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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

 

 
 FORM 10-Q
 

(Mark one)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the quarterly period ended March 31, 2003
 
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   1-8246
 

SOUTHWESTERN ENERGY COMPANY

(Exact name of the registrant as specified in its charter)
 

Arkansas

71-0205415

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)
 

2350 N. Sam Houston Pkwy. E., Suite 300, Houston, Texas 77032

(Address of principal executive offices, including zip code)
 

(281) 618-4700

(Registrant's telephone number, including area code)
 

Not Applicable

(Former name, former address and former fiscal year: if changed since last report)
 
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 and 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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

                              Yes:   X  

                    No:        
 
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
 
                                   Class                                       Outstanding at April 15, 2003
                Common Stock, Par Value $0.10                                  35,532,378
 
   
 

 

 
 
 
 
 
 
 

PART I
 

FINANCIAL INFORMATION
 
 
 
 

1
 

 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
 

For the three months ended
 

March 31,
   

2003

  

2002
 

(in thousands, except share/per share amounts)
Operating Revenues:
Gas sales

$

 77,707 

$

 66,986 
Gas marketing 12,606  9,702 
Oil sales 3,459  3,183 
Gas transportation and other   4,883    1,787 
    98,655    81,658 
Operating Cost and Expenses:
Gas purchases - utility 27,048  24,768 
Gas purchases - marketing 11,558  8,673 
Operating expenses 9,046  9,558 
General and administrative expenses 7,883  5,790 
Depreciation, depletion and amortization 12,383  13,870 
Taxes, other than income taxes   3,063    2,160 
    70,981    64,819 
Operating Income   27,674    16,839 
 
Interest Expense:
Interest on long-term debt 4,927  5,354 
Other interest charges 385  322 
Interest capitalized   (365)   (291)
    4,947    5,385 
Other Income (Expense)   1,422    (242)
 
Income Before Income Taxes, Minority Interest & Accounting Change 24,149  11,212 
Minority Interest in Partnership   (765)   (293)
 
Income Before Income Taxes & Accounting Change 23,384  10,919 
Provision for Income Taxes - Deferred    8,887    4,204 
 
Income Before Accounting Change 14,497    6,715 
Cumulative Effect of Adoption of Accounting Principle   (855)   - 
 
Net Income

$

 13,642 

$

 6,715 
 
Basic Earnings Per Share:
Income Before Accounting Change

$

 0.51 

$

 0.26 
Cumulative Effect of Adoption of Accounting Principle   (0.03)    - 
Net Income

$

 0.48 

$

 0.26 
 
Diluted Earnings Per Share:
Income Before Accounting Change

$

 0.50 

$

 0.26 
Cumulative Effect of Adoption of Accounting Principle    (0.03)   - 
Net Income

$

 0.47 

$

 0.26 
 
Weighted Average Common Shares Outstanding:
Basic 28,138,469 

25,499,294 
Diluted 28,991,295 

25,859,247 
 

The accompanying notes are an integral part of the financial statements.
 

2

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)
 

ASSETS
 
March 31, December 31,

2003

2002
(in thousands)
Current Assets
Cash

$

 3,781 

$

 1,690 
Accounts receivable 52,639  42,115 
Inventories, at average cost 16,331  24,735 
Hedging asset - SFAS No. 133 419  3,130 
Other    4,993     4,468 
Total current assets   78,163    76,138 
 
Investments   14,269    15,287 
 
Property, Plant and Equipment, at cost
Gas and oil properties, using the full cost method 1,059,025  1,030,300 
Gas distribution systems 199,060  197,473 
Gas in underground storage 28,005  32,395 
Other   31,544    31,391 
  1,317,634  1,291,559 
Less: Accumulated depreciation, depletion and amortization   667,053    659,398 
    650,581      632,161 
 
Other Assets   16,700    16,576 
 
Total Assets

$

 759,713 

$

 740,162 
 

The accompanying notes are an integral part of the financial statements.
 

3
 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)
 

LIABILITIES AND SHAREH0LDERS' EQUITY
 
March 31, December 31,

2003

2002
(in thousands)
Current Liabilities
Accounts payable

$

 31,451 

$

 29,881 
Taxes payable 4,114  5,213 
Interest payable 6,239  2,513 
Customer deposits 5,001  4,999 
Hedging liability - SFAS No. 133 27,414  20,409 
Regulatory liability - hedges -  3,130 
Over-recovered purchased gas costs 3,967  5,697 
Other   4,546    2,715 
Total current liabilities   82,732    74,557 
 
Long-Term Debt   225,000    342,400 
 
Other Liabilities
Deferred income taxes 122,691  116,591 
Other   24,181    16,671 
    146,872    133,262 
 
Commitments and Contingencies
 
Minority Interest in Partnership   13,265    12,455 
 
Shareholders' Equity

Common stock, $.10 par value; authorized 75,000,000 shares, issued 37,225,584 shares

 3,723  2,774 
Additional paid-in capital 121,392  19,130 
Retained earnings 211,630  197,988 
Accumulated other comprehensive income (loss)   (21,342)   (17,358)
315,403  202,534 

Less:

Common stock in treasury, at cost, 1,693,206 shares at March 31, 2003 and 1,793,456 shares at December 31, 2002 

   18,864    19,981 

Unamortized cost of 498,664 restricted shares at March 31, 2003 and 498,123 restricted shares at December 31, 2002 issued under stock incentive plan

   4,695    5, 065 
  291,844    177,488 
 
Total Liabilities and Shareholders' Equity

$

 759,713 

$

 740,162 
 

The accompanying notes are an integral part of the financial statements
 

4
 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
 
 

For the three months ended
 

March 31,
 

2003

2002
 

(in thousands)
Cash Flows From Operating Activities
Net income

$

 13,642 

$

 6,715 
Adjustments to reconcile net income to
  net cash provided by operating activities:
Depreciation, depletion and amortization 13,105  14,472 
Deferred income taxes 8,887  4,204 
Ineffectiveness of cash flow hedges 914  - 
Equity in (income) loss of NOARK partnership (1,482) 200 
Minority interest in partnership 765  293 
Cumulative effect of adoption of accounting principle 855  - 
Change in assets and liabilities:
Accounts receivable (10,523) 803 
Inventories 8,404  2,059 
Under/over-recovered purchased gas costs (1,730) - 
Accounts payable 2,187  (12,241)
Taxes payable (1,099) 94 
Interest payable 3,726  3,951 
Other operating assets and liabilities   921    802 
Net cash provided by operating activities   38,572    21,352 
 
Cash Flows From Investing Activities
Capital expenditures (30,369) (21,369)
Distribution from NOARK partnership 2,500  - 
Decrease in gas stored underground 4,391  4,047 
Other items   749    944 
Net cash used in investing activities   (22,729)   (16,378)
 
Cash Flows From Financing Activities
Issuance of common stock 103,301  - 
Payment on revolving long-term debt (147,500) (75,600)
Borrowings under revolving long-term debt 30,100  68,300 
Change in bank drafts outstanding (616) - 
Proceeds from exercise of common stock options   963    - 
Net cash used in financing activities   (13,752)   (7,300)
 
Increase (decrease) in cash 2,091  (2,326)
Cash at beginning of year   1,690    3,641 
Cash at end of period

$ 

 3,781 

$

 1,315 
 

The accompanying notes are an integral part of the financial statements
 

5
 

 

 

SOUTHWESTERN ENERGY COMPANY AND SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Unamortized Accumulated
Additional Restricted Other

Common Stock

 Paid-In Retained Treasury Stock Comprehensive

Shares

Amount

Capital

Earnings

Stock

Awards

Income (Loss)

Total
 
Balance at December 31, 2002 27,738  $ 2,774  $ 19,130  $ 197,988  $ (19,981) $ (5,065) $ (17,358) $ 177,488 
  Comprehensive income:
    Net Income -  -  -  13,642  -  -  -  13,642 
 &n