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: 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)
(817) 665-5000
(Registrant’s telephone number, including area code)
None
(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 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 9, 2003, the registrant had 21,179,759 outstanding shares of its common stock, $0.01 par value.
INDEX TOFORM 10-Q
For the Period Ending March 31, 2003
| Page | ||
| PART I. FINANCIAL INFORMATION |
||
| Item 1. Financial Statements |
||
| 3 | ||
| Condensed Consolidated Balance Sheets at March 31, 2003 and December 31, 2002 |
4 | |
| Condensed Consolidated Statements of Income for the three months ended March 31, 2003 and 2002 |
5 | |
| 6 | ||
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002 |
7 | |
| 8 | ||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
16 | |
| 18 | ||
| PART II. OTHER INFORMATION |
||
| 19 | ||
| 20 | ||
| 21 |
2
PART I. FINANCIAL INFORMATION
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 March 31, 2003, and the related condensed consolidated statements of income, comprehensive income and cash flows for the three month periods ended March 31, 2003 and 2002. 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, 2002, and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated March 14, 2003, 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, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
As discussed in Note 2 to the condensed consolidated financial statements, on January 1, 2003, the Company adopted Statement of Financial Accounting Standard No. 143, Accounting for Asset Retirement Obligations.
/s/ DELOITTE & TOUCHE LLP
Fort Worth, Texas
May 9, 2003
3
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands, except for share data
| March 31, 2003 |
December 31, 2002 |
|||||||
| ASSETS |
(Unaudited) |
|||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ |
7,490 |
|
$ |
9,116 |
| ||
| Accounts receivable |
|
33,319 |
|
|
21,075 |
| ||
| Current deferred income taxes |
|
10,968 |
|
|
9,045 |
| ||
| Inventories and other current assets |
|
6,328 |
|
|
5,540 |
| ||
| Total current assets |
|
58,105 |
|
|
44,776 |
| ||
| Investments in and advances to equity affiliates |
|
9,217 |
|
|
10,219 |
| ||
| Properties, plant and equipment – net (“full cost”) |
|
495,691 |
|
|
470,078 |
| ||
| Other assets |
|
4,476 |
|
|
4,465 |
| ||
| $ |
567,489 |
|
$ |
529,538 |
| |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities |
||||||||
| Current portion of long-term debt |
$ |
951 |
|
$ |
951 |
| ||
| Accounts payable |
|
10,399 |
|
|
14,931 |
| ||
| Accrued derivative obligations |
|
33,007 |
|
|
26,362 |
| ||
| Accrued liabilities |
|
29,232 |
|
|
26,210 |
| ||
| Total current liabilities |
|
73,589 |
|
|
68,454 |
| ||
| Long-term debt |
|
265,122 |
|
|
248,493 |
| ||
| Derivative obligations |
|
25,705 |
|
|
26,387 |
| ||
| Asset retirement obligations |
|
12,707 |
|
|
234 |
| ||
| Deferred income taxes |
|
59,028 |
|
|
57,065 |
| ||
| 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, 23,688,730 and 23,663,447 shares issued, respectively |
|
237 |
|
|
237 |
| ||
| Paid in capital in excess of par value |
|
113,769 |
|
|
114,113 |
| ||
| Treasury stock of 2,570,502 shares |
|
(10,099 |
) |
|
(10,099 |
) | ||
| Accumulated other comprehensive income |
|
(35,508 |
) |
|
(34,170 |
) | ||
| Retained earnings |
|
62,939 |
|
|
58,824 |
| ||
| Total stockholders’ equity |
|
131,338 |
|
|
128,905 |
| ||
| $ |
567,489 |
|
$ |
529,538 |
| |||
The accompanying notes are an integral part of these financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
In thousands, except for per share data – Unaudited
| For the Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Revenues |
||||||||
| Oil, gas and related product sales |
$ |
37,087 |
|
$ |
24,928 |
| ||
| Other revenue |
|
429 |
|
|
3,971 |
| ||
| Total revenues |
|
37,516 |
|
|
28,899 |
| ||
| Expenses |
||||||||
| Oil and gas production costs |
|
12,602 |
|
|
11,079 |
| ||
| Other operating costs |
|
438 |
|
|
337 |
| ||
| Depletion, depreciation and accretion |
|
7,801 |
|
|
7,382 |
| ||
| General and administrative |
|
2,034 |
|
|
2,143 |
| ||
| Total expenses |
|
22,875 |
|
|
20,941 |
| ||
| Income from equity affiliates |
|
306 |
|
|
219 |
| ||
| Operating income |
|
14,947 |
|
|
8,177 |
| ||
| Other (income) expense-net |
|
56 |
|
|
(164 |
) | ||
| Interest expense |
|
4,892 |
|
|
4,944 |
| ||
| Income before income taxes and cumulative effect of change in accounting principle |
|
9,999 |
|
|
3,397 |
| ||
| Income tax expense |
|
3,587 |
|
|
1,225 |
| ||
| Net income before cumulative effect of change in accounting principle |
|
6,412 |
|
|
2,172 |
| ||
| Cumulative effect of change in accounting principle, net of tax |
|
2,297 |
|
|
— |
| ||
| Net income |
$ |
4,115 |
|
$ |
2,172 |
| ||
| Basic net income per common share: |
||||||||
| Net income before cumulative effect of accounting change |
$ |
0.30 |
|
$ |
0.11 |
| ||
| Cumulative effect of accounting change, net of tax |
|
(0.11 |
) |
|
— |
| ||
| Net income |
$ |
0.19 |
|
$ |
0.11 |
| ||
| Diluted net income per common share: |
||||||||
| Net income before cumulative effect of accounting change |
$ |
0.30 |
|
$ |
0.11 |
| ||
| Cumulative effect of accounting change, net of tax |
|
(0.11 |
) |
|
— |
| ||
| Net income |
$ |
0.19 |
|
$ |
0.11 |
| ||
| Weighted average common shares outstanding |
||||||||
| Basic |
|
21,103 |
|
|
19,025 |
| ||
| Diluted |
|
21,589 |
|
|
19,676 |
| ||
The accompanying notes are an integral part of these financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
In thousands – Unaudited
| For the Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Net income |
$ |
4,115 |
|
$ |
2,172 |
| ||
| Other comprehensive income (loss) – net of taxes |
||||||||
| Reclassification adjustments – hedge settlements |
|
(9,021 |
) |
|
(267 |
) | ||
| Change in derivative fair value |
|
5,260 |
|
|
(10,593 |
) | ||
| Change in foreign currency translation adjustment |
|
2,423 |
|
|
(69 |
) | ||
| Comprehensive income (loss) |
$ |
2,777 |
|
$ |
(8,757 |
) | ||
The accompanying notes are an integral part of these financial statements.
6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands – Unaudited
| For the Three Months Ended March 31, |
||||||||
| 2003 |
2002 |
|||||||
| Operating activities: |
||||||||
| Net income |
$ |
4,115 |
|
$ |
2,172 |
| ||
| Charges and credits to net income not affecting cash |
||||||||