<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to ____________
Commission File Number : 0-26444
FORCENERGY INC
(Exact name of registrant as specified in its charter)
Delaware 65-0429338
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3838 North Causeway Boulevard, Suite 2300
Metairie, Louisiana
70002
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (504) 838-7022
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 twelve months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ].
As of July 31 , 2000, there were 24,048,672 shares of the registrant's
Common Stock, $.01 par value, outstanding.
<PAGE> 2
FORCENERGY INC
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements (Unaudited)
1) Consolidated Balance Sheets - June 30, 2000 and December 31,
1999.................................................................. 1
2) Consolidated Statements of Operations - Three months and six
months ended June 30, 2000 and 1999................................... 2
3) Consolidated Statements of Cash Flows - Six months ended June
30, 2000 and 1999..................................................... 3
4) Notes to Consolidated Financial Statements............................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........................... 15
Item 6. Exhibits and Reports on Form 8-K.............................................. 15
</TABLE>
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-Q INCLUDES FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE
EXCHANGE ACT. THE WORDS "ANTICIPATE," "BELIEVE," "EXPECT," "PLAN," "INTEND,"
"ESTIMATE," "PROJECT," "WILL," "COULD," "MAY," "PREDICT" AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. ALL STATEMENTS OTHER THAN
STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS FORM 10-Q, INCLUDING STATEMENTS
UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS" REGARDING PLANNED CAPITAL EXPENDITURES, THE AVAILABILITY OF
CAPITAL TO FUND CAPITAL EXPENDITURES, ESTIMATES OF PROVED RESERVES, THE
COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND OTHER PLANS AND OBJECTIVES
FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE
REASONABLE, IT CAN GIVE NO ASSURANCE THAT ACTUAL RESULTS MAY NOT DIFFER
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS HEREIN FOR REASONS
INCLUDING, WITHOUT LIMITATION, PETITIONS FILED OR ACTIONS TAKEN IN CONNECTION
WITH ITS BANKRUPTCY PROCEEDINGS, THE EFFECT OF COMPETITION, THE LEVEL OF
PETROLEUM INDUSTRY EXPLORATION AND PRODUCTION EXPENDITURES, WORLD ECONOMIC
CONDITIONS, PRICES OF AND THE DEMAND FOR CRUDE OIL AND NATURAL GAS, DRILLING
ACTIVITY, WEATHER, THE LEGISLATIVE ENVIRONMENT IN THE UNITED STATES AND OTHER
COUNTRIES, OPEC POLICY, CONFLICT IN THE MIDDLE EAST AND OTHER MAJOR PETROLEUM
PRODUCING REGIONS AND THE CONDITION OF THE CAPITAL AND EQUITY MARKETS. IN
ADDITION, RESERVE ENGINEERING IS A SUBJECTIVE PROCESS OF ESTIMATING UNDERGROUND
ACCUMULATIONS OF OIL AND GAS, AND RESERVE ESTIMATES ARE GENERALLY DIFFERENT FROM
QUANTITIES OF OIL AND GAS THAT ARE ULTIMATELY RECOVERED. ALL SUBSEQUENT WRITTEN
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH FACTORS.
READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS CONTAINED IN THIS FORM 10-Q, WHICH SPEAK ONLY AS OF
THE DATE OF THIS FORM 10-Q. FORCENERGY UNDERTAKES NO OBLIGATION TO RELEASE
PUBLICLY THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT
MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE FILING DATE OF THIS
FORM 10-Q OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORCENERGY INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash ................................................................................ $ 2,887 $ 96,506
Accounts receivable, net ............................................................ 37,255 41,332
Other current assets ................................................................ 25,662 18,862
--------- ---------
Total current assets ............................................................ 65,804 156,700
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost (full cost
method) net of accumulated depletion, depreciation
and amortization .................................................................... 544,818 512,000
--------- ---------
OTHER ASSETS ............................................................................. 9,454 6,701
--------- ---------
$ 620,076 $ 675,401
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable .................................................................... $ 17,101 $ 58,917
Accrued liabilities ................................................................. 42,357 62,011
Current maturities of long-term debt ................................................ 5,000 --
--------- ---------
Total current liabilities ....................................................... 64,458 120,928
--------- ---------
LONG-TERM DEBT ........................................................................... 234,696 314,473
--------- ---------
COMMITMENTS AND CONTINGENCIES
14% SERIES A REDEEMABLE CUMULATIVE PREFERRED STOCK,
$.01 par value; 41,551 shares issued
and outstanding at June 30, 2000 .................................................... 30,589 --
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 100,000,000 shares
authorized; 24,022,610 outstanding .............................................. 240 240
Capital in excess of par value ...................................................... 268,558 239,760
Retained earnings ................................................................... 22,548 --
Unearned stock compensation ......................................................... (1,013) --
--------- ---------
Total stockholders' equity ...................................................... 290,333 240,000
--------- ---------
$ 620,076 $ 675,401
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
FORCENERGY INC
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
------- ------- ------- -------
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Oil and gas sales .......................................... $ 76,916 $ 65,116 $ 153,686 $ 124,596
Other ...................................................... 220 41 416 299
--------- --------- --------- ---------
77,136 65,157 154,102 124,895
--------- --------- --------- ---------
EXPENSES:
Lease operating ............................................ 19,254 23,142 39,322 48,706
Depletion, depreciation and amortization ................... 27,528 31,194 55,155 63,668
Production taxes ........................................... 1,515 1,145 3,250 1,990
General and administrative ................................. 6,812 3,628 9,962 7,839
--------- --------- --------- ---------
55,109 59,109 107,689 122,203
--------- --------- --------- ---------
INCOME FROM OPERATIONS ..................................... 22,027 6,048 46,413 2,692
Interest and other income .................................. 887 1,364 2,068 7,225
Interest expense, net of amounts capitalized ............... (4,404) (4,786) (9,724) (17,542)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES .......................... 18,510 2,626 38,757 (7,625)
Income tax provision ....................................... (6,953) -- (14,638) --
--------- --------- --------- ---------
NET INCOME (LOSS) .......................................... 11,557 2,626 24,119 (7,625)
PREFERRED STOCK DIVIDEND ................................... (1,400) -- (1,571) --
--------- --------- --------- ---------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS .......................................... $ 10,157 $ 2,626 $ 22,548 $ (7,625)
========= ========= ========= =========
NET INCOME (LOSS) PER SHARE:
Basic ................................................. $ .42 $ .11 $ .94 $ (.31)
Diluted ............................................... $ .40 $ .11 $ .91 $ (.31)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ................................................. 24,000 24,755 24,000 24,752
Diluted ............................................... 25,430 24,755 24,715 24,752
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
FORCENERGY INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
COMPANY COMPANY
--------- ---------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ............................................. $ 24,119 $ (7,625)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion, depreciation and amortization ...................... 55,155 64,362
Deferred taxes ................................................ 14,638 --
Equity in net income of affiliate ............................. (637) (845)
Stock compensation ............................................ 2,000 --
Decrease (increase) in accounts receivable .................... 4,177 (13,311)
Increase in other current assets .............................. (7,204) (239)
(Decrease) increase in accounts payable and accrued liabilities (57,302) 11,503
--------- ---------
Net cash provided by operating activities .......................... 34,946 53,845
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions .................................................. (957) (276)
Capital expenditures .......................................... (87,967) (25,195)
Proceeds from sale of assets .................................. 951 --
Change in other assets ........................................ (1,089) 5,464
--------- ---------
Net cash used in investing activities .............................. (89,062) (20,007)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under senior credit facility ....................... 70,057 26,473
Repayments under senior credit facility ....................... (148,530) (8,700)
Issuance of common stock ...................................... 190 312
Net proceeds from issuance of preferred stock ................. 38,800 --
Preferred dividends ........................................... (20) --
--------- ---------
Net cash (used in) provided by financing activities ................ (39,503) 18,085
--------- ---------
Net increase (decrease) in cash .................................... (93,619) 51,923
Cash at beginning of period ........................................ 96,506 1,690
--------- ---------
Cash at end of period .............................................. $ 2,887 $ 53,613
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
FORCENERGY INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
Forcenergy Inc, a Delaware corporation ("Forcenergy" or the "Company"),
and its subsidiaries is an independent oil and gas company engaged in the
exploration, acquisition, development, exploitation and production of oil and
natural gas properties. The Company's principal areas of operation are the Gulf
of Mexico and the Cook Inlet, Alaska.
Forcenergy and its wholly owned subsidiary Forcenergy Resources Inc.
("Resources") emerged from bankruptcy on February 15, 2000 (see Note 3 for a
more detailed discussion of the reorganized entity). The original voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code was filed on
March 21, 1999 (the "Petition Date") in order to facilitate the restructuring of
the Company's long-term debt, revolving credit, trade and other obligations.
While under Chapter 11, certain claims against the Company as of the Petition
Date were stayed while the Company continued its operations as a
debtor-in-possession and worked to restructure its debt. On January 19, 2000,
the Bankruptcy Court approved the Company's Plan of Reorganization (the "Plan"),
which became effective on February 15, 2000 (the "Emergence Date").
The unaudited interim consolidated financial statements of the Company
included herein reflect accounting principles set forth in the American
Institute of Certified Public Accountants Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code", ("SOP
90-7"), which provides guidance for financial reporting by entities that have
filed voluntary petitions for relief under, and have reorganized in accordance
with, the Bankruptcy Code. In accordance with guidance provided by SOP 90-7, the
consummation of the Plan (the "Reorganization") has been reflected as though
effective on December 31, 1999 (the "Effective Date"). Under provisions of SOP
90-7 and fresh-start reporting (see Note 3), the December 31, 1999 Consolidated
Balance Sheet is the opening balance sheet of the reorganized company (the
"Successor Company"). The December 31, 1999 Consolidated Balance Sheet includes
all adjustments necessary to reflect assets at fair market value as of the
Effective Date and the Plan's treatment of creditor claims and previous equity
interests.
The unaudited interim consolidated financial statements of the Company
included herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission and in accordance with
generally accepted accounting principles for interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, consisting of normal recurring
accruals, necessary to present fairly the information in the accompanying
consolidated financial statements have been included. Interim period results are
not necessarily indicative of the results of operations or cash flows for a full
year period. The unaudited interim consolidated financial statements included
herein for the three and six months ended June 30, 1999 and those of the Company
prior to the Reorganization (the "Predecessor Company") may not be comparable in
certain respects to the consolidated financial statements of the Successor
Company. Capitalized terms not defined herein have the meanings as defined in
the notes to the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
4
<PAGE> 7
NOTE 2 - PROPOSED MERGER
On July 10, 2000 the board of directors of Forcenergy approved a plan
of merger with Forest Oil Corporation ("Forest") (NYSE:FST). The plan of merger
provides that Forest will issue 1.6 common shares for each Forcenergy common
share outstanding and 68.6141 common shares for each Forcenergy share of
preferred stock outstanding. The merger is subject to shareholder approval for
both companies and is expected to be treated as a tax-free reorganization and
accounted for as a pooling of interests.
NOTE 3 - REORGANIZATION AND FRESH-START REPORTING
In August 1999, the Company filed with the bankruptcy court a
disclosure statement that included the proposed Plan. The disclosure statement
was approved by the bankruptcy court on October 22, 1999, the Plan was approved
by the bankruptcy court on January 19, 2000 and the Company emerged from
bankruptcy on February 15, 2000.
On February 15, 2000, the Company issued 23,040,000 shares of New
Common Stock in exchange for all of the outstanding 8.5% and 9.5% Senior
Subordinated Notes, (collectively, the "Senior Subordinated Notes"), and in
satisfaction of various other unsecured trade obligations. The unsecured
claimants were also entitled to participate in the rights offering discussed
below.
Also, on February 15, 2000, the Company and its existing bank lending
group entered into a new senior credit facility (the "New Senior Credit
Facility") that replaced the Company's prior senior credit facility (the "Prior
Facility") and satisfied all pre-petition claims thereunder (see Note 4).
Pursuant to provisions of the Plan and the New Senior Credit Facility, the
Company paid $66.9 million in cash to the bank group on the Effective Date,
which included a repayment of $40 million in principal outstanding under the
Prior Facility and $24.3 million in accrued interest.
In accordance with provisions of the Plan, all outstanding shares of
the common stock of the Predecessor Company (the "Old Common Stock") were
cancelled effective as of the Emergence Date and the holders of Old Common Stock
as of the January 28, 2000 record date received, on a pro-rata basis (i.e.,
approximately one share of New Common Stock for each 25.849 shares of Old Common
Stock held): (i) 960,000 shares of New Common Stock; (ii) associated warrants to
purchase 240,000 shares of New Common Stock at $16.67 per share (expiring on
February 15, 2004); and (iii) warrants to purchase 240,000 shares of New Common
Stock at $20.83 per share (expiring on February 15, 2005). The cancellation of
Old Common Stock and issuance of these equity instruments is reflected in the
Successor Company's Consolidated Balance Sheet at December 31, 1999.
The Plan also required the Company to raise $40 million in additional
equity capital through a rights offering to unsecured claimants to purchase
preferred stock units, each of which included one share of 14% Series A
Cumulative Preferred Stock (the "Preferred Stock") and warrants ("Subscription
Warrants") to purchase 45 shares of New Common Stock (collectively, the "Rights
Offering"), for $1,000 per unit. On March 20, 2000 the Rights Offering was
closed with the issuance of 40,000 shares of Preferred Stock and Subscription
Warrants to purchase 1,800,000 shares of New Common Stock. The proceeds from the
Rights Offering aggregated $40.0 million, $38.8 million net of offering costs of
$1.2 million. The Company allocated $29.0 million to Preferred Stock and $11.0
million to the Subscription Warrants (using the Black Scholes valuation model),
which is included in capital in excess of par value. The proceeds were used to
pay down amounts outstanding under the New Senior Credit Facility.
For more detailed discussion of the reorganization and fresh-start
reporting refer to the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999.
5
<PAGE> 8
NOTE 4 - LONG-TERM DEBT
NEW SENIOR CREDIT FACILITY
Pursuant to the Reorganization, the Company and substantially the same
bank lending group entered into the New Senior Credit Facility on February 15,
2000 (see Notes 1 and 3).
The New Senior Credit Facility consists of a $250 million Revolving
Credit Facility (the "Revolver") and a $70 million Term Loan (the "Term Loan").
The amount that can be borrowed under the Revolver is subject to a
borrowing base limitation, which has been established initially at $250 million
through February 15, 2001. The Revolver provides for borrowings on a revolving
basis through August 15, 2003, at which time all outstanding amounts under the
Revolver become due and payable. Advances under the Revolver bear interest at
prime plus 1.5% or LIBOR plus 2% per annum at the election of the Company. The
weighted-average interest rate under the Revolver was 8.7% at June 30, 2000. The
agreement provides for a commitment fee on the unused portion of the Revolver at
.50% due quarterly. The borrowing base is subject to semi-annual redetermination
after the first redetermination on February 15, 2001.
The terms of the Term Loan provide mandatory quarterly principal
repayments of $2.5 million each commencing on March 31, 2001, with a $50 million
lump sum repayment at maturity on August 15, 2003. Interest is payable monthly
at the prime rate plus 3% or LIBOR plus 3.5%. The interest rate in effect under
the Term Loan was 10.2% at June 30, 2000.
At July 31, 2000 the Company had drawn down $167.1 million under the
Revolver and an additional $5.4 million of availability was utilized for
outstanding letters of credit issued under the Revolver, leaving $77.5 million
available for general corporate purposes.
The New Senior Credit Facility is secured by substantially all of the
Company's oil and gas properties and contains events of default, representations
and warranties and covenants typical for facilities of this type.
NOTE 5 - EARNINGS PER SHARE
The following reconciles the numerators and denominators of the basic
and diluted EPS computations (in thousands, except per share data):
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
------------------------------- ----------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------- ------ ----- ------ ------ -----
BASIC EPS:
Income available
to common stockholders ............................ $10,157 24,000 $.42 $2,626 24,755 $.11
EFFECT OF DILUTIVE SECURITIES:
Options and warrants ................................ -- 1,430 (.02) -- -- --
------- ------ ---- ------ ------ ----
DILUTED EPS:
Income available to
common stockholders
and assumed exercises ............................. $10,157 25,430 $.40 $2,626 24,755 $.11
======= ====== ==== ====== ====== ====
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
SUCCESSOR COMPANY PREDECESSOR COMPANY
--------------------------------- ----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
--------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ -----
BASIC EPS:
Income (loss) available
to common stockholders ................ $22,548 24,000 $.94 $(7,625) 24,752 $(.31)
EFFECT OF DILUTIVE SECURITIES:
Options and warrants .................... -- 715 (.03) -- -- --
------- ------ ---- ------- ------ ----
DILUTED EPS:
Income (loss) available to
Common stockholders
And assumed exercises ................. $22,548 24,715 $.91 $(7,625) 24,752 $(.31)
======= ====== ==== ======= ====== ====
</TABLE>
NOTE 6 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company has historically entered into various financial instruments
with off-balance-sheet risk in the normal course of business to reduce its
exposure to changing commodity prices. The Company normally utilizes these
arrangements for portions of its current oil and gas production to achieve more
predictable cash flows and to reduce its exposure to fluctuations in oil and gas
prices for varying time periods. The remaining portion of current production is
not hedged so as to provide the Company the opportunity to benefit from
increases in prices on that portion of the production, should price increases
materialize.
The Company has entered into several financial hedging contracts
("SWAPS") with respect to its future oil and natural gas production. Under these
agreements, monthly settlements are based on the differences between the prices
specified in the instrument and/or the settlement price of certain oil and gas
futures contracts quoted on the New York Mercantile Exchange ("NYMEX"). In
instances where the applicable settlement price is less than the price specified
in the contract, the Company receives a settlement based on the difference and
in instances where the applicable settlement price is higher than the specified
prices, the Company pays an amount based on the difference. Forcenergy has
hedged approximately 372,000 barrels ("Bbls") per month of its estimated oil
production through December 31, 2000 at a weighted average price of $24.86 per
Bbl. The Company has also hedged approximately 3,100 million cubic feet of
natural gas ("MMcf") per month of its estimated natural gas production through
December 31, 2000 at a weighted average price of $2.76 per thousand cubic feet
of natural gas ("Mcf").
At July 31, 2000, the Company had $4.0 million in collateral on deposit
with the counterparties associated with the above contracts. The Company may be
required to increase the amount of the collateral deposit to the extent that the
market price of oil and gas is higher than the contract price.
The instruments contain an element of credit risk and price risk. The
Company attempts to minimize the extent of credit risk by limiting the
counterparties to major banks or significant industry participants. All of these
arrangements are entered into on a no-cost basis and are settled monthly. The
Company accounts for the swap arrangements as hedging activities and,
accordingly, gains or losses are included in oil and gas revenues for the period
the production was hedged. The Company recorded a $16.6 million reduction in
revenues associated with hedging contracts in place during the quarter ended
June 30, 2000. The Company had no hedging contracts in place during the quarter
ended June 30, 1999. The Company recorded a $24.1 million reduction in revenues
for the six months ended June 30, 2000 and a $7.7 million increase in revenues
7
<PAGE> 10
for the six months ended June 30, 1999 associated with its hedging activities.
The Company's future exposure under the hedging instruments in place at June 30,
2000 and extending through December 31, 2000 is estimated to be approximately
$39.3 million based on average NYMEX strip prices for oil and gas of $29.40 per
Bbl and $4.35 per Mcf.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest of $32.8 million and $14.2 million in the six
month periods ending June 30, 2000 and 1999, respectively. The increase in
interest paid over the previous year's period relates to the implementation of
the Plan, as $24.3 million of interest accrued during the reorganization process
was paid to the bank group on the Emergence Date.
The Company paid non-cash dividends to the holders of Preferred Stock,
in the form of additional Preferred Stock, with a stated value of $1,551,000
during the first six months of 2000.
NOTE 8 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"). The statement
requires companies to report the fair market value of derivatives on the balance
sheet and record in income or other comprehensive income, as appropriate, any
changes in the fair value of the derivative. Statement No. 133 will become
effective with respect to the Company on January 1, 2001. The Company is
currently evaluating the impact of the statement.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" (SAB 101), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 is applicable beginning with
the Company's fourth quarter of 2000. Based on the Company's current analysis,
SAB 101 will not have an impact on the financial results of the Company.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion is intended to assist in an understanding of
the Company's historical financial position and results of operations and should
be read in conjunction with the financial statements of the Company appearing
elsewhere in this report. For the period from March 21, 1999 to February 15,
2000 the Company operated as a debtor-in-possession. Effective December 31, 1999
the Company adopted fresh-start reporting; accordingly the results of operations
for the three and six months ended June 30, 1999 express those results of the
predecessor company (see Notes 1 and 3 to the interim consolidated financial
statements included in this Form 10-Q) while the results presented for periods
in 2000 represent those of the successor company. Management has attempted to
indicate the major affects on comparability from adopting fresh-start reporting
between the successor and predecessor in the following discussion and analysis
of financial condition and results of operations for the three and six months
ended June 30, 2000.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER UNIT DATA)
----------------------------------------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
------------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Production in thousands:
Liquids (MBbls) (1)....................................... 1,762 2,067 3,710 4,106
Natural Gas (MMcf)........................................ 13,900 16,604 26,761 34,573
Total (MBOE).............................................. 4,079 4,834 8,170 9,868
Average realized sales prices (2)
Liquids (per Bbl) (1)..................................... $ 21.16 $ 14.45 $ 21.43 $ 12.82
Natural gas (per Mcf)..................................... 2.85 2.12 2.77 2.08
Expenses (per BOE):
Lease operating........................................... $ 4.72 $ 4.79 $ 4.81 $ 4.94
Depletion, depreciation and
amortization............................................. 6.75 6.45 6.75 6.45
General and administrative, net........................... 1.67 .75 1.22 .79
</TABLE>
-------
(1) Includes crude oil, condensate and natural gas liquids.
(2) Net of hedging results
COMPARISON OF THE THREE MONTH PERIODS ENDED JUNE 30, 2000, AND JUNE 30, 1999
NET INCOME/LOSS. Net income for the quarter ended June 30, 2000 was
$10.2 million compared $2.6 million reported for the same period last year.
Several factors contributed to the increase in earnings. Higher realized liquids
and natural gas prices, lower depletion, depreciation and amortization expense
and lower lease operating expenses were the main contributors to the increase in
the quarterly results.
PRODUCTION. On an equivalent unit basis, liquids and natural gas
production was 4,079 thousand barrels of oil equivalent ("MBOE") in the second
quarter of 2000 compared with 4,834 MBOE reported for the 1999 quarter. Net
liquids production was 1,762 thousand barrels ("MBbls") in the second quarter of
2000 and 2,067 MBbls in the second quarter of 1999. Net gas production was
13,900 MMcf in the 2000 quarter compared to 16,604 MMcf reported for the 1999
quarter. Production of both liquids and natural gas declined as the Company
significantly reduced its capital expenditure program during the reorganization,
thereby
9
<PAGE> 12
limiting the Company's ability to maintain production rates with workovers,
recompletions and new drilling. The reduction in capital spending continued
until February 15, 2000, at which time the Company emerged from bankruptcy (see
Notes 1 and 3 to the interim consolidated financial statements included in this
Form 10-Q).
REVENUES. Revenues were $77.1 million for the 2000 second quarter
compared to $65.2 million reported for the 1999 second quarter, as the benefits
realized from higher oil and natural gas prices (including effects of hedging)
more than offset the natural decline in production volumes. Average net realized
liquids prices increased to $21.16 per Bbl for the 2000 second quarter, a 46%
increase over the $14.45 per Bbl received during the same period in 1999.
Average net realized natural gas prices increased to $2.85 per Mcf for the three
months ended June 30, 2000, a 34% increase from the $2.12 per Mcf reported for
the comparable 1999 period. Average prices received at the field level for the
2000 second quarter were $26.12 per Bbl and $3.42 per Mcf for liquids and
natural gas, respectively. The net effect of financial hedging instruments on
second quarter 2000 revenue, and therefore, realized prices, was an $8.7 million
decrease in liquids revenue and a $7.9 million decrease in natural gas revenue.
Average prices received at the field level for the comparable 1999 period were
$14.45 per Bbl and $2.12 per Mcf for liquids and natural gas, respectively. The
Company had no hedging contracts in place during the quarter ended June 30, 1999
(see Note 6 to the interim consolidated financial statements included in this
Form 10-Q).
LEASE OPERATING EXPENSES. Lease operating expenses decreased 17% to
$19.3 million for the three months ended June 30, 2000 compared to the $23.1
million reported for the same period in 1999. The decrease related primarily to
the development of operating efficiencies during the reorganization proceedings.
Lease operating expenses on an equivalent unit of production basis also
decreased from $4.79 to $4.72 per barrel of oil equivalent ("BOE"), despite the
lower production volumes.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense
decreased 12% to $27.5 million for the 2000 second quarter, compared with $31.2
million reported for the same period in 1999. The decrease was due to previously
discussed declines in production, partially offset by an increase in the DD&A
rate from $6.45 per BOE in 1999 to $6.75 per BOE in 2000.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative expenses,
net of capitalized internal costs and overhead reimbursements was $6.8 million
for the three months ended June 30, 2000, compared to $3.6 million for the
comparable 1999 period. The increase in general and administrative expenses
relates primarily to reorganization-related severance costs paid or accrued in
the second quarter of 2000, offsetting savings from company-wide staff
reductions implemented in the first quarter of 1999. On a per BOE produced
basis, general and administrative expenses increased to $1.67 per BOE from $.75
per BOE reported in last year's quarter because of the severance costs.
Exclusive of the severance costs, general and administrative costs would have
been $.78 per BOE in the 2000 quarter.
INTEREST EXPENSE. Interest expense was $4.4 million for the quarter
ended June 30, 2000, compared with $4.8 million for the 1999 second quarter, a
marginal decrease resulting from lower long-term debt levels (see Notes 3 and 4)
offset by higher average interest rates.
INCOME TAX PROVISION. The Company recognized an income tax provision of
$7.0 million in the second quarter of 2000 based on an effective combined
federal and state income tax rate of 38.0%. The Company did not record an income
tax provision in the three months ended June 30, 1999 due to net losses
accumulated for the first six months then ended.
PREFERRED STOCK DIVIDENDS. The Company paid $1.4 million in preferred
stock dividends in the quarter ended June 30, 2000 on the Preferred Stock issued
on March 20, 2000 (see Notes 1,3 and 7 to the interim consolidated financial
statements included in this Form 10-Q).
10
<PAGE> 13
COMPARISON OF THE SIX MONTH PERIODS ENDED JUNE 30, 2000 AND JUNE 30, 1999
NET INCOME/LOSS. Net income for the six months ended June 30, 2000 was
$22.5 million compared to a net loss of $7.6 million reported for the same
period last year. Several factors contributed to the improvement in earnings.
Higher realized liquids and natural gas prices, lower lease operating expenses
and lower 1999 depletion, depreciation and amortization expense were the main
contributors to the increase in earnings.
PRODUCTION. On an equivalent unit basis, liquids and natural gas
production was 8,170 MBOE in the first half of 2000 compared with 9,868 MBOE
reported for the comparable 1999 period. Net liquids production was 3,710 MBbls
for the first six months of 2000 and 4,106 MBbls for the same period in 1999.
Net gas production was 26,761 MMcf in the 2000 period compared to 34,573 MMcf
reported for the 1999 period. Production of both liquids and natural gas
declined as the Company significantly reduced its capital expenditure program
during the reorganization, thereby limiting the Company's ability to maintain
production rates through workovers, recompletions and new drilling. The
limitation on capital spending continued until February 15, 2000, at which time
the Company emerged from bankruptcy (see Notes 1 and 3 to the interim
consolidated financial statements included in this Form 10-Q).
REVENUES. Revenues were $154.1 million for the six months ended June
30, 2000 compared to the $124.9 million reported for the comparable 1999 period,
as the benefits realized from higher oil and natural gas prices (including
effects of hedging) were only partially offset by the lower production volumes.
Average net realized liquids prices increased to $21.43 per Bbl for the 2000
period, a 67% increase over the $12.82 per Bbl received during the same period
in 1999. Average net realized natural gas prices increased to $2.77 per Mcf for
the six months ended June 30, 2000, a 33% increase over the $2.08 per Mcf
reported for the comparable 1999 period. Average prices received at the field
level for the 2000 period were $26.13 per Bbl and $3.02 per Mcf for liquids and
natural gas, respectively. The net effect of financial hedging instruments on
revenue for the first six months of 2000 and therefore, realized prices, was a
$17.4 million decrease in liquids revenue and a $6.7 million decrease in natural
gas revenue. Average prices received at the field level for the comparable 1999
period were $12.46 per Bbl and $1.90 per Mcf for liquids and natural gas,
respectively. The effects of hedging activities during the first half of 1999
were a $1.5 million increase in liquids revenue and a $6.2 million increase in
natural gas revenue (see Note 6 to the interim consolidated financial statements
included in this Form 10-Q).
LEASE OPERATING EXPENSES. Lease operating expenses decreased 19% to
$39.3 million for the six months ended June 30, 2000 compared to the $48.7
million reported for the same period in 1999. The decrease related primarily to
a reduction in workover costs and the development of operating efficiencies
during the reorganization proceedings. Total lease operating expenses declined
by $9.4 million and lease operating expenses on an equivalent unit of production
basis decreased from $4.94 to $4.81 per BOE despite the lower production
volumes.
DEPLETION, DEPRECIATION AND AMORTIZATION ("DD&A"). DD&A expense
decreased 13% to $55.2 million for the six months ended June 30, 2000 period,
compared with $63.7 million reported for the same period in 1999. The decrease
was due to previously discussed declines in production offset by the increase in
the DD&A rate from $6.45 per BOE in 1999 to $6.75 per BOE in 2000.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative expenses,
net of capitalized internal costs and overhead reimbursements, were $10.0
million for the six months ended June 30, 2000, compared to $7.8 million for the
comparable 1999 period. Reductions in general and administrative expenses
relating to 1999 company wide staff reductions were offset by
reorganization-related severance costs paid or accrued in the second quarter of
2000. On a per BOE produced basis, general and administrative expenses increased
11
<PAGE> 14
to $1.22 per BOE from $.79 per BOE reported in last year's six month period
ended June 30, 2000 because of severance costs. Exclusive of severance costs,
general and administrative costs would have been $.77 per BOE in the 2000
period.
INTEREST AND OTHER INCOME. Interest and other income was $2.1 million
in the six months ended June 30, 2000, compared with $7.2 million in the 1999
period. The decrease related primarily to the Company's recognition in March
1999 of a $5.5 million settlement on the cancellation of hedging contracts by
the counterparties subsequent to the Company's Chapter 11 bankruptcy filing (see
Notes 1 and 3 to the interim consolidated financial statements included in this
Form 10-Q).
INTEREST EXPENSE. Interest expense was $9.7 million for the six months
ended June 30, 2000, compared with $17.5 million for the 1999 period, a decrease
primarily due to the reduction in long-term debt pursuant to the confirmation
and execution of the Company's bankruptcy Plan of Reorganization (see Notes 3
and 4 to the interim consolidated financial statements included in this Form
10-Q) and the Company's discontinuation of the accrual of interest expense on
the 9 1/2% and 8 1/2% Senior Subordinated Note issues on March 21, 1999.
INCOME TAX PROVISION. The Company recognized an income tax provision of
$14.6 million in the first half of 2000 based on an effective combined federal
and state income tax rate of 38.0%. The Company did not record an income tax
provision in the six months ended June 30, 1999 because of losses accumulated in
that period.
PREFERRED STOCK DIVIDENDS. The Company paid $1.6 million in preferred
stock dividends during the six months ended June 30, 2000 on the Preferred Stock
issued on March 20, 2000 (see Notes 1, 3 and 7 to the interim consolidated
financial statements included in this Form 10-Q).
LIQUIDITY AND CAPITAL RESOURCES
The Company makes substantial capital expenditures for the exploration
and development of oil and natural gas reserves in the ordinary course of
business. Historically, the Company has financed its capital expenditures, debt
service and working capital requirements with cash flow from operations, public
offerings of equity, public and private offerings of debt, temporary borrowings
under its senior credit facility and other financings. Cash flow from operations
is sensitive to the prices the Company receives for its oil and natural gas.
Lower production associated with reductions in planned capital spending or an
extended decline in oil and gas prices could result in less than anticipated
cash flow from operations in the current fiscal year and later years, which
could have a material adverse affect on the Company. Such a decline in prices or
production could also adversely affect the amount that the Company could borrow
under its senior credit facility. The availability of capital to the energy
industry, in general, and specifically from the public equity and debt markets,
is also influenced by prevailing market sentiment that might be totally
unrelated to the industry's current performance.
On March 21, 1999, the Company and its wholly owned subsidiary,
Forcenergy Resources Inc., filed a voluntary petition for relief under Chapter
11 of the U.S. Bankruptcy Code in order to facilitate the restructuring of the
Company's long-term debt, revolving credit, trade and other obligations. The
filing was made in the U.S. District Court for the Eastern District of Louisiana
in New Orleans. The Company continued to operate as a debtor-in-possession
subject to the Bankruptcy Court's supervision and orders until February 15,
2000, at which time the Plan of Reorganization became effective (see Notes 1, 3
and 4 to the consolidated financial statements included elsewhere in this Form
10-Q).
In conjunction with the Reorganization, the Company replaced the Prior
Facility with the New Senior Credit Facility. The New Senior Credit Facility
consists of a $250 million Revolving Credit Facility and a $70 million Term
Loan. The amount that can be borrowed under the Revolver is further subject to a
borrowing base, which has been initially established at $250 million through
February 15, 2001. The Revolver provides for borrowings on a revolving basis
through August 15, 2003, at which time all outstanding amounts under the
Revolver become due and payable. Advances under the Revolver bear interest at
prime plus 1.5% or LIBOR plus 2% per annum at the election of the Company. The
agreement provides for
12
<PAGE> 15
a commitment fee on the unused portion of the Revolver at .50% due quarterly.
The borrowing base is subject to semi-annual redetermination after the first
redetermination on February 15, 2001. The terms of the Term Loan provide for
mandatory quarterly principal repayments of $2.5 million each commencing on
March 31, 2001, with a $50 million lump sum repayment at maturity on August 15,
2003. Interest is payable monthly at prime plus 3% or LIBOR plus 3.5%.
On March 20, 2000 the Company received $40.0 million, $38.8 million net
of offering costs, in proceeds from a preferred stock and warrants issuance
required by the Plan of Reorganization (see Note 3 to the interim consolidated
financial statements included elsewhere in this Form 10-Q). The proceeds were
used to pay down amounts drawn under the Revolver. At July 31, 2000, $167.1
million was utilized under the Revolver with $77.5 million available for use for
general corporate purposes.
Historically, the Company has financed its capital expenditures, debt
service and working capital requirements with cash flow from operations, public
offerings of equity, private offerings of debt, borrowings under its senior
credit facility and other financings. The Company's primary sources of funds for
each of the periods presented were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------------------------
2000 1999 2000 1999
---------- ----------- ---------- ------------
SUCCESSOR PREDECESSOR SUCCESSOR PREDECESSOR
COMPANY COMPANY COMPANY COMPANY
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 49,059 $44,656 $ 34,946 $ 53,845
Borrowings under the Senior Credit Facility 63,457 -- 70,057 26,473
Repayments under the Senior Credit Facility (65,030) -- (148,530) (8,700)
</TABLE>
Working capital at June 30, 2000 was $1.3 million compared to $35.8
million at December 31, 1999. The reduction in working capital relates primarily
to a decrease in cash balances on hand from $96.5 million at December 31, 1999,
to $2.9 million at June 30, 2000. The decrease in cash relates principally to
the implementation of the Plan and the associated cash distributions to secured
creditors. The decrease in cash was partially offset by an increase in other
current assets of approximately $9.6 million, due to the posting of cash
collateral deposits with the counterparties under the Company's commodity price
hedging program and cash prepayments paid to others for capital activities on
non-operated properties.
Cash flow from operating activities, excluding the $54.4 million in
excess of cash payments to secured creditors and others associated with the
implementation of the Plan was $89.4 million in the first six months of 2000
compared to $53.9 million in the 1999 period. This increase was primarily due to
higher revenues associated with higher oil and gas prices and to lower lease
operating and interest expenses. Cash flow from operations, including the
effects of the changes in current assets and liabilities, was $34.9 million for
the six months ended June 30, 2000, compared with $53.8 million for the same
period in 1999.
Capital expenditures were $88.9 million for the six months ended June
30, 2000, compared with $25.5 million for the 1999 period. Capital expenditures
were lower in the 1999 period due to the Company's lack of available capital
preceding its March 21, 1999 Chapter 11 bankruptcy filing and due to spending
limitations during the Reorganization. Capital expenditures in the first six
months of 2000 were funded by cash flow from operations. The Company's capital
expenditure program for the year 2000 is planned at approximately $155 million,
all of which is expected to be funded by cash flow from operations.
13
<PAGE> 16
Management believes that cash flow from operations and temporary
borrowings available under the New Senior Credit Facility should be sufficient
to meet its anticipated capital expenditures and other operating requirements in
2000. However, because future cash flows and the availability of financing are
subject to a number of variables, such as oil and gas prices, production
operations, drilling results and the number and size of acquisitions made by the
Company, there can be no assurance that the Company's capital resources will be
sufficient to maintain currently planned levels of capital expenditures and to
fund future acquisitions. Additional debt and equity financings or an increase
in the size of the Senior Credit Facility may be required in connection with
future acquisitions. The availability of these capital sources will depend on
prevailing market conditions and interest rates and the then-existing financial
conditions of the Company.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"). The statement
requires companies to report the fair market value of derivatives on the balance
sheet and record in income or other comprehensive income, as appropriate, any
changes in the fair value of the derivative. Statement No. 133 will become
effective with respect to the Company on January 1, 2001. The Company is
currently evaluating the impact of the statement.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 "Revenue Recognition" (SAB 101), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements filed with the SEC. SAB 101 is applicable beginning with
the Company's fourth quarter of 2000 consolidated financial statements. Based on
the Company's current analysis, SAB 101 will not have an impact on the financial
results of the Company.
14
<PAGE> 17
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on June 7,
2000. Certain matters voted upon at the meeting and the votes cast with respect
to such matters are as follows:
(a) Directors were elected as follows:
<TABLE>
<CAPTION>
NAME FOR AGAINST ABSTAINED/WITHHELD
---- --- ------- ------------------
<S> <C> <C> <C>
Michael F. Bennet 19,483,626 - 4,556,537
B. James Ford 19,483,624 - 4,556,539
Clifford P. Hickey 19,483,627 - 4,556,536
Forrest E. Hoglund 19,483,625 - 4,556,538
Stephen A. Kaplan 19,483,626 - 4,556,537
Gregory P. Pipkin 19,483,626 - 4,556,537
Stig Wennerstrom 19,483,597 - 4,556,566
Richard G. Zepernick, Jr. 19,483,624 - 4,556,539
</TABLE>
(b) PricewaterhouseCoopers LLP was appointed as independent auditors of the
Company for the year ending December 31, 2000:
FOR AGAINST ABSTAINED/WITHHELD
--- ------- ------------------
19,483,623 1,023 4,555,517
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the quarter
ended June 30, 2000.
15
<PAGE> 18
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 hereunto, duly authorized, in the City of Miami, State of
Florida, on the 10th day of August, 2000.
FORCENERGY INC
By: /s/ E. JOSEPH GRADY
--------------------------
E. Joseph Grady
Vice President - Chief Financial Officer
(Principal Financial Officer and officer
duly authorized to sign on behalf of the
Registrant)
16
