SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11516
REMINGTON OIL AND GAS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-2369148
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
8201 Preston Road, Suite 600, Dallas, Texas 75225-6211
(Address of principal executive offices)
(Zip code)
(214) 210-2650
(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 shorter period than
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
--- ---
There were 3,221,510 outstanding shares of Class A (Voting) Common
Stock, $1 par value, on November 10, 1998. There were also 17,155,297
outstanding shares of Class B (Non-Voting) Common Stock, $1 par value,
on such date.
<PAGE>
Remington Oil and Gas Corporation
INDEX
PART I FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Balance Sheets as of September 30, 1998 and
December 31, 1997 3
Statements of Income - Three and nine months ended
September 30, 1998 and 1997 4
Statements of Cash Flows - Nine months ended
September 30, 1998 and 1997 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION 17
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Remington Oil and Gas Corporation
Balance Sheets
(In thousands, except share data)
September 30, December 31,
1998 1997
Assets ------------- ------------
Current assets (Unaudited)
Cash and cash equivalents $ 48,139 $ 4,552
Accounts receivable - oil and natural
gas 2,116 5,725
Accounts receivable - other 190 268
Note receivable - S-Sixteen Holding
Company 4,939 6,192
Prepaid expenses and other current assets 3,312 2,118
------------- ------------
Total current assets 58,696 18,855
------------- ------------
Properties
Oil and natural gas properties
(successful-efforts method) 241,096 220,481
Other properties 2,259 2,800
Accumulated depreciation, depletion and
amortization (162,159) (144,548)
------------- ------------
Total properties 81,196 78,733
------------- ------------
Other assets
Deferred charges (net of accumulated
amortization) 844 927
------------- ------------
Total other assets 844 927
------------- ------------
Total assets $ 140,736 $ 98,515
============= ============
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable $ 6,707 $ 8,694
Accrued interest payable 1,128 264
Accrued transportation payable -
related party 135 305
Net Profits expense payable 349 594
Judgment - Phillips Petroleum 17,950 -
Short-term portion of note payable 2,200 6,000
------------- ------------
Total current liabilities 28,469 15,857
Long-term liabilities
Note payable 7,500 -
Convertible subordinated notes payable 38,371 38,371
------------- ------------
Total long-term liabilities 45,871 38,371
------------- ------------
Total Liabilities 74,340 54,228
------------- ------------
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock, $1.00 par value
Class A (Voting) - 15,000,000 shares
authorized, 3,250,110 shares issued 3,250 3,250
Class B (Non-Voting) - 30,000,000
shares authorized, 17,579,569 shares
issued 17,580 17,553
Additional paid-in capital 25,310 25,197
Treasury stock, at cost, 28,600 shares
Class A, and 424,272 shares Class B (3,161) (3,465)
Retained earnings 23,417 1,752
------------- ------------
Total stockholders' equity 66,396 44,287
------------- ------------
Total liabilities and stockholders' equity $ 140,736 $ 98,515
============= ============
See accompanying Notes to Financial Statements.
<PAGE>
Remington Oil and Gas Corporation
Statements of Income
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Oil sales $ 2,795 $ 5,011 $ 11,103 $ 15,544
Gas sales 2,871 7,436 17,626 28,842
Other income 50,861 1,028 52,361 3,283
---------- ---------- ---------- ----------
Total revenues 56,527 13,475 81,090 47,669
---------- ---------- ---------- ----------
Costs and expenses
Operating costs and expenses 1,312 1,032 4,295 2,750
Transportation expense 560 673 2,071 2,081
Net Profits interest expense 358 1,883 3,401 6,588
Exploration expenses 2,222 2,617 5,852 6,523
Depreciation, depletion and amortization 4,196 5,587 15,608 17,741
Impairment of oil and gas properties 2,541 - 3,063 -
Phillips Petroleum judgment 17,950 - 17,950 -
General and administrative 935 1,603 3,317 5,030
Legal expense 208 558 378 2,275
Reorganization expense - 6,434 - 7,072
Interest and financing expense 1,068 1,394 3,129 3,845
---------- ---------- ---------- ----------
Total costs and expenses 31,350 21,781 59,064 53,905
---------- ---------- ---------- ----------
Income (loss) before taxes 25,177 (8,306) 22,026 (6,236)
---------- ---------- ---------- ----------
Income tax expense (benefit) 361 (725) 361 -
---------- ---------- ---------- ----------
Net income (loss) $ 24,816 $ (7,581) $ 21,665 $ (6,236)
========== ========== ========== ==========
Basic income per share $ 1.22 $ (0.37) $ 1.06 $ (0.30)
========== ========== ========== ==========
Diluted income per share $ 1.06 $ (0.37) $ 0.97 $ (0.30)
========== ========== ========== ==========
Weighted average shares outstanding 20,369 20,307 20,359 20,579
========== ========== ========== ==========
Diluted weighted average shares
outstanding 23,857 20,307 23,847 20,579
========== ========== ========== ==========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Remington Oil and Gas Corporation
Statements of Cash Flow
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flow provided by operations
Net income (loss) $ 21,665 $ (6,236)
Depreciation, depletion and amortization 15,608 17,741
Impairment of oil and gas properties 3,063 -
Amortization of deferred charges 193 196
Amortization of premium on marketable securities - 29
Dry hole costs 1,929 3,823
Decrease in accounts receivable 3,687 2,497
(Increase) decrease in prepaid expenses and
other current assets (1,194) 495
(Increase) in deferred charges (104) -
Increase in accounts payable and accrued expenses 16,412 3,719
(Gain) loss on sale of properties (107) 68
----------- -----------
Net cash flow provided by operations 61,152 22,332
----------- -----------
Cash from investing activities
Payments for capital expenditures (23,207) (27,275)
Sales and maturities of marketable securities - 10,216
Investment in marketable securities - (597)
Notes receivable - S-Sixteen Holding Company - (7,250)
Principal repayments - S-Sixteen Holding Company 1,253 485
Proceeds from property sales 245 289
----------- -----------
Net cash used in investing activities (21,709) (24,132)
Cash from financing activities
Proceeds from notes payable 3,800 7,000
Payments on notes payable (100) (1,000)
Common stock issued 444 -
Repurchase common stock - (3,465)
----------- -----------
Net cash provided by financing activities 4,144 2,535
----------- -----------
Net increase (decrease) in cash and cash equivalents 43,587 735
Cash and cash equivalents at beginning of period 4,552 2,997
----------- -----------
Cash and cash equivalents at end of period $ 48,139 $ 3,732
=========== ===========
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
Note 1 - Basis of Presentation
Remington Oil and Gas Corporation ("Remington"), is an independent
oil and gas exploration and production company incorporated in
Delaware. Our oil and gas properties are located in three areas,
offshore Gulf of Mexico, Mississippi/Alabama, and onshore Gulf Coast.
We use the "Successful-Efforts" method of accounting for oil and gas
properties as opposed to the "Full Cost" method. The primary
differences between the two methods is that we record dry hole costs,
seismic expenses and other prospecting costs as exploration expenses
when incurred and we amortize capital costs on a property by property
basis rather than one pool of total capitalized costs.
We prepared these financial statements according to the
instructions for Form 10-Q. Therefore, the financial statements may not
include all disclosures required by generally accepted accounting
principles. We have, however, recorded all transactions and adjustments
necessary to fairly present the financial statements included in this
Form 10-Q. The adjustments made are normal and recurring.
The following notes describe only the material changes in
accounting policies, account details or financial statement notes
during the first nine months of 1998. Therefore, please read these
financial statements and notes to the financial statements together
with the audited financial statements and notes to financial statements
in our 1997 annual report. Finally, the income statements for the three
and nine months ended September 30, 1998, can not necessarily be used
to project results for the full year.
Note 2 - Proposed Transaction
S-Sixteen Holding Company owns 1,840,525 shares (approximately
57%) of our Class A (Voting) Common Stock and 88,668 shares of our
Class B (Non-Voting) Common Stock. A subsidiary of S-Sixteen Holding
Company owns 205,975 shares of our Class B (Non-Voting) Common Stock.
Mr. J. R. Simplot controls the parent entity of S-Sixteen Holding
Company. Mr. Simplot also owns 2,846,000 additional shares of the Class
B (Non-Voting) Common Stock of Remington. On June 22, 1998, we executed
an Agreement and Plan of Merger with S-Sixteen Holding Company under
which it will merge into us and we will be the surviving corporation.
In addition, if the transaction is approved, we will convert our two
classes of common stock into a single class of common stock, all the
shares of which will be entitled to one vote. We will hold a special
meeting for all shareholders to vote on the proposed transaction. If
the transaction is approved the following will occur:
The holders of the Class A (Voting) Common Stock, excluding S-
Sixteen Holding Company, receive 1.15 shares of the new voting common
stock for each share of Class A Stock presently owned.
The holders of the Class B (Non-Voting) Common Stock, excluding S-
Sixteen Holding Company, will receive 1 share of the new voting common
stock for each share of Class B Stock presently owned.
The sole stockholder of S-Sixteen Holding Company will receive
2,785,028 shares of the new common stock and warrants to purchase up to
300,000 additional shares of the new common stock in exchange for all
of the outstanding common stock of S-Sixteen Holding Company. The
outstanding common stock of S-Sixteen Holding Company will be canceled
and S-Sixteen Holding Company will be merged into Remington.
The 1,840,525 shares of Class A (Voting) Common Stock of Remington
and the 88,668 shares of Class B (Non-Voting) Common Stock of Remington
owned directly by S-Sixteen Holding Company will be canceled.
The note receivable to Remington from S-Sixteen Holding Company,
as discussed in Note 4 - Note Receivable S-Sixteen Holding Company,
will be canceled. A note and accrued interest payable by S-Sixteen
Holding Company to its sole shareholder will be contributed to
additional paid in capital.
The assets of S-Sixteen Holding Company that will remain after its
Remington common stock is canceled, primarily include two subsidiary
corporations, CKB Petroleum, Inc. and CKB & Associates, Inc. We will
acquire control of these subsidiaries. CKP Petroleum, Inc. owns an
undivided interest in the pipeline that transports our oil production
from the South Pass complex to Venice, Louisiana. The transportation
expense that we pay to CKB Petroleum, Inc. is discussed in Note 6 -
Related Party Transactions. CKB & Associates owns a small oil and gas
property and 205,975 shares of our non-voting common stock. As part of
the proposed transaction, the 205,975 shares of our non-voting common
stock will be exchanged for 205,975 shares of the new voting common
stock.
CKB Petroleum, Inc. and CKB & Associates, Inc. each have two
minority shareholders who together own approximately 5.9% of the common
stock. These two shareholders have brought litigation against S-Sixteen
Holding Company, CKB Petroleum, Inc. and CKB & Associates, Inc. Upon
consummation of this proposed transaction, we will assume the defense
of this litigation.
Note 3 - Termination of Gas Sales Contract
On July 31, 1998, we executed an agreement with Texas Eastern
Transmission Corporation to terminate our South Pass Block 89 gas sales
contract. The termination was effective June 30, 1998, and as of July
1, 1998, we began selling all gas produced from this block at spot
market prices. We received $49.8 million in cash and agreed to release
Texas Eastern Transmission Corporation from the gas purchase contract,
including the gas substitution and indemnification rights, as well as
related indemnification and other obligations that had been in effect
under a 1990 settlement agreement between Texas Eastern Transmission
Corporation and us.
For the first six months of 1998, under the gas sales contract,
which was to expire in July 2002, we received $12.38 per Mcf for gas
produced from the southern portion of South Pass Block 89 and $6.83 per
Mcf for gas produced from the northern portion of the block. These
prices were to escalate 10% each year. During the first six months of
1998, we received approximately $5.8 million more for the gas sold
at the contract price compared to the same gas if sold at spot market
prices. For the last six months of 1998, we estimate that the
difference would have been approximately $4.3 million.
When significant events such as this occur, the accounting rules
for impairment of long-lived assets require us to compare the estimated
future net revenue to the remaining net capital costs. If the remaining
net capital costs exceed the future net revenue, then we record an
impairment expense equal to the difference between the remaining net
capital cost and the fair value of the asset. Because of the reduction
in the estimated future gas revenue from this property, we recorded a
$2.5 million impairment expense in the third quarter.
Note 4 - Note Receivable S-Sixteen Holding Company
In May we extended the maturity date of the note receivable from
S-Sixteen Holding Company from May 29, 1998, to November 29, 1998. The
balance on September 30, 1998, was $4.9 million. This note receivable
will be canceled if the proposed transaction described in Note 2 -
Proposed Transaction is approved. However, the Agreement and Plan of
Merger requires S-Sixteen Holding Company to continue to make payments
until the proposed transaction is effective.
The terms of the note receivable require S-Sixteen Holding Company
to make monthly installment payments of principal and interest totaling
$100,000. The interest rate is equal to the prime rate of Chase Bank of
Texas, N.A. plus 1% through November 29, 1997, when the rate escalates
monthly by 0.1% over the previous month's rate. S-Sixteen Holding
Company has pledged its 1.8 million shares of Remington Class A
(Voting) Common Stock, 800,000 shares of CKB Petroleum, Inc. common
stock and 800,000 shares of CKB & Associates, Inc. common stock as
collateral.
Note 5 - Notes Payable
We currently have $38.4 million of 8 1/4% Convertible Subordinated
Notes outstanding. These notes mature December 1, 2002, and are
convertible at $11.00 per share into shares of Class B (Non-Voting)
Common Stock by the note holders any time before they mature. We pay
interest semiannually on June 1 and December 1.
If the proposed transaction discussed in Note 2 is approved, it
will cause a "change in control" under the indenture governing the 8
1/4% Convertible Subordinated Notes. The "change in control" occurs
because the current holders of our voting common stock immediately
prior to the effective date of the proposed transaction will no longer
hold a majority of the new common stock, all of which will be entitled
to vote, issued as a result of the transaction. The "change in control"
provision requires that we make an offer to purchase all of the
outstanding notes at 100% of the principal amount plus accrued
interest. We must make this offer to purchase within 15 business days
after the "change in control" and within 40 business days after the
"change in control," pay for any notes delivered.
We renewed and extended our bank line of credit in September. The
new line of credit has a borrowing base of $15.0 million that will
increase to $20.0 million if less than $10.0 million of the 8 1/4%
Convertible Subordinated Notes are delivered by the note holders
pursuant to the offer to purchase as discussed in the preceding
paragraph. The line of credit expires on March 31, 2000. The borrowing
base can be increased or decreased based on our success in increasing
oil and gas reserves.
Note 6 - Related Party Transactions
Under both applicable law and a resolution by our board of
directors, transactions with related parties must be approved by the
board of directors, be fair and reasonable, and be on terms no less
favorable than can be obtained from an unrelated party in an arm's-
length transaction.
We pay $2.75 per barrel to CKB Petroleum Inc., a subsidiary of S-
Sixteen Holding Company, for each barrel of oil that CKB Petroleum,
Inc. transports for us from the South Pass Area blocks in the Gulf of
Mexico, to Venice, Louisiana. The pipeline tariff, or rate per barrel,
is published with the Federal Energy Regulatory Commission and is the
same rate offered by unrelated parties. In connection with these
transportation services, we recorded amounts payable to CKB Petroleum,
Inc. as follows:
Three months ended September 30,
1998 $ 612,000
1997 $ 777,000
Nine months ended September 30,
1998 $ 2,318,000
1997 $ 2,383,000
Interest and principal payments received on the note receivable
from S-Sixteen Holding Company, discussed in Note 4 - Note Receivable
S-Sixteen Holding Company, were as follows:
Interest Principal
Income Payments
------------ -------------
Three months ended September 30,
1998 $ 173,000 $ 370,000
1997 $ 166,000 $ 134,000
Nine months ended September 30,
1998 $ 420,000 $ 1,253,000
1997 $ 271,000 $ 485,000
We recorded the following executive search fees payable to Preng
and Associates, Inc., an entity controlled by a member of our Board of
Directors.
Nine months ended September 30,
1998 $ 40,000
1997 $ 76,000
In September 1997, we recorded $1.9 million payable to Mr. Simplot
and $100,000 payable to Mr. James Arthur Lyle for attorneys' fees in
connection with the settlement of the Griffin et al. v. Box et al.
litigation. Mr. Simplot controls S-Sixteen Holding Company and Mr. Lyle
is a member of our Board of Directors.
Note 7. Contingencies
Phillips Petroleum Case
We are engaged in litigation with Phillips Petroleum Company
concerning the Net Profits interest in South Pass Block 89. In this
dispute, Phillips contends that pursuant to its 33% Net Profits
interest in South Pass Block 89, it was entitled to receive an
overriding royalty for months in which "net profits" were not achieved;
that an excessive oil transportation fee was being charged to the Net
Profits account; and that the entire $69.6 million cash payment that
had been received by OKC Limited Partnership (our predecessor) from the
1990 settlement of previous litigation between Texas Eastern and us,
should have been credited to the Net Profits account instead of the
$5.8 million that was credited. On the latter claim, Phillips seeks to
receive in excess of $21.5 million, while on the first two claims
Phillips alleged aggregate damages of several million dollars. In
addition, Phillips, under the Louisiana Mineral Code, is seeking double
damages and cancellation of the farm-out agreement that created the Net
Profits interest. We denied Phillips' claims and defended ourselves
during a non-jury trial in April 1997. At trial we asserted a
counterclaim that Phillips had breached a settlement agreement
regarding previous litigation, and we sought to recover damages in
excess of $10.0 million.
On August 18, 1998, we received a ruling from the court in the
litigation. In its ruling, the court awarded Phillips $1.6 million plus
interest for its overriding royalty claim and $9.3 million plus
interest for its claim on the 1990 settlement. The trial court
dismissed Phillips' claim of excessive transportation charges and its
claims for double damages and lease cancellation. The trial court also
dismissed our counterclaim. On October 23, 1998, the trial court
finalized its judgment. We believe that the judgment including interest
will be between $17.0 million and $18.0 million. We have filed notice
of our intent to appeal the adverse portions of the judgment. The trial
court has required that we post a bond in order to prevent Phillips
from executing on the judgment pending appeal. The amount of the bond
is $11.0 million, 50% of which is collateralized by cash. During the
pendency of the appeal, simple interest will continue to accrue on the
$10.9 million judgment. Phillips has also filed notice to appeal all
aspects of the judgment except the counterclaim.
In connection with the proceeds from the termination of the Texas
Eastern gas sales contract, we filed a declaratory judgment action
against Phillips in federal district court in Dallas, Texas. In this
action we asked the court to declare that none of the $49.8 million we
received from the contract termination is owed to Phillips under the
farm-out agreement. In existing litigation in Collin County, Texas,
addressing the same issues that have been adjudicated by the Louisiana
court, Phillips has filed a counterclaim asserting that the proceeds of
the termination agreement should be credited to the Net Profits
account. In response to Phillips counterclaim, we have filed an amended
petition seeking a declaratory judgment that the termination proceeds
need not be credited to the Net Profits account. Certain possible
outcomes of our current litigation with Phillips Petroleum Company or
our declaratory judgment action could have a material adverse effect on
Remington.
In connection with the judgment, and in accordance with Statement
of Financial Accounting Standards No. 5 entitled "Accounting for
Contingencies," we recorded $18.0 million as an expense in August 1998.
This amount includes both the awards by the trial court and the
estimated interest on those awards through September 30, 1998.
Other Contingencies
The Company is not a party to any material pending legal
proceedings other than the foregoing.
Note 8. Comprehensive Income
Effective January 1, 1998, we adopted Statement of Financial
Accounting Standards No. 130 entitled "Reporting Comprehensive Income."
The statement establishes standards for reporting and display of
comprehensive income and its components. For the three and nine months
ended September 30, 1998 and 1997, comprehensive income includes net
income (loss) and unrealized gains on marketable securities. The impact
of adopting the Statement is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1998 1997 1998 1997
-------- --------- -------- --------
Net income (loss) $ 24,816 $ (7,581) $ 21,665 $(6,236)
Unrealized gain on
marketable securities - 58 - 112
-------- --------- -------- --------
Net comprehensive income
(loss) $ 24,816 $ (7,523) $ 21,665 $(6,124)
======== ========= ======== ========
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion will assist in the understanding of the
Company's financial position and results of operations. The information
below should be read in conjunction with the financial statements, the
related notes to financial statements and the Company's Form 10-K for
the year ended December 31, 1997.
Our discussion contains both historical and forward-looking
information. We assess the risks and uncertainties about our business,
long-term strategy, and financial condition before we make any forward-
looking statements, but we can not guarantee that our assessment is
accurate or that our goals and projections can or will be met.
Statements concerning results of future exploration, exploitation,
development and acquisition expenditures as well as expense and reserve
levels are forward-looking statements. We make assumptions about
commodity prices, drilling results, production costs, administrative
expenses and interest costs that we believe are reasonable based on
currently available information of known facts and trends. In addition,
we believe that the proposed transaction to acquire S-Sixteen Holding
Company and convert to one class of common stock, as discussed below,
will be approved by the shareholders.
This discussion is primarily an update to the Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in the 1997 Form 10-K. We recommend that you read
this discussion in conjunction with the Form 10-K as well as the Forms
10-Q filed for the first and second quarters of 1998.
Our long-term strategy is to increase shareholder value by
economically increasing reserves, production, and cash flow on an
annual basis. Our capital expenditures, financed primarily by operating
cash flow and bank debt, will be balanced between exploration,
development and acquisitions. In addition, during the last year we have
also concentrated on lowering our costs and expenses to be in line with
our industry peers and we have made an effort to end the litigation
that has characterized this company for the last several years.
Since 1982, we have had a long-term gas sales contract covering
gas sales from South Pass Block 89. The contract was to expire in July
2002. We entered into the contract with Texas Eastern Transmission
Corporation during a time when natural gas supplies were scarce. Over
time as natural gas supplies became more abundant, we continued to
receive the contract price for our gas production from this block, even
though such price was by then substantially higher than the market
price. In 1989 Texas Eastern Transmission Corporation sued us alleging
termination of the contract. In 1990 we settled this litigation and
received $69.6 million as part of the settlement. The contract
continued to be in effect, although the new contract price was reduced
to approximately one-half of the original contract price. These prices,
however, escalated 10% each year. In 1998, under the contract, we
received $12.38 per Mcf for gas produced from the southern portion of
the block and $6.83 per Mcf for gas produced from the northern portion
of the block.
On July 31, 1998, we executed an agreement with Texas Eastern
Transmission Corporation to terminate this gas sales contract. The
termination was effective June 30, 1998, and as of July 1, 1998, we
began selling all gas produced from this block at spot market prices.
We received $49.8 million in cash and agreed to release Texas Eastern
Transmission Corporation from the contract, including the gas
substitution and indemnification rights, as well as related
indemnification and other obligations that had been in effect under the
1990 settlement agreement between Texas Eastern and us.
During the first six months of 1998, we received approximately
$5.8 million more for the gas sold at the long-term contract price
compared to the same gas if sold at spot market prices. For the last
six months of 1998, we estimate that the difference would have been
approximately $4.3 million.
Phillips Petroleum Company owns a Net Profits interest created in
1977 by a farm-out agreement covering South Pass Block 89. Since
1981, except for brief periods of time, there has been litigation
brought by Phillips against us over the Net Profits interest. Since the
inception of the farm-out we have paid Phillips Petroleum Company
$100.5 million related to the Net Profits interest and overriding
royalty. We have tried numerous times to settle this litigation
equitably, but so far we have been unsuccessful in our attempts to
reach an agreement. Our goal is to settle or dispose of this litigation
in a manner that would prevent any future litigation. We will, however,
vigorously defend ourselves against all litigation that Phillips
Petroleum Company brings against us. We believe, and the Louisiana
court has ruled, that under the farm-out agreement Phillips can look
only to actual production for determination of its Net Profits
interest.
In this latest litigation, Phillips contends that pursuant to its
33% Net Profits interest in South Pass Block 89, it was entitled to
receive an overriding royalty for months in which "net profits" were
not achieved; that an excessive oil transportation fee was being
charged to the Net Profits account; and that the entire $69.6 million
cash payment that had been received by OKC Limited Partnership (our
predecessor) from the 1990 settlement of previous litigation between
Texas Eastern and us, should have been credited to the Net Profits
account instead of the $5.8 million that was credited. On the latter
claim, Phillips seeks to receive in excess of $21.5 million, while on
the first two claims Phillips alleged aggregate damages of several
million dollars. In addition, Phillips, under the Louisiana Mineral
Code, is seeking double damages and cancellation of the farm-out
agreement that created the Net Profits interest. We denied Phillips'
claims and defended ourselves during a non-jury trial in April 1997. At
trial we asserted a counterclaim that Phillips had breached a
settlement agreement regarding previous litigation, and we sought to
recover damages in excess of $10.0 million.
On August 18, 1998, we received a ruling from the court in the
litigation. In its ruling, the court awarded Phillips $1.6 million plus
interest for its overriding royalty claim and $9.3 million plus
interest for its claim on the 1990 settlement. The trial court
dismissed Phillips' claim of excessive transportation charges and its
claims for double damages and lease cancellation. The trial court also
dismissed our counterclaim. On October 23, 1998, the trial court
finalized its judgment. We believe that the judgment including interest
will be between $17.0 million and $18.0 million. We have filed notice
of our intent to appeal the adverse portions of the judgment. The trial
court has required that we post a bond in order to prevent Phillips
from executing on the judgment pending appeal. The amount of the bond
is $11.0 million, 50% of which is collateralized by cash. During the
pendency of the appeal, simple interest will continue to accrue on the
$10.9 million judgment. Phillips has also filed notice to appeal all
aspects of the judgment except the counterclaim.
In connection with the judgment, and in accordance with Statement
of Financial Accounting Standards No. 5 entitled "Accounting for
Contingencies," we recorded $18.0 million as an expense in the third
quarter of this year. This amount includes both the awards by the trial
court and the estimated interest on those awards through September 30,
1998.
In connection with the proceeds from the termination of the Texas
Eastern gas sales contract, we filed a declaratory judgment action
against Phillips in federal district court in Dallas, Texas. In this
action we asked the court to declare that none of the $49.8 million we
received from the contract termination is owed to Phillips under the
farm-out agreement. In existing litigation in Collin County, Texas,
addressing the same issues that have been adjudicated by the Louisiana
court, Phillips has filed a counterclaim asserting that the proceeds of
the termination agreement should be credited to the Net Profits
account. In response to Phillips' counterclaim, we have filed an amended
petition seeking a declaratory judgment that the termination proceeds
need not be credited to the Net Profits account. Certain possible
outcomes of our current litigation with Phillips Petroleum Company or
our declaratory judgment action could have a material adverse effect on
Remington.
In June of this year we entered into a merger agreement with S-
Sixteen Holding Company. The event is significant because, if the
transaction is approved by the shareholders at the special meeting, all
owners of Remington common stock will thereafter have the right to
vote. The transaction is structured so that a new class of voting
common stock will be exchanged for the two classes of common stock
currently outstanding, and we will acquire certain assets and assume
certain liabilities of S-Sixteen Holding Company. At the special
meeting, the two classes of common stock, Class A (Voting) Common Stock
and Class B (Non-Voting) Common Stock, will vote as separate classes on
the proposed transaction. One of the subsidiaries of S-Sixteen Holding
Company that we will acquire is CKB Petroleum, Inc. CKB Petroleum, Inc.
owns an undivided interest in the pipeline that transports our oil
production from four of our offshore properties to Venice, Louisiana.
We project that the acquisition of CKB Petroleum, Inc. will have a
positive effect on our future net income and cash flow from operations.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 entitled "Disclosures about
Segments of an Enterprise and Related Information." This Statement,
which will be effective for years ending December 31, 1998, establishes
standards for reporting information about operating segments and
related disclosures about products and services, geographic areas, and
major customers. This Statement is not anticipated to have a material
impact on our financial disclosures.
Liquidity and Capital Resources
Our balance sheet liquidity increased significantly during the
third quarter after we received $49.8 million from the termination of
our long-term gas contract. At September 30, 1998, current assets
exceeded current liabilities by $30.2 million and the current ratio was
2.06 to 1. At December 31, 1997, current assets exceeded current
liabilities by $3.0 million and the current ratio was approximately 1.2
to 1.
Cash flow from operations for the first nine months of 1998
increased $38.8 million, or 174%, compared to the first nine months of
1997. Again, the increase relates to the cash received from the
termination of the gas contract. Without the proceeds from the
termination of the gas contract, cash flow from operations would have
decreased by $10.6 million, or 48%. This decrease results from lower
total oil prices and lower gas revenue from South Pass Block 89. The
average oil prices for the first nine months of 1998 were $11.52 per
barrel compared to $18.22 per barrel during the first nine months of
1997. The lower oil prices caused oil revenues to be $5.2 million lower
in 1998 compared to 1997. In addition, gas sales revenue from South
Pass Block 89 decreased $11.7 million during the first nine months of
1998 compared to the same period in the prior year. The decrease
resulted primarily from lower gas production for the first six months
and both lower production and lower gas prices during the third
quarter. If the gas production during the third quarter of 1998 from
South Pass Block 89 had been sold at the former contract price, gas
revenues would have been approximately $2.1 million higher.
Throughout the year, the Company has financed capital expenditures
through cash flow from operations and bank debt. Capital expenditures
through September 30, 1998, were 15% lower because we delayed certain
drilling operations due to lower oil prices and the resulting lower net
cash flow from operations. We incurred $20.5 million for drilling and
completion costs during the first nine months of 1998. Acquisitions of
proved and unproved properties totaled $2.7 million during the first
three quarters of 1998.
We have committed to a $7.7 million acquisition of 10 blocks in
the Gulf of Mexico. Our interest will vary from 5% to 100% with all of
the properties being non-operated. Unaudited reserves are approximately
7 Bcf, and current net daily production totals 4.5 MMcf per day. We
anticipate that additional production will begin in December.
Additional drilling and exploration opportunities exist on these
blocks. Our budget includes an additional $5.0 million for drilling and
other capital expenditures for the fourth quarter of 1998, although
some of the planned expenditures may be delayed.
We currently have $38.4 million of the 8 1/4% Convertible
Subordinated Notes outstanding. If the proposed merger transaction with
S-Sixteen Holding Company, discussed above, is approved, it will cause
a "change in control" as it is defined in the indenture governing these
notes. The "change in control" occurs because the holders of a majority
of our voting common stock immediately prior to the effective date of
the proposed transaction will no longer hold a majority of the voting
stock after the proposed transaction becomes effective. As a result of
the "change in control," we would be required to make an offer to
purchase all of the outstanding notes at 100% of the principal amount
plus accrued interest. We must offer to purchase the notes within 15
business days of the "change in control" and within 40 business days
after the "change in control," purchase any notes delivered.
We renewed and extended our line of credit in September. The new
line of credit has a borrowing base of $15.0 million that will increase
to $20.0 million if less than $10.0 million of the 8 1/4% Convertible
Subordinated Notes are delivered by the note holders pursuant to the
offer to purchase as discussed in the preceding paragraph. The line of
credit expires March 31, 2000. The borrowing base can be increased or
decreased based on our success in adding oil and gas reserves.
The year 2000 issue relates to computer programs being written
with two digits rather than four to define the applicable year.
Computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 instead of 2000 or not at all. This inability
to recognize or properly treat the year 2000 may cause a breakdown of both
information technology and non-information technology systems and cause these
systems to process critical financial and operational information
incorrectly. We have assessed and continue to assess the year 2000
issue and its impact on us, our partners, suppliers, vendors and
customers. The year 2000 issue has a potential impact on us in several
areas including, among others, the ability to be paid for our oil and
gas production, the operations of the producing properties in which we
hold an interest, the ability to pay our vendors and suppliers and the
management of our financial assets including cash and securities held
with financial institutions.
We currently receive payment for the majority of our oil and gas
production from two sources. While these two sources are currently
studying the year 2000 issue in order to develop systems to prevent
problems in payment processing, they have informed us that manual
backup systems exist so that even in the event that the computer
software fails, such failure would not result in a material delay in
receiving payment for oil and gas production.
At the present time, we do not operate any of our oil and gas
properties. Therefore, we have not developed contingency plans relating
to the year 2000 issue in connection with the operation of these
properties. The operators of these properties are, however, studying
the year 2000 issue in connection with both the information technology
and non-information technology aspects of operating the oil and gas
properties. These operators have informed us that they will develop
systems sufficient to address any problems that may arise. In addition
the operators have informed us that manual back-up systems exist in the
event the computer software fails to adequately address any problems.
If we do act as operator in the future of any oil or gas property, we
anticipate that we will provide for adequate systems to address any
year 2000 issue.
We have assessed our current oil and gas accounting system and
network operating software and have determined that they are year 2000
compliant. In the event that the network operating system fails due to
a year 2000 problem, we believe that our accounting system can operate
on a stand alone basis. We do not believe that the year 2000 issue will
materially affect our ability to pay our vendors and suppliers or track
our assets in the custody of financial institutions.
Results of Operations
The following table summarizes oil and gas production and average
prices for the three and nine months ended September 30, 1998 and 1997.
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- -------
Production
Oil MBbls 270 296 964 853
Gas MMcf 1,262 1,597 5,029 5,535
Average Prices
Oil (per barrel) $ 10.36 $ 16.90 $ 11.52 $ 18.22
Gas (per Mcf) $ 2.28 $ 4.65 $ 3.50 $ 5.21
Oil revenue for the third quarter of 1998 decreased $2.2 million
because of lower pricing and production when compared to the third
quarter of 1997. The $6.54 decrease in average prices caused oil
revenue to be $1.7 million lower, while the 26,000 barrel decrease in
production caused oil revenue to be $500,000 lower. A decrease in oil
production of 49,000 barrels from South Pass resulted from natural
depletion and from the loss of about 17 days of production caused by
four shut-ins due to hurricanes in September of this year. New
production from Eugene Island Block 135, West Cameron Block 170, and
onshore gulf coast properties offset the decline from South Pass by
23,000 barrels.
Oil revenue for the nine months ended September 30, 1998,
decreased $4.4 million because of a $6.70, or 37%, decrease in prices,
partially offset by an 111,000-barrel increase in oil production. The
lower prices caused oil revenue to be $6.4 million lower. Oil
production increased by 13% because of the new properties located in
all three areas of concentration.
Gas revenue for the third quarter of 1998 was $4.6 million lower
due to a 335,000 Mcf decrease in gas production and a $2.37 decrease in
the average price received. A decrease in gas production of 686,000 Mcf
from South Pass resulted from natural depletion and from four shut-ins
caused by hurricanes in September of this year. We partially offset the
decrease from the South Pass blocks with new production from Eugene
Island Block 135 and properties purchased in the onshore gulf coast
area. Lower average prices, which occurred primarily as a result of the
termination of the gas contract on South Pass Block 89, caused gas
revenues to be $3.0 million lower.
Gas revenue for the first nine months of 1998 was $11.2 million
lower than the first nine months of 1997, primarily due to the lower
production from South Pass Block 89 in 1998 compared to the prior year.
We sold gas from this block at an average price of $8.99 per Mcf in
1997. In 1998, however, production from this block was 1,035,000 Mcf
lower during the first nine months of the year causing a decrease
in gas revenue of approximately $9.3 million. The decrease in the
average gas selling price was due primarily to the termination of the
gas contract. This average price decrease, partially offset by
increased gas production from properties other than South Pass Block
89, accounted for the remaining decrease in gas revenue.
Other income increased primarily because of the $49.8 million
received from the termination of the gas sales contract. Operating
costs increased during the third quarter and first nine months of 1998
compared to the third quarter and first nine months of the prior year
because the number of our producing properties has increased
significantly.
Net Profits expense decreased by 81% in the third quarter of 1998
compared to the third quarter of 1997 and by 48% for the first nine
months of 1998 compared to the same nine months of 1997. The decrease
is another result of the termination of the gas contract on South Pass
Block 89, which decreased the gas revenue credited to the Net Profits
account.
We recorded the $2.5 million impairment charge for South Pass
Block 89 Platform B in the third quarter of 1998 because the
termination of the gas sales contract caused us to evaluate our ability
to recover the remaining net capital costs of the property after the
reduction in prices.
In connection with the August 1998 judgment issued in our
litigation with Phillips Petroleum Company, and in accordance with
Statement of Financial Accounting Standards No. 5 entitled "Accounting
for Contingencies," we recorded an $18.0 million expense in August of
this year. This amount includes both the damage award by the trial
court and estimated interest on the award.
We have reduced general and administrative expense by 42% in the
third quarter of 1998 compared to the third quarter of 1997 and by 34%
for the first nine months of 1998 compared to the same period in the
prior year. The decrease in general and administrative expense has been
primarily from reduced salaries and payroll expense, rent expense, and
professional services fees. Legal expenses have decreased because of
the reduction in expense associated with defending the Phillips
Petroleum Company litigation and the settlement of other litigation.
Reorganization expense for 1997 includes payments to employees
under employee severance agreements and legal fees or other charges
that relate to or were paid because of the purchase of S-Sixteen
Holding Company (formerly Box Brothers Holding Company) by Mr. Simplot
in August 1997. We recorded the following as reorganization costs:
employee severance payments $3.6 million, Thomas D. Box severance and
legal claims and fees $1.2 million, Mr. Simplot and Mr. Lyle $2.0
million and other associated expenses $300,000.
Interest expense is 23% lower for the third quarter of 1998
compared to the third quarter of 1997 and 19% lower for the first nine
months of 1998 compared to the same period last year. Interest expense
is lower because of the repurchase by the Company of $16.7 million of
the outstanding 8 1/4% Convertible Subordinated Notes in October 1997.
The lower interest expense that resulted from the retirement of the
notes was partially offset by increased interest expense on the
increased balance of the bank line of credit outstanding for the third
quarter and first nine months of 1998.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated herein by this reference is the discussion of
litigation set forth in Part I, Item 1. Notes to the Financial
Statements - Note 7. Contingencies of this Form 10-Q.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1* Certificate of Incorporation, as amended.
3.2 ### Certificate of Amendment of Certificate of Incorporation
of Box Energy Corporation.
3.3++ By-Laws as amended.
4.1* Form of Indenture Box Energy Corporation to United States
Trust Company of New York, Trustee, dated December 1, 1992, 8 1/4%
Convertible Subordinated Notes due December 1, 2002.
10.1* Amended and Restated Certificate and Articles of Limited
Partnership of OKC Limited Partnership.
10.2* Restatement and Amendment of Gas Purchase Contract dated
July 15, 1982, as amended October 5, 1982, December 21, 1982, and
December 26, 1984.
10.3* Assignment of Lease, dated May 26, 1977.
10.4* Oil and Gas Lease of Submerged Lands under the Outer
Continental Shelf Lands Act dated July 1, 1967, covering all of Block
89, South Pass Area and East Addition by the United States of America,
as Lessor, dated July 1, 1967, said lease having been assigned to Box
Energy Corporation as of April 15, 1992.
10.5* Oil and Gas Lease of Submerged Lands under the Outer
Continental Shelf Lands Act dated July 1, 1967, covering all of Block
86, South Pass Area and East Addition by the United States of America,
as Lessor, dated July 1, 1983, said lease having been assigned to Box
Energy Corporation as of April 15, 1992.
10.6* Oil and Gas Lease of Submerged Lands under the Outer
Continental Shelf Lands Act dated July 1, 1967, covering all of Block
87, South Pass Area and East Addition by the United States of America,
as Lessor, dated September 1, 1985, said lease having been assigned to
Box Energy Corporation as of April 15, 1992.
10.7* Farmout Agreement with Aminoil USA, Inc., effective May 1,
1977, dated May 9, 1977.
10.8* Transportation Agreement with CKB Petroleum, Inc. dated
March 1, 1985, as amended on April 19, 1989.
10.9* Agreement of Compromise and Amendment to Farmout Agreement
dated July 3, 1989.
10.10* Settlement Agreement with Texas Eastern Transmission
Corporation dated November 14, 1990.
10.11* Guarantee of Panhandle Eastern Corporation dated November
21, 1990.
10.12* Bill of Sale and Assumption of Obligations from OKC
Limited Partnership dated April 15, 1992.
10.13* Asset Purchase Agreement dated April 15, 1992.
10.14* 1992 Incentive Stock Option Plan of Box Energy
Corporation.
10.15** Pension Plan of Box Energy Corporation, effective April
16, 1992.
10.16# First Amendment to the Pension Plan of Box Energy
Corporation dated December 16, 1993.
10.17## Second Amendment to the Pension Plan of Box Energy
Corporation dated December 31, 1994.
10.18+ Form of Executive Severance Agreement dated as of December
12, 1995 by and between Box Energy Corporation and key employees.
10.19+ Form of Letter Agreement regarding severance benefits
dated as of December 12, 1995 by and between Box Energy Corporation and
employees not covered by Executive Severance Agreements.
10.20*** Amended and Restated Promissory Note between Box Energy
Corporation and Box Brothers Holding Company.
10.21*** Amended and Restated Pledge Agreement between Box Energy
Corporation and Box Brothers Holding Company.
10.22*** Agreement by and between Box Energy Corporation and James
A. Watt.
10.23### Box Energy Corporation Severance Plan.
10.24### Box Energy Corporation 1997 Stock Option Plan.
10.25### Box Energy Corporation Non-Employee Director Stock
Purchase Plan.
10.26### Form of Executive Employment Agreement, effective August
29, 1997, by and between Box Energy Corporation and two executive
officers.
11.1 Statement regarding Computation of Income per share.
27 Financial Data Schedule
(b) We filed a Form 8-K on September 4, 1998.
- ------------
* Incorporated by reference to the Company's Registration
Statement on Form S-2 (file number 33-52156) filed with the Commission
and effective on December 1, 1992.
** Incorporated by reference to the Company's Form 10-K (file
number 0-19967) for the fiscal year ended December 31, 1992 filed with
the Commission and effective on or about March 30, 1993.
# Incorporated by reference to the Company's Form 10-K (file
number 0-19967) for the fiscal year ended December 31, 1993 filed with
the Commission and effective on or about March 30, 1994.
## Incorporated by reference to the Company's Form 10-K (file
number 0-19967) for the fiscal year ended December 31, 1994 filed with
the Commission and effective on or about March 30, 1995.
+ Incorporated by reference to the Company's Form 10-K (file
number 0-19967) for the fiscal year ended December 31, 1995 filed with
the Commission and effective on or about April 1, 1996.
++ Incorporated by reference to the Company's Form 10-K (file
number 1-11516) for the fiscal year ended December 31, 1996 filed with
the Commission and effective on or about March 31, 1997.
*** Incorporated by reference to the Company's Form 10-Q (file
number 1-11516) for the fiscal quarter ended June 30, 1997 filed with
the Commission and effective on or about August 12, 1997
### Incorporated by reference to the Company's Form 10-K (file
number 1-11516) for the fiscal year ended December 31, 1997 filed with
the Commission and effective on or about March 30, 1998.
<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.
REMINGTON OIL AND GAS CORPORATION
Date: November 12, 1998 By: (James A. Watt)
----------------- --------------------------------
James A. Watt
President and Chief Executive Officer
Date: November 12, 1998 By: (J. Burke Asher)
----------------- --------------------------------
J. Burke Asher
Vice President/Finance
Remington Energy Corporation
Computation of Earnings per Share
Exhibit 11.1
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income (loss) available for basic
income per share $ 24,816 $ (7,581) $ 21,665 $ (6,236)
Interest expense on the Notes (net of tax) 519 - 1,548 -
--------- --------- --------- ---------
Net income (loss) available for diluted
income per share $ 25,335 $ (7,581) $ 23,213 $ (6,236)
========= ========= ========= =========
Basic income (loss) per share $ 1.22 $ (0.37) $ 1.06 $ (0.30)
========= ========= ========= =========
Diluted income (loss) per share $ 1.06 $ (0.37) $ 0.97 $ (0.30)
========= ========= ========= =========
Weighted average
Class A Stock 3,222 3,219 3,222 3,238
Class B Stock 17,147 17,088 17,137 17,341
--------- --------- --------- ---------
Total common shares for basic income
(loss) per share 20,369 20,307 20,359 20,579
Dilutive stock options outstanding
(treasury stock method) (1) - - - -
Shares assumed issued by conversion of
the Notes 3,488 - 3,488 -
--------- --------- --------- ---------
Total common shares for diluted income
(loss) per share 23,857 20,307 23,847 20,579
========= ========= ========= =========
(1) Non dilutive.
Potential increase to net income for
diluted income per share
Interest expense on Notes (net of tax) 744 2,210
Potential issues of common stock for
diluted income per share
Weighted average stock options granted 801 417 755 306
Weighted average shares issued assuming
conversion of Notes 5,007 5,007
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REMINGTON
OIL AND GAS CORPORATION'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000874992
<NAME> REMINGTON OIL AND GAS CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JUL-01-1998 JAN-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 48,139 48,139
<SECURITIES> 0 0
<RECEIVABLES> 2,306 2,306
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 58,696 58,696
<PP&E> 243,355 243,355
<DEPRECIATION> 162,159 162,159
<TOTAL-ASSETS> 140,736 140,736
<CURRENT-LIABILITIES> 28,469 28,469
<BONDS> 38,371 38,371
0 0
0 0
<COMMON> 20,830 20,830
<OTHER-SE> 45,566 45,566
<TOTAL-LIABILITY-AND-EQUITY> 140,736 140,736
<SALES> 5,666 28,729
<TOTAL-REVENUES> 56,527 81,090
<CGS> 11,189 34,290
<TOTAL-COSTS> 30,282 55,935
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,068 3,129
<INCOME-PRETAX> 25,177 22,026
<INCOME-TAX> 361 361
<INCOME-CONTINUING> 24,816 21,665
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 24,816 21,665
<EPS-PRIMARY> 1.22 1.06
<EPS-DILUTED> 1.06 0.97
</TABLE>
