Why did this amended 10-K/A get filed, and does it change the financial results?

The amendment refiles Item 8 and Item 14 solely to revise Ernst & Young's Report of Independent Auditors by adding a sentence referencing SFAS No. 121 adopted in 1995, along with a revised auditor consent. The financial statements, figures, and notes are the same as in the original 10-K. Investors should note that the substantive content for 1995 is unchanged.

What caused the sharp drop in 1995 earnings?

The primary cause was a $121.1 million write-down of long-lived assets under SFAS No. 121, triggered by a sustained decline in natural gas and oil prices. The write-down covered $73.9 million of exploration and production properties, $21.2 million of intrastate transmission facilities in energy marketing, $20.8 million of information systems and other distribution assets, and $5.2 million of storage and other transmission assets. Lower operating income in energy marketing and exploration and production also contributed.

Are the 1995 earnings sustainable, given the one-time items?

Probably not entirely. Net income was helped by non-recurring settlements, including the $31.2 million Columbia bankruptcy recovery and about $20 million from state regulatory and Kentucky West settlements, while the write-down was a non-cash charge. The $133.5 million deferred revenue from the tax-credit property sale will be recognized over time as targets are met, which may support future reported income. Core earnings from exploration and production and energy marketing were weak in 1995.

Is the dividend covered by earnings and cash flow?

Not by earnings in 1995. Dividends paid totaled $41.1 million ($1.18 per share), well above the $1.5 million of net income. Operating cash flow of $279.8 million covered the dividend comfortably, but that figure was boosted by working capital changes and the $129.9 million deferred revenue inflow, which is non-cash in nature. Investors should watch whether earnings recover enough to support the payout over the longer term.

How is the balance sheet positioned for 2024 and beyond debt maturities?

Total debt was roughly $550 million at year-end 1995, including $135.0 million of commercial paper in short-term loans and $415.5 million of long-term debt. Notably, the $75 million 8 1/4% debentures mature in July 1996 and are to be retired with new long-term debt proceeds. Short-term borrowings fell by $134.3 million during 1995, and the company had a $500 million five-year revolving credit facility, providing ample liquidity.

EQT 10-K FY1995 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K/A filed April 26, 1996. Cited figures are marked; the original filing is the authoritative source.

Equitable Resources' amended 1995 10-K/A refiles the financial statements solely to revise Ernst & Young's audit report, adding a reference to SFAS No. 121 (Accounting for the Impairment of Long-Lived Assets).

The financial results themselves are unchanged from the original filing. The results show a sharp earnings collapse: net income fell to $1.5 million^a ($0.04 per share) from $60.7 million ($1.76 per share) in 1994. The decline was driven mainly by a $121.1 million non-cash impairment charge, primarily on exploration and production properties, following a sustained drop in gas and oil prices.

Operating income fell to $22.0 million^b from $110.2 million, and the exploration and production and energy marketing segments both posted operating losses. Underlying results were partly cushioned by one-time gains. The company received $31.2 million from the Columbia Gas Transmission bankruptcy settlement, which added about $20.2 million to 1995 net income, and recognized roughly $11.3 million from Pennsylvania PUC-approved direct billing settlements and $8.9 million from a Kentucky West Virginia Gas settlement.

A November 1995 sale of an interest in Appalachian properties that qualify for nonconventional fuels tax credits brought in $133.5 million^c, recorded as deferred revenue to be recognized as performance targets are met. This is a large non-cash balance sheet item that could lift future income. Cash flow from operations rose to $279.8 million, though that figure was boosted by the deferred revenue inflow and a $134.3 million reduction in short-term borrowings.

For investors, the key concerns are the thin earnings base and the dividend. Dividends paid of $41.1 million^d ($1.18 per share) far exceeded 1995 net income, and reported profitability depended heavily on non-recurring settlements. Stockholders' equity declined to $715.1 million from $750.0 million, and total assets were $1.96 billion.

Long-term debt was $415.5 million, with $75 million of 8 1/4% debentures maturing in July 1996 to be refinanced. Although the company's utility and pipeline businesses remain steady, the 1995 write-down and weak exploration and production results raise questions about asset values and the sustainability of earnings and payouts.

02—Key points

Key Highlights

Net income plunged to $1.5 million ($0.04 per share) in 1995 from $60.7 million ($1.76 per share) in 1994, mainly due to a $121.1 million impairment charge that reduced net income by $74.2 million.
Operating revenues rose slightly to $1.43 billion from $1.40 billion, but net operating revenues increased to $514.6 million from $470.4 million, while operating income fell to $22.0 million from $110.2 million.
The company recognized one-time settlement gains in 1995, including $31.2 million from the Columbia Gas bankruptcy (about $20.2 million net income impact), plus $11.3 million from PUC-approved direct billing recoveries and $8.9 million from the Kentucky West Virginia Gas settlement.
A $133.5 million sale of an interest in nonconventional fuels tax credit-eligible Appalachian properties was recorded as deferred revenue, to be recognized in income as performance targets are met.
Dividends paid of $41.1 million ($1.18 per share) exceeded 1995 net income, while operating cash flow rose to $279.8 million, aided by the deferred revenue inflow.
Segment results were weak: exploration and production posted a $13.8 million operating loss and energy marketing a $18.8 million loss, while natural gas distribution ($23.5 million) and transmission ($31.1 million) carried operating income.
The balance sheet remained sizable with total assets of $1.96 billion, equity of $715.1 million, and long-term debt of $415.5 million, while short-term loans were reduced to $135.0 million from $269.3 million.

03—Questions

Frequently Asked Questions

Why did this amended 10-K/A get filed, and does it change the financial results?
The amendment refiles Item 8 and Item 14 solely to revise Ernst & Young's Report of Independent Auditors by adding a sentence referencing SFAS No. 121 adopted in 1995, along with a revised auditor consent. The financial statements, figures, and notes are the same as in the original 10-K. Investors should note that the substantive content for 1995 is unchanged.
What caused the sharp drop in 1995 earnings?
The primary cause was a $121.1 million write-down of long-lived assets under SFAS No. 121, triggered by a sustained decline in natural gas and oil prices. The write-down covered $73.9 million of exploration and production properties, $21.2 million of intrastate transmission facilities in energy marketing, $20.8 million of information systems and other distribution assets, and $5.2 million of storage and other transmission assets. Lower operating income in energy marketing and exploration and production also contributed.
Are the 1995 earnings sustainable, given the one-time items?
Probably not entirely. Net income was helped by non-recurring settlements, including the $31.2 million Columbia bankruptcy recovery and about $20 million from state regulatory and Kentucky West settlements, while the write-down was a non-cash charge. The $133.5 million deferred revenue from the tax-credit property sale will be recognized over time as targets are met, which may support future reported income. Core earnings from exploration and production and energy marketing were weak in 1995.
Is the dividend covered by earnings and cash flow?
Not by earnings in 1995. Dividends paid totaled $41.1 million ($1.18 per share), well above the $1.5 million of net income. Operating cash flow of $279.8 million covered the dividend comfortably, but that figure was boosted by working capital changes and the $129.9 million deferred revenue inflow, which is non-cash in nature. Investors should watch whether earnings recover enough to support the payout over the longer term.
How is the balance sheet positioned for 2024 and beyond debt maturities?
Total debt was roughly $550 million at year-end 1995, including $135.0 million of commercial paper in short-term loans and $415.5 million of long-term debt. Notably, the $75 million 8 1/4% debentures mature in July 1996 and are to be retired with new long-term debt proceeds. Short-term borrowings fell by $134.3 million during 1995, and the company had a $500 million five-year revolving credit facility, providing ample liquidity.

04—Continue

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