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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 2000
Commission File Number 0-30475
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TRANSTEXAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0401023
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 NORTH SAM HOUSTON PARKWAY EAST
SUITE 310
HOUSTON, TEXAS 77032
(Address of principal executive offices) (Zip Code)
(281) 987-8600
(Registrant's telephone number, including area code)
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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
--- ---
The number of shares of common stock of the registrant outstanding on
June 14, 2000 was 1,250,000, consisting of 1,002,500 shares of Class A Common
Stock and 247,500 shares of Class B Common Stock.
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TRANSTEXAS GAS CORPORATION
TABLE OF CONTENTS
<TABLE>
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PAGE
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PART I.
FINANCIAL INFORMATION
Item 1. Financial Statements:
Report of Independent Accountants............................................................ 2
Condensed Consolidated Balance Sheet as of April 30, 2000 and January 31, 2000............... 3
Condensed Consolidated Statement of Operations for the three months ended
April 30, 2000 and 1999.................................................................. 4
Condensed Consolidated Statement of Cash Flows for the three months ended
April 30, 2000 and 1999.................................................................. 5
Notes to Condensed Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................... 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................................... 23
PART II.
OTHER INFORMATION
Item 1. Legal Proceedings............................................................................... 25
Item 2. Changes in Securities and Use of Proceeds....................................................... 25
Item 6. Exhibits and Reports on Form 8-K................................................................ 25
Signature.................................................................................................. 26
</TABLE>
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
of TransTexas Gas Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
TransTexas Gas Corporation (successor) as of April 30, 2000, the related
condensed consolidated statements of operations and of cash flows for the three
months ended April 30, 2000 and the related condensed consolidated statements of
operations and of cash flows of TransTexas Gas Corporation (predecessor) for the
three months ended April 30, 1999 (successor and predecessor are collectively
referred to as the "Company"). These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated interim financial
statements for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of January 31, 2000, and the
related consolidated statements of operations, of stockholders' equity
(deficit), and of cash flows for the year then ended (not presented herein); and
in our report dated May 1, 2000, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of January 31, 2000, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
PricewaterhouseCoopers LLP
Houston, Texas
June 14, 2000
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TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
2000 2000
---------- -----------
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ASSETS
Current assets:
Cash and cash equivalents ................................................... $ 5,152 $ 18,288
Accounts receivable ......................................................... 33,217 19,592
Receivable from affiliates .................................................. 1,099 1,107
Inventories ................................................................. 1,286 1,741
Other current assets ........................................................ 1,845 926
---------- ----------
Total current assets ................................................... 42,599 41,654
---------- ----------
Property and equipment ......................................................... 349,230 327,087
Less accumulated depreciation, depletion and amortization ...................... 21,413 --
---------- ----------
Net property and equipment -- based on the full cost method of accounting
for gas and oil properties of which $94,906 and $90,000 was excluded
from amortization at April 30, 2000 and January 31, 2000,
respectively .............................................................. 327,817 327,087
---------- ----------
Other assets, net .............................................................. 2,616 513
---------- ----------
$ 373,032 $ 369,254
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt ........................................ $ 5,218 $ 6,934
Accounts payable ............................................................ 10,951 15,759
Accrued liabilities ......................................................... 18,678 10,061
---------- ----------
Total current liabilities .............................................. 34,847 32,754
---------- ----------
Long-term debt, less current maturities ........................................ 275,250 48,290
Production payments, less current portion ...................................... 30,573 32,460
Note payable to affiliate ...................................................... -- 196,346
Deferred income taxes .......................................................... 10,000 10,000
Other liabilities .............................................................. 24,594 49,404
Redeemable preferred stock ..................................................... 4,920 --
Commitments and contingencies (Note 7) ......................................... -- --
Stockholders' deficit:
Common stock, $0.01 par value, 100,247,500 shares and 100,000,000
shares authorized at April 30, 2000 and January 31, 2000; 1,250,000
shares and 57,515,566 shares issued and outstanding at April 30, 2000
and January 31, 2000 ...................................................... 12 740
Additional paid-in capital .................................................. (12) (740)
Accumulated deficit ......................................................... (7,152) --
---------- ----------
Total stockholders' deficit ............................................ (7,152) --
---------- ----------
$ 373,032 $ 369,254
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ ------------
THREE MONTHS ENDED
APRIL 30,
-------------------------------
2000 1999
------------ | ------------
|
<S> <C> | <C>
Revenues: |
Gas, condensate and natural gas liquids ................. $ 37,902 | $ 18,393
Loss on the sale of assets .............................. -- | (502)
Other ................................................... 577 | 1,174
------------ | ------------
Total revenues ........................................ 38,479 | 19,065
------------ | ------------
|
Costs and expenses: |
Operating ............................................... 3,204 | 6,880
Depreciation, depletion and amortization ................ 21,429 | 17,805
General and administrative .............................. 5,412 | 5,937
Taxes other than income taxes ........................... 1,485 | 1,660
------------ | ------------
Total costs and expenses .............................. 31,530 | 32,282
------------ | ------------
Operating income (loss) ............................... 6,949 | (13,217)
------------ | ------------
|
Other income (expense): |
Interest income ......................................... 173 | 49
Interest expense, net ................................... (9,354) | (22,713)
------------ | ------------
Total other income (expense) .......................... (9,181) | (22,664)
------------ | ------------
Net loss .............................................. $ (2,232) | $ (35,881)
============ | ============
Accretion of preferred stock ............................... $ 4,920 | $ --
============ | ============
Net loss available to common stockholders ............. $ (7,152) | $ (35,881)
============ | ============
|
Basic and diluted net loss per share ....................... $ (5.72) | $ (0.62)
============ | ============
|
Weighted average number of shares outstanding for basic |
and diluted net loss per share .......................... 1,250,000 | 57,515,566
============ | ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ ------------
THREE MONTHS ENDED
APRIL 30,
------------------------------
2000 1999
------------ | ------------
|
<S> <C> | <C>
Operating activities: |
Net loss .......................................................... $ (2,232) | $ (35,881)
Adjustments to reconcile net loss to net cash provided (used) by |
operating activities: |
Depreciation, depletion and amortization ....................... 21,429 | 17,805
Accretion of discount on long-term debt ........................ 3,503 | --
Amortization of debt issue costs ............................... 17 | 1,677
Loss on the sale of assets ..................................... -- | 502
Changes in assets and liabilities: |
Accounts receivable .......................................... (13,625) | (2,501)
Receivable from affiliates ................................... 8 | 36
Inventories .................................................. 455 | 32
Other current assets ......................................... (919) | 446
Accounts payable ............................................. (4,235) | (219)
Accrued interest payable to affiliates ....................... -- | 14,722
Accrued liabilities .......................................... 6,422 | 4,436
Transactions with affiliates, net ............................ -- | 700
Other assets ................................................. (171) | 878
Other liabilities ............................................ (25,052) | (1,796)
------------ | ------------
Net cash provided (used) by operating activities .......... (14,400) | 837
------------ | ------------
|
Investing activities: |
Capital expenditures .............................................. (22,072) | (1,189)
Proceeds from the sale of assets .................................. 581 | 550
------------ | ------------
Net cash used by investing activities ..................... (21,491) | (639)
------------ | ------------
|
Financing activities: |
Issuance of production payments ................................... 4,500 | --
Principal payments on production payments ......................... (4,604) | (1,054)
Issuance of note payable .......................................... -- | 6,000
Issuance of long-term debt ........................................ 32,500 | --
Principal payments on long-term debt .............................. (12,142) | --
Revolving credit agreement, net ................................... 4,456 | 29
Debt issue costs .................................................. (1,955) | (187)
------------ | ------------
Net cash provided by financing activities ................. 22,755 | 4,788
------------ | ------------
Increase (decrease) in cash and cash equivalents .......... (13,136) | 4,986
Beginning cash and cash equivalents .................................. 18,288 | 3,775
------------ | ------------
Ending cash and cash equivalents ..................................... $ 5,152 | $ 8,761
============ | ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
In the opinion of management, all adjustments, consisting of normal
recurring accruals, have been made that are necessary to fairly state the
financial position of TransTexas Gas Corporation ("TransTexas" or the "Company")
as of April 30, 2000 and the results of its operations and cash flows for the
interim periods ended April 30, 2000 and 1999. The condensed consolidated
balance sheet as of January 31, 2000 was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. The results of operations for interim periods should not
be regarded as necessarily indicative of results that may be expected for the
entire year. The financial information presented herein should be read in
conjunction with the consolidated financial statements and notes included in
TransTexas' annual report on Form 10-K for the year ended January 31, 2000.
Unless otherwise noted, the terms "TransTexas" and the "Company" refer to
TransTexas Gas Corporation and its subsidiaries, including Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company. Prior to March 17,
2000 (the "Effective Date"), TransTexas was a subsidiary of TransAmerican Energy
Corporation ("TEC"), which is an indirect subsidiary of TransAmerican Natural
Gas Corporation ("TransAmerican").
Recently Issued Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. In July
1999, the FASB issued SFAS 137, "Deferral of the Effective Date of FASB
Statement No. 133," which delays the effective date for one year, to fiscal
years beginning after June 15, 2000. TransTexas is evaluating the impact of the
provisions of SFAS 133.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." Management of the Company believes that SAB No. 101 will not have
a material impact on the Company.
2. REORGANIZATION
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware. On April 20, 1999, TEC and its wholly owned
subsidiary, TransAmerican Refining Corporation ("TARC") also filed voluntary
petitions under Chapter 11. On May 20, 1999, the cases were transferred to the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division (the "Bankruptcy Court"). The bankruptcy cases are being
jointly administered. TransTexas' Chapter 11 filing did not include its
subsidiaries, including Galveston Bay Processing and Galveston Bay Pipeline.
TransTexas filed its bankruptcy petition in order to preserve cash and to give
the Company the opportunity to restructure its debt. The Company's Second
Amended, Modified and Restated Plan of Reorganization dated January 25, 2000
(the "Plan") was confirmed by the Bankruptcy Court on February 7, 2000. The
Effective Date of the Plan is March 17, 2000.
In connection with the Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain accounts
payable, severance, property and franchise taxes. The $28.3 million is
payable in quarterly installments generally over a five year period with
stated interest ranging from 8% to 10%. The Company agreed to pay
approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares
of Series A Junior Preferred Stock, 1,002,500 shares of Class A Common
Stock, 247,500 shares of Class B
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TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
Common Stock and 625,000 warrants to purchase Class A Common Stock to
settle the TransTexas Senior Secured Notes Claims. A portion of this
distribution was reallocated pursuant to the Plan as follows:
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred Stock
and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable to
purchase 109,375 shares of Class A Common Stock at a price of $120 per
share to the holders of the old TransTexas common stock who were not
Affiliates of the Debtor (as defined in the Plan); and
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price
of $120 per share to John R. Stanley;
(4) issued $6.7 million in secured notes in exchange for old secured notes
and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
The January 31, 2000 consolidated balance sheet is the opening balance
sheet of reorganized TransTexas, the successor company. The January 31, 2000
consolidated balance sheet includes all adjustments necessary to reflect assets
at the reorganization value and the Plan's treatment of creditor claims and
previous equity interests. Since the January 31, 2000 consolidated balance sheet
was affected by fresh-start reporting, it is not comparable in certain material
respects to the consolidated balance sheets of any prior period. The
consolidated statements of operations and cash flows for the three months ended
April 30, 1999 reflect the activities of the predecessor reporting entity.
Pursuant to fresh-start reporting, the Company's reorganization value as of
January 31, 2000 was estimated by management and allocated to identified assets
based on their relative fair values. Postpetition liabilities were valued at the
present value of amounts to be paid. The present value of liabilities has been
adjusted for imputed interest at a rate of 15% for the period from February 1,
2000 to the Effective Date of the Plan. The imputed interest was charged to
interest expense during the three months ended April 30, 2000.
Based on the reorganization value of the Company, the fair value of the
Preferred Stock and Common Stock was estimated to be zero. The Senior Preferred
Stock and Junior Preferred Stock are mandatorily redeemable in 2006 and 2010,
respectively. As a result, the Company will accrete, in the form of a non-cash
dividend deducted from net income available to common stockholders and charged
to retained earnings, an amount equal to the combined redemption amount totaling
$243.2 million (initial liquidation value) over the period prior to redemption.
For the three months ended April 30, 2000, accretion of preferred stock totaled
$4.9 million. In addition, earnings available to common stockholders will be
reduced by dividends accrued on the Preferred Stock. Accrued preferred stock
dividends will be recorded at fair value. Any difference between the initial
fair value and the redemption value will be accreted in the same manner as
described above.
On the Effective Date, the Company's capital consists of (i) 1,002,500
shares of Class A Common Stock, $0.01 par value, (ii) 247,500 shares of Class B
Common Stock, $0.01 par value, (iii) 222,455,320 shares of Series A Senior
Preferred Stock, $1.00 par value, (iv) 20,716,080 shares of Series A Junior
Preferred Stock, $1.00 par value, and (v) warrants exercisable to purchase
625,000 shares of Class A Common Stock at a price of $120 per share.
The Series A Senior Preferred Stock (the "Senior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first two years following the
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TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
Effective Date, the Company will be required to pay cash dividends at a rate of
$0.10 per share per annum, or, at its option, in-kind dividends of additional
shares of Senior Preferred Stock at a rate of $0.20 per share per annum. The
Senior Preferred Stock is mandatorily redeemable on March 15, 2006 at a rate of
$1.00 per share plus accrued and unpaid dividends. One-half of the
then-outstanding shares of Senior Preferred Stock is mandatorily convertible
into shares of Class A Common Stock at a rate of 0.3461 shares of Class A Common
Stock per $1.00 of liquidation preference if either (i) more than 75 million
shares of Senior Preferred Stock remain outstanding after March 15, 2006 or (ii)
the Company fails to pay dividends on the Senior Preferred Stock on any two
dividend payment dates. The Certificate of Designation for the Senior Preferred
Stock includes restrictive covenants comparable to those included in the
Indenture.
Holders of Senior Preferred Stock have the right, voting separately as a
class, to elect four (4) of the five (5) directors to the Board of Directors;
provided, that if the Company has not paid dividends with respect to the
payments due commencing March 15, 2002, such holders will have the right,
voting separately as a class, to elect all five (5) directors to the Board
of Directors. Holders of Senior Preferred Stock have one vote per share,
voting together with the Class A Common Stock, the Junior Preferred Stock and
any other series or classes of stock entitled to vote with the Class A Common
Stock, on all matters on which the holders of the Class A Common Stock are
entitled to vote generally. Voting rights of the Senior Preferred Stock
may not be changed without the consent of the holders of 75% of the shares of
Senior Preferred Stock, voting as a class.
The Series A Junior Preferred Stock (the "Junior Preferred Stock") has a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Junior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds legally available therefor, if any. During the
first six years following the Effective Date, the Company will be required to
pay in-kind dividends of additional shares of Junior Preferred Stock at a rate
of $0.10 per share per annum. Thereafter, dividends will be payable both in cash
at a rate of $0.10 per share per annum and in kind at a rate of $0.10 per share
per annum. The Junior Preferred Stock is mandatorily redeemable on March 15,
2010 at a rate of $1.00 per share plus accrued and unpaid dividends. Each share
of Junior Preferred Stock is mandatorily convertible into shares of Class A
Common Stock at the rate of 0.1168 shares of Class A Common Stock per $1.00 of
liquidation preference if either (i) more than 75 million shares of Senior
Preferred Stock remain outstanding after March 15, 2006 or (ii) the Company
fails to pay dividends on the Senior Preferred Stock on any two dividend payment
dates. The Certificate of Designation for the Junior Preferred Stock includes
restrictive covenants comparable to those included in the Indenture. Such
covenants will become effective when all of the Notes (and any refinancings
thereof) have been repaid and all of the Senior Preferred Stock has been
redeemed.
Holders of Junior Preferred Stock have one vote per share, voting
together with holders of the Class A Common Stock, the Senior Preferred Stock
and any other series or classes of stock entitled to vote with the Class A
Common Stock, on all matters on which holders of the Class A Common Stock are
entitled to vote. If no shares of the Senior Preferred Stock are outstanding,
holders of the shares of Junior Preferred Stock will have the right, voting
separately as a class, to elect two directors to the Board of Directors. Voting
rights of the Junior Preferred Stock may not be changed without the consent of
the holders of 75% of the shares of the Junior Preferred Stock, voting as a
class.
Under Delaware law, dividends (including dividends payable in stock) may
only be paid to the extent a corporation has surplus or, in certain cases, out
of net profits for the current fiscal year and the preceding fiscal year. At
April 30, 2000, for purposes of Delaware law, the Company had a capital deficit,
and currently is legally unable to pay any dividends. The Company intends to
request that its stockholders approve amendments to the certificates of
designation under which the preferred stock is outstanding to reduce the par
value of the preferred stock. These amendments would eliminate substantially all
of the Company's capital deficit. If these amendments are approved, the Company
believes that it will be legally able to pay the dividends payable on the
preferred stock in the foreseeable future. The Company cannot give any assurance
that the proposed amendments will be approved or, therefore, that the Company
will be legally able to pay dividends.
3. LIQUIDITY
In order to maintain or increase proved oil and gas reserves, TransTexas
is required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
TransTexas remains highly leveraged and a substantial portion of its cash
flow will be required for debt service. In addition, cash flow from operations
is dependent on the level of gas and oil prices which are historically volatile.
Management's plans are to fund its 2001 debt service and planned capital
expenditures with cash flows from existing producing properties and certain
identified relatively low risk exploratory prospects to be drilled and completed
during fiscal 2001. Expected reserves from these prospects will be used to
obtain additional production payment financing which, together with excess cash
flow from these prospects, is necessary to continue to fund debt service and
capital expenditure requirements. Should these prospects not be productive or
should prices decline for a prolonged period, absent other sources of capital,
the Company would substantially reduce its capital expenditures which would
limit its ability to maintain or increase production and in turn meet its debt
service requirements. Asset sales and financings are restricted under the terms
of TransTexas' debt documents and Senior Preferred Stock.
8
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TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
4. LONG-TERM DEBT AND PRODUCTION PAYMENTS
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The security interest in favor of the Trustee is subordinated to
the Security Interest in favor of the Agent under the Oil and Gas Facility.
On the Effective Date, The Company and GMAC Commercial Credit LLC
("GMACC") entered into a Third Amended and Restated Accounts Receivable
Management and Security Agreement, dated as of March 15, 2000 (the "Accounts
Receivable Facility"). The Accounts Receivable Facility is a revolving credit
facility secured by accounts receivable and inventory. The maximum loan amount
under the facility is $15 million, against which the Company may from time to
time, subject to the conditions of the Accounts Receivable Facility, borrow,
repay and reborrow. Advances under the facility bear interest at a rate per
annum equal to the higher of (i) the prime commercial lending rate of The Bank
of New York plus 1/2 of 1%, and (ii) the Federal Funds Rate plus 1% payable
monthly in arrears. As of April 30, 2000, the outstanding principal balance
under the Accounts Receivable Facility was $8.7 million with availability for
additional advances of approximately $0.2 million and will be due on March 14,
2005.
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMACC, as a Lender and as
Agent. The Oil and Gas facility consists of a term loan (the "Term Loan") in the
amount of $22.5 million and a revolving facility (the "Revolving Loan") in a
maximum amount of $30 million (all of which was funded on the Effective Date).
The Term Loan bears interest at a rate of 14% per annum and the Revolving Loan
bears interest at a rate of 13 1/2% per annum. Interest on the Term Loan and the
Revolving Loan is payable monthly in arrears. Principal amortization of the Term
Loan is due in 20 quarterly installments of $56,250 each, with the balance due
March 14, 2005. The principal amount of the Revolving Loan is due on March 14,
2005; however the Company may, and in certain circumstances must, make
prepayments of such amount. If, subsequent to such prepayments, the Company
demonstrates sufficient collateral value meeting the requirements of the Oil and
Gas Facility provisions, the Company may be entitled to borrow additional
advances under the Revolving Loan. The Oil and Gas Facility is secured by
substantially all of the assets of the Company. The security interest in
accounts receivable and inventory securing the Oil and Gas Facility is
subordinated to the security interest of GMACC under the Accounts Receivable
Facility.
In December 1998, TransTexas borrowed $5.65 million from an unaffiliated
third party in order to meet a portion of its December 31, 1998 interest payment
obligations. In accordance with the Plan, the principal amount of the note was
increased to $6.7 million, bears interest at 8% and is collateralized by a
pledge of the stock of Galveston Bay Processing Corporation and a mortgage on
the Winnie, Texas processing facility.
Additional notes payable totaling $14.5 million and $13.9 million at April
30, 2000 and January 31, 2000, respectively, consist of amounts payable pursuant
to the Plan in settlement of the claims of certain creditors. Such amounts are
generally payable over a five year period with stated interest ranging from 8%
to 10%.
Prior to the Effective Date, the Company had outstanding $115.8 million
principal amount of 13 3/4% Senior Subordinated Notes due 2001 (the
"Subordinated Notes"). As described in Note 2, in accordance with the Plan, the
holders of the Subordinated Notes received $1.8 million cash, 2,455,320 shares
of Senior Preferred Stock and 20,716,080 shares of Junior Preferred Stock and
the Subordinated Notes were canceled.
9
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TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
Production Payments
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were conveyed to TransTexas
and a new production payment drilling program agreement was entered into between
TransTexas and two unaffiliated third parties in the form of a term overriding
royalty interest carved out of and burdening certain properties including the
Original Subject Interests (collectively, the "New Subject Interests"). The
Company has the right to offer additional properties ("Offered Wells") to the
production payment parties at a negotiated purchase price, up to an aggregate
maximum for all such wells, of up to $52 million. Upon acceptance of the Offered
Wells, one of the third parties would be committed to pay to the Company either
the drilling costs of the Offered Wells or, at the third party's discretion, a
higher, mutually agreed upon amount. The production payment calls for the
repayment of the primary sum plus an amount equivalent to a 15% annual interest
rate on the unpaid portion of such primary sum. As of April 30, 2000, the
outstanding balance of the production payment was $35.0 million. The Oil and Gas
Facility places certain restrictions on the amount that may be outstanding under
the production payment.
In June 2000, under provisions of the new production payment, the Company
offered an additional well (Offered Well) to the two unaffiliated third
parties. One of the third parties agreed to a negotiated purchase price for the
additional Offered Well of $8.0 million.
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing.
Pursuant to the terms of the Company's production payment agreement
entered into in March 2000, the production payment purchasers entered into the
following hedge arrangements with respect to a portion of the natural gas and
condensate production associated therewith and which effectively hedge a portion
of the Company's production:
<TABLE>
<CAPTION>
Contract Price
-----------------
Collar
Volumes in -----------------
Period MMBtus/Bbls Floor Ceiling
------ ----------- ------ -------
<S> <C> <C> <C>
Natural Gas:
April 2000 -- October 2000........................................ 3,745,000 $ 2.10 $ 3.40
November 2000 -- March 2001....................................... 1,887,500 2.35 3.95
Condensate:
April 2000 -- September 2000...................................... 228,750 18.50 32.50
October 2000 -- March 2001........................................ 182,000 18.50 29.95
</TABLE>
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
As of April 30, 2000, the Company did not realize any gains or losses under
these contracts.
10
<PAGE> 12
TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
5. NOTES PAYABLE TO AFFILIATES
Prior to the Effective Date, the Company had outstanding a $450 million
note payable to TEC (the "TransTexas Intercompany Loan"). The TransTexas
Intercompany Loan accrued interest at a rate of 10 7/8% per annum and was
pledged to secure TEC's obligations on its 11 1/2% Senior Secured Notes and 13%
Senior Secured Discount Notes due 2002. As described in Note 2, the TransTexas
Intercompany Loan was settled on the Effective Date pursuant to the Plan.
During the year ended January 31, 1999, TEC made advances to TransTexas
pursuant to a $50 million promissory note which was scheduled to mature on June
14, 2002. This note was canceled on the Effective Date pursuant to the Plan.
6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
The following information reflects TransTexas' noncash investing and
financing activities (in thousands of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ ------------
THREE MONTHS ENDED
APRIL 30,
-----------------------------
2000 1999
------------ | ------------
|
<S> <C> | <C>
INVESTING ACTIVITIES: |
Accounts payable for property and equipment ............. $ 6,445 | $ 40,680
============ | ============
|
FINANCING ACTIVITIES: |
Accretion of preferred stock ............................ $ 4,920 | $ --
============ | ============
Cancellation of old common stock ........................ $ 740 | $ --
============ | ============
Issuance of new common stock ............................ $ 12 | $ --
============ | ============
</TABLE>
11
<PAGE> 13
TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
7. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
High River. As described in Note 2, the Company's Plan was confirmed by
the Bankruptcy Court ("Confirmation Order") on February 7, 2000. On February 14,
2000, High River Limited Partnership ("High River") filed an appeal of the
Confirmation Order with the Bankruptcy Court objecting to confirmation of the
Company's Plan on various grounds, including that: (a) certain provisions of the
Company's Plan that reallocate distributions made to the holders of certain
secured notes (the "TEC Notes") issued by TEC violate the absolute priority rule
under section 1129(b)(2)(B) of the Bankruptcy Code and violate the unfair
discrimination provisions of section 1129(b)(1) of the Bankruptcy Code; (b) the
Company's Plan contains unauthorized releases of non-debtor third parties,
injunctions preventing actions against such parties, and language exculpating
the parties from liability for carrying out the terms of the Company's Plan; and
(c) the acceptance of the Company's Plan by the class consisting of holders of
TEC Notes (Class 3) by the majority vote of such holders was improper because,
under the agreements establishing the indenture for the TEC Notes, only the
indenture trustee, not the holders themselves, was the proper party to vote on
behalf of Class 3.
The Company filed a motion to dismiss High River's appeal asserting that
on appeal, the Company's Plan cannot be "unwound" since it has been
substantially consummated and, therefore, the appeal must be dismissed as moot.
The Company's motion to dismiss has not yet been heard by the District Court.
The Company also asserted that High River's appeal is without merit
because: (a) High River waived its objections by failing to raise them in
Bankruptcy Court or failing to do so in a timely manner; (b) High River has no
standing to raise objections to the reallocation provisions, and High River is
bound by the affirmative vote of a majority of members of Class 3, who voted to
accept the Company's Plan and its reallocation provisions; (c) High River's
objection to the exculpatory provisions are without merit because High River's
only substantive argument is that no consideration supported the exculpatory
language, yet there was ample evidence of consideration for these provisions;
and (d) High River's objection to the voting on the Company's Plan by holders of
the TEC Notes is without merit because under the indenture relating to the TEC
Notes, the holders expressly reserved to themselves the right to vote on any
bankruptcy plan that affected their interests.
High River has asserted that, if the court were to grant the relief High
River requests (a) the Company would be required to distribute to High River its
proportionate share of the cash and securities that were reallocated to junior
classes, to the extent that the Company was unable to recover such amounts from
the junior classes; and (b) all releases and exculpations granted to non-debtor
third parties would be void and enforceable. High River has not requested that
the Confirmation Order be reversed in its entirety, but only to the extent
necessary to provide the foregoing relief. The Company has asserted that the
provisions of the Plan to which High River objects cannot be selectively
modified on appeal, and reversal of the Confirmation Order in its entirety would
be required if the District Court found that the Bankruptcy Court erred in
confirming the Company's Plan.
TransTexas is a party to various claims and routine litigation arising in
the normal course of its business. Any obligations of the Company in respect of
such claims and litigation arising out of activities prior to the Petition Date
were discharged pursuant to the Plan. Recovery of these obligations, if any,
will be limited to any collateral held by the claimant and/or such claimant's
pro rata share of amounts available to pay general unsecured claims.
Environmental Matters
TransTexas' operations and properties are subject to extensive federal,
state, and local laws and regulations relating to the generation, storage,
handling, emission, transportation, and discharge of materials into the
environment. Permits are required for various of TransTexas' operations, and
these permits are subject to revocation, modification, and renewal by issuing
authorities. TransTexas also is subject to federal, state and local laws and
regulations that impose liability for the cleanup or remediation of property
which has been contaminated by the discharge or release
12
<PAGE> 14
TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
of hazardous materials or wastes into the environment. Governmental authorities
have the power to enforce compliance with their regulations, and violations are
subject to fines or injunctions, or both. Certain aspects of TransTexas'
operations may not be in compliance with applicable environmental laws and
regulations, and such noncompliance may give rise to compliance costs and
administrative penalties. It is not anticipated that TransTexas will be required
in the near future to expend amounts that are material to the financial
condition or operations of TransTexas by reason of environmental laws and
regulations, but because such laws and regulations are frequently changed and,
as a result, may impose increasingly strict requirements, TransTexas is unable
to predict the ultimate cost of complying with such laws and regulations.
Potential Tax Liabilities
Based upon independent legal advice, including an opinion from a
nationally recognized law firm, TransTexas did not report any significant
federal income tax liability as a result of the Lobo Sale. There are, however,
significant uncertainties regarding TransTexas' tax position and no assurance
can be given that TransTexas' position will be sustained if challenged by the
Internal Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was
part of an affiliated group for tax purposes (the "TNGC Consolidated Group"),
which included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's indebtedness. However, due to factual and legal uncertainties,
there can be no assurance that the IRS will not challenge this position, or that
any such challenge would not be upheld. Under the Tax Allocation Agreement,
TransTexas has agreed to pay an amount equal to any federal tax liability (which
would be approximately $25.4 million) attributable to the inapplicability of the
COD Exclusion. Any such tax would be offset in future years by alternative
minimum tax credits and retained loss and credit carryforwards to the extent
recoverable from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the
above-described transactions. The IRS
13
<PAGE> 15
TRANSTEXAS GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
has commenced an audit of the consolidated federal income tax returns of the
TNGC Consolidated Group for its taxable years ended July 31, 1994 and July 31,
1995. The Company has not been advised by the IRS as to whether any tax
deficiencies will be proposed by the IRS as a result of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
Gas Delivery Commitments
In March 2000, TransTexas entered into firm and interruptible contracts
with Tejas Ship Channel LLC for transportation of its production from the Eagle
Bay field to the Winnie facilities at a fixed negotiated rate. Under the firm
agreement, the Company is committed to deliver a minimum of 75,000 MMBtu per day
of natural gas and condensate.
The Company also entered into a contract with Centana Intrastate Pipeline
Company for transportation of natural gas on a firm and interruptible basis from
the Winnie facility to natural gas liquids recovery facilities located in the
Beaumont/Port Arthur, Texas area, and residue gas from these facilities to
various distribution points. Under the agreement, the Company is committed to
deliver up to a maximum of 56,250 Mcf of natural gas and 19,500 MMBtu of residue
gas. Transportation fees for natural gas are based on a fixed negotiated rate.
Transportation fees for residue gas are based on a published industry index.
8. SUPPLEMENTAL GUARANTOR INFORMATION
Galveston Bay Pipeline Company and Galveston Bay Processing Corporation
are guarantors of the Notes and the Oil and Gas Facility. Separate financial
statements of the Guarantors are not considered to be material to holders of the
Notes and GMACC. The following condensed consolidating financial statements
present supplemental information of the Guarantors as of and for the three
months ended April 30, 2000.
14
<PAGE> 16
TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
APRIL 30, 2000
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 4,719 $ 94 $ 339 $ -- $ 5,152
Accounts receivable, net .......................... 33,049 -- 168 -- 33,217
Receivables from affiliates ....................... 9,092 -- -- (7,993) 1,099
Inventories ....................................... 1,286 -- -- -- 1,286
Other current assets .............................. 1,843 -- 2 -- 1,845
---------- ---------- ---------- ---------- ----------
Total current assets ............................ 49,989 94 509 (7,993) 42,599
---------- ---------- ---------- ---------- ----------
Property and equipment ............................ 337,863 1,401 9,966 -- 349,230
Less accumulated depreciation, depletion and
amortization ..................................... 20,726 77 610 -- 21,413
---------- ---------- ---------- ---------- ----------
Net property and equipment ...................... 317,137 1,324 9,356 -- 327,817
---------- ---------- ---------- ---------- ----------
Other assets, net ................................. 2,617 -- 1 (2) 2,616
---------- ---------- ---------- ---------- ----------
$ 369,743 $ 1,418 $ 9,866 $ (7,995) $ 373,032
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt .............. $ 3,568 $ 35 $ 1,615 $ -- $ 5,218
Accounts payable .................................. 10,831 -- 120 -- 10,951
Accrued liabilities ............................... 18,582 13 83 -- 18,678
---------- ---------- ---------- ---------- ----------
Total current liabilities ....................... 32,981 48 1,818 -- 34,847
---------- ---------- ---------- ---------- ----------
Payable to affiliates ................................ -- 310 7,683 (7,993) --
Long-term debt, less current maturities .............. 273,786 1,223 241 -- 275,250
Production payments, less current portion ............ 30,573 -- -- -- 30,573
Deferred income taxes ................................ 10,000 -- -- -- 10,000
Other liabilities .................................... 24,594 -- -- -- 24,594
Redeemable preferred stock ........................... 4,920 -- -- -- 4,920
Stockholders' equity (deficit):
Common stock ...................................... 12 -- -- -- 12
Additional paid-in capital ........................ (12) 1 1 (2) (12)
Retained earnings (accumulated deficit)............ (7,111) (164) 123 -- (7,152)
---------- ---------- ---------- ---------- ----------
Total stockholders' equity (deficit) ............ (7,111) (163) 124 (2) (7,152)
---------- ---------- ---------- ---------- ----------
$ 369,743 $ 1,418 $ 9,866 $ (7,995) $ 373,032
========== ========== ========== ========== ==========
</TABLE>
15
<PAGE> 17
TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 2000
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids ........... $ 37,902 $ -- $ -- $ -- $ 37,902
Other ............................................. 36 215 2,116 (1,790) 577
---------- ---------- ---------- ---------- ----------
Total revenues .................................. 37,938 215 2,116 (1,790) 38,479
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Operating ......................................... 3,840 1 1,153 (1,790) 3,204
Depreciation, depletion and amortization .......... 20,742 77 610 -- 21,429
General and administrative ........................ 5,184 123 105 -- 5,412
Taxes other than income taxes ..................... 1,438 17 30 -- 1,485
---------- ---------- ---------- ---------- ----------
Total costs and expenses ........................ 31,204 218 1,898 (1,790) 31,530
---------- ---------- ---------- ---------- ----------
Operating income (loss) ......................... 6,734 (3) 218 -- 6,949
---------- ---------- ---------- ---------- ----------
Other income (expense)
Interest income ................................... 173 -- -- -- 173
Interest expense, net ............................. (9,098) (161) (95) -- (9,354)
---------- ---------- ---------- ---------- ----------
Total other income (expense) .................... (8,925) (161) (95) -- (9,181)
---------- ---------- ---------- ---------- ----------
Net income (loss) ............................... $ (2,191) $ (164) $ 123 $ -- $ (2,232)
========== ========== ========== ========== ==========
</TABLE>
16
<PAGE> 18
TRANSTEXAS GAS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED APRIL 30, 2000
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
GALVESTON GALVESTON
BAY BAY CONSOLIDATED
TRANSTEXAS PIPELINE PROCESSING ELIMINATIONS TRANSTEXAS
---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss) ................................. $ (2,191) $ (164) $ 123 $ -- $ (2,232)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation, depletion and amortization ........ 20,742 77 610 -- 21,429
Accretion of discount on long-term debt ......... 3,442 24 37 -- 3,503
Amortization of debt issue costs ................ 17 -- -- -- 17
Changes in assets and liabilities:
Accounts receivable ........................... (13,906) 110 171 -- (13,625)
Receivable from affiliates .................... 1,154 -- -- (1,146) 8
Inventories ................................... 455 -- -- -- 455
Other current assets .......................... (935) -- 16 -- (919)
Accounts payable .............................. (4,248) (3) 16 -- (4,235)
Accrued liabilities ........................... 6,392 2 28 -- 6,422
Transactions with affiliates, net ............. -- (327) (819) 1,146 --
Other assets .................................. (171) -- -- -- (171)
Other liabilities ............................. (25,052) -- -- -- (25,052)
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
operating activities ....................... (14,301) (281) 182 -- (14,400)
---------- ---------- ---------- ---------- ----------
Investing activities:
Capital expenditures .............................. (21,889) (166) (17) -- (22,072)
Proceeds from the sale of assets .................. 45 536 -- -- 581
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
investing activities ........................ (21,844) 370 (17) -- (21,491)
---------- ---------- ---------- ---------- ----------
Financing activities:
Issuance of production payments ................... 4,500 -- -- -- 4,500
Principal payments on production payments ......... (4,604) -- -- -- (4,604)
Issuance of long-term debt ........................ 32,500 -- -- -- 32,500
Principal payments on long-term debt .............. (11,884) (39) (219) -- (12,142)
Revolving credit agreement, net ................... 4,456 -- -- -- 4,456
Debt issue costs .................................. (1,955) -- -- -- (1,955)
---------- ---------- ---------- ---------- ----------
Net cash provided (used) by
financing activities ......................... 23,013 (39) (219) -- 22,755
---------- ---------- ---------- ---------- ----------
Increase (decrease) in cash and
cash equivalents ............................. (13,132) 50 (54) -- (13,136)
Beginning cash and cash equivalents .................. 17,851 44 393 -- 18,288
---------- ---------- ---------- ---------- ----------
Ending cash and cash equivalents ..................... $ 4,719 $ 94 $ 339 $ -- $ 5,152
========== ========== ========== ========== ==========
</TABLE>
17
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto of TransTexas included
elsewhere in this report.
RESULTS OF OPERATIONS
General
TransTexas' results of operations are dependent upon natural gas
production volumes and unit prices from sales of natural gas, condensate and
natural gas liquids ("NGLs"). The profitability of TransTexas also depends on
its ability to minimize finding and lifting costs and maintain its reserve base
while maximizing production.
TransTexas' operating data for the three months ended April 30, 2000 and
1999, is as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
---------- -----------
THREE MONTHS ENDED
APRIL 30,
---------------------------
2000 1999
---------- | -----------
<S> <C> | <C>
Sales volumes: |
Gas (Bcf) ............................ 7.0 | 7.1
NGLs (MMgal) ......................... 12.8 | 8.4
Condensate (MBbls) ................... 448 | 458
Average prices: |
Gas (dry) (per Mcf) .................. $ 2.78 | $ 1.86
NGLs (per gallon) .................... .45 | .20
Condensate and oil (per Bbl) ......... 28.35 | 13.70
Number of gross wells drilled .......... 2 | 3
Percentage of wells completed .......... 100% | --
</TABLE>
A summary of TransTexas' operating expenses is set forth below (in
millions of dollars):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
---------- -----------
THREE MONTHS ENDED
APRIL 30,
---------------------------
2000 1999
---------- | -----------
<S> <C> | <C>
Operating costs and expenses: |
Lease .............................. $ 1.3 | $ 4.1
Pipeline and gathering ............. 1.9 | 2.8
---------- | ----------
3.2 | 6.9
Taxes other than income taxes (1) ...... 1.5 | 1.7
---------- | ----------
$ 4.7 | $ 8.6
========== | ==========
</TABLE>
----------
(1) Taxes other than income taxes include severance, property and other taxes.
18
<PAGE> 20
TransTexas' average depletion rates have been as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
---------- -----------
THREE MONTHS ENDED
APRIL 30,
---------------------------
2000 1999
---------- | -----------
<S> <C> | <C>
Depletion rates (per Mcfe) ............. $ 2.17 | $ 1.79
========== | ==========
</TABLE>
THREE MONTHS ENDED APRIL 30, 2000 COMPARED WITH THE THREE MONTHS ENDED
APRIL 30, 1999
Gas, condensate and NGL revenues for the three months ended April 30, 2000
increased $19.5 million from the prior period, due primarily to higher prices
for all products and an increase in NGLs sales volumes. The average monthly
prices received per Mcf of gas ranged from $2.64 to $3.01 in the three months
ended April 30, 2000, compared to a range of $1.76 to $1.91, in the prior
period. For the three months ended April 30, 1999, TransTexas recognized a
pre-tax loss of $0.5 million on the sale of certain vehicles and other
equipment.
Lease operating expenses for the three months ended April 30, 2000
decreased $2.8 million from the prior period due primarily to decreases in salt
water disposal costs and workover expenses. Pipeline and gathering expenses
decreased $0.9 million from the prior period due primarily to the termination of
certain natural gas transportation contracts in connection with the Company's
bankruptcy proceedings. Depreciation, depletion and amortization expense for the
three months ended April 30, 2000 increased $3.6 million due to an increase in
the depletion rate resulting from higher cost properties and unsuccessful
drilling results in prior periods. General and administrative expenses decreased
$0.5 million primarily as a result of a decrease in personnel and related costs.
Taxes other than income taxes decreased by $0.2 million over the prior period
due primarily to decreases in property taxes.
Interest income for the three months ended April 30, 2000 increased by
$0.1 million as compared to the prior period due to higher cash balances
available for investment. TransTexas does not expect to earn significant
interest income during fiscal 2001. Interest expense for the three months ended
April 30, 2000 decreased by $13.4 million due primarily to the Company's
reorganization as of January 31, 2000 which resulted in an overall decrease in
the amount of outstanding debt.
LIQUIDITY AND CAPITAL RESOURCES
On April 19, 1999, TransTexas filed a voluntary petition for relief under
Chapter 11 of the U.S. Bankruptcy Code. The United States Bankruptcy Court for
the Southern District of Texas, Corpus Christi Division confirmed the Company's
Second Amended, Modified and Restated Plan of Reorganization dated January 25,
2000 (the "Plan") on February 7, 2000. The Effective Date of the Plan is March
17, 2000. In connection with the Effective Date of the Plan, the Company
(1) paid approximately $2.6 million in cash to settle certain accounts
payable and royalty claims;
(2) agreed to pay approximately $28.3 million to settle certain accounts
payable, severance, property and franchise taxes. The $28.3 million is
payable in quarterly installments generally over a five year period with
stated interest ranging from 8% to 10%. The Company agreed to pay
approximately $8.0 million of this amount in fiscal 2001.
(3) paid approximately $21.9 million in cash, issued $200 million
principal amount of 15% Senior Secured Notes due 2005 (the "Notes"),
222,455,320 shares of Series A Senior Preferred Stock, 20,716,080 shares
of Series A Junior Preferred Stock, 1,002,500 shares of Class A Common
Stock, 247,500 shares of Class B Common Stock and 625,000 warrants to
purchase Class A Common Stock to settle the TransTexas Senior Secured
Notes Claims. A portion of this distribution was reallocated pursuant to
the Plan as follows:
19
<PAGE> 21
(a) $20 million in cash and five million shares of Senior Preferred
Stock to settle on a pro rata basis all general prepetition unsecured
claims;
(b) $1.8 million in cash, 2,455,320 shares of Senior Preferred Stock
and all of the Junior Preferred Stock to the holders of TransTexas
13 3/4% Senior Subordinated Notes;
(c) 52,500 shares of Class A Common Stock and warrants exercisable to
purchase 109,375 shares of Class A Common Stock at a price of $120
per share to the holders of the old TransTexas common stock who were
not Affiliates of the Debtor (as defined in the Plan); and
(d) all of the Class B Common Stock and warrants exercisable to
purchase 515,625 shares of Class A Common Stock at an exercise price
of $120 per share to John R. Stanley;
(4) issued $6.7 million in secured notes in exchange for old secured notes
and related accrued interest; and
(5) canceled all of the old TransTexas common stock and 13 3/4% Senior
Subordinated Notes.
On the Effective Date, the Company, as Borrower, and Galveston Bay
Processing Corporation and Galveston Bay Pipeline Company, as Guarantors,
entered into an Oil and Gas Revolving Credit and Term Loan Agreement, dated as
of March 15, 2000 (the "Oil and Gas Facility") with GMAC Commercial Credit LLC
("GMACC"), as a Lender and as Agent. The Oil and Gas facility consists of a term
loan (the "Term Loan") in the amount of $22.5 million and a revolving facility
(the "Revolving Loan") in a maximum amount of $30 million (all of which was
funded on the Effective Date). The Term Loan bears interest at a rate of 14% per
annum and the Revolving Loan bears interest at a rate of 13 1/2% per annum.
Interest on the Term Loan and the Revolving Loan is payable monthly in arrears.
Principal amortization of the Term Loan is due in 20 quarterly installments of
$56,250 each, with the balance due March 14, 2005; however, the Company may, and
in certain circumstances must, make prepayments of such amount. If, subsequent
to such prepayments, the Company demonstrates sufficient collateral value
meeting the requirements of the Oil and Gas Facility provisions, the Company may
be entitled to borrow additional advances under the Revolving Loan. The Oil and
Gas Facility is secured by substantially all of the assets of the Company. The
security interest in accounts receivable and inventory securing the Oil and Gas
Facility is subordinated to the security interest of GMACC under the Accounts
Receivable Facility.
On the Effective Date, the Company, as Issuer, Galveston Bay Pipeline
Company and Galveston Bay Processing Corporation, as Guarantors, and Firstar
Bank, N.A., as Trustee, entered into an Indenture dated as of March 15, 2000,
pursuant to which the Company issued the Notes. Interest on the Notes is due
semi-annually on March 15 and September 15. The Notes are secured by
substantially all of the assets of the Company other than accounts receivable
and inventory. The Indenture contains certain covenants that restrict the
Company's ability to incur indebtedness, engage in related party transactions,
dispose of assets or engage in sale/leasebacks transactions, issue dividends on
common stock, change its line of business, consolidate or merge with or into
another entity or convey, transfer or lease all or substantially all of its
assets, and suffer a change of control. The security interest in favor of the
Trustee is subordinated to the Security Interest in favor of the Agent under the
Oil and Gas Facility.
On the Effective Date, The Company and GMACC entered into a Third Amended
and Restated Accounts Receivable Management and Security Agreement, dated as of
March 15, 2000 (the "Accounts Receivable Facility"). The Accounts Receivable
Facility is a revolving credit facility secured by accounts receivable and
inventory. The maximum loan amount under the facility is $15 million, against
which the Company may from time to time, subject to the conditions of the
Accounts Receivable Facility, borrow, repay and reborrow. Advances under the
facility bear interest at a rate per annum equal to the higher of (i) the prime
commercial lending rate of The Bank of New York plus 1/2 of 1%, and (ii) the
Federal Funds Rate plus 1% payable monthly in arrears. As of April 30, 2000, the
outstanding principal balance under the Accounts Receivable Facility was $8.7
million with availability for additional advances of approximately $0.2 million
and will be due on March 14, 2005.
As of the Effective Date, the Company had outstanding 222,455,320 shares
of Series A Senior Preferred Stock (the "Senior Preferred Stock") with a
liquidation preference of $1.00 per share plus accrued and unpaid dividends. The
terms of the Senior Preferred Stock include a cumulative dividend preference,
payable quarterly out of funds
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<PAGE> 22
legally available therefor, if any. During the first two years following the
Effective Date, the Company will be required to pay cash dividends at a rate of
$0.10 per share per annum, or, at its option, in-kind dividends of additional
shares of Senior Preferred Stock at a rate of $0.20 per share per annum. The
Senior Preferred Stock is mandatorily redeemable on March 15, 2006 at a rate of
$1.00 per share plus accrued and unpaid dividends. One-half of the
then-outstanding shares of Senior Preferred Stock is mandatorily convertible
into shares of Class A Common Stock at a rate of 0.3461 shares of Class A Common
Stock per $1.00 of liquidation preference if either (i) more than 75 million
shares of Senior Preferred Stock remain outstanding after March 15, 2006 or (ii)
the Company fails to pay dividends on the Senior Preferred Stock on any two
dividend payment dates. The Certificate of Designation for the Senior Preferred
Stock includes restrictive covenants comparable to those included in the
Indenture.
As of the Effective Date, the Company had outstanding 20,716,080 shares of
Series A Junior Preferred Stock (the "Junior Preferred Stock" and, together with
the Senior Preferred Stock, the "Preferred Stock") with a liquidation preference
of $1.00 per share plus accrued and unpaid dividends. The terms of the Junior
Preferred Stock include a cumulative dividend preference, payable quarterly out
of funds legally available therefor, if any. During the first six years
following the Effective Date, the Company will be required to pay in-kind
dividends of additional shares of Junior Preferred Stock at a rate of $0.10 per
share per annum. Thereafter, dividends will be payable both in cash at a rate of
$0.10 per share per annum and in kind at a rate of $0.10 per share per annum.
The Junior Preferred Stock is mandatorily redeemable on March 15, 2010 at a rate
of $1.00 per share plus accrued and unpaid dividends. Each share of Junior
Preferred Stock is mandatorily convertible into shares of Class A Common Stock
at the rate of 0.1168 shares of Class A Common Stock per $1.00 of liquidation
preference if either (i) more than 75 million shares of Senior Preferred Stock
remain outstanding after March 15, 2006 or (ii) the Company fails to pay
dividends on the Senior Preferred Stock on any two dividend payment dates. The
Certificate of Designation for the Junior Preferred Stock includes restrictive
covenants comparable to those included in the Indenture. Such covenants will
become effective when all of the Notes (and any refinancings thereof) have been
repaid and all of the Senior Preferred Stock has been redeemed.
Under Delaware law, dividends (including dividends payable in stock) may
only be paid to the extent a corporation has surplus or, in certain cases, out
of net profits for the current fiscal year and the preceding fiscal year. At
April 30, 2000, for purposes of Delaware law, the Company had a capital deficit,
and currently is legally unable to pay any dividends. The Company intends to
request that its stockholders, at a meeting scheduled to be held July 25, 2000,
approve amendments to the certificates of designation under which the Preferred
Stock is outstanding to reduce the par value of the Preferred Stock. These
amendments would eliminate substantially all of the Company's capital deficit.
The affirmative vote of the holders of a majority of the outstanding shares
of (i) the Company's voting securities entitled to vote at the meeting and
(ii) the respective series of Preferred Stock will be necessary to approve
these amendments. If these amendments are approved, the Company believes that it
will be legally able to pay the dividends payable on the Preferred Stock in the
foreseeable future. The Company cannot give any assurance that the proposed
amendments will be approved or, therefore, that the Company will be legally able
to pay dividends.
In February and September 1998, TransTexas entered into two production
payment agreements with an unaffiliated third party pursuant to which the
Company conveyed certain properties (the "Original Subject Interests") in the
form of a term overriding royalty interest. As of January 31, 2000, the
outstanding balance of these production payments was $35.1 million.
In March 2000, the Original Subject Interests were reconveyed to
TransTexas and a new production payment drilling program agreement was entered
into between TransTexas and two unaffiliated third parties in the form of a term
overriding royalty interest carved out of and burdening certain properties
including the Original Subject Interests (collectively, the "New Subject
Interests"). The Company has the right to offer additional properties ("Offered
Wells") to the production payment parties at a negotiated purchase price, up to
an aggregate maximum for all such wells, of up to $52 million. Upon acceptance
of the Offered Wells, one of the third parties would be committed to pay to the
Company either the drilling costs of the Offered Wells or, at the third party's
discretion, a higher, mutually agreed upon amount. The production payment calls
for the repayment of the primary sum plus an amount equivalent to a 15% annual
interest rate on the unpaid portion of such primary sum. The Oil and Gas
Facility places certain restrictions on the amount that may be outstanding under
the production payment. As of April 30, 2000, the outstanding balance of the
production payment was $35.0 million.
In June 2000, under provisions of the new production payment, the Company
offered an additional well (Offered Well) to the two unaffiliated third parties.
One of the third parties agreed to a negotiated purchase price for the
additional Offered Well of $8.0 million.
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<PAGE> 23
In connection with the new production payment, the Company entered into
various marketing and processing agreements with one of the third parties.
Pursuant to these agreements, the Company will pay a nominal marketing fee with
respect to the Company's production associated with the New Subject Interests.
In addition, the third party will pay a fee for certain processing services to
be provided by Galveston Bay Processing.
After the Effective Date, TransTexas remains highly leveraged and will
have significant cash requirements for debt service and significant charges for
Preferred Stock dividends to net income available for common stockholders.
In order to maintain or increase proved oil and gas reserves, TransTexas
is required to make substantial capital expenditures for the exploration and
development of natural gas and oil reserves in the normal course of business.
For the three months ended April 30, 2000, total capital expenditures incurred
were $23 million, including $5 million for lease acquisitions, $17 million for
drilling and development and $1 million for gas gathering, other equipment and
seismic acquisitions. Capital expenditures for fiscal 2001 are estimated to be
approximately $90 million which amount is in excess of anticipated cash flows
from operating activities. Management's plans are to fund its 2001 debt service
requirements and planned capital expenditures with cash flows from existing
producing properties and certain identified relatively low risk exploratory
prospects to be drilled and completed during fiscal 2001. Expected reserves from
these prospects will be used to obtain additional production payment financing
which, together with excess cash flow from these prospects, is necessary to
continue to fund debt service and capital expenditure requirements. Should these
prospects not be productive or should prices decline for a prolonged period,
absent other sources of capital, the Company would substantially reduce its
capital expenditures, which would limit its ability to maintain or increase
production and in turn meet its debt service requirements. Asset sales and
financings are restricted under the terms of TransTexas' debt documents and
Senior Preferred Stock.
Potential Tax Liabilities
Based upon independent legal advice, including an opinion from a
nationally recognized law firm, TransTexas did not report any significant
federal income tax liability as a result of the Lobo Sale. There are, however,
significant uncertainties regarding TransTexas' tax position and no assurance
can be given that TransTexas' position will be sustained if challenged by the
Internal Revenue Service (the "IRS"). Prior to the bankruptcy, TransTexas was
part of an affiliated group for tax purposes (the "TNGC Consolidated Group"),
which included TNGC Holdings Corporation, the sole stockholder of TransAmerican
("TNGC"), TransAmerican, TEC, TransTexas and TARC. If the IRS were to
successfully challenge TransTexas' position, each member of the TNGC
Consolidated Group would be severally liable under the consolidated tax return
regulations for the resulting taxes, in the estimated amount of up to $270
million (assuming the use of none of the available tax attributes of the TNGC
Consolidated Group), possible penalties equal to 20% of the amount of the tax,
and interest at the statutory rate (currently 9%) on the tax and penalties (if
any). Assuming the use of available tax attributes of the TNGC Consolidated
Group, primarily the carryback of net operating loss carryovers ("NOLs"), this
estimated tax would be reduced to approximately $10 million (with the NOL
carrybacks reducing interest as of the end of the tax year in which the
carryback arose and not reducing penalties). In this event, a substantial
portion of TransTexas' NOLs would be utilized and thus not available to
TransTexas after the bankruptcy. Pursuant to the tax allocation agreement among
the members of the TNGC Consolidated Group, TransAmerican is obligated to fund
the entire tax deficiency (if any) resulting from the Lobo Sale. There can be no
assurance that TransAmerican would be able to make any such payment and the
other members of the TNGC Consolidated Group, including TransTexas as a former
member, may be required to pay the tax, penalties and interest. There can be no
assurance that TransTexas could pay this contingency.
Part of the refinancing of TransAmerican's debt in 1993 involved the
cancellation of approximately $65.9 million of accrued interest and of a
contingent liability for interest of $102 million owed by TransAmerican.
TransAmerican has taken the federal tax position that the entire amount of this
debt cancellation is excluded from its income under the cancellation of
indebtedness provision (the "COD Exclusion") of the Internal Revenue Code of
1986, as amended (the "Tax Code"), and has reduced its tax attributes (including
its net operating loss and credit carryforwards) as a consequence of the COD
Exclusion. No federal tax opinion was rendered with respect to this transaction,
however, and TransAmerican has not obtained a ruling from the IRS regarding this
transaction. TransTexas believes that there is substantial legal authority to
support the position that the COD Exclusion applies to the cancellation of
TransAmerican's indebtedness. However, due to factual and legal uncertainties,
there can be no assurance that the IRS will not challenge this position, or that
any such challenge would not be upheld. Under the Tax Allocation
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<PAGE> 24
Agreement, TransTexas has agreed to pay an amount equal to any federal tax
liability (which would be approximately $25.4 million) attributable to the
inapplicability of the COD Exclusion. Any such tax would be offset in future
years by alternative minimum tax credits and retained loss and credit
carryforwards to the extent recoverable from TransAmerican.
As a former member of the TNGC Consolidated Group, TransTexas will be
severally liable for any tax liability resulting from any transaction of the
TNGC Consolidated Group that occurred during any taxable year of the TNGC
Consolidated Group during which TransTexas was a member, including the
above-described transactions. The IRS has commenced an audit of the consolidated
federal income tax returns of the TNGC Consolidated Group for its taxable years
ended July 31, 1994 and July 31, 1995. The Company has not been advised by the
IRS as to whether any tax deficiencies will be proposed by the IRS as a result
of its review.
TransTexas expects that a significant portion of its NOLs will be
eliminated and the use of those NOLs that are not eliminated will be severely
restricted as a consequence of the Plan. In addition, certain other tax
attributes of TransTexas may under certain circumstances be eliminated or
reduced as a consequence of the Plan. The elimination or reduction of NOLs and
such other tax attributes may substantially increase the amount of tax payable
by TransTexas following the consummation of the Plan as compared with the amount
of tax payable had no such attribute reduction or restriction been required.
Forward-Looking Statements
Forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
are included throughout this report. All statements other than statements of
historical facts included in this report regarding TransTexas' financial
position, business strategy, and plans and objectives of management for future
operations, including, but not limited to words such as "anticipates,"
"expects," "estimates," "believes" and "likely" indicate forward-looking
statements. TransTexas' management believes its current views and expectations
are based on reasonable assumptions; however, there are significant risks and
uncertainties that could significantly affect expected results. Factors that
could cause actual results to differ materially from those in the
forward-looking statements include fluctuations in the commodity prices for
natural gas, crude oil, condensate and natural gas liquids, the extent of
TransTexas' success in discovering, developing and producing reserves,
conditions in the equity and capital markets, competition and the ultimate
resolution of litigation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from adverse changes in prices for
natural gas, condensate and oil and interest rates as discussed below.
The Company's revenues, profitability, access to capital and future rate
of growth are substantially dependent upon the prevailing prices of natural gas,
condensate and oil. These prices are subject to wide fluctuations in response to
relatively minor changes in supply and demand and a variety of additional
factors beyond the Company's control. From time to time, the Company has
utilized hedging transactions with respect to a portion of its gas and oil
production to achieve a more predictable cash flow, as well as to reduce
exposure to price fluctuations. While hedging limits the downside risk of
adverse price movements, it may also limit future revenues from favorable price
movements. Because gains or losses associated with hedging transactions are
included in gas and oil revenues when the hedged volumes are delivered, such
gains and losses are generally offset by similar changes in the realized prices
of commodities. The Company had no open hedging transactions at April 30, 2000.
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<PAGE> 25
Pursuant to the terms of the Company's production payment agreement
entered into in March 2000, the production payment purchasers entered into the
following hedge arrangements with respect to a portion of the natural gas and
condensate production associated therewith and which effectively hedge a portion
of the Company's production:
<TABLE>
<CAPTION>
Contract Price
-----------------
Collar
Volumes in -----------------
Period MMBtus/Bbls Floor Ceiling
------ ----------- ------ -------
<S> <C> <C> <C>
Natural Gas:
April 2000-- October 2000......................................... 3,745,000 $ 2.10 $ 3.40
November 2000-- March 2001........................................ 1,887,500 2.35 3.95
Condensate:
April 2000-- September 2000....................................... 228,750 18.50 32.50
October 2000-- March 2001......................................... 182,000 18.50 29.95
</TABLE>
Under these contracts, the counterparty is required to make payment to the
production payment purchaser if the settlement price for the period is below the
floor, and the production payment purchaser is required to make payment to the
counterparty if the settlement price for any period is above the ceiling price.
As of April 30, 2000, the Company did not realize any gains or losses under
these contracts.
Because substantially all of its long-term obligations at April 30, 2000
are at fixed rates, the Company considers its interest rate exposure to be
minimal. The Company's borrowings under its credit facility are subject to a
rate of interest that fluctuates based on short-term interest rates ($8.7
million outstanding at April 30, 2000). The Company had no open interest rate
hedge positions at April 30, 2000.
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<PAGE> 26
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 7 to the condensed consolidated financial statements for a
discussion of TransTexas' legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
See Note 2 to the condensed consolidated financial statements for a
description of the securities issued by TransTexas pursuant to the Plan.
The Class A Common Stock purchase warrants issued pursuant to the
Plan may be exercised at any time at an exercise price of $120.00 per share,
subject to adjustment in accordance with customary antidilution provisions.
Both the Senior Preferred Stock and the Junior Preferred Stock issued
pursuant to the Plan are subject to certain conversion provisions in the event
that either (i) more than 75 million shares of the Senior Preferred Stock are
outstanding after March 15, 2006 or (ii) any two dividend payments have not been
paid on the Senior Preferred Stock. See Note 2 to the condensed consolidated
financial statements for a description of the conversion terms (including
conversion ratios) by which the Senior Preferred Stock and the Junior Preferred
Stock may be converted into shares of TransTexas' Class A Common Stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K:
On February 18, 2000, TransTexas filed a current report on Form 8-K
to report under Item 3 the confirmation of its Second Amended, Modified and
Restated Plan of Reorganization.
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<PAGE> 27
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.
TRANSTEXAS GAS CORPORATION
(Registrant)
By: /s/ Ed Donahue
------------------------------
Ed Donahue, Vice President
and Chief Financial Officer
June 14, 2000
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<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<S> <C>
27.1 -- Financial Data Schedule
</TABLE>
