SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 [ ]
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 0-17389
TEJAS GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 76-0263364
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1301 MCKINNEY, SUITE 700
HOUSTON, TEXAS 77010
(Address of Principal Executive Offices) (Zip Code)
(713) 658-0509
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
As of October 31, 1996, Tejas Gas Corporation had 20,513,730 shares of
common stock, par value $.25 per share, outstanding.
- ---------------
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TEJAS GAS CORPORATION
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of Tejas Gas Corporation ("Tejas")
included herein have been prepared, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
notes normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. These financial statements should be read in
conjunction with the audited financial statements and the notes thereto included
in Tejas' Annual Report on Form 10-K for the year ended December 31, 1995 and
Tejas' Form 8-K dated June 18, 1996, as amended by Form 8-K/A dated July 17,
1996, which includes certain historical financial information for the assets and
business acquired and certain pro forma financial information pertaining to the
business combination.
Because of the seasonal nature of Tejas' operations, among other
factors, the results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for an entire year.
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TEJAS GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
----------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................................ $ 24,698 $ 4,816
Accounts receivable ...................................................................... 190,686 181,704
Exchange gas receivable .................................................................. 9,661 10,004
Storage gas inventory .................................................................... 60,929 38,733
Prepaids and other current assets ........................................................ 23,989 9,124
Deferred income tax asset ................................................................ 3,085 2,024
----------- --------
Total current assets ............................................................... 313,048 246,405
----------- --------
PROPERTY, PLANT AND EQUIPMENT - AT COST ...................................................... 1,558,803 793,376
Less accumulated depreciation ............................................................ 209,569 178,642
----------- --------
Property, plant and equipment, net ................................................. 1,349,234 614,734
----------- --------
GOODWILL, NET ................................................................................ 9,911 10,278
----------- --------
INVESTMENTS IN UNCONSOLIDATED ENTITIES ....................................................... 69,703 31,927
----------- --------
OTHER ASSETS ................................................................................. 22,498 12,107
----------- --------
TOTAL .............................................................................. $ 1,764,394 $915,451
=========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Gas purchases payable .................................................................... $ 219,075 $153,867
Exchange gas payable ..................................................................... 7,122 9,825
Accounts payable ......................................................................... 42,405 9,508
Accrued liabilities ...................................................................... 62,762 25,397
Income taxes payable ..................................................................... (4,650) 1,881
Current maturities of long-term obligations .............................................. 7,294 5,317
----------- --------
Total current liabilities .......................................................... 334,008 205,795
----------- --------
LONG-TERM DEBT ............................................................................... 894,755 306,075
----------- --------
DEFERRED INCOME TAXES ........................................................................ 59,778 50,413
----------- --------
PREFERRED MEMBERSHIP UNITS OF A SUBSIDIARY ................................................... 46,693 50,683
----------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1 par value; 6,000,000 shares authorized;
200,000 shares of 9.96% Cumulative Preferred Stock
issued and outstanding in 1996 and 1995; $250
liquidation preference per share .............................................. 200 200
260,000 shares of 5 1/4% Convertible Preferred Stock
issued and outstanding in 1996 and 1995; $250
liquidation preference per share .............................................. 260 260
Common Stock, $.25 par value; 30,000,000 shares authorized;
20,508,469 and 17,404,895 shares issued and
outstanding in 1996 and 1995, respectively ......................................... 5,128 4,351
Capital surplus .......................................................................... 294,476 191,490
Retained earnings ........................................................................ 129,096 106,184
----------- --------
Total stockholders' equity ......................................................... 429,160 302,485
----------- --------
TOTAL .............................................................................. $ 1,764,394 $915,451
=========== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------------
1996 1995 1996 1995
--------- --------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES ......................................................... $ 541,912 $ 246,510 $ 1,393,597 $ 700,265
--------- --------- ----------- ---------
COSTS AND EXPENSES:
Cost of sales ................................................ 466,960 204,495 1,228,825 578,714
Operating expenses ........................................... 19,301 9,887 40,729 28,507
Depreciation and amortization ................................ 13,333 8,222 31,539 24,245
General and administrative ................................... 11,258 5,172 23,516 14,840
--------- --------- ----------- ---------
Total ..................................................... 510,852 227,776 1,324,609 646,306
--------- --------- ----------- ---------
EARNINGS FROM OPERATIONS ......................................... 31,060 18,734 68,988 53,959
--------- --------- ----------- ---------
OTHER INCOME (EXPENSE):
Equity in earnings (loss) of unconsolidated entities ......... 425 (320) 6,000 (654)
Interest income .............................................. 141 111 653 336
Interest expense ............................................. (16,372) (6,703) (28,911) (19,610)
Distributions on Preferred Membership Units of
a Subsidiary .............................................. (913) -- (2,785) --
Other, net ................................................... (4) 113 668 1,757
--------- --------- ----------- ---------
Total ..................................................... (16,723) (6,799) (24,375) (18,171)
--------- --------- ----------- ---------
EARNINGS BEFORE INCOME TAXES ..................................... 14,337 11,935 44,613 35,788
--------- --------- ----------- ---------
INCOME TAXES:
Current ...................................................... (1,294) 2,951 4,579 5,965
Deferred ..................................................... 5,379 1,338 10,829 6,888
--------- --------- ----------- ---------
Total ..................................................... 4,085 4,289 15,408 12,853
--------- --------- ----------- ---------
NET EARNINGS ..................................................... 10,252 7,646 29,205 22,935
--------- --------- ----------- ---------
PREFERRED STOCK DIVIDEND REQUIREMENTS ............................ 2,098 2,098 6,294 6,294
--------- --------- ----------- ---------
NET EARNINGS APPLICABLE TO COMMON STOCK .......................... $ 8,154 $ 5,548 $ 22,911 $ 16,641
========= ========= =========== =========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING ...................................................... 19,655 17,363 18,161 17,349
========= ========= =========== =========
EARNINGS PER COMMON SHARE ........................................ $ 0.41 $ 0.32 $ 1.26 $ 0.96
========= ========= =========== =========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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TEJAS GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings ............................................................................ $ 29,205 $ 22,935
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization ........................................................ 31,539 24,245
Amortization of other assets ......................................................... 2,061 1,599
Deferred income taxes ................................................................ 10,829 6,888
Equity in (earnings) loss of unconsolidated entities ................................. (6,000) 654
Distributions from unconsolidated entities ........................................... 8,462 1,387
Other, net ........................................................................... 3,585 (1,708)
--------- --------
79,681 56,000
Changes in current assets and current liabilities:
(Increase) decrease in -
Accounts and exchange gas receivable ............................................. 41,491 6,694
Storage gas inventory ............................................................ (17,714) (21,006)
Prepaids and other current assets ................................................ 2,973 (5,004)
Increase (decrease) in -
Gas purchases, exchange gas and accounts payable ................................. 30,989 (5,824)
Accrued liabilities .............................................................. (7,499) (1,337)
Deferred credits ................................................................. 20,461 2,356
Income taxes payable ............................................................. (6,531) 659
--------- --------
Net cash provided by operating activities ............................................... 143,851 32,538
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and acquisition .................................................... (25,656) (17,003)
Acquisition of Transok .................................................................. (568,500) --
Investments in unconsolidated entities .................................................. (10,800) (102)
Other, net .............................................................................. (3,149) 2,410
--------- --------
Net cash used in investing activities ................................................... (608,105) (14,695)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line-of-credit agreements .......................................... (7,900) (16,700)
Proceeds from issuance of long-term debt ................................................ 605,900 15,000
Retirement of long-term debt ............................................................ (208,320) (10,000)
Preferred stock dividends ............................................................... (6,294) (6,294)
Issuance of additional common shares .................................................... 102,761 --
Exercise of stock options ............................................................... 1,002 106
Retirement of Preferred Membership Units of a Subsidiary ................................ (3,013) --
--------- --------
Net cash provided by (used in) financing activities ..................................... 484,136 (17,888)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........................................ 19,882 (45)
========= ========
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................................ 4,816 7,954
========= ========
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................................. $ 24,698 $ 7,909
========= ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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TEJAS GAS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto for
Tejas Gas Corporation ("Tejas") have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. In connection with the preparation of
these financial statements, management was required to make estimates and
assumptions that affect the reported amount of assets, liabilities, revenues,
expenses and disclosure of contingent liabilities. Actual results could differ
from such estimates. The accompanying consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in Tejas' Annual Report on Form 10-K for
the year ended December 31, 1995 and Tejas' Form 8-K dated June 18, 1996, as
amended by Form 8-K/A dated July 17, 1996, which includes certain historical
financial information for the assets and business acquired and certain pro forma
financial information pertaining to the business combination.
Effective July 1, 1996, Tejas reevaluated the estimated useful lives of
its operating assets to better reflect the economic lives under which these
assets will remain in service. The effect of the change in lives, the majority
of which occurred as a result of an increase in the lives for natural gas
transmission lines, resulted in an increase in net income available to common
stockholders of approximately $.6 million or $.03 per share for both the nine
months and quarter ended September 30, 1996, respectively.
In the opinion of Tejas' management, all adjustments (all of which are
normal and recurring) have been made which are necessary to fairly state the
consolidated financial position of Tejas and subsidiaries as of September 30,
1996, the results of their operations for the three month and nine month periods
ended September 30, 1996 and 1995 and the cash flows for the nine month periods
ended September 30, 1996 and 1995.
2. COMMITMENTS AND CONTINGENCIES
Tejas' West Clear Lake Storage Facility requires the maintenance of
cushion gas in order to sustain anticipated operational requirements. Such
cushion gas requirements may be satisfied by the combination of cushion gas
purchased by Tejas and the volume of gas stored for third parties in the storage
facility. At September 30, 1996, Tejas owned approximately 10.4 billion cubic
feet ("BCF") of cushion gas and a third party owned 18.5 BCF of natural gas,
valued at $33.1 million, for which Tejas is obligated to pay a reservation fee.
Further, Tejas is obligated to redeliver the 18.5 BCF of natural gas and will
bear the cost of physical loss, if any, incurred during storage. Management
estimates that physical losses will not be significant and has insured for
physical losses due to catastrophic events. Based upon volumes and rates in
effect at September 30, 1996, Tejas estimates the net 1996 cost related to the
reservation of the 18.5 BCF to be approximately $1.1 million.
3. STOCKHOLDERS' EQUITY
On April 11, 1996, the Tejas Board of Directors authorized a
three-for-two split of the common stock, par value $.25 per share (the "Common
Stock"), of Tejas effected in the form of a stock dividend
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payable to stockholders of record as of April 26, 1996. All references to shares
issued and outstanding, average shares outstanding and earnings per share
included in the financial statements and accompanying notes and schedules have
been restated to give effect to the stock split. As a result of the stock split,
5,801,769 shares of Common Stock were added to the 11,603,263 common shares
outstanding at December 31, 1995. The par value of the additional shares,
approximately $1.5 million, has been transferred from retained earnings to
Common Stock. As a result of the stock split, the conversion price of Tejas' 5
1/4% Convertible Preferred Stock was adjusted from $63.6364 to $42.4243
(equivalent to an adjustment in the conversion rate from .7857 to 1.1786 shares
of Common Stock for each Depositary Share representing a one-fifth interest in a
share of the 5 1/4% Convertible Preferred Stock). The adjustment to the
conversion price (and conversion rate) was effective as of April 27, 1996.
Additionally, options to purchase Common Stock under Tejas' Stock Option Plans
as well as option prices were adjusted as a result of the Common Stock split.
On July 22, 1996, Tejas sold 3,075,000 shares of its Common Stock in an
underwritten public offering. Net proceeds to Tejas from the sale of the Common
Stock, approximately $103 million, were used to reduce indebtedness under a new
$425 million revolving credit agreement (see Note 4).
4. TRANSOK, INC. ACQUISITION
On June 6, 1996, Tejas acquired Transok, Inc. ("Transok") from Central
and South West Corporation ("CSW") through a merger of a recently formed wholly
owned subsidiary of Tejas into Transok. Immediately prior to the acquisition,
Transok sold seven natural gas processing plants (the "Transok Plants") to a
third party lessor (the "Lessor"), which in turn leased these facilities (the
"Lease") to a subsidiary of Tejas (the "Lessee").
Transok operates intrastate natural gas pipeline systems in Oklahoma,
Louisiana and Texas and is one of the largest processors of natural gas in
Oklahoma. At the time of the acquisition, Transok's operations included (i)
approximately 7,000 miles of gathering and transmission pipelines in Oklahoma,
Louisiana and Texas with 2.3 billion cubic feet of natural gas per day ("BCF/d")
of pipeline capacity; (ii) eight natural gas processing plants, of which seven
are being leased to a subsidiary of Tejas, with total processing capacity of 564
million cubic feet per day ("MMCF/d") of natural gas; (iii) a 26 BCF-capacity
natural gas reservoir storage facility with 300 MMCF/d of withdrawal and 200
MMCF/d of injection capacity; and (iv) 1.4 trillion cubic feet of connected
third-party natural gas reserves.
The total purchase price received by CSW at closing was $690 million in
cash, of which $565 million was paid by Tejas and $125 million was paid by the
Lessor to acquire the Transok Plants. In addition, as part of the transaction,
Transok retained $200 million of long-term debt. To finance the cash
requirements for the Transok acquisition, Tejas borrowed (i) $178 million under
its existing credit facilities and (ii) $387 million, net of a $38 million
voluntary prepayment, under a new $425 million credit agreement (the "Transok
Credit Facility"). The Transok Credit Facility matures on December 31, 1997 and
bears interest, at Transok's option, based on either the London Interbank
Offered Rate ("LIBOR") or the prime rate plus a margin. The margin over the
LIBOR or prime rate which Transok must pay ranges from a minimum of
approximately 1.2% to a maximum of 2%. At September 30, 1996, as a result of the
application of approximately $103 million of net proceeds from the public
offering of common stock, described in Note 3, the commitment level under this
facility was reduced to approximately $321.7 million with available borrowing
capacity of $38 million. See Note 5 below for discussion of additional
commitment level reductions.
The obligations under the Transok Credit Facility are secured by the
capital stock of all of Transok's subsidiaries and certain partnership interests
held by Transok and are guaranteed by such subsidiaries. The
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Transok Credit Facility is also secured by certain intercompany notes. In
addition, Tejas guarantees Transok's obligations under the Transok Credit
Facility and under the Lease agreement for the Transok Plants.
The amount of loans, advances and dividends (collectively
"Distributions") that may be made directly or indirectly by Transok to Tejas
under the Transok Credit Facility is subject to certain limitations. At
September 30, 1996, Distributions to Tejas of $10.4 million were permitted. In
general, once certain financial ratios are attained, distribution allowances may
be adjusted by a percentage of consolidated quarterly net earnings or losses of
Transok, certain investments and any cumulative aggregate Distributions. Such
limitations as herein described are not expected to have any material effect on
the ability of Tejas to meet its cash obligations.
In connection with the acquisition of Transok, CSW sold seven natural
gas processing plants to an unrelated third party (the "Lessor") for $125
million. Tejas, through a wholly-owned subsidiary, leased the Transok Plants
from the Lessor for a five year term which requires annual lease payments of
approximately $9.0 million. In addition, under the Lease, the Lessee has the
option to extend the term of the Lease for up to two years, subject to approval
by the Lessor, and to purchase the Transok Plants for $125 million. If by the
end of the Lease term, the Lessee has not exercised its option to purchase the
Transok Plants, it is obligated to pay the Lessor a termination fee of
approximately $106 million. However, the Lease contains a provision which
reduces the termination fee to the extent the proceeds from the Lessor's
subsequent sale of the Transok Plants exceed $19 million. The Lease also
provides the Lessee the option to purchase, at any time during the Lease term,
one or more of the Transok Plants for an aggregate amount not exceeding $31
million, with corresponding reductions to the $106 million termination fee and
the $19 million threshold amount.
The acquisition was recorded using the purchase method of accounting and
the allocation of the purchase price based on the fair value of the assets and
liabilities acquired. The Lease is for a five-year term and is accounted for as
an operating lease. The allocation of the purchase price is preliminary, as
valuation and other studies have not been finalized. It is not expected that the
final allocation of the purchase price will produce materially different results
from those presented herein. The results of operations for the assets acquired
or leased as a result of the Transok acquisition are included in the
accompanying financial statements for the period subsequent to June 6, 1996.
The unaudited pro forma condensed statements of earnings which follow
represent consolidated results of operations as if the Transok acquisition and
the public offering of common stock described in the preceding paragraph had
been consummated at the beginning of each year presented. Pro forma adjustments
have been made to the historical amounts for the entities and operations
acquired for operating expenses, depreciation and amortization, general and
administrative expenses, interest expense and related tax effects. The pro forma
results do not purport to be indicative of the results of operations that would
actually have been obtained if the acquisition had occurred at the beginning of
each period presented.
Pro Forma Nine Months Ended September 30,
- --------------------------------------------------------------------------------
1996 1995
---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS - UNAUDITED)
Revenues ................................. $1,766,072 $1,210,876
---------- ----------
Net earnings ............................. $ 34,120 $ 22,422
---------- ----------
Earnings per common share ................ $ 1.36 $ .79
---------- ----------
7
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5. SUBSEQUENT EVENT
During October 1996, Tejas completed sales of two of Transok's
non-strategic assets, a transmission and gathering system located in northern
Louisiana, and a processing plant, and its related gathering system, in north
central Oklahoma. These transactions, neither of which resulted in a gain or
loss, generated net proceeds of approximately $102.9 million which were used to
reduce the commitment level and repay indebtedness under the Transok Credit
Facility.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
A summary of natural gas average daily throughput in millions of cubic
feet ("MMCF") and average daily natural gas liquids production in thousands of
gallons is set forth below:
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
----- ----- ----- -----
Average Daily Throughput in MMCF:
System sales ............................... 1,993 1,494 1,863 1,417
Transportation ............................. 2,676 1,490 2,020 1,499
Partnership Volumes (Tejas' share) ......... 156 105 134 108
----- ----- ----- -----
Total system throughput ............. 4,825 3,089 4,017 3,024
Gas processed and other .................... 305 94 176 89
----- ----- ----- -----
Total throughput .................... 5,130 3,183 4,193 3,113
===== ===== ===== =====
Natural Gas Processing Data:
Average daily natural gas liquids
production in thousands of gallons ...... 1,394 177 667 183
Average daily inlet volumes (MMCF) ......... 561 76 281 78
===== ===== ===== =====
On June 6, 1996, Tejas acquired pipeline assets and related facilities
and leased processing plants as a result of the Transok acquisition, as more
fully discussed herein under "Capital Resources, Liquidity and Outlook". The
results of operations for the assets acquired or leased ("Transok Operations")
are included herein for the period subsequent to the acquisition on June 6,
1996.
Tejas' net earnings for the first nine months of 1996 were $29.2 million
as compared to $22.9 million for the same period in 1995, an increase of $6.3
million. Net earnings for the third quarter of 1996 were $10.3 million as
compared to $7.6 million for the third quarter of 1995. Net earnings applicable
to common stock and earnings per common share for the first nine months of 1996
were $22.9 million and $1.26 respectively, versus $16.6 million and $0.96,
respectively, for the corresponding period in 1995. Net earnings applicable to
common stock for the third quarter of 1996 were $8.2 million as compared to $5.5
million for the same period in 1995, an increase of $2.7 million due mainly to
additional earnings related to Coral Energy Resources, L.P. ("Coral") and the
Transok Operations. Earnings per common share increased to $0.41 for the 1996
third quarter as compared to $0.32 for the 1995 third quarter. Average shares
outstanding used in the computation of per share amounts have been restated to
retroactively reflect a three-for-two split of the common stock implemented in
April 1996 (see Note 3 of "Notes to Consolidated Financial Statements"). Net
earnings applicable to common stock and per share results include a provision
for dividends on Tejas' 9.96% Cumulative Preferred Stock (the "9.96% Preferred
Stock") and Tejas' 5 1/4% Convertible Preferred Stock (the "5 1/4% Preferred
Stock").
NATURAL GAS SYSTEMS
Sales and transportation of natural gas through its owned/operated
natural gas pipeline is Tejas' core business. For the first nine months of 1996,
Tejas' total systems volume increased by approximately 33% to 4.0 billion cubic
feet of natural gas per day ("BCF/d") compared to the corresponding period in
1995. The improved systems volume contributed to a corresponding increase of
$28.5 million in gross profit, which occurred primarily as a result of the
inclusion of the Transok Operations.
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Total systems volume for the quarter ended September 30, 1996, increased
by approximately 56% to 4.8 BCF/d which contributed to a corresponding increase
in gross profit of $19.8 million over the third quarter in 1995. Of the $19.8
million increase in gross profit for the third quarter, the Transok Operations
contributed an additional $21.9 million to gross profit which was offset
slightly by a $2.1 million decrease in gross profit experienced by Tejas'
Louisiana operations.
NATURAL GAS PROCESSING/OFF-SYSTEM
Gross profit from Tejas' natural gas processing and off-system marketing
activities increased by $14.7 million and $13.1 million, respectively, for the
nine month period and quarter ended September 30, 1996 as compared to the
corresponding periods in 1995. The increase in gross profit for both periods
occurred as a result of the inclusion of the Transok Operations.
ENERGY MARKETING PARTNERSHIP- CORAL ENERGY RESOURCES, L.P.
In November 1995, Coral, an energy marketing joint venture between Tejas
and Shell Oil Company, commenced operations. During the nine months and quarter
ended September 30, 1996, Coral's total sales volume of approximately 4.4 BCF/d
and 4.7 BCF/d, respectively, generated additional pre-tax earnings for Tejas of
$6.0 million and $0.1 million, respectively, which are included in equity in
earnings of unconsolidated entities.
REVENUES
Revenues increased by $693.3 million and $295.4 million, respectively,
for the nine months and three months ended September 30, 1996, from the same
periods in 1995. This increase in revenues was primarily due to increased
natural gas prices and system sales throughput due to weather-related demands
and the Transok Operations. Revenues attributable to the Transok Operations for
the period June 6, 1996 through the end of the quarter accounted for slightly
more than 29% and 50% of the increase in revenues during the nine months and
quarter ending September 30, 1996, respectively.
OPERATING EXPENSES/DEPRECIATION/GENERAL AND ADMINISTRATIVE EXPENSES
Operating expenses, depreciation, and general and administrative
expenses increased by $28.2 million and $20.6 million, respectively, for the
first nine months of 1996 and the third quarter of 1996, from the same periods
in 1995. The increase was primarily due to the Transok Operations.
OTHER INCOME (EXPENSE)
Interest expense increased by $9.3 million and $9.7 million,
respectively, for the nine months and quarter ended September 30, 1996 when
compared to the corresponding periods in 1995. Such increases in interest
expense resulted primarily from the increases in debt associated with the
Transok acquisition.
Distributions on Preferred Membership Units of a Subsidiary were $2.8
million and $0.9 million for the nine months and quarter ended September 30,
1996, respectively, resulting from the issuance of preferred membership units to
a third party during December 1995.
The nine month period ended September 30, 1996, in comparison to the
corresponding period in 1995, reflects a decrease in "Other, net" of $1.1
million which occurred, primarily, due to a non-recurring $1.6 million pre-tax
gain from the sale of a non-strategic asset during the second quarter of 1995.
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CAPITAL RESOURCES, LIQUIDITY AND OUTLOOK
TRANSOK ACQUISITION
On June 6, 1996, Tejas acquired Transok, Inc. ("Transok") from Central
and South West Corporation ("CSW") through a merger of a recently formed wholly
owned subsidiary of Tejas into Transok. Immediately prior to the acquisition,
Transok sold seven natural gas processing plants (the "Transok Plants") to an
unrelated third party (the "Lessor"), which in turn leased these facilities (the
"Lease") to a subsidiary of Tejas (the "Lessee").
Transok operates intrastate natural gas pipeline systems in Oklahoma,
Louisiana and Texas and is one of the largest processors of natural gas in
Oklahoma. At the time of the acquisition, Transok's operations included (i)
approximately 7,000 miles of gathering and transmission pipelines in Oklahoma,
Louisiana and Texas with 2.3 BCF/d of pipeline capacity; (ii) eight natural gas
processing plants, of which seven are being leased to a subsidiary of Tejas with
total processing capacity of 564 million cubic feet per day ("MMCF/d") of
natural gas; (iii) a 26 BCF-capacity natural gas reservoir storage facility with
300 MMCF/d of withdrawal and 200 MMCF/d of injection capacity; and (iv) 1.4
trillion cubic feet of connected third-party natural gas reserves.
The acquisition was recorded using the purchase method of accounting and
the allocation of the purchase price based on the fair value of the assets and
liabilities acquired. The Lease is for a five-year term and is accounted for as
an operating lease. The allocation of the purchase price is preliminary, as
valuation and other studies have not been finalized. It is not expected that the
final allocation of the purchase price will produce materially different results
from those presented herein. The results of operations for the assets acquired
or leased as a result of the Transok acquisition are included in the
accompanying financial statements for the period subsequent to June 6, 1996. The
total purchase price received by CSW at closing was $690 million in cash, of
which $565 million was paid by Tejas and $125 million was paid by the Lessor to
acquire the Transok Plants. In addition, as part of the transaction, Transok
retained $200 million of long-term debt. Tejas' financing for its cash
requirements consisted of (i) $178 million borrowed under an existing credit
facility and (ii) $387 million, net of a voluntary prepayment, borrowed under a
new $425 million credit facility (the "Transok Credit Facility"). Tejas intends
to refinance or pay down borrowings under the Transok Credit Facility prior to
the facility's maturity date of December 31, 1997. In July 1996, Tejas completed
the sale of 3,075,000 shares of common stock in a public offering. Net proceeds
of approximately $103 million from the public offering were used to repay
indebtedness under the Transok Credit Facility.
To enhance throughput on Transok's pipeline system, in August, 1996,
Tejas began construction on a 24-inch pipeline project, which includes eight
additional compressors. This expansion project is expected to provide Tejas with
additional throughput capacity, facilitate the movement of natural gas from
western to eastern Oklahoma and access numerous natural gas delivery points.
These delivery points are expected to enable Tejas to sell excess supply volumes
to Coral. In addition, these delivery points, combined with the additional sales
to Coral, are expected to allow Tejas, through Coral, to more fully benefit from
certain price anomalies between different geographic regions. Tejas estimates
that construction costs for this project will be approximately $66 million,
which it intends to finance through cash generated from operating activities and
borrowings from its existing credit facilities. Tejas expects to place these
assets in service during April 1997.
CASH FLOWS FROM OPERATING ACTIVITIES
For the nine months ended September 30, 1996, net cash provided by
operating activities totaled $143.9 million as compared to $32.5 million for the
same period in 1995. This $111.4 million increase
11
<PAGE>
in net cash provided by operations is primarily due to changes in working
capital. Excluding net changes in working capital components, Tejas' operating
activities generated $79.7 million in cash during the first nine months of 1996
as compared to $56.0 million in the first nine months of 1995, an increase of
$23.7 million.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities during the first nine months of
1996 totaled $608.1 million. Approximately $568.5 million was used for the
acquisition of Transok, while the remainder was used for capital expenditures
and investments in unconsolidated entities.
CASH FLOWS FROM FINANCING ACTIVITIES
Tejas increased its long-term debt balances by $389.7 million during the
first nine months of 1996. Tejas borrowed $605.9 million (prior to a voluntary
prepayment of $38 million and including acquisition
costs) to finance the Transok acquisition. During the same period, $208.3
million of debt was retired, $7.9 million of net repayments were made under
Tejas' various money market lines and $200 million of Transok long-term debt was
retained in the acquisition. In addition, Tejas issued 3,075,000 shares of
Common Stock in a public offering which generated cash flow of $102.7 million.
LIQUIDITY
Tejas' working capital decreased $58.2 million to $(17.6) million at
September 30, 1996 from $40.6 million at December 31, 1995. This decrease was
due primarily to increased payable balances from the acquisition of Transok and
a decline in Tejas' investment in storage gas inventory. In order to effectively
utilize its cash balances, Tejas will continue to make periodic borrowings under
its revolving credit facilities and money market credit lines to meet immediate
cash needs.
To finance the Transok acquisition, Transok entered into a $425 million
revolving credit agreement, the Transok Credit Facility. The Transok Credit
Facility matures on December 31, 1997 and bears interest, at Transok's option,
based on either the London Interbank Offered Rate ("LIBOR") or the prime rate
plus a margin. The margin over the LIBOR or prime rate, which Transok must pay,
ranges from a minimum of 1.2% to a maximum of 2%. As a result of the application
of approximately $103 million of net proceeds from the public offering of common
stock, the commitment level under this facility was reduced to approximately
$321.7 million with available borrowing capacity of $38 million at September 30,
1996.
The amount of loans, advances and dividends (collectively
"Distributions") that may be made directly or indirectly by Transok to Tejas
under the Transok Credit Facility is subject to certain limitations. At
September 30, 1996, Distributions to Tejas of $10.4 million were permitted. In
general, once certain financial ratios are attained, distribution allowances may
be adjusted by a percentage of Transok's consolidated quarterly net earnings or
losses, certain investments and any cumulative aggregate Distributions. Such
limitations as herein described are not expected to have any material effect on
the ability of Tejas to meet its cash obligations.
In connection with Tejas' acquisition of Transok, Tejas (i) incurred
indebtedness of $387 million, net of a voluntary payment, under the Transok
Credit Facility, which matures on December 31, 1997, (ii) borrowed $180.9
million (including acquisition costs) under the Tejas-Acadian Holding Company
credit facility and (iii) retained $200 million of Transok's long-term debt.
At September 30, 1996, Tejas' long-term debt with banks totaled $685.6
million consisting of $398.8 million borrowed under its $480 million revolving
credit facilities established for its subsidiaries,
12
<PAGE>
Tejas-Acadian Holding Company ("TAHC") and Tejas Natural Gas Company ("TNGC"),
$283.7 million borrowed under the Transok Credit Facility and $3.1 million
borrowed under various money market credit lines. In addition, Tejas had $200
million of long-term debt that was retained by Transok as part of the Transok
acquisition, and $9.2 million in notes payable, net of $2.0 million in current
maturities, related to industrial development revenue bonds issued by Lewis and
Pleasants Counties, West Virginia.
The obligations under the TAHC and TNGC revolving credit agreements are
secured by the capital stock, partnership interests and various intercompany
notes of all material subsidiaries and partnerships of TAHC (excluding the
capital stock of Acadian Gas Corporation ("Acadian"), a wholly-owned subsidiary
of TAHC, but including the capital stock and partnership interests of the
material operating subsidiaries and partnerships of Acadian) and are guaranteed
by such subsidiaries and partnerships. In addition, Tejas guarantees TNGC's
obligations under a lease of certain pipeline and related facilities from a
third party. The obligations under the Transok Credit Facility are secured by
the capital stock of all of Transok's subsidiaries and certain partnership
interests held by Transok and are guaranteed by such subsidiaries. The Transok
Credit Facility is also secured by certain intercompany notes. In addition,
Tejas guarantees Transok's obligations under the Transok Credit Facility and
under the lease of seven natural gas processing plants (see Note 4 in Notes to
Consolidated Financial Statements). All of Tejas' credit facilities are subject
to certain covenants, including the maintenance of certain financial ratios,
with which Tejas expects to be able to comply in the ordinary course of
business.
The notes payable related to Lewis & Pleasants Counties' bonds are
secured by bank letters of credit which in turn are secured by mortgages on two
natural gas processing plants located in West Virginia. The notes are also
subject to certain covenants and require that Tejas' subsidiaries, Gulf Energy
Development Corporation and Gulf Energy Gathering & Processing Corporation,
maintain certain financial standards.
Although TAHC and TNGC have additional borrowing capacity available
under their credit facilities, the amount of loans, advances and dividends that
may be made to Tejas from TAHC or TNGC is subject to certain limitations. At
September 30, 1996, the permitted amount of such payments was $110.5 million.
Such limitations as herein described are not expected to have any material
effect on the ability of Tejas to meet its cash obligations. Tejas' liquidity is
ultimately dependent on cash generated by operations, and Tejas believes its
earnings from operations will generate sufficient cash to fund expansion
projects, make required debt payments and meet anticipated dividend requirements
of the 9.96% Preferred Stock and 5 1/4% Preferred Stock in the foreseeable
future. Based on the terms of the TAHC and TNGC revolving credit facilities and
the outstanding principal balance at September 30, 1996, no principal payments
are required until early 1999.
In July 1996, Tejas completed the sale of 3,075,000 shares of its Common
Stock in an underwritten public offering. Net proceeds of approximately $103
million were used to reduce the commitments and repay indebtedness under the
Transok Credit Facility.
In connection with the Transok acquisition, CSW sold seven natural gas
processing plants, the Transok Plants, to an unrelated third party (the
"Lessor") for $125 million. Tejas, through a wholly-owned subsidiary, leased the
Transok Plants from the Lessor over a five-year term which requires annual lease
payments of approximately $9.0 million. In addition, under the Lease agreement,
the Lessee has the option to extend the term of the Lease for up to two years,
subject to approval by the Lessor, and to purchase the Transok Plants for $125
million. If by the end of the Lease term, the Lessee has not exercised its
option to purchase the Transok Plants, it is obligated to pay the Lessor a
termination fee of approximately $106 million. However, the Lease contains a
provision which reduces the termination fee to the extent the proceeds from the
Lessor's subsequent sale of the Transok Plants exceeds $19 million. The Lease
also provides the Lessee the option to purchase, at any time during the Lease
term,
13
<PAGE>
one or more of the Transok Plants for an aggregate amount not exceeding $31
million, with corresponding reductions to the $106 million termination fee and
the $19 million threshold amount.
Tejas owns, as a result of the Transok acquisition, a 26 BCF storage
facility in Oklahoma (the "Greasy Creek Storage Facility"). The Greasy Creek
Storage Facility requires the maintenance of cushion gas in order to sustain
operational requirements. Such gas is currently provided by Transok.
In order to hedge the interest rate risks associated with Tejas'
financing activities (including an operating lease obligation), Tejas frequently
enters into interest rate swaps with financial institutions in order to manage
interest rate risk. While the interest rate swaps eliminate the risks associated
with increases in the floating interest rates of Tejas' obligations, the swaps
also eliminate the opportunities associated with reductions in such floating
interest rates. Payments received or made by Tejas under such interest rate
swaps are recorded as reductions to or increases in interest expense over the
life of the interest rate derivative instrument. In connection with the Transok
acquisition, Tejas also entered into certain fixed interest rate swaps and caps
and a notional amount of $200 million of other interest rate option agreements.
As of September 30, 1996, Tejas had entered into a total notional amount of
$530.5 million of fixed interest rate swaps and caps for hedging purposes with a
weighted average LIBOR rate of 6.4% (excluding Tejas' average borrowing cost
over LIBOR). The weighted average life of the interest rate swap and cap hedging
transactions is approximately four years.
Tejas uses derivative financial instruments (primarily futures, swaps
and other contracts) as an extension of its commercial natural gas purchases and
sales and to hedge price exposure, including location and pricing basis, of its
storage and exchange gas inventories, commitments, and certain anticipated
transactions. While the derivative financial instruments are intended to reduce
the risks associated with unfavorable changes in such prices, the derivative
financial instruments also reduce the opportunities associated with favorable
changes in market prices. Any increases or decreases in the market value of such
derivative transactions are deferred and accounted for as part of the
transactions or activities being hedged. Tejas' interest rate and other
derivative agreements are with established exchanges, energy companies, and
major financial institutions, and Tejas believes that its counter parties will
be able to satisfy their contractual obligations. Coral engages in similar
derivatives transactions for its own account. Transok has historically entered
into anticipatory hedges for gas storage and gas processing. The methodology
used could result in Transok's having open positions in anticipation of future
requirements.
In the normal course of business, Tejas regularly reviews opportunities
such as Transok for the possible acquisition of additional natural gas pipelines
and companies that own natural gas pipelines. When potential acquisition
opportunities are deemed to be consistent with Tejas' growth strategy, bids or
offers in amounts and with terms acceptable to Tejas may be submitted. It is
uncertain whether any such bids or offers which may be submitted by Tejas would
be acceptable to the sellers of such acquisition targets. In the event of a
future significant acquisition, Tejas may require additional financing in
connection therewith.
OUTLOOK
Tejas' management expects its results of operations for the entire year
of 1996 to be favorable when compared to the 1995 annual period due to several
factors. Tejas believes there are many opportunities available for future growth
and continued expansion of operations. The Transok acquisition provides Tejas
with the opportunity to increase the sale of natural gas to certain new markets
in Oklahoma and to increase the flow of natural gas, within the state, west to
east. While no prediction can be made as to the impact of Coral on Tejas'
prospects, Tejas believes that over the next several years Coral should be in a
position to take advantage of the unutilized capacity in Tejas' major
long-distance transmission lines. In addition, the large number of interconnects
between Tejas' pipelines and other intrastate and interstate pipelines have
14
<PAGE>
the potential to become important supply points for Coral. Additionally,
substantial capacity remains to be developed at the West Clear Lake Storage
Facility ("WCLSF") which has the potential to continue to enhance profits from
services provided to both suppliers and consumers and from gas held in storage
for future delivery. The capital invested by Tejas at the WCLSF since September
1993 has increased the availability of natural gas and the operational
flexibility of the WCLSF. This permitted Tejas to sell approximately 11 BCF of
additional natural gas volumes out of the storage facility during the 1995-96
winter season and to provide additional daily storage injection and withdrawal
capabilities to accommodate the seasonal needs of customers. Further development
of the WCLSF is possible and Tejas will continue to monitor and review the
economic benefit of such development. There can be no assurance that market
conditions, including the average cost of natural gas held in storage, will
always be conducive to maintaining the current level of profitability. Tejas has
historically shown the ability to adapt to changing operational requirements and
capitalize on new market opportunities. Although the foregoing factors present
Tejas with opportunities to grow and expand, there can be no assurance that such
factors will result in future growth and expansion of Tejas' operations,
revenues or earnings.
In October 1996, Tejas completed sales of two non strategic operating
assets, a transmission and gathering system located in northern Louisiana and a
processing plant and its related gathering system in north central Oklahoma.
Proceeds from these transactions were used to reduce the committments and repay
indebtedness under the Transok Credit Facility. Tejas intends to refinance or
make further payments to reduce borrowings under the Transok Credit Facility
(which matures on December 31, 1997) and other indebtedness incurred in
connection with the Transok acquisition through the possible sale of interests
in non-strategic assets, formation of partnerships or joint ventures, placement
of long-term debt, renegotiation of credit facilities, the application of excess
cash flow, if any, or otherwise. There can be no assurance that Tejas will be
able to pay down such borrowings or other indebtedness or successfully carry out
such refinancing measures or that such measures, if available, would be on terms
favorable to Tejas. Because of the many opportunities Tejas believes are
available for future growth and continued expansion of operations, Tejas
anticipates using substantially all of its available cash in 1996 and 1997 for
capital expenditures.
The statements included in this Report on Form 10-Q regarding future
financial performance and results and the other statements that are not
historical facts are forward-looking statements. The words "expect," "project,"
"estimate," "predict," "anticipate," "believes" and similar expressions are also
intended to identify forward-looking statements. Such statements and Tejas'
results are subject to numerous risks, uncertainties and assumptions, including
but not limited to, changes in general economic conditions in the United States,
changes in laws and regulations to which Tejas is subject, the cost and effects
of legal and administrative claims and proceedings against Tejas or its
subsidiaries or which may be brought against Tejas or its subsidiaries,
conditions in the capital markets utilized by Tejas to access capital to finance
operations, Tejas' ability to develop expanded markets and product offerings as
well as maintain existing markets, energy prices, competition from other
pipelines and alternate fuels, the general level of natural gas and petroleum
product demand and weather conditions, among other things, and other risks and
uncertainties described in this Report on Form 10-Q and in Tejas' other filings
with the Securities and Exchange Commission. Further, natural gas prices, which
directly impact transportation and gathering and processing throughput and
operating profits, may fluctuate in unpredictable ways. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a description of certain legal proceedings affecting Tejas,
reference is made to the information in Item 1, Legal Proceedings, included in
Part II of Tejas' Report on Form 10-Q for the quarter ended June 30, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
11.1 Computation of Earnings Per Common Share
27.1 Financial Data Schedule
- -----------------
(b) Reports on Form 8-K
A Current Report on Form 8-K dated June 18, 1996, filed during the
second quarter of 1996, was amended by a Form 8-K/A dated July 17, 1996,
filed during the third quarter of 1996. Such form and amendment were
filed with respect to Item 2 of Form 8-K "Acquisition or Disposition of
Assets" and Item 7 of Form 8-K "Financial Statements and Exhibits" to
report the acquisition of Transok, Inc. by Tejas Gas Corporation on June
6, 1996, and to file certain exhibits with respect thereto. Financial
statements included in such Form 8-K filing included certain historical
financial information for the assets and business acquired and certain
pro forma financial information pertaining to the business combination.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEJAS GAS CORPORATION
(Registrant)
By: /s/ JAMES W. WHALEN
James W. Whalen
Senior Executive Vice President -
Chief Financial Officer (principal
financial officer and principal
accounting officer)
Date: November 12, 1996
17
EXHIBIT 11.1
TEJAS GAS CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1996 1995 1996 1995
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding ................................................ 19,655 17,363 18,161 17,349
Incremental common shares resulting from
assumed exercise of stock options based
on the stock's daily average market price .................. -- -- -- --
------- ------- ------- -------
Weighted average number of common shares
outstanding and common equivalent shares
for primary calculation .................................... 19,655 17,363 18,161 17,349
Incremental common shares resulting from
assumed exercise of stock options based
on the more dilutive of the stock's daily
average market price or ending price ....................... -- -- -- --
------- ------- ------- -------
Weighted average number of common shares
outstanding and common equivalent shares
assuming full dilution ..................................... 19,655 17,363 18,161 17,349
======= ======= ======= =======
Net Earnings Applicable to Common Stock ........................ $ 8,154 $ 5,548 $22,911 $16,641
======= ======= ======= =======
Earnings per common and common
equivalent share:
Primary ........................................................ $ 0.41 $ 0.32 $ 1.26 $ 0.96
======= ======= ======= =======
Fully-diluted .................................................. $ 0.41 $ 0.32 $ 1.26 $ 0.96
======= ======= ======= =======
</TABLE>
NOTE: Weighted average number of Common Shares outstanding and primary and
fully-diluted earnings per common share have been restated to reflect
the following: (i) a three-for-two split of the Common Stock effected in
the form of a stock dividend payable to stockholders of record as of
April 26, 1996 and (ii) a dividend of one-tenth of one share of Common
Stock payable to stockholders of record as of July 27, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> MAR-31-1996 JUN-30-1996 SEP-30-1996
<CASH> 937 9,679 24,968
<SECURITIES> 0 0 0
<RECEIVABLES> 194,628 254,667 200,347
<ALLOWANCES> 0 0 0
<INVENTORY> 10,484 31,204 60,929
<CURRENT-ASSETS> 212,039 316,465 313,048
<PP&E> 799,817 1,547,738 1,558,803
<DEPRECIATION> 186,364 196,119 209,569
<TOTAL-ASSETS> 881,958 1,768,242 1,764,394
<CURRENT-LIABILITIES> 223,764 335,643 334,008
<BONDS> 243,075 1,011,275 896,755
55,000 53,246 51,987
460 460 460
<COMMON> 4,351 4,351 5,128
<OTHER-SE> 306,521 312,542 423,572
<TOTAL-LIABILITY-AND-EQUITY> 881,958 1,768,242 1,764,394
<SALES> 432,401 851,685 1,393,597
<TOTAL-REVENUES> 432,401 851,685 1,393,597
<CGS> 389,072 761,865 1,228,825
<TOTAL-COSTS> 406,667 801,499 1,301,093
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,155 12,539 28,911
<INCOME-PRETAX> 17,645 30,276 44,613
<INCOME-TAX> 6,707 11,323 15,408
<INCOME-CONTINUING> 10,938 18,953 29,205
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 10,938 18,953 29,205
<EPS-PRIMARY> 0.51 0.85 1.26
<EPS-DILUTED> 0 0.85 1.26
</TABLE>
