 5,196 6,173 (15.8)
Income from operations plus
depreciation and amortization 18,658 18,543 0.6
Earnings per common share $ .39 .48 (18.7)
<CAPTION>
System
Supply Off-System Crude Oil Total
-------- ---------- --------- -----
<S> <C> <C> <C> <C>
1993
Operating revenue $113,179 190,506 121,562 425,247
Net operating margin(1) 27,260 3,833 2,366 33,459
Percent 24.1% 2.0% 1.9% 7.9%
1992
Operating revenue $108,725 108,071 147,613 364,409
Net operating margin(1) 26,019 2,545 1,775 30,339
Percent 23.9% 2.4% 1.2% 8.3%
</TABLE>
(1) Net operating margin is equal to operating revenue, less natural gas and
petroleum products purchases.
10
<PAGE>
<TABLE>
<CAPTION>
Three months ended
December 31,
------------------------ Percent
1993 1992 Increase
---- ---- ---------
<S> <C> <C> <C> <C>
Natural Gas Volumes (MCF Per Day):
System Supply:
Rocky Mountain Region 142,000 132,000 7.6%
Mid-Continent Region 245,000 221,000 10.9
Gulf Coast Region 372,000 291,000 27.8
--------- ---------
759,000 644,000 17.9
Off-System: 848,000 407,000 108.4
--------- ---------
1,607,000 1,051,000 52.9
========= =========
</TABLE>
Three months ended December 31, 1993 versus 1992:
For the three months ended December 31, 1993, the Company earned $5.2 million
on total revenue of $425 million, as compared to $6.2 million on total revenue
of $364 million for the three months ended December 31, 1992. Earnings per
common share was $.39 per share for the three months ended December 31, 1993 as
compared to $.48 per share for the three months ended December 31, 1992.
The increase in operating revenue is primarily attributable to higher off-
system natural gas volumes marketed, higher crude oil volumes marketed and the
Company's continued growth in volumes through its system supply facilities. For
the three months ended December 31, 1993, the Company expended approximately $56
million on new acquisitions and $11 million on new construction, thereby further
expanding its system supply facilities. The increase in operating revenue
attributable to the increase in volumes company-wide were offset somewhat by
lower NGLs values which mirrored the worldwide decline in crude oil prices
during the quarter. The average price per MCF received by the Company for
natural gas sold from all of its system supply facilities was $2.21 and $2.28
for the three months ended December 31, 1993 and 1992, respectively.
The Company's overall net operating margin (as a percentage of operating
revenue) decreased from 8.3% to 7.9% primarily as a result of increases in the
volume of off-system natural gas and crude oil marketed, which generate
substantially lower unit margins. The Company's net operating margin for its
system supply facilities as a percentage of operating revenue was comparable in
1993 in relation to 1992. System supply volumes increased approximately 18% in
1993, due to the Endevco acquisition in November 1993 and higher gas volumes
being processed/transported through the Company's Colorado D-J Basin, Texas
Wilcox and Oklahoma Cyril systems.
Average daily system supply NGLs processed, fractionated, transported or
marketed increased 45% from 23,300 barrels per day for the previous year's
period to 33,900 barrels per day. This increase is attributable to the
Company's Oklahoma Hillsboro plant coming on line in May 1993, the acquisiton of
Dean Pipeline and higher NGLs recovered through the Company's Colorado D-J Basin
and Texas Wilcox plants due to higher gas volumes being processed.
11
<PAGE>
NGLs prices were lower for the Company during this period in relation to the
corresponding period in 1992. The following reflects the Company's weighted
average NGLs price per gallon received by the Company at all its system supply
facilities.
<TABLE>
<CAPTION>
Three months ended
December 31,
------------------
1993 1992
---- ----
<S> <C> <C>
Ethane $.128 .175
Propane .302 .332
Butanes .305 .372
Gasoline .331 .443
Overall weighted average price/gal. .268 .329
</TABLE>
The Company's operations and general and administrative expenses increased
30.6% and 15.2% respectively, due to the Company's continued growth through
construction and acquisitions. Operations and general and administrative
expenses as a percentage of net operating margin increased from 38.9% in 1992 to
44.2% in 1993 as the increase in expenses associated with its expanding
operations more than offset the resulting increase in net operating margin.
Depreciation and amortization expense increased 24.6% due to the Company's
acquisitions and new construction.
The Company's interest expense increased 8.7% due to higher borrowings under
its Revolving Credit Agreement offset somewhat by lower interest rates on
variable rate borrowings. For the three months ended December 31, 1993 and
1992, the Company's effective cost of funds was 7.7% and 8.9%, respectively.
Interest income represents interest earned on the Company's cash and cash
equivalents. The Company endeavors to maximize interest income by utilizing
controlled disbursement checking accounts which allow the Company to temporarily
invest funds relating to outstanding checks in highly rated liquid corporate
demand notes.
The increase in the provision for income taxes as a percentage of earnings
before income taxes is due to the increase in the corporate tax rate to 35%
under the Revenue Reconciliation Act of 1993.
CAPITAL RESOURCES AND LIQUIDITY
The Company's sources of capital resources and liquidity historically have
been net cash provided by operating activities, proceeds from the offerings of
equity securities, proceeds from debt securities and funds available under its
financing facilities. In the past, these sources have been sufficient to meet
the needs and finance the growth of the Company's business. Net cash provided
by operating activities has been primarily affected by natural gas and NGLs
prices, the Company's success in increasing "system supply" volumes and the
margin on crude oil and "off-system" natural gas purchased for resale. The
Company's continued growth will be dependent upon success in the areas of
additions to dedicated plant reserves, acquisitions, new project development and
marketing.
An additional source of liquidity to the Company is volumes of natural gas,
crude oil and NGLs held in inventory. The Company stores volumes of natural
gas, crude oil and NGLs primarily to assure an adequate supply for term sales
contracts and for resale during periods when prices are favorable. At December
31, 1993, the Company held in inventory approximately $10.5, $10.3 and $2.6
million of natural gas, crude oil and NGLs, respectively.
On January 13, 1994 the Company closed on an amendment effective December 31,
1993 to its Revolving Credit Agreement dated June 1, 1992 with certain
commercial lending institutions and Continental Bank N.A.,
12
<PAGE>
as agent. The amendment expanded the committed amount of the Agreement from
$100 million to $150 million subject to certain limitations based upon the total
debt of the Company. The Agreement will become a three-year term loan, with
quarterly principal payments equal to one twelfth of the balance outstanding on
May 1, 1996, due commencing on August 1, 1996 with a maturity date of May 1,
1999. The outstanding principal under the Agreement and term loan bears
interest at the Agreement's applicable margin above the adjusted Eurodollar Rate
or Base Rate. A non-use fee, currently 3/8 of one percent per annum, is charged
on the unused portion of the facility. The Agreement contains certain
covenants, including covenants regarding net worth; current ratio; charge
coverage ratio; dividends; loans, advances and investments; permitted
indebtedness; environmental provisions and information requirements. At
December 31, 1993, the Company was in compliance with the terms of its debt
agreements.
On February 10, 1994 the Company entered into a $20 million Line of Credit
with Continental Bank, N.A. which expires on December 30, 1994. Interest on
borrowings will be based on a quoted rate furnished by the bank for daily
periods of up to one week. The similar Line of Credit established November 15,
1993 was cancelled.
It has been the Company's practice (which it expects to continue) to secure
sources of long-term capital prior to committing to new projects. The Company
intends to borrow additional amounts under its debt agreements, as required, to
fund operations and to construct or acquire new facilities in accordance with
its asset-based business plan. The Company has negotiated its debt financings
in a manner which defers and staggers principal repayments through fiscal 2003.
Management believes the Company's current cash position, future cash provided by
operating activities, borrowing capacity under its debt agreements and its
relations with its institutional lenders and equity investors should enable it
to meet its future capital requirements, although there can be no assurance
regarding the Company's ability to obtain additional capital when needed on
acceptable terms.
13
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See Proxy for Annual Stockholder's Meeting, held February 10, 1994. At
the meeting a proposal to amend Article IV of the Restated Certificate of
Incorporation to increase the number of authorized shares of common stock
from 20 to 40 million and to reduce the par value from $.10 to $.05 per
share was voted upon. Of a total of 10,738,561 shares voted, 10,080,023
shares were voted for, 644,769 shares against, and 13,769 shares abstained
in such proposal.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. None.
B. A Form 8-K was filed by the Registrant on January 13, 1994 for an
amendment effective December 31, 1993 to the Revolving Credit Agreement
dated June 1, 1992 with certain commercial lending institutions and
Continental Bank N.A., as agent.
14
<PAGE>
SIGNATURES
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.
ASSOCIATED NATURAL GAS CORPORATION
----------------------------------
(Registrant)
Date February 14, 1994 By /s/ J. Roger Grace
---------------------- -------------------------------
J. Roger Grace
Treasurer
(Principal Accounting Officer)
15
