<PAGE>
===============================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSACTION PERIOD FROM _____ TO _____
COMMISSION FILE NUMBER 1-10592
DESTEC ENERGY, INC.
(A DELAWARE CORPORATION)
2500 CITYWEST BLVD.
HOUSTON, TEXAS 77042
(NAME OF REGISTRANT, STATE OF INCORPORATION, ADDRESS
OF PRINCIPAL EXECUTIVE OFFICE AND ZIP CODE)
I.R.S. EMPLOYER IDENTIFICATION NO. 38-2875546
TELEPHONE: (713) 735-4000
(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 of each of the issuer's classes
of common stock, as of the latest practicable date.
On June 30, 1996 there were 55,952,614 shares of the issuer's Common
Stock, $.01 par value, outstanding.
===============================================================================
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PART I Financial Information Page No.
---------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets................................... 2
Statements of Consolidated Income -
For the three months ended June 30, 1996 and 1995........... 4
Statements of Consolidated Income -
For the six months ended June 30, 1996 and 1995............. 5
Statements of Consolidated Cash Flows......................... 6
Notes to Consolidated Financial Statements.................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 10
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K............................... 19
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DESTEC ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 19,093 $ 7,044
Cash equivalents - Dow 3,748 4,422
------------ ----------
Total cash and cash equivalents 22,841 11,466
------------ ----------
Marketable Securities 240,310 328,799
Accounts Receivable:
Trade 73,365 64,029
Dow 2,666 1,144
Affiliates 20,217 23,832
Other 4,127 4,085
Notes receivable - affiliates 2,977 2,983
Income taxes receivable 2,941 1,934
Deferred taxes - net 5,465 5,680
Costs and estimated earnings in excess of billings
on uncompleted contracts - affiliates 21,394 37,063
Recoverable project costs 22,442 58,398
Prepaid expenses and other assets 20,963 14,076
------------ ----------
Total current assets 439,708 553,489
------------ ----------
Property - at cost 459,208 365,020
Accumulated depreciation, depletion and amortization (160,372) (154,831)
------------ ----------
Property, net 298,836 210,189
------------ ----------
Less receivable from Dow 44,159 44,159
Equity investments 144,400 139,784
Goodwill (Net of accumulated amortization of $16,262 and $15,027
at June 30, 1996 and December 31, 1995, respectively) 82,546 83,781
Other assets 21,858 16,410
Other assets - affiliates 5,018 ---
------------ ------------
Total $ 1,036,525 $ 1,047,812
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
2
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable:
Trade $ 70,917 $ 45,169
Dow 12,759 13,249
Accrued liabilities 44,185 49,951
Billings in excess of costs and estimated
earnings on uncompleted contracts - affiliates 14,433 41,309
Income taxes payable -- 249
---------- ----------
Total current liabilities 142,294 149,927
---------- ----------
Long-term liabilities 45,198 46,172
Deferred taxes - net 41,128 34,720
Deferred income 52,470 47,676
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value; 50,000,000 shares
authorized, none issued
Common stock, $.01 par value; 150,000,000 shares
authorized, 62,250,000 issued 623 623
Additional paid-in capital 394,296 394,296
Retained earnings 444,739 427,757
Unearned compensation - related to outstanding
deferred stock (678) --
Unrealized gains (losses) on investments (1,441) 651
Less 6,297,386 and 4,159,464 shares of treasury
stock at cost at June 30, 1996 and
December 31, 1995, respectively (82,104) (54,010)
---------- ----------
Total stockholders' equity 755,435 769,317
---------- ----------
Total $1,036,525 $1,047,812
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
3
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands of Dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
--------------------------
1996 1995
----------- ------------
<S> <C> <C>
Revenues:
Power, steam, syngas and energy resources
-affiliates $ -- $ 3,284
-guaranteed payments -- 22,920
-nonaffiliates 55,404 27,205
----------- -----------
Total power, steam, syngas and energy resources 55,404 53,409
Development, engineering and operations - affiliates 72,578 154,185
----------- -----------
Total Revenues 127,982 207,594
----------- -----------
Operating Costs:
Power, steam, syngas and energy resources
-affiliates 621 18,744
-nonaffiliates 51,305 29,670
----------- -----------
Total power, steam, syngas and energy resources 51,926 48,414
Development, engineering and operations - affiliates 64,922 152,362
----------- -----------
Total Operating Costs 116,848 200,776
----------- -----------
Amortization of intangibles 618 618
----------- -----------
Selling, General and Administrative Expenses:
Dow 259 235
Direct 8,190 6,638
----------- -----------
Total selling, general and administrative 8,449 6,873
----------- -----------
Total operating costs and expenses 125,915 208,267
----------- -----------
Operating Income (Loss) 2,067 (673)
----------- -----------
Earnings from equity investments 4,360 3,134
----------- -----------
Other Income:
Interest Income - Dow 1,111 2,581
Interest Income - other 3,429 5,601
Sundry income - net 247 442
----------- -----------
Total Other Income 4,787 8,624
----------- -----------
Income before provision for taxes 11,214 11,085
Provision for taxes 3,575 3,326
----------- -----------
Net Income $ 7,639 $ 7,759
=========== ===========
Per Share Amounts:
Net Income Per Share $ 0.13 $ 0.13
=========== ===========
Weighted average shares outstanding 57,149,982 58,694,474
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands of Dollars, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Power, steam, syngas and energy resources
-affiliates $ -- $ 8,526
-guaranteed payments -- 45,305
-nonaffiliates 97,629 50,390
----------- -----------
Total power, steam, syngas and energy resources 97,629 104,221
Development, engineering and operations - affiliates 188,114 268,298
----------- -----------
Total Revenues 285,743 372,519
----------- -----------
Operating Costs:
Power, steam, syngas and energy resources
-affiliates 1,197 38,968
-nonaffiliates 93,347 55,734
----------- -----------
Total power, steam, syngas and energy resources 94,544 94,702
Development, engineering and operations - affiliates 166,613 260,726
----------- -----------
Total Operating Costs 261,157 355,428
----------- -----------
Amortization of intangibles 1,236 1,234
----------- -----------
Selling, General and Administrative Expenses:
Dow 305 437
Direct 15,379 13,631
----------- -----------
Total selling, general and administrative 15,684 14,068
----------- -----------
Total operating costs and expenses 278,077 370,730
----------- -----------
Operating Income 7,666 1,789
----------- -----------
Earnings from equity investments 6,606 4,222
----------- -----------
Other Income:
Interest Income - Dow 2,446 7,935
Interest Income - other 8,119 6,802
Sundry income - net 263 672
----------- -----------
Total Other Income 10,828 15,409
----------- -----------
Income before provision for taxes 25,100 21,420
Provision for taxes 8,028 6,427
----------- -----------
Net Income $ 17,072 $ 14,993
=========== ===========
Per Share Amounts:
Net Income Per Share $ 0.30 $ 0.26
=========== ===========
Weighted average shares outstanding 57,839,308 58,767,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
5
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------
1996 1995
---------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income.................................................. $ 17,072 $ 14,993
Adjustments to reconcile net income to net cash
provided by operating activities:
Earnings from equity investments......................... (6,606) (4,222)
Deferred income, net..................................... 4,794 3,211
Depreciation, depletion and amortization................. 6,776 16,856
Compensation recognized under Variable Pay Plan.......... 521 --
Increase in deferred income taxes, net................... 6,623 2,736
Changes in assets and liabilities that provided
(used) cash:
Accounts receivable - trade.......................... (9,336) (21,718)
Accounts receivable - Dow............................ (1,522) 10,710
Accounts receivable - affiliates..................... 3,615 6,236
Accounts receivable - other.......................... (42) (3,032)
Notes receivable - affiliates........................ 6 78
Income taxes - receivable............................ (1,007) --
Costs and estimated earnings in excess of
billings on uncompleted contracts - affiliates...... 15,669 (18,264)
Recoverable project costs............................ 35,956 (3,841)
Prepaid expenses and other assets.................... (6,887) (1,183)
Accounts payable - trade............................. 25,748 2,246
Accounts payable - Dow............................... (490) (6,670)
Accrued liabilities.................................. (5,766) (11,881)
Billings in excess of costs and estimated
earnings on uncompleted contracts - affiliates...... (26,876) (2,591)
Income taxes payable................................. (249) (11,516)
Long - term liabilities.............................. 310 10,086
--------- -----------
Net Cash Provided by (Used in) Operating Activities......... 58,309 (17,766)
--------- -----------
Cash Flows From Investing Activities:
Investments in marketable securities..................... (512,973) (1,006,489)
Proceeds from sale of marketable securities.............. 599,370 720,547
Purchases of property, net............................... (94,188) (12,554)
Long - term notes receivable - affiliates................ -- (101)
Equity investments - contributions....................... (6,016) --
Equity investments - distributions....................... 8,006 6,570
Investment in project.................................... (8,600) --
Other assets............................................. (1,866) (269)
--------- -----------
Net Cash Used in Investing Activities....................... (16,267) (292,296)
--------- -----------
Cash Flows from Financing Activities:
Proceeds from borrowings - Dow........................... -- --
Repayment of borrowings - Dow............................ -- --
Proceeds from issuance of treasury stock................. 49 113
Treasury stock purchases................................. (30,716) (2,215)
--------- -----------
Net Cash Used in Financing Activities....................... (30,667) (2,102)
--------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents................................................ 11,375 (312,164)
Cash and Cash Equivalents at Beginning of
Period..................................................... 11,466 354,137
--------- -----------
Cash and Cash Equivalents at End of Period.................. $ 22,841 $ 41,973
========= ===========
Supplemental Disclosures of Cash Flow Information:
Schedule of Noncash Investing and Financing
Activities:
Loss on sale of treasury stock........................... $ 90 --
Unrealized loss on marketable securities................. $ 2,092 --
Proceeds from treasury stock............................. $ 2,483 --
Unearned compensation.................................... $ 678 --
Cash paid for:
Interest................................................. -- $ 165
Income taxes............................................. $ 987 $ 14,955
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
6
<PAGE>
DESTEC ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
1. OPINION OF MANAGEMENT
In the opinion of management, all adjustments necessary for a fair
presentation of the unaudited results for the period are included. These
interim consolidated financial statements should be read in conjunction with the
Destec Energy, Inc. ("Destec") Financial Statements for the year ended December
31, 1995, included in Destec's 1995 Annual Report and on Destec's Form 10-K for
the year ended December 31, 1995. The results for interim periods are not
necessarily indicative of results for the full year.
2. LEASE COMMITMENTS
Effective June 7, 1996, Gasification Services, Inc. ("GSI") refinanced its
operating lease agreement associated with the Wabash facility for a term of 5
years resulting in a reduction in interest spreads and elimination of several
financial covenants associated with the original financing. The future minimum
lease payments associated with the lease as of June 30, 1996 are approximately
$231,000. Destec has guaranteed GSI's performance pursuant to this new lease
agreement.
Destec also has an operating lease for the CoGen Lyondell, Inc. facility with
future estimated minimum lease payments as of June 30, 1996 of approximately
$218,000. In addition to the aforementioned lease agreements, Destec leases
office space under an operating lease.
The total future minimum lease payments under non-cancelable operating leases
at June 30, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 (6 months) $ 15,380
1997 28,402
1998 28,991
1999 30,108
2000 194,693
Thereafter 173,754
----------
Total minimum lease payments $471,328
==========
</TABLE>
3. PURCHASE OF GAS PROPERTIES
In April 1996, Destec agreed to acquire from Snyder Oil Corporation ("SOCO")
an undivided 45% interest in proved producing natural gas properties and related
undeveloped leasehold acreage and gas pipeline system in northwest Colorado for
approximately $22,000. The total proved reserves for Destec's interest in the
properties are estimated to be approximately 42 billion cubic feet. SOCO will
retain a majority working interest in the properties and will continue to
operate the wells. Destec has entered into a joint venture agreement with SOCO
covering the long-term development of the underlying properties and associated
gas pipeline.
7
<PAGE>
4. TREASURY STOCK
During each of the years, 1993 and 1992, the Destec Board of Directors (the
"Board") authorized the repurchase of up to $20,000 of Destec's common stock
over the succeeding three year periods. In 1994, the Board authorized the
repurchase of an additional 2,300,000 shares of its common stock over the next
three years with a maximum cost of $30,000. In May 1996, the Board authorized
the repurchase of an additional 1,750,000 shares of its common stock over the
next three years with a maximum cost of $25,000. As of June 30, 1996, Destec
had repurchased 6,816,549 shares and reissued 519,163 shares of common stock
repurchased under these programs.
As a result of the stock repurchase programs, during the second quarter of
1996, Dow's ownership of Destec increased above 80% of Destec's total
outstanding shares. This increased ownership results in Destec and its
subsidiaries being included in the consolidated federal income tax return of Dow
and its subsidiaries. Under the terms of the new tax sharing agreement between
Dow and Destec, Dow will have a continuous, cumulative option to purchase from
Destec at then current market prices such number of shares of common stock of
Destec as Dow determines necessary to allow Dow to continue to include Destec in
Dow's consolidated federal income tax return. Effective June 6, 1996, Destec's
results from operations will be included in the consolidated U.S. federal income
tax return of Dow. Pursuant to a new tax sharing agreement between Dow and
Destec, federal and state income tax expense is computed on a stand-alone basis.
Any resulting current tax liability or refund is settled with Dow. The
agreement permits Destec to reduce its federal stand-alone tax liability by
certain non-conventional fuels tax credits which have been utilized in Dow's
consolidated return, even where such credits would not otherwise be currently
usable by Destec.
5. RESTRUCTURING CHARGES
In 1994, Destec's management announced a corporate restructuring in order to
refocus business development efforts from domestic to international markets and
to de-emphasize vertical integration. In order to implement this shift in
focus, management developed a restructuring plan to reduce and realign the work
force and reduce overhead. During 1994, Destec recorded a $10,000 restructuring
charge as a component of operating costs. As of June 30, 1996, Destec's
remaining accrual relating to this charge was $1,859 for vacated lease space net
of revenues from subleases.
6. UNEARNED COMPENSATION
As of June 30, 1996, a total of 65,114 shares of deferred stock
have been issued from treasury stock under the 1995 Variable Pay Plan for
the Executive Officers at the grant date price of $12.50. These shares are
currently held for the employees and will be distributed at the end of the
vesting periods in one-third increments on December 31, 1996, 1997 and
1998, if the average market price for the thirty day period ending on such
dates equals or exceeds the defined targets under the 1995 Variable Pay Program
as approved by the Compensation Committee. If the average market price of
the stock for the thirty day period ending on the applicable vesting date is
below the defined targets, no deferred stock shall be awarded that
year. However, if on the subsequent vesting date, the average market
price equals or exceeds the defined targets, the employee will receive the
current year shares as well as shares not awarded in the previous period.
Compensation expense will be adjusted in future periods based on the difference
between the value assigned to the award at the grant date and the value of the
stock at the respective measurement dates.
7. EVENTS SUBSEQUENT TO JUNE 30, 1996
In July 1996, Destec agreed to sell its ownership interest in the 150 MW Blue
Mountain Power project to AES Corporation. The sale of this project is expected
to have a positive after tax effect of
8
<PAGE>
approximately $6,300 (considering an effective tax rate of 32.0%) or $0.11 per
share in the third quarter of 1996. The actual after tax effect of this sale is
subject to certain contractual undertakings.
In August 1996, Destec, as part of an international consortium, won the
$1,900,000 bid for the 1600 MW Hazelwood Power Station and the adjacent
Hazelwood Mine in Victoria, Australia. As a 20% partner in the consortium,
Destec's investment in the Hazelwood acquisition will be approximately $380,000.
Destec plans to make an equity contribution of up to $180,000 with the remainder
borrowed on a nonrecourse basis at the partnership level. The financial closing
of the Hazelwood acquisition is expected to occur in September 1996.
8. RECLASSIFICATIONS
Certain amounts for 1995 have been reclassified to conform to the 1996
presentation.
9
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes certain forwardlooking statements reflecting the Company's
expectations in the near future; however, many factors which may affect the
actual results, especially prospective contract prices and changing regulations,
are difficult to predict. Accordingly, there is no assurance that the Company's
expectations will be realized.
OVERVIEW
- --------
Destec is an independent producer and marketer of electricity, thermal energy
and syngas. Destec has nineteen operating power projects and one operating
syngas project in the U.S.; in addition, Destec's first international project,
the Los Mina project, commenced commercial operations in the second quarter of
1996. During 1996, Destec received revenues from the sale of electricity,
thermal energy and syngas from Destec's owned or leased projects. These revenues
and revenues earned in 1995 from the sale of syngas to The Dow Chemical Company
("Dow") and from the sale of power from Dow's Freeport facility under the Power
Marketing Agreement ("PMA") are classified as "Power, steam and syngas" in the
"Summary of Statements of Consolidated Income" presented below. Destec also
received revenues from its oil and gas properties and lignite properties
(classified as "Energy resources"), from fees earned in connection with its
activities as an engineer and operator of various cogeneration projects
(classified as "Engineering and operations") and from fees earned as a developer
of power generation projects (classified as "Development"). The related costs
for each of these activities appears in the corresponding section of the summary
as "Operating Costs and Expenses." Gross margin for these activities represents
revenues less the related operating costs.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and notes thereto.
DOMESTIC POWER
Destec has an interest in and receives income from nineteen operating power
projects in the United States. Eleven of the nineteen operating projects are
located in California, three are located in Texas and the remainder are located
in Virginia, Nevada, Georgia, Florida and Michigan. In addition, Destec Power
Services ("DPS"), a power marketing subsidiary of Destec, began selling excess
power from Destec's facilities as well as from other power sources in June 1995.
In May 1996, DPS agreed to supply peaking power to Texas-New Mexico Power
("TNP"). The original agreement between DPS and TNP was for a maximum of 55 MW
of peaking power with an option to increase the amount. TNP, in various
periods, has exercised its option to increase this amount to as high as 132 MW.
The term of the contract expires on October 31, 1996. In addition to the TNP
contract, DPS has also begun making spot sales for the excess capacity from the
CoGen Lyondell ("CLI") facility to various customers. Management believes that
DPS's access to a wide range of power supply sources, including facilities owned
by Destec, allows DPS to take advantage of opportunities made available as Texas
continues to deregulate its electric power industry.
In February 1996, CLI and Lyondell Petrochemical Company ("LYO") formed
Channelview CoGen General Partnership (the "Partnership") with CLI as an 88%
partner and LYO as a 12% partner. Houston Lighting and Power Company
has challenged the partnership on the basis that the structure is actually a
retail sale of electricity from CLI to LYO. A decision is currently pending in
Austin District Court with resolution expected in early September 1996.
Deliveries of power to LYO via the private transmission line will not commence
until after a decision has been rendered. The power generated at the CLI
facility will be distributed to the partners, in proportion to their
partnership percentages, under the self
10
<PAGE>
generation exception of the Texas Public Utility Regulatory Act. In July 1996,
the private transmission line owned by LYO which interconnects with the CLI
facility was completed. Destec will continue to operate and manage the facility
on behalf of the Partnership.
In October 1995, Rayburn Country Electric Cooperative ("Rayburn Electric")
announced that it had selected the proposal team comprised of Destec, Lower
Colorado River Authority and Enron Power Marketing to negotiate a 350 MW
contract. During the course of contract negotiations between Rayburn Electric
and the Destec proposal team, Rayburn Electric received and gave consideration
to a new proposal submitted by another power marketer. This action
substantially changed the complexion of the negotiations, ultimately leading to
a contract announcement by Rayburn Electric and the other power marketer. The
Destec proposal team could not find value in meeting the new price expectations
of Rayburn Electric.
During 1995, Destec acquired a minority ownership interest in the 240 MW
Crockett Cogeneration project located in Crockett, California from a subsidiary
of Pacific Generation. In April 1996, Destec paid $8.6 million for the interest
in the Crockett project which began commercial operations in May 1996.
In July 1996, Destec completed the sale of its ownership interest in the 150
MW Blue Mountain Power project to AES Corporation (see Note 7 of the Notes to
Consolidated Financial Statements).
INTERNATIONAL POWER
Currently, Destec is in construction or active development on several
international projects including Kingston (Ontario, Canada), Elsta (Terneuzen,
The Netherlands), Indian Queens (Cornwall, England) and Chiahui (Taipei,
Taiwan). In addition, management is currently evaluating the acquisition or
development of several international project opportunities in areas including
Asia, the Far East, Europe, Africa, Australia, the Middle East and Latin
America.
In June 1996, Destec purchased the remaining interest in the Los Mina project
from Turbine Energy, Inc. for approximately $10.0 million. In the second quarter
of 1996, the fully-owned Los Mina project, located in Santo Domingo, Dominican
Republic, commenced commercial operations to become Destec's first operating
international power project. The Kingston and Indian Queens projects are under
construction and are expected to commence commercial operations later in 1996.
The Elsta project, which is also under construction, is expected to begin
operations in 1997, and construction of the Chiahui project is scheduled to
begin in 1997 with commercial operations estimated to begin in 2000.
In August 1996, Destec, as part of an international consortium, won the $1.9
billion bid for the 1600 MW Hazelwood Power Station and the adjacent Hazelwood
Mine in Victoria, Australia. The consortium is composed of National Power,
Destec, PacifiCorp and the Commonwealth Bank of Australia. As a 20% partner in
the consortium, Destec's investment in the Hazelwood acquisition is
approximately $380 million. Destec plans to make an equity contribution of up
to $180 million with the remainder borrowed on a nonrecourse basis at the
partnership level. The consortium is planning a major capital expenditure
program to maximize operating efficiencies and upgrade environmental performance
in an effort to extend the thirty year old plant's operating life another thirty
years. The consortium will also seek further investment opportunities in the
Australian power industry as they become available.
SYNGAS
The Wabash River Coal Gasification facility ("Wabash facility") began
commercial operations in November 1995. Under the terms of the gasification
services agreement with PSI Energy, Inc., Wabash is subject to either an
operating bonus or penalty depending on the operating rate of the facility. The
11
<PAGE>
maximum bonus or penalty is $7.0 million per year and is calculated based on the
annual average syngas production. Destec's accrual for the potential operating
penalty at June 30, 1996 was $1.6 million. In order to improve the reliability
and profitability of the Wabash facility, Destec is currently making significant
equipment and process improvements at an estimated cost of $14.3 million.
In June 1996, Destec refinanced the operating lease for the Wabash facility
with a third-party owner for a term of five years. Under the new agreement,
Destec assumed a $193.3 million lease obligation which resulted in future
minimum lease payments of approximately $231 million. The cost associated with
the Wabash facility improvements discussed above is included in the financing
amount (see Note 2 of the Notes to Consolidated Financial Statements).
RESULTS OF OPERATIONS: THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS
- --------------------------------------------------------------------------------
ENDED JUNE 30, 1995
- -------------------
The following table sets forth a summary of statements of consolidated income
for Destec for the three month periods ended June 30, 1996 and 1995,
respectively. This information has been derived from Destec's unaudited
Consolidated Financial Statements.
SUMMARY OF STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
For the
Three Months Ended
June 30,
------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Power, steam and syngas............................ $ 50,704 $ 48,330
Engineering and operations......................... 70,050 154,170
Energy resources................................... 4,700 5,079
Development........................................ 2,528 15
-------- --------
Total Revenues.................................... 127,982 207,594
-------- --------
Operating Costs and Expenses:
Power, steam and syngas............................ 48,849 44,655
Engineering and operations......................... 61,578 149,100
Energy resources................................... 3,077 3,759
Development........................................ 3,344 3,262
Amortization of intangibles........................ 618 618
Selling, general & administrative expenses......... 8,449 6,873
-------- --------
Total Operating Costs and Expenses............... 125,915 208,267
-------- --------
Earnings from equity investments.................... 4,360 3,134
Other income........................................ 4,787 8,624
-------- --------
Income before provision for taxes on income......... 11,214 11,085
Provision for taxes on income....................... 3,575 3,326
-------- --------
Net Income.......................................... $ 7,639 $ 7,759
======== ========
</TABLE>
For the three months ended June 30, 1996, Destec recorded net income of $7.6
million. The operating income for the quarter was $2.1 million which resulted
primarily from the positive gross margins contributed by power, steam and
syngas, engineering and operations and energy resources.
12
<PAGE>
These positive results were partially offset by a negative gross margin from
development and charges for amortization of intangibles and selling, general and
administrative expenses.
The major factors supporting the operating income during the period ended June
30, 1996 were the commencement of operations at the Los Mina power project,
continued construction of the Elsta and Kingston projects, lower costs due to
the new Operating and Maintenance ("O&M") contracts for certain California
projects and the continued earnings from Destec's equity investments. Negative
factors affecting the operating income included an unfavorable fuel variance at
the CLI facility, increased marketing expenditures for DPS and continuing
expenditures in the international market. See the discussion below for a
detailed analysis of revenue and expense for the three month periods ending June
30, 1996 and 1995.
REVENUES
- --------
Destec's second quarter revenue decreased $79.6 million, or 38%, for 1996 as
compared to 1995. This decrease resulted primarily from an $84.1 million
decrease in engineering and operations and a $0.4 million decrease in energy
resources revenue, partially offset by a $2.4 million increase in power, steam
and syngas revenue and a $2.5 million increase in development revenue.
The $84.1 million decrease in engineering and operations revenue resulted
primarily from an $85.8 million decrease in engineering revenue, partially
offset by a $1.7 million increase in operations revenue. Engineering revenue was
lower in the second quarter of 1996 due to revenue recognition on the
construction costs related to the Elsta and Kingston projects in 1996, as
compared to revenue recognition on the Wabash River, Michigan Power, Bear
Mountain and Elsta projects in 1995. Operations revenue increased in the first
quarter of 1996 as a result of a performance bonus Destec earned related to the
Double "C" facility and due to O&M revenue earned from the Michigan Power
project which began commercial operation in October 1995. Operations revenue
also includes fees earned prior to start-up of the Kingston and Elsta projects
which are expected to begin operations in late 1996 and 1997, respectively.
This increase was partially offset by lower O&M revenue from the Kern Front,
High Sierra and Double "C" projects due to the new O&M contracts which became
effective May 1, 1996.
Energy resources revenue decreased $0.4 million due to lower production
revenue as a result of the sale of gas properties in the third quarter of 1995,
partially offset by increased revenue from the Southeast Piceance gas properties
which were purchased in April 1996 (see Note 3 of the Notes to Consolidated
Financial Statements).
The $2.4 million increase in power, steam and syngas revenue resulted from a
$19.1 million increase in power revenue from the Los Mina, CLI and CoGen Power
("CPI") projects and a $1.2 million increase in revenue from DPS, partially
offset by a $17.3 million decrease in syngas revenue and a $0.6 million decrease
in PMA revenue. Power revenue from the Los Mina project increased due to the
commencement of commercial operations in the second quarter of 1996. Power
revenue from the CLI and CPI facilities increased compared to the second quarter
of 1995 as a result of higher fuel prices and the addition of the sixth gas
turbine at the CLI facility in June 1995 which provides approximately 120 MW of
additional capacity. DPS revenue is higher in the second quarter of 1996
because DPS did not begin marketing power until June 1995. These increases were
partially offset by a net decrease in syngas revenue due to the decommissioning
of the LGTI facility and the start-up of commercial operations of the Wabash
facility which both occurred in November 1995. PMA revenue decreased due to the
expiration on April 30, 1995 of the remaining power contract supporting the PMA
agreement with Dow.
The $2.5 million increase in development revenue results from the recognition
in the second quarter of 1996 of fees related to the Kingston project.
13
<PAGE>
OPERATING COSTS AND EXPENSES
- ----------------------------
Destec's second quarter total operating costs and expenses decreased $82.4
million, or 40%, for 1996 as compared to 1995. This decrease resulted from an
$87.5 million decrease in engineering and operations costs and a $0.7 million
decrease in energy resources costs, partially offset by a $4.2 million increase
in power, steam and syngas costs and a $1.6 million increase in selling, general
and administrative costs.
The $87.5 million decrease in engineering and operations costs is primarily
due to lower construction costs for the Elsta and Kingston projects in the
second quarter of 1996, as compared to construction costs related to the Wabash
River, Michigan Power, Bear Mountain and Elsta projects for the same period of
1995. Operations costs decreased as a result of new O&M contracts for the Kern
Front, High Sierra and Double "C" projects which became effective May 1, 1996.
The $0.7 million decrease in energy resources costs results from lower
production costs in the second quarter of 1996 due to the sale of the gas
properties in the third quarter of 1995, partially offset by higher production
costs associated with the Southeast Piceance gas properties which were purchased
in April 1996 (see Note 3 of the Notes to Consolidated Financial Statements).
The $4.2 million increase in power, steam and syngas costs is primarily a
result of increased power costs due to the commencement of commercial operations
of the Los Mina facility in the second quarter of 1996, higher fuel consumption,
ad valorem and depreciation costs at the CLI facility related to the addition of
the sixth gas turbine in June 1995 and higher fuel prices at the CLI and CPI
facilities. These increases in power costs were partially offset by lower lease
costs resulting from the refinancing of the CLI lease in August 1995. Syngas
costs decreased in total as a result of the decommissioning of the LGTI
facility, partially offset by the commencement of operations at the Wabash
facility which both occurred in November 1995.
The $1.6 million increase in selling, general and administrative costs
resulted from additional marketing expenses for DPS and increased international
development costs.
EQUITY INVESTMENTS, OTHER INCOME AND TAXES
- ------------------------------------------
Earnings from equity investments increased $1.2 million for the three months
ended June 30, 1996, as compared to the same period of 1995. The increase in
equity earnings is a result of lower interest expense on the projects' term
loans due to lower interest rates and principal. Equity earnings were also
improved on the Oyster Creek project as a result of the conversion of its
construction loan to a term loan in July 1995. In addition, equity earnings
included earnings from the Bear Mountain project which commenced commercial
operations in April 1995.
Other income decreased $3.8 million due primarily to decreased interest income
on a lower average cash balance at a lower average rate of return for the three
months ended June 30, 1996 compared to the same period of 1995.
The effective tax rate at June 30, 1996 was 31.9% as compared to 30.0% in the
same period of 1995. Effective June 6, 1996, Destec's results from operations
will be included in the consolidated U.S. federal income tax return of Dow.
Pursuant to a new tax sharing agreement between Dow and Destec, federal and
state income tax expense is computed on a stand-alone basis. Any resulting
current tax liability or refund is settled with Dow. The agreement permits
Destec to reduce its federal stand-alone tax liability by certain non-
conventional fuels tax credits which have been utilized in Dow's consolidated
return, even where such credits would not otherwise be currently usable by
Destec.
14
<PAGE>
RESULTS OF OPERATIONS: SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS
- ----------------------------------------------------------------------------
ENDED JUNE 30, 1995
- -------------------
The following table sets forth a summary of statements of consolidated income
for Destec for the six month periods ended June 30, 1996 and 1995, respectively.
This information has been derived from Destec's unaudited Consolidated Financial
Statements.
SUMMARY OF STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
For the
Six Months Ended
June 30,
------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Power, steam and syngas............................. $ 89,082 $ 95,143
Engineering and operations.......................... 176,377 260,241
Energy resources.................................... 8,547 9,078
Development......................................... 11,737 8,057
-------- --------
Total Revenues..................................... 285,743 372,519
-------- --------
Operating Costs and Expenses:
Power, steam and syngas............................. 89,304 86,772
Engineering and operations.......................... 159,176 251,281
Energy resources.................................... 5,240 7,930
Development......................................... 7,437 9,443
Amortization of intangibles......................... 1,236 1,236
Selling, general & administrative expenses.......... 15,684 14,068
-------- --------
Total Operating Costs and Expenses................ 278,077 370,730
-------- --------
Earnings from equity investments..................... 6,606 4,222
Other income......................................... 10,828 15,409
-------- --------
Income before provision for taxes on income.......... 25,100 21,420
Provision for taxes on income........................ 8,028 6,427
-------- --------
Net Income........................................... $ 17,072 $ 14,993
======== ========
</TABLE>
REVENUES
- --------
Destec's revenue for the six months ended June 30, 1996 decreased $86.8
million, or 23%, as compared to the same period in 1995. This decrease resulted
primarily from a $6.1 million decrease in power, steam and syngas revenue, an
$83.9 million decrease in engineering and operations revenue and a $0.5 million
decrease in energy resources revenue, partially offset by a $3.7 million
increase in development revenue.
The $6.1 million decrease in power, steam and syngas revenue resulted from a
$3.3 million decrease in PMA revenue and a $35.7 million decrease in syngas
revenue, partially offset by a $32.9 million increase in power revenue compared
to the same period of 1995. PMA revenue decreased due to the expiration on April
30, 1995 of the remaining power contract supporting the PMA agreement with Dow.
Syngas revenue decreased due to the decommissioning of the LGTI facility,
partially offset by the commencement of commercial operations at the Wabash
facility which both occurred in November
15
<PAGE>
1995. Power revenue increased due to the commencement of commercial operations
of the Los Mina facility in the second quarter of 1996 and higher revenues from
CLI resulting from the addition of the sixth gas turbine at the CLI facility in
June 1995 which provides approximately 120 MW of additional capacity and
increased revenue due to higher fuel prices for both CLI and CPI. DPS revenue is
higher in 1996 because DPS did not begin selling power until June 1995.
The $83.9 million decrease in engineering and operations revenue resulted
primarily from a $89.0 million decrease in engineering revenue, partially offset
by a $5.1 million increase in operations revenue. Engineering revenue was lower
for the first six months of 1996 due to revenue recognition on the construction
costs related to the Elsta and Kingston projects in 1996, as compared to revenue
recognition on the Wabash River, Michigan Power, Bear Mountain and Elsta
projects in 1995. Operations revenue for the period ended June 30, 1996 includes
revenue from operating and maintenance services provided for the Bear Mountain
and Michigan Power projects which began commercial operations in April and
October 1995, respectively, and revenue related to performance bonuses Destec
earned from the High Sierra and Double "C" facilities in the first half of 1996.
Energy resources revenue decreased $0.5 million due to lower production
revenue as a result of the sale of gas properties in the third quarter of 1995,
partially offset by increased revenue from the Southeast Piceance gas properties
which were purchased in April 1996 (see Note 3 of the Notes to Consolidated
Financial Statements).
The $3.7 million increase in development revenue results from the recognition
of fees from the Elsta and Kingston projects in 1996, as compared to the
development fees earned on the Bear Mountain, Elsta and Michigan Power projects
in 1995.
OPERATING COSTS AND EXPENSES
- ----------------------------
Destec's total operating costs for the six month period ended June 30, 1996
decreased $92.7 million, or 25%, as compared to 1995. This decrease resulted
from a $92.1 million decrease in engineering and operations costs, a $2.7
million decrease in energy resources costs and a $2.0 million decrease in
development costs, partially offset by a $2.5 million increase in power, steam
and syngas costs and a $1.6 million increase in selling, general and
administrative costs.
The $92.1 million decrease in engineering and operations costs is primarily
due to lower construction costs for the Elsta and Kingston projects in 1996, as
compared to construction costs related to the Wabash River, Michigan Power, Bear
Mountain and Elsta projects for the same period of 1995. The decrease in
engineering costs is partially offset by an increase in the deferred profit
expense in the first quarter of 1996 related to the Elsta project. The deferred
profit expense is a result of Destec's 50% ownership interest in the Elsta
project. Operations costs decreased as a result of the new O&M contracts for the
Kern Front, High Sierra and Double "C" projects.
The $2.7 million decrease in energy resources costs results from lower
production costs in 1996 due to the sale of the gas properties in the third
quarter of 1995, partially offset by higher production costs associated with the
Southeast Piceance gas properties which were purchased in April 1996 (see Note 3
of the Notes to Consolidated Financial Statements).
Development costs decreased $2.0 million due to costs related to the Bear
Mountain project incurred in the first quarter of 1995. No such expenses were
recorded in 1996.
The $2.5 million increase in power, steam and syngas costs is primarily a
result of increased power costs due to the commencement of commercial operations
of the Los Mina facility in the second quarter of 1996, higher fuel consumption,
ad valorem and depreciation costs at the CLI facility related to the
16
<PAGE>
addition of the sixth gas turbine in June 1995 and higher fuel prices at the CLI
and CPI facilities. These increases in power costs were partially offset by
lower lease costs resulting from the refinancing of the CLI lease in August
1995. Syngas costs decreased as a result of lower operating costs at the LGTI
facility due to the decommissioning of the plant in November 1995, partially
offset by increased costs for the Wabash facility which began commercial
operations in November 1995.
The $1.6 million increase in selling, general and administrative costs
resulted from additional marketing expenses for DPS and increased international
development costs.
EQUITY INVESTMENTS, OTHER INCOME AND TAXES
- ------------------------------------------
Earnings from equity investments increased $2.4 million in 1996, as compared
to the same period of 1995. The increase in equity earnings is a result of
lower interest expense on the projects' term loans due to lower interest rates
and principal. Equity earnings also improved on the Oyster Creek project as a
result of the conversion of its construction loan to a term loan in July 1995.
In addition, equity earnings includes a full six months of earnings from the
Bear Mountain project which began commercial operations in April 1995.
Other income decreased $4.6 million due primarily to decreased interest income
on a lower average cash balance at a lower average rate of return for the six
months ended June 30, 1996 compared to the same period of 1995.
The effective tax rate at June 30, 1996 was 32.0% as compared to 30.0% in the
same period of 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1996, cash and cash equivalents totaled $22.8 million and
working capital totaled $297.4 million. In the first six months of 1996, cash
and cash equivalents increased $11.4 million and working capital decreased
$106.1 million. The increase in cash and cash equivalents resulted from $58.3
million provided by Destec's operating activities, offset by $16.2 million used
in Destec's investing activities and $30.7 million used in Destec's financing
activities. See Destec's "Statements of Consolidated Cash Flows" for additional
detail.
In August 1995, CLI refinanced and amended the terms of its operating lease
agreement which resulted in a reduction to operating costs for the facility.
The financing underlying the lease expires in August 2000. The lease is an
operating lease with an initial non-cancelable term of five years ending in 2000
and an extended term of an additional thirteen years ending in 2013. The lease
allows for termination after the initial term, subject to a penalty clause. CLI
is required to remit to the lessor, in addition to basic rentals as defined,
variable rentals associated with the leveraged portion of the lease. As of June
30, 1996, the future estimated minimum lease payments under the operating lease
are approximately $218 million.
Effective June 7, 1996, Destec refinanced its operating lease agreement for
the Wabash facility with a third-party owner. This lease agreement expires in
June 2001. Under the lease, Destec assumed a $193.3 million lease obligation
which resulted in future estimated minimum lease payments of approximately $231
million as of June 30, 1996. Destec has the option to purchase the facility
at the end of the lease term or make a surrender payment to the lessor and
surrender the facility. The refinancing of the lease reduced the magnitude of
financial covenants on Destec. Destec's management believes that these lease
obligations and covenants will not significantly affect Destec's ability to
conduct its business.
At June 30, 1996, Destec had irrevocable letters of credit from banks totaling
$16.6 million pledged to support certain Destec obligations including $11.5
million for an equity contribution to the Michigan
17
<PAGE>
Power project. The remainder is pledged to support various obligations related
to the Bear Mountain, Indian Queens, Live Oak and Crockett projects. Management
plans to fund Destec's remaining equity contribution to the Michigan Power
project in the latter half of 1996. Additionally, Destec has committed to make a
capital contribution to the Elsta project of up to $35.7 million.
In 1993, Destec entered into a twenty-year firm transportation agreement with
Florida Gas Transmission to maintain firm gas transportation capacity which
began in March 1995. Destec is required to pay approximately $3.5 million per
year over the life of the contract. During the first six months of 1996, Destec
sold the excess capacity which it was unable to utilize. The current market
rate for natural gas transportation capacity is less than Destec's contracted
cost resulting in net costs of $1.6 million to Destec for the period ended June
30, 1996.
Between August 1992 and November 1994, Destec's Board of Directors (the
"Board") authorized the repurchase of up to $70.0 million of Destec's common
stock. In May 1996, the Board authorized the repurchase of an additional
1,750,000 shares of Destec's common stock with a maximum cost of $25.0 million
(see Note 4 of the Notes to Consolidated Financial Statements).
Destec currently has $350 million available under a revolving credit agreement
with Dow (the "Dow Credit Agreement"). Under the terms of this agreement which
expires in December 1996, interest is paid quarterly on advances based on Dow's
short-term borrowing rate plus .125%. At June 30, 1996, there were no
outstanding borrowings under this line of credit. This credit agreement along
with cash, cash equivalents and marketable securities is expected to be
sufficient to fund Destec's working capital, additions to fixed assets, and
investments in projects.
Covenants are contained in various agreements relating to Dow's indebtedness.
Destec's management believes that these restrictions will not significantly
affect Destec's ability to conduct its business.
As a result of operational defects in the administration of the Destec Energy,
Inc. Retirement and Savings Plan since 1991, Destec filed a Voluntary Compliance
Report ("VCR") with the Internal Revenue Service ("IRS"). If the VCR
application is approved by the IRS, Destec will make a contribution to the Plan
of approximately $3.7 million (before tax effect) plus interest from January 1,
1996 to the date of contribution.
18
<PAGE>
PART II--OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits --
11 Statement re: computation of per share earnings
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended June 30, 1996.
19
<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.
DESTEC ENERGY, INC.
By: /s/ Craig E. Hess
-------------------------------
CRAIG E. HESS, VICE PRESIDENT AND CONTROLLER
(CHIEF ACCOUNTING OFFICER AND DULY
AUTHORIZED SIGNATORY)
August 12, 1996
<PAGE>
EXHIBIT 11
DESTEC ENERGY, INC.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In Thousands of Dollars, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1996 1995 1996 1995
----------- ---------- ------------ ---------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE (a)
Weighted average shares of common stock
outstanding............................................... 57,149,982 58,694,474 57,839,308 58,767,882
Effect of issuance of shares from assumed exercise of
stock options (treasury stock method)..................... (218,903) (188,211) (218,903) (188,211)
----------- ----------- ----------- -----------
Weighted average shares.................................... 56,931,079 58,506,263 57,620,405 58,579,671
=========== =========== =========== ===========
Net Income................................................. $ 7,639 $ 7,759 $ 17,072 $ 14,993
=========== =========== =========== ===========
Primary earnings per share................................. $ 0.13 $ 0.13 $ 0.30 $ 0.26
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE
Weighted average shares per primary earnings per share
computation................................................ 56,931,079 58,506,263 57,620,405 58,579,671
Additional dilutive effect of stock options (treasury stock
method).................................................... 91,600 85,700 91,600 85,700
----------- ----------- ----------- -----------
Weighted average shares..................................... 57,022,679 58,591,963 57,712,005 58,665,371
=========== =========== =========== ===========
Net Income.................................................. $ 7,639 $ 7,759 $ 17,072 $ 14,993
=========== =========== =========== ===========
Fully diluted earnings per share............................ $ 0.13 $ 0.13 $ 0.30 $ 0.26
=========== =========== =========== ===========
</TABLE>
- ----------------
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraphs 14, 30, and 40 of APB
Opinion No. 15 because it produces antidilutive results for the three and
six month periods ended June 30, 1996 and 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 22,841 22,841
<SECURITIES> 240,310 240,310
<RECEIVABLES> 100,375 100,375
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 439,708 439,708
<PP&E> 459,208 459,208
<DEPRECIATION> 160,372 160,372
<TOTAL-ASSETS> 1,036,525 1,036,525
<CURRENT-LIABILITIES> 142,294 142,294
<BONDS> 0 0
0 0
0 0
<COMMON> 623 623
<OTHER-SE> 754,812 754,812
<TOTAL-LIABILITY-AND-EQUITY> 1,036,525 1,036,525
<SALES> 127,982 285,743
<TOTAL-REVENUES> 127,982 285,743
<CGS> 116,848 261,157
<TOTAL-COSTS> 125,915 278,077
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 11,214 25,100
<INCOME-TAX> 3,575 8,028
<INCOME-CONTINUING> 7,639 17,072
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,639 17,072
<EPS-PRIMARY> 0.13 0.30
<EPS-DILUTED> 0.13 0.30
</TABLE>
