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Table of Contents
 
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 June 30, 2002
 
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: 001-14837
 
Quicksilver Resources Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation or organization)
 
75-2756163
(I.R.S. Employer Identification No.)
 
777 West Rosedale, Suite 300, Fort Worth, Texas 76104
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: (817) 665-5000
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Name of each exchange on which registered
Common Stock, par value
$0.01 per share
  
New York Stock Exchange
 
Securities registered pursuant to Section 12 (g) of the Act:  None
 
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  þ         No  ¨
 
As of August 2, 2002, the registrant had 19,893,877 outstanding shares of its common stock, $0.01 par value.
 

Table of Contents
 
QUICKSILVER RESOURCES INC.
 
INDEX
 
    
Page
    
    
  
3
  
4
  
5
  
6
  
7
  
11
  
16
    
  
18
  
18
  
20

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Table of Contents
 
PART I.    FINANCIAL INFORMATION
 
ITEM 1.    Financial Statements
 
INDEPENDENT ACCOUNTANTS’ REPORT
 
To the Board of Directors and Stockholders of
Quicksilver Resources Inc. Fort Worth, Texas
 
We have reviewed the accompanying condensed consolidated balance sheet of Quicksilver Resources Inc. (the Company) as of June 30, 2002, and the related condensed consolidated statements of income for the three and six month periods ended June 30, 2002 and 2001 and cash flows for the six month periods ended June 30, 2002 and 2001. These financial statements are the responsibility of the Company’s management.
 
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
 
Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
 
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of the Company as of December 31, 2001, and the related consolidated statements of income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 8, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
 
/s/ DELOITTE & TOUCHE LLP
 
Fort Worth, Texas
August 12, 2002

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Table of Contents
 
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for share data
 
    
June 30,
2002
     
December 31,
2001
  
    
(Unaudited)
         
ASSETS
                  
Current assets
                  
Cash and cash equivalents
   
$
13,990
 
   
$
8,726
 
Accounts receivable
   
 
19,612
 
   
 
21,489
 
Inventories and other current assets
   
 
4,585
 
   
 
5,079
 
    
  
Total current assets
   
 
38,187
 
   
 
35,294
 
Investments in and advances to equity affiliates
   
 
13,593
 
   
 
14,248
 
Properties, plant and equipment – net (“full cost”)
   
 
417,550
 
   
 
412,455
 
Other assets
   
 
5,479
 
   
 
7,247
 
    
  
    
$
474,809
 
   
$
469,244
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current liabilities
                  
Current portion of long-term debt
   
$
945
 
   
$
945
 
Accounts payable
   
 
8,589
 
   
 
12,168
 
Accrued derivative obligations
   
 
18,024
 
   
 
9,025
 
Accrued liabilities
   
 
23,026
 
   
 
29,936
 
    
  
Total current liabilities
   
 
50,584
 
   
 
52,074
 
Long-term debt
   
 
244,364
 
   
 
248,425
 
Unearned revenue
   
 
4,397
 
   
 
9,562
 
Deferred derivative obligations
   
 
22,978
 
   
 
13,461
 
Other long-term liabilities
   
 
298
 
   
 
222
 
Deferred income taxes
   
 
47,136
 
   
 
51,113
 
Stockholders’ equity
                  
Preferred stock, $0.01 par value, 10,000,000 shares authorized,
1 share issued and outstanding
   
 
—  
 
   
 
—  
 
Common stock, $0.01 par value, 40,000,000 shares authorized,
23,607,329 and 22,534,875 shares issued, respectively
   
 
236
 
   
 
225
 
Paid in capital in excess of par value
   
 
94,810
 
   
 
77,814
 
Treasury stock of 3,714,752 and 3,751,852 shares, respectively
   
 
(14,490
)
   
 
(14,634
)
Accumulated other comprehensive income
   
 
(26,355
)
   
 
(14,007
)
Retained earnings
   
 
50,851
 
   
 
44,989
 
    
  
    
 
105,052
 
   
 
94,387
 
    
  
    
$
474,809
 
   
$
469,244
 
    
  
 
The accompanying notes are an integral part of these financial statements.

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Table of Contents
 
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per share data—Unaudited
 
    
For the Three Months Ended June 30,
     
For the Six Months Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Revenues
                                    
Oil, gas and related product sales
   
$
27,191
 
   
$
33,418
 
   
$
52,119
 
   
$
71,910
 
Other revenue
   
 
3,561
 
   
 
4,869
 
   
 
7,751
 
   
 
9,809
 
    
  
  
  
Total revenues
   
 
30,752
 
   
 
38,287
 
   
 
59,870
 
   
 
81,719
 
Expenses
                                    
Oil and gas production costs
   
 
10,526
 
   
 
15,309
 
   
 
21,605
 
   
 
28,593
 
Other operating costs
   
 
306
 
   
 
338
 
   
 
643
 
   
 
694
 
Depletion and depreciation
   
 
7,424
 
   
 
7,362
 
   
 
14,806
 
   
 
14,447
 
Provision for doubtful accounts
   
 
—  
 
   
 
(311
)
   
 
—  
 
   
 
(1,071
)
General and administrative
   
 
2,213
 
   
 
1,940
 
   
 
4,356
 
   
 
4,526
 
    
  
  
  
Total expenses
   
 
20,469
 
   
 
24,638
 
   
 
41,410
 
   
 
47,189
 
    
  
  
  
Operating income
   
 
10,283
 
   
 
13,649
 
   
 
18,460
 
   
 
34,530
 
Other income-net
   
 
(284
)
   
 
(188
)
   
 
(448
)
   
 
(414
)
Interest expense
   
 
4,894
 
   
 
6,082
 
   
 
9,838
 
   
 
12,542
 
    
  
  
  
Income before income taxes
   
 
5,673
 
   
 
7,755
 
   
 
9,070
 
   
 
22,402
 
Income tax expense
   
 
1,983
 
   
 
2,751
 
   
 
3,208
 
   
 
7,994
 
    
  
  
  
Net income
   
$
3,690
 
   
$
5,004
 
   
$
5,862
 
   
$
14,408
 
    
  
  
  
Basic earnings per share
   
$
0.19
 
   
$
0.27
 
   
$
0.30
 
   
$
0.77
 
Diluted earnings per share
   
$
0.18
 
   
$
0.26
 
   
$
0.29
 
   
$
0.75
 
Basic weighted average shares outstanding
   
 
19,867
 
   
 
18,610
 
   
 
19,448
 
   
 
18,592
 
Diluted weighted average shares outstanding
   
 
20,454
 
   
 
19,265
 
   
 
20,074
 
   
 
19,105
 
 
The accompanying notes are an integral part of these financial statements.

5

Table of Contents
 
QUICKSILVER RESOURCES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands—Unaudited
 
    
For the Six Months Ended June 30,
  
    
2002
     
2001
  
Operating activities:
                  
Net income
   
$
5,862
 
   
$
14,408
 
Charges and credits to net income not affecting cash
                  
Depletion and depreciation
   
 
14,806
 
   
 
14,447
 
Deferred income taxes
   
 
3,174
 
   
 
7,822
 
Recognition of unearned revenues
   
 
(5,024
)
   
 
(4,741
)
Other
   
 
1,095
 
   
 
96
 
Changes in assets and liabilities
                  
Accounts receivable
   
 
1,993
 
   
 
(1,449
)
Inventory, prepaid expenses and other
   
 
(671
)
   
 
(737
)
Accounts payable
   
 
(3,647
)
   
 
(501
)
Accrued and other liabilities
   
 
(6,545
)
   
 
1,491
 
    
  
Net cash from operating activities
   
 
11,043
 
   
 
30,836
 
    
  
Investing activities:
                  
Development and exploration costs and other property additions
   
 
(20,290
)
   
 
(29,062
)
Advances from (to) equity affiliates – net
   
 
508
 
   
 
(1,089
)
Proceeds from sale of assets
   
 
1,205
 
   
 
40
 
    
  
Net cash used for investing activities
   
 
(18,577
)
   
 
(30,111
)
    
  
Financing activities:
                  
Notes payable, bank proceeds
   
 
7,000
 
   
 
8,000
 
Principal payments on long-term debt
   
 
(9,403
)
   
 
(13,151
)
Deferred financing costs
   
 
(1,398
)
   
 
—  
 
Issuance of common