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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1994
COMMISSION IRS EMPLOYER
FILE STATE OF IDENTIFICATION
NUMBER REGISTRANT INCORPORATION NUMBER
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1-7810 Energen Corporation Alabama 63-0757759
2-38960 Alabama Gas Corporation Alabama 63-0022000
2101 Sixth Avenue North
Birmingham, Alabama 35203
(205) 326-2700
Securities Registered Pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
- ------------------- ----------------------------
Energen Corporation Common Stock, $0.01 par value New York Stock Exchange
Energen Corporation Preferred Stock Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by a check mark whether registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports) and (2) have been subject to
such filing requirements for the past 90 days. YES X NO
----- -----
Indicate by a check mark if disclosure of delinquent files pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ( )
Aggregate market value of the voting stock held by non-affiliates of the
registrants as of November 15, 1994:
Energen Corporation $233,414,500
Indicate number of shares outstanding of each of the registrant's classes of
common stock as of November 15, 1994:
Energen Corporation 10,919,977 shares
Alabama Gas Corporation 1,972,052 shares
DOCUMENTS INCORPORATED BY REFERENCE
- - Energen Corporation Proxy Statement to be filed on or about December
15, 1994 (Part III, Item 10-13)
- - Portions of Energen Corporation 1994 Annual Report to Stockholders are
incorporated by reference into Part II, Items 5, 6, 7, and 8 of this
report
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ENERGEN CORPORATION
1994 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
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PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 8
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 12
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART III
Item 10. Directors and Executive Officers of the Registrants . . . . . . . . . . . . . 12
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . 13
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . 13
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . 13
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This Form 10-K is filed on behalf of Energen Corporation (Energen or the
Company) and Alabama Gas Corporation (Alagasco).
PART I
ITEM 1. BUSINESS
GENERAL
Energen is a diversified energy holding company engaged primarily in the
distribution, exploration, and production of natural gas.
Energen was incorporated in Alabama in 1978 in connection with the
reorganization of its largest subsidiary, Alagasco. Alagasco was formed in
1948 by the merger of Alabama Gas Company into Birmingham Gas Company, the
predecessors of which had been in existence since the late 1800's. Alagasco
became a public company in 1953.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The information required by this item is incorporated by reference from Note 13
to the Consolidated Financial Statements of the 1994 Annual Report to
Stockholders, and is attached herein as Part 1V, Item 14, Exhibit 13.
NARRATIVE DESCRIPTION OF BUSINESS
- - NATURAL GAS DISTRIBUTION
GENERAL: Alagasco, Energen's principal subsidiary, is the largest
natural gas distribution utility in the State of Alabama. Alagasco
purchases natural gas through interstate and intrastate suppliers and
distributes the purchased gas through its distribution facilities for
sale to residential, commercial, industrial and other end-users of
natural gas. Alagasco also provides transportation services to
industrial and commercial customers located on its distribution
system. These transportation customers, acting on their own or using
Alagasco as their agent, purchase gas directly from producers or other
suppliers and arrange for delivery of the gas into the Alagasco
distribution system. Alagasco then charges a fee to transport this
customer-owned gas through its distribution system to the customer's
facility.
Alagasco's service territory is located primarily in central and north
Alabama and includes over 175 communities in 30 counties. Birmingham,
the largest city in Alabama, and Montgomery, the state capital, are
served by Alagasco. The counties in which Alagasco provides service
have an aggregate area of more than 22,000 square miles and include
the service territories of various municipal gas distribution systems.
The aggregate population of the counties served by Alagasco is
estimated to be 2.4 million. During 1994 Alagasco served an average
of 402,531 residential customers, 32,563 small commercial and
industrial customers, and 43 large commercial and industrial
customers. The Alagasco distribution system includes approximately
8,500 miles of main, more than 9,300 miles of service lines,
odorization and regulation facilities, and customer meters. Alagasco
also operates two liquefied natural gas facilities which it uses to
meet peak demands.
APSC REGULATION: As a public utility in the state of Alabama,
Alagasco is subject to regulation by the Alabama Public Service
Commission (APSC), which has adopted several innovative approaches to
rate regulation, including Alabama's Rate Stabilization and
Equalization (RSE) rate-setting process. Implemented in 1983 and
modified in 1985, 1987, and 1990, RSE replaces the traditional utility
rate case
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with APSC-monitored periodic rate adjustments presently designed to
give Alagasco the opportunity to earn an average return on equity
(ROE) at its fiscal year-end within a specified range. Under
Alagasco's current RSE order, which became effective December 1990,
Alagasco's allowed ROE range is 13.15 percent to 13.65 percent. The
APSC conducts quarterly reviews to determine, based on Alagasco's
budget and fiscal year-to-date performance, whether Alagasco's
projected ROE for the fiscal year will be within the allowed range.
Reductions in rates can be made quarterly to bring the projected ROE
within the allowed range. Increases, however, are permitted only once
each fiscal year effective on December 1, and cannot exceed 4 percent
of prior-year revenues.
RSE limits Alagasco's equity upon which a return is permitted to 60
percent of total capitalization and provides for a cost control
measure designed to monitor Alagasco's operations and maintenance (O &
M) expense. If increases in O & M expense per customer fall within
1.25 percent above or below the Consumer Price Index for all Urban
Customers (index range), no adjustment is required. If, however,
increases in O & M expense per customer exceed the index range,
three-fourths of the difference is returned to customers. To the
extent increases in O & M expense per customer are less than the index
range, Alagasco will benefit by one-half of the difference through
future rate adjustments.
Under its terms, Alagasco's current RSE order continues until, after
notice to Alagasco, the APSC votes to either modify or discontinue its
operation. On October 4, 1993, the APSC unanimously voted to defer
review of the current RSE order until such time as certain hearings
mandated by the Energy Policy Act of 1992 (Energy Act) in connection
with integrated resource planning and demand side management programs
are completed. The Energy Act proceedings are expected to conclude
during 1995 at which time it is expected that the Commission will
begin reviewing Alagasco's RSE. No time table for review has yet been
established.
FERC REGULATION: Alagasco's interstate pipeline suppliers, Southern
Natural Gas Company (Southern) and Transcontinental Gas Pipeline
Corporation (Transco), are subject to regulation by the Federal Energy
Regulatory Commission (FERC). Among other things, FERC regulates the
character of services that Southern and Transco can offer and the
rates and fees they can charge Alagasco and other customers for gas
sales and transportation; thus, FERC can directly affect Alagasco's
services and operating expenses.
Effective November 1, 1993, Southern substantially restructured its
services pursuant to FERC Order 636 which required interstate
pipelines to eliminate their role as a merchant of a "bundled" sales
service; Transco unbundled its services prior to fiscal 1994. In place
of the sales service formerly offered, Southern now provides unbundled
contract storage service and various transportation services. As a
result of the shift from merchant to transporter, Southern has and
will incur transition costs, including the cost of buy-outs or
buy-downs of long-term gas supply contracts. These costs, referred to
as Gas Supply Realignment, or GSR, costs are recovered primarily by
Southern from its firm customers, subject to prudence and eligibility
review by FERC, in the form of a surcharge. Alagasco has received
approval from the APSC to pass through the GSR surcharge to Alagasco's
customers through the Gas Supply Adjustment (GSA) rider to Alagasco's
tariff.
In addition, Order 636 required pipelines to change the methodology
used to classify costs between the demand and commodity components for
purposes of cost allocation and rate design from the Modified Fixed
Variable (MFV) to the Straight Fixed Variable (SFV) methodology. The
SFV method recovers more of the pipeline's fixed costs through the
demand component of rates and causes cost shifts from customers with
relatively high load factors to customers with relatively low load
factors. Order 636 required that pipeline customers which were
negatively affected by the use of SFV, such as Alagasco, must be
provided mitigation measures to reduce the rate impact of
restructuring. In accordance with Southern's restructuring order,
Alagasco has been allowed to reduce its capacity demand during the
six-month off-peak period in order to limit the rate impact of the SFV
cost shift to less than 10 percent.
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Alagasco's GSA filing with the APSC, which became effective November
1, 1993, included all of the cost components for restructuring (GSR
costs, mitigation of SFV, lower commodity cost of gas, costs of
storage service, etc.). This adjustment to rates resulted in a modest
rate reduction.
Although Southern commenced its restructured services on November 1,
1993, there remain proceedings pending before FERC and the courts
challenging the Southern restructuring order as well as the Order 636
process generally.
GAS SUPPLY: The Alagasco distribution system is connected to and has
firm transportation contracts with two major interstate pipeline
systems--Southern and Transco. Effective November 1, 1993,
Alagasco's pre-Order 636 contract demand and firm transportation with
Southern converted to 250,924 Mcf (thousand cubic feet) per day of
No-Notice Firm Transportation service for a period of 15 years, 91,946
Mcf per day of Firm Transportation service for 15 years, and 50,000
Mcf per day of Firm Transportation for five years. Southern also
unbundled its existing storage capacity. Alagasco's pro rata share of
this storage is 12,426,687 Mcf. Alagasco has a maximum withdrawal
rate from storage of 250,924 Mcf per day and a maximum injection rate
into storage of 95,590 Mcf per day. The Transco firm transportation
contract, which expires in 2001, provides for maximum daily firm
transportation of up to 100,000 Mcf. Thus the Company has a peak day
firm interstate pipeline transportation capacity of 492,870 Mcf per
day.
Alagasco has replaced the sales service formerly provided by Southern
with purchases from various gas producers and marketers including
affiliates of Southern and Transco and from certain intrastate
producers including Basin Pipeline Corp., an Energen subsidiary.
Alagasco has contracts in place to purchase up to a total of 286,776
Mcf per day of firm supply, of which 271,946 is supported by firm
transportation on the Transco and Southern systems, 14,830 Mcf provides
redundant supply on the Southern system, and 30,000 Mcf is purchased
at the city gate from intrastate suppliers. This volume along with
Alagasco's maximum withdrawal from storage of 250,924 Mcf per day and
200,000 Mcf per day of liquefied natural gas peak shaving capacity
gives Alagasco a peak day firm supply of 722,870 Mcf per day. Alagasco
also utilizes the Southern and Transco pipeline systems to access spot
market gas in order to supplement its firm system supply and serve its
industrial transportation customers.
COMPETITION AND PRICING: The price of natural gas is a significant
marketing factor in the territory served by Alagasco; propane, coal
and fuel oil are readily available, and many major industrial
customers have the capability to switch to alternate fuels. In the
residential and small industrial and commercial markets, electricity
is the principal competitor.
Natural gas service available to Alagasco customers generally falls
into two categories -- interruptible and firm. Interruptible service
is contractually subject to interruption by Alagasco for various
reasons, the most common of which is curtailment of industrial
customers during periods of peak residential heating demand on the
Alagasco system. Firm service is generally not subject to
interruption and, therefore, is more expensive than interruptible
service. Firm service is generally provided to residential and small
commercial and industrial customers. Interruptible service is
generally provided to large commercial and industrial customers which
typically have the capacity to reduce consumption by adjusting their
production schedules or by switching to alternate fuels during periods
of interruption. Deliveries of sales and transportation gas totaled
97,531 MMcf (million cubic feet) in 1994.
Alagasco has a Competitive Fuel Clause as part of its rate tariff
which allows Alagasco to adjust large commercial and industrial prices
on a case-by-case basis to compete with either alternate fuels or
alternate sources of gas. The GSA rider to Alagasco's tariff
increases the rates paid by other customers to recover the reduction
in rates allowed under the Competitive Fuel Clause because the
retention of any customer, particularly large commercial and
industrial, benefits all customers by recovering a portion of the
system's fixed cost. During 1994 approximately 23.9 percent (12,582
MMcf) of Alagasco's deliveries of gas to large commercial and
industrial customers were made under the Competitive Fuel Clause.
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Alagasco also has a Transportation Tariff which allows the Company to
transport gas for customers rather than buying and reselling gas to
them. The Transportation Tariff is based on Alagasco's gas sales
profit margin so that Alagasco's net income is not affected whether it
transports or sells gas. The Transportation Tariff also may be
adjusted under the Competitive Fuel Clause. Of Alagasco's total large
commercial and industrial customer deliveries during 1994, 99.7
percent (37,678 MMcf) was from transportation of customer-owned gas.
GROWTH: Alagasco has supplemented traditional service area growth
with acquisitions of municipally-owned gas distribution systems.
Since 1985 Alagasco has acquired 19 such systems, including the
2,200-customer gas system of Alabaster purchased in early fiscal 1995.
More than 42,000 customers have been added through initial system
purchases and subsequent customer additions, as Alagasco has increased
the relatively low saturation rates in the acquired areas through a
variety of marketing efforts including: offering natural gas service
to propane customers already situated on the municipal system lines;
extending the acquired municipal system into nearby neighborhoods
which desire natural gas service; and marketing natural gas appliances
to existing and new customers. Approximately 80 municipal systems
remain in Alabama, and many are located in or near Alagasco's existing
service territory. The Company is optimistic that additional
acquisition opportunities will arise in the future.
Power generation is a possible avenue of future growth for Alagasco.
During 1994 Alagasco built a nine-mile pipeline to an Alabama Power
Company electric peaking plant in order to provide natural gas to nine
combustion turbine (CT) units scheduled to begin operation in 1995.
The CT units will generate electricity during periods of peak demand,
providing Alagasco with a new substantial summertime load.
WEATHER: Alagasco's gas distribution business is highly seasonal
since a material portion of Alagasco's total sales and delivery
volumes is to customers whose use varies depending upon temperature,
principally residential, small commercial and small industrial
customers. Alagasco's rate tariff includes a temperature adjustment
rider which is designed to mitigate the effect of departures from
normal temperature on Alagasco's earnings. The calculation is
performed monthly and adjustments are made to customer's bills in the
actual month the weather variation occurs.
ENVIRONMENTAL MATTERS: Alagasco is in the chain of title of eight
former manufactured gas plant sites, of which it still owns four, and
five manufactured gas distribution sites, of which it still owns one.
A preliminary investigation of the sites does not indicate the present
need for remediation activities. Management expects that, should
remediation of any such sites be required in the future, Alagasco's
share, if any, of such costs will not materially affect the results of
operations or financial condition of Alagasco.
- - OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
Energen's oil and gas exploration and production activities are
conducted by its subsidiary, Taurus Exploration, Inc. (Taurus), and
involve the exploration for and the production of natural gas and oil
from conventional and nonconventional reservoirs. Taurus's 1994 oil
and gas production totaled 10.3 Bcf (with oil expressed in natural gas
equivalents), and the average sales price was $1.94 per Mcf
equivalent. Conventional oil and gas reserves of 42,261 MMcf
equivalents plus nonconventional gas reserves of 26,712 MMcf combine
for total oil and gas reserves at fiscal year-end of 68,973 MMcf
equivalents.
CONVENTIONAL: Taurus's conventional oil and gas strategy is to build
a foundation of low-risk, income- producing properties through
acquisitions and supplement its returns with exploration activities.
Taurus has agreements with PMC Reserve Acquisition Company and General
Atlantic Resources, Inc. which provide avenues for investment in
producing properties. Taurus is continuing to independently evaluate
other producing property acquisition opportunities. To help ensure a
continuing flow of exploratory prospects, during 1994 Taurus entered
into a multi-year joint venture with King Ranch and Holley Petroleum
Inc.
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which will utilize newly available 3-D seismic data. The new 3-D data
will provide coverage of more than 200 offshore Texas blocks,
representing approximately one million acres of potential leasehold.
Taurus's exploration activities are concentrated in the shallow waters
of the Gulf of Mexico. Four successful discoveries during 1994 added
reserves of 5.3 Bcf equivalents. Proved property acquisitions added
reserves of 1.7 Bcf equivalents.
NONCONVENTIONAL: Taurus's nonconventional gas strategy is to focus on
operating the large projects in which it has a small working interest
and operate for others; supplementing these activities, Taurus also
consults on an international basis. Taurus does not anticipate
additional major project development in the Black Warrior Basin, and
results of an internally generated, comprehensive evaluation of North
America for new coalbed methane exploration opportunities showed that
available opportunities do not meet Taurus's current risk profile.
Taurus does plan, however, to continue its operating and consulting
activities.
At September 30, 1994, Taurus had working interests in 441 coalbed
methane wells and royalty interests in an additional 216 wells, all
located in Alabama's Black Warrior Basin. Gas produced from these
wells through the year 2002 qualifies for the Section 29 tax credit
for producing fuel from nonconventional sources. Net decreases to
coalbed methane reserves in 1994 totaled 3.7 Bcf, and primarily
reflect the effects of lower prices as of September 30, 1994.
Taurus is the operator of more than 950 coalbed methane wells,
including wells in an existing project owned by TECO Coalbed Methane,
Inc., one of Taurus's coalbed methane associates in other projects.
Under the terms of the agreement, Taurus provides technical,
administrative and operating services and receives additional
compensation based on the project's profitability.
During 1994 Taurus signed a multi-year strategic alliance with Conoco,
Inc. designed to enhance both companies' coalbed methane programs.
Taurus will provide consulting and associated services relative to the
acquisition, exploration and development of coalbed methane properties
to complement Conoco's capabilities.
Substantially all of the gas produced from the coalbed methane wells
in which Taurus has an interest is being sold under long-term
contracts which provide markets for 100 percent of the wells'
production capacity and is sold at prices indexed to the monthly Gulf
Coast spot market. Contracts representing approximately one-third of
this gas are subject to price renegotiation during 1995.
ENVIRONMENTAL MATTERS: Taurus is subject to various environmental
regulations. Management believes that Taurus is in compliance with
currently applicable standards of the environmental agencies to which
it is subject and that potential environmental liabilities, if any,
are minimal. Also, to the extent Taurus has operating agreements with
various joint venture partners, environmental costs, if any, would be
shared proportionately.
- - PROPANE SALES
Prior to June 1994, Energen had been involved in the retail propane
distribution business through its subsidiary, W & J Propane Gas, Inc.
(W & J). In June 1994, W & J sold substantially all of its assets.
- - INTRASTATE GAS GATHERING AND TRANSMISSION
Energen operates an intrastate gas pipeline and gathering system
through its subsidiary, Basin Pipeline Corp. (Basin). Basin's
pipeline and gathering facilities primarily serve certain of Taurus's
coalbed methane properties.
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- - COMBUSTION TECHNOLOGY
Prior to May 1994, through its American Heat Tech, Inc. (Heat Tech)
subsidiary, Energen owned a 41 percent equity interest in American
Combustion, Inc. During May 1994, a substantial portion of this
interest was sold leaving Heat Tech with approximately an 8 percent
ownership interest. ACI designs, manufactures and markets high
temperature combustion technology products.
EMPLOYEES
The Company has 1,488 employees; Alagasco employs 1,318; Taurus employs 158;
and Energen's other subsidiaries employ 12.
ITEM 2. PROPERTIES
The corporate headquarters of Energen, Alagasco and Taurus are located in
leased office space in Birmingham, Alabama.
The properties of Alagasco consist primarily of its gas distribution system,
which includes more than 8,500 miles of main, more than 9,300 miles of service
lines, odorization and regulation facilities, and customer meters. Alagasco
also has two liquefied natural gas facilities, 23 commercial offices, nine
service centers, and other related property and equipment, some of which are
leased by Alagasco. Substantially all of Alagasco's fixed assets are subject to
the lien of its first mortgage bonds. The Montgomery, Alabama service center
also serves as collateral for a mortgage note, the terms of which are discussed
in Note 2 to the Consolidated Financial Statements which is incorporated by
reference from the 1994 Annual Report to Stockholders and is included in Part
IV, Item 14, Exhibit 13, herein.
For a description of Taurus's oil and gas properties, see the discussion under
Item 1--Business. Information concerning Taurus's production, reserves and
development is included in Note 15 to the Consolidated Financial Statements
which is incorporated by reference from the 1994 Annual Report to Stockholders
and is included in Part IV, Item 14, Exhibit 13, herein. The proved reserve
estimates are consistent with comparable reserve estimates filed by Taurus with
any federal authority or agency.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than routine litigation
incidental to the Company's business, in which the Company or any of its
subsidiaries is a party. There are no material legal proceedings to which any
officer or director of the Company or any of its subsidiaries is a party or has
a material interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
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EXECUTIVE OFFICERS OF THE REGISTRANTS
ENERGEN CORPORATION
Name Age Position (1)
---- --- ------------
Rex J. Lysinger 57 Chairman of the Board and Chief
Executive Officer (2)
Wm. Michael Warren, Jr. 47 President and Chief Operating Officer (3)
Geoffrey C. Ketcham 43 Executive Vice President, Chief
Financial Officer and Treasurer (4)
Dudley C. Reynolds 41 General Counsel and Secretary (5)
Gary C. Youngblood 51 Executive Vice President of Alagasco (6)
John A. Wallace 50 Senior Vice President--Methane of
Taurus (7)
James T. McManus 36 Vice President--Finance and Corporate
Development (8)
NOTES: (1) All executive officers of Energen have been employed by
Energen for the past five years. Officers serve at the
pleasure of its Board of Directors.
(2) Served as Vice President of Alagasco from July 1975 to January
1977, when he was elected President. Elected President of
Energen upon its formation in 1978. Elected Chairman of the
Board of Energen and its subsidiaries September 1982.
Currently Chairman of the Board and Chief Executive Officer of
Energen and its subsidiaries. Serves as a Director of Energen
and each of its subsidiaries.
(3) Served as Senior Vice President and General Counsel of
Alagasco from September 1983 to October 1984, when he was
elected President and Chief Operating Officer of that
corporation. Elected Executive Vice President of Energen June
1987 and elected President and Chief Operating Officer of
Energen April 1, 1991. Elected President and Chief Operating
Officer of all Energen subsidiaries (except W & J) January
1992. Serves as a Director of Energen and each of its
subsidiaries.
(4) Elected Controller of Alagasco November 1981, Vice President
and Controller June 1984, Vice President--Finance and Planning
of Alagasco June 1985 and Vice President--Planning of Energen
August 1986. Elected Vice President--Finance and Treasurer of
Energen and each of its subsidiaries June 1987. Elected
Senior Vice President--Finance and Treasurer of Energen and
each of its subsidiaries April 1989. Elected Executive Vice
President, Chief Financial Officer and Treasurer of Energen
and each of its subsidiaries April 1, 1991.
(5) Served as Staff Attorney for Energen and its subsidiaries to
November 1, 1984, when he was named Senior Attorney. Elected
Assistant Secretary in 1985 and Secretary effective September
1986. Elected Vice President--Legal and Secretary of Energen
and each of its subsidiaries June 1987. Elected General
Counsel and Secretary of Energen and each of its subsidiaries
April 1, 1991.
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(6) Served as District Manager--Birmingham District until June
1985, when he was elected Vice President--Birmingham
Operations; Elected Senior Vice President--Administration
April 1, 1991. Elected Executive Vice President October 1993.
(7) Served as Manager, Methane Development of Taurus until August
1988, when he was elected Vice President Methane Operations of
Taurus. Elected Vice President Methane Exploration and
Production of Taurus November 1990. Elected Senior Vice
President--Methane of Taurus February 1992.
(8) Served as Director of Corporate Accounting of Energen until
November 1988, when he was elected Controller of Energen;
Elected Controller of Alagasco May 1989. Elected Assistant
Vice President--Corporate Development of Energen June 1990.
Elected Vice President--Finance and Corporate Development of
Energen and Vice President--Finance and Planning of Alagasco
effective April 1, 1991.
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ALABAMA GAS CORPORATION
Name Age Position (1)
---- --- ------------
Rex J. Lysinger 57 Chairman of the Board and Chief
Executive Officer (2)
Wm. Michael Warren, Jr. 47 President and Chief Operating Officer (2)
Geoffrey C. Ketcham 43 Executive Vice President and Chief
Financial Officer (2)
Dudley C. Reynolds 41 General Counsel and Secretary (2)
Gary C. Youngblood 51 Executive Vice President (2)
Roy F. Etheredge 58 Senior Vice President--Operations (3)
T. Irving Hawkins 60 Senior Vice President--Marketing
Services (4)
James T. McManus 36 Vice President--Finance and Planning (2)
Gerald G. Turner 59 Vice President--Rates (5)
NOTES: (1) All executive officers of Alagasco have been employed by
Energen for the past five years. Officers serve at the
pleasure of the Board of Directors.
(2) See discussion of Energen officers above.
(3) Elected Assistant Vice President in 1983, Vice
President--Northern Division in 1984. Elected Vice
President--State Operations in 1985. Elected Senior Vice
President--Operations April 1, 1991.
(4) Served as General Manager--Marketing of Alagasco until August
1, 1982, when he was elected Vice President--Marketing
Services. Elected Senior Vice President--Marketing Services
April 1, 1991.
(5) Served as Director of Rates and Regulations until he was
elected Assistant Vice President--Rates in June 1987. Elected
Vice President--Rates May 1989.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information regarding Energen's common stock and the frequency and amount
of dividends paid during the past two years with respect to such stock is
incorporated by reference from the 1994 Annual Report to Stockholders, page 52,
and is included in Part IV, Item 14, Exhibit 13, herein. At October 29, 1994,
there were approximately 6,000 holders of record of Energen's common stock. For
restrictions on Energen's present and future ability to pay dividends, see Note
2 to the Consolidated Financial Statements which is incorporated by reference
from the 1994 Annual Report to Stockholders and is included in Part IV, Item
14, Exhibit 13, herein.
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At the date of this filing, Energen Corporation owns all the issued and
outstanding common stock of Alabama Gas Corporation.
ITEM 6. SELECTED FINANCIAL DATA
Energen Corporation
The information regarding selected financial data is incorporated by reference
from the 1994 Annual Report to Stockholders, pages 54-55, and is included in
Part IV, Item 14, Exhibit 13, herein.
Alabama Gas Corporation
(unaudited)
==========================================================================================
YEARS ENDED SEPTEMBER 30, 1994 1993 1992 1991 1990
(IN THOUSANDS)
==========================================================================================
Operating revenues $344,637 $330,560 $310,726 $309,128 $310,959
Net income $ 14,896 $ 13,024 $ 12,420 $ 11,970 $ 9,390
Cash dividends on common stock $ 8,695 $ 7,975 $ 7,630 $ 6,994 $ 4,301
Cash dividends on preferred stock $ -- $ 70 $ 85 $ 85 $ 97
- ------------------------------------------------------------------------------------------
Total assets $308,905 $264,548 $258,902 $246,573 $242,814
Long-term debt $ 84,391 $ 43,912 $ 60,979 $ 66,307 $ 69,865
Preferred stock $ -- $ -- $ 1,800 $ 1,800 $ 1,800
==========================================================================================
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information is incorporated by reference from the 1994 Annual Report to
Stockholders and is included in Part IV, Item 14, Exhibit 13, herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item for Energen Corporation and subsidiaries
is incorporated by reference from the 1994 Annual Report to Stockholders and is
included in Part IV, Item 14, Exhibit 13, herein. The information required by
this item for Alabama Gas Corporation is contained in Part IV, Item 14, herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of both Energen and Alagasco is
included in Part I. The other information required by Item 10 is incorporated
herein by reference from Energen's definitive proxy statement for the Annual
Meeting of Stockholders to be held January 25, 1995. The proxy statement will
be filed within 120 days after the end of the fiscal year covered by this Form
10-K. The directors and nominees for director
12
14
of Alagasco are the same as those of Energen except the Alagasco directors do
not have staggered terms, thus the entire Alagasco Board has been nominated for
re-election to an annual term at the Annual Meeting.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation is incorporated herein by
reference from Energen's definitive proxy statement for the Annual Meeting of
Stockholders to be held January 25, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
A. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The information regarding the security ownership of the beneficial
owners of more than five percent of Energen's common stock is
incorporated herein by reference from Energen's definitive proxy
statement for the Annual Meeting of Stockholders to be held January
25, 1995.
B. SECURITY OWNERSHIP OF MANAGEMENT
The information regarding the security ownership of management is
incorporated herein by reference from Energen's definitive proxy
statement for the Annual Meeting of Stockholders to be held January
25, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions is
incorporated herein by reference from Energen's definitive proxy statement for
the Annual Meeting of Stockholders to be held January 25, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS The financial statements listed in the
accompanying Index to Financial Statements and Financial
Statement Schedules are filed as part of this report and are
included in Part IV, Item 14, Exhibit 13, herein.
(2) FINANCIAL STATEMENT SCHEDULES The financial statement
schedules listed in the accompanying Index to Financial
Statements and Financial Statement Schedules are filed as part
of this report.
(3) EXHIBITS The exhibits listed on the accompanying Index to
Exhibits are filed as part of this report.
B. REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the fourth quarter of 1994.
13
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrants have duly caused this report to be signed
on their behalf by the undersigned thereunto duly authorized.
ENERGEN CORPORATION
(Registrant)
ALABAMA GAS CORPORATION
(Registrant)
December 21, 1994 /s/Rex J. Lysinger
- ----------------------- ------------------------------
DATE Rex J. Lysinger
Chairman of the Board, Chief
Executive Officer and Director
14
16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrants
and in the capacities and on the dates indicated:
December 21, 1994 /s/Rex J. Lysinger
- ----------------------- --------------------------------
DATE Rex J. Lysinger
Chairman of the Board, Chief
Executive Officer and Director
December 21, 1994 /s/Wm. Michael Warren, Jr.
- ----------------------- --------------------------------
DATE Wm. Michael Warren, Jr.
President, Chief Operating
Officer and Director
December 21, 1994 /s/Geoffrey C. Ketcham
- ----------------------- --------------------------------
DATE Geoffrey C. Ketcham
Executive Vice President, Chief
Financial Officer and Treasurer
December 21, 1994 /s/James T. McManus
- ----------------------- --------------------------------
DATE James T. McManus
Vice President--Finance and
Corporate Development of Energen
and Vice President--Finance and
Planning of Alagasco
December 21, 1994 /s/Dr. Stephen D. Ban
- ----------------------- --------------------------------
DATE Dr. Stephen D. Ban
Director
December 21, 1994 /s/James S. M. French
- ----------------------- --------------------------------
DATE James S. M. French
Director
December 21, 1994 /s/Harris Saunders, Jr.
- ----------------------- --------------------------------
DATE Harris Saunders, Jr.
Director
December 21, 1994 /s/Dr. Judy M. Merritt
- ----------------------- --------------------------------
DATE Dr. Judy M. Merritt
Director
15
17
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(A)
1. Energen Corporation Reference Page
------------------- ----------------
1994
1994 Annual
10-K Report
-- - ------
A. Financial Statements
Report of Independent Certified Public Accountants . . . . . . . . . . 53
Consolidated statements of income for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . 33
Consolidated balance sheets as of September 30,
1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated statements of shareholders' equity for the year
ended September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . 36
Consolidated statements of cash flows for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . 37
Notes to consolidated financial statements . . . . . . . . . . . . . . 38
B. Financial Statement Schedules
Report of Independent Certified Public Accountants . . . . . . . . . . 39
Schedule V Property, Plant and Equipment . . . . . . . . . . . . . 40
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment . . . . . . . . . . . . . . . . . . . . . . . 43
Schedule VIII Valuation and Qualifying Accounts . . . . . . . . . . . 44
Schedule X Supplementary Income Statement Information . . . . . . 45
16
18
Reference Page
------------------
1994
1994 Annual
10-K Report
-- - ------
2. Alabama Gas Corporation
-----------------------
A. Financial Statements
Report of Independent Certified Public Accounts . . . . . . . . . . . 22
Statements of income for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . 23
Balance sheets as of September 30, 1994 and 1993 . . . . . . . . . . . 24
Statements of retained earnings for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . 26
Statements of cash flows for the years ended
September 30, 1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . 27
Notes to financial statements . . . . . . . . . . . . . . . . . . . . 28
B. Financial Statement Schedules
Schedule V Property, Plant and Equipment . . . . . . . . . . . . . 46
Schedule VI Accumulated Depreciation, Depletion and
Amortization of Property, Plant and
Equipment . . . . . . . . . . . . . . . . . . . . . . . 49
Schedule VIII Valuation and Qualifying Accounts . . . . . . . . . . . 50
Schedule X Supplementary Income Statement Information . . . . . . 51
Schedules other than those listed above are omitted for the reason that they
are not required or are not applicable, or the required information is shown in
the financial statements or notes thereto.
17
19
ENERGEN CORPORATION
ALABAMA GAS CORPORATION
INDEX TO EXHIBITS
ITEM 14(A)(3)
Exhibit
Number Description
- ------- -----------
*3(a) Restated Certificate of Incorporation of Energen Corporation (formerly
Alagasco, Inc.) which was filed as Exhibit 4(a) to Energen's
Registration Statement on Form S-8 (Registration No. 33-14855).
*3(b) Amendment to the Restated Certificate of Incorporation of Energen
Corporation (formerly Alagasco, Inc.) adopted on July 18, 1985, which
was filed as Exhibit 4(b) to Energen's Registration Statement on Form
S-8 (Registration No. 33-14855).
*3(c) Amendment to the Restated Certificate of Incorporation of Energen
Corporation adopted on January 15, 1987, which was filed as Exhibit
4(c) to Energen's Registration Statement on Form S-8 (Registration No.
33-14855).
*3(d) Amendment to the Restated Certificate of Incorporation of Energen
Corporation adopted on January 25, 1989, which was filed as Exhibit
4(d) to Energen's Registration Statement on Form S-3 (Registration No.
33-70464).
*3(e) Composite Restated Certificate of Incorporation of Energen
Corporation, as amended through February 12, 1989, which was filed as
Exhibit 4(e) to Energen's Registration Statement on Form S-3
(Registration No. 33-70464).
*3(f) Certificate of Adoption of Resolutions designating Series A Junior
Participating Preferred Stock (June 27, 1988) which was filed as
Exhibit 4(e) to Energen's Registration Statement on Form S-2
(Registration No. 33-25435).
*3(g) Bylaws of Energen Corporation, which were filed as Exhibit 4(e) to
Energen's Registration Statement on Form S-8 (Registration No.
33-14855).
*3(h) Joint Agreement of Merger, under the name Alabama Gas Corporation
(November 19, 1948), which was filed as Exhibit 4(a) to Alabama Gas'
Registration Statement on Form S-3 (Registration No. 33-12841).
*3(i) Alabama Gas Corporation, Certificate of Amendment to Joint Agreement
of Merger which constitutes the Certificate of Incorporation of said
Corporation (March 13, 1953), which was filed as Exhibit 4(b) to
Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*3(j) Alabama Gas Corporation, Certificate of Amendment to the Certificate
of Incorporation (April 22, 1954), which was filed as Exhibit 4(c) to
Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*3(k) Alabama Gas Corporation, Certificate of Amendment to the Joint
Agreement of Merger, as heretofore amended, which constitutes the
Certificate of Incorporation of Alabama Gas Corporation (January 20,
1959), which was filed as Exhibit 4(d) to Alabama Gas' Registration
Statement on Form S-3 (Registration No. 33-12841).
18
20
*3(l) Alabama Gas Corporation, Certificate of Amendment to the Joint
Agreement of Merger, as heretofore amended, which constitutes the
Certificate of Incorporation of Alabama Gas Corporation (January 26,
1968), which was filed as Exhibit 4(e) to Alabama Gas' Registration
Statement on Form S-3 (Registration No. 33-12841).
*3(m) Alabama Gas Corporation, Certificate of Amendment to the Joint
Agreement of Merger, as heretofore amended, which constitutes the
Certificate of Incorporation of Alabama Gas Corporation (October 16,
1980), which was filed as Exhibit 4(f) to Alabama Gas' Registration
Statement on Form S-3 (Registration No. 33-12841).
*3(n) Articles of Amendment to the Certificate of Incorporation of Alabama
Gas Corporation (October 26, 1984), which was filed as Exhibit 4(g) to
Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*3(o) Articles of Amendment to the Certificate of Incorporation of Alabama
Gas Corporation (December 18, 1986), which was filed as Exhibit 4(h)
to Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*3(p) Composite Joint Agreement of Merger under the name Alabama Gas
Corporation, as Amended March 20, 1986, which was filed as Exhibit
4(i) to Alabama Gas' Registration Statement on Form S-3 (Registration
No. 33-12841).
*3(q) Alabama Gas Corporation, Certificate filed pursuant to Section 33 of
Act Number 414 of the Regular Session of the Legislature of the State
of Alabama (August 26, 1965, reclassifying and authorizing $4.70
Series Cumulative Preferred Stock), which was filed as Exhibit 4(j) to
Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*3(r) By-Laws of Alabama Gas Corporation, which was filed as Exhibit 4(k) to
Alabama Gas' Registration Statement on Form S-3 (Registration No.
33-12841).
*4(a) Rights Agreement, dated as of July 27, 1988, between Energen
Corporation and AmSouth Bank, N.A., Rights Agent, which was filed as
Exhibit 1 to Energen's Registration Statement on Form 8-A (File No.
1-7810).
*4(b) Amendment of Rights Agreement, dated as of February 28, 1990, between
Energen Corporation and AmSouth Bank, N.A., Rights Agent, which was
filed as Exhibit 2 to Energen's Form 8 Amendment No. 2 to its
Registration Statement on Form 8-A (File No. 1-7810).
*4(c) Indenture, dated as of January 1, 1992, between Energen Corporation
and Boatmen's Trust Company, Trustee, which was filed as Exhibit 4 to
Energen's Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 33-44936).
*4(d) Indenture, dated as of March 1, 1993, between Energen Corporation and
Boatmen's Trust Company, Trustee, which was filed as Exhibit 4 to
Energen's to Registration Statement on Form S-3 (Registration No.
33-25435).
*4(e) Ninth Supplemental Indenture, dated as of April 1, 1949, between
Alabama Gas Corporation and Chemical Bank and Trust Company, Trustee,
supplementing, amending, and restating the First Mortgage and Deed of
Trust between Birmingham Gas Company and Chemical Bank and Trust
Company, Trustee, dated April 1, 1941 (filed as Exhibit 7(a)(J) to
Alabama Gas' Form S-1, Registration Statement 2-7910, effective March
26, 1949).
19
21
*4(f) Nineteenth Supplemental Indenture dated as of December 1, 1985,
between Alabama Gas Corporation and Chemical Bank and Trust Company,
Trustee, which was filed as Exhibit 4(o) to Energen's Registration
Statement on Form S-3 (Registration No. 33-70464).
*4(g) Indenture dated as of October 1, 1989, between Alabama Gas Corporation
and Boatmen's Trust Company, Trustee, which was filed as Exhibit 4(l)
to Alabama Gas' Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 33-31400).
*4(h) Indenture dated as of November 1, 1993, between Alabama Gas
Corporation and NationsBank of Georgia, National Association,
Trustee, which was filed as Exhibit 4(k) to Alabama Gas's Registration
Statement on Form S-3 (Registration No. 33-70466).
*10(a) Form of Service Agreement Under Rate Schedule CSS (No. S10710),
between Southern Natural Gas Company and Alabama Gas Corporation as
filed as Exhibit 10(a) to Energen's Annual Report on Form 10-K for the
year ended September 30, 1993.
*10(b) Form of Service Agreement Under Rate Schedule IT (No. 790420), between
Southern Natural Gas Company and Alabama Gas Corporation as filed as
Exhibit 10(b) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(c) Form of Service Agreement Under Rate Schedule FT-NN (No. 866941),
between Southern Natural Gas Company and Alabama Gas Corporation as
filed as Exhibit 10(c) to Energen's Annual Report on Form 10-K for the
year ended September 30, 1993.
*10(d) Form of Service Agreement Under Rate Schedule FT (No. 866940) between
Southern Natural Gas Company and Alabama Gas Corporation as filed as
Exhibit 10(d) to Energen's Annual Report on Form 10-K for the year
ended September 30, 1993.
*10(e) Form of Executive Retirement Supplement Agreement between Energen
Corporation and certain executive officers as filed as Exhibit 10(f)
to Energen's Annual Report on Form 10-K for the year ended September
30, 1993.
10(f) Amendment to Executive Retirement Supplement Agreement effective as of
June 22, 1994, between Energen Corporation and certain executive
officers.
*10(g) Restricted Stock Incentive Plan of Energen Corporation, which was
filed as Exhibit 4 to Post Effective Amendment No. 2 to Energen
Corporation's Registration Statement on Forms S-8 and S-3
(Registration No. 2-89855).
*10(h) Severance Compensation Agreement between Energen Corporation and
certain executive officers, which was filed as Exhibit 10(e) to
Energen's Annual Report on Form 10-K for the year ended September 30,
1992.
*10(i) Energen Corporation 1988 Stock Option Plan as filed as Exhibit 10(i)
to Energen's Annual Report on Form 10-K for the year ended September
30, 1993.
*10(j) Energen Corporation 1992 Long-Range Performance Share Plan, dated as
of October 1, 1991, which was filed as Exhibit A to the Registrant's
Proxy Statement for its January 22, 1992 Annual Meeting (File No.
1-7810).
20
22
*10(k) Energen Corporation 1992 Directors Stock Plan, effective as of January
22, 1992, which was filed as Exhibit B to Energen's Proxy Statement
for its January 22, 1992 Annual Meeting (File No. 1-7810).
*10(l) Energen Corporation Director Fees Deferral Plan as filed as Exhibit
10(l) to Energen's Annual Report on Form 10-K for the year ended
September 30, 1993.
10(m) Energen Corporation Annual Incentive Compensation Plan, Revised 5/90,
as amended effective October 1, 1993.
13 Information incorporated by reference from the Energen Corporation
1994 Annual Report to Stockholders
21 Subsidiaries of Energen Corporation
23(a) Consent of Independent Certified Public Accountants (Energen).
23(b) Consent of Independent Certified Public Accountants (Alagasco).
27.1 Financial Data Schedule of Alabama Gas Corporation (for SEC purposes
only)
27.2 Financial Data Schedule of Energen Corporation (for SEC purposes only)
*Incorporated by reference
21
23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF ALABAMA GAS CORPORATION:
We have audited the financial statements and the financial statement schedules
of Alabama Gas Corporation listed in the index on pages 16 and 17 of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alabama Gas Corporation as of
September 30, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1994, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
As discussed in Note 12 to the financial statements, the Company changed its
method of accounting for certain other postretirement benefits, effective
October 1, 1993, and income taxes effective October 1, 1991.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 26, 1994
22
24
STATEMENTS OF INCOME
ALABAMA GAS CORPORATION
===============================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
===============================================================================================
OPERATING REVENUES $344,637 $330,560 $310,726
- -----------------------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of gas 188,592 187,800 176,411
Operations 72,639 66,196 61,470
Maintenance 9,147 8,781 8,611
Depreciation 17,941 17,206 17,154
Income taxes
Current 10,623 5,407 4,777
Deferred, net (2,418) 1,530 1,945
Deferred investment tax credits, net (487) (528) (535)
Taxes, other than income taxes 26,301 24,196 21,165
- -----------------------------------------------------------------------------------------------
Total operating expenses 322,338 310,588 290,998
- -----------------------------------------------------------------------------------------------
OPERATING INCOME 22,299 19,972 19,728
- -----------------------------------------------------------------------------------------------
OTHER INCOME
Allowance for funds used during construction 465 163 50
Other, net 452 376 238
- -----------------------------------------------------------------------------------------------
Total other income 917 539 288
- -----------------------------------------------------------------------------------------------
INTEREST CHARGES
Interest on long-term debt 6,475 5,532 6,243
Other interest expense 1,845 1,955 1,353
- -----------------------------------------------------------------------------------------------
Total interest charges 8,320 7,487 7,596
- -----------------------------------------------------------------------------------------------
NET INCOME 14,896 13,024 12,420
Less cash dividends on cumulative preferred stock -- 70 85
- -----------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON $ 14,896 $ 12,954 $ 12,335
===============================================================================================
The accompanying Notes to Financial Statements are an integral part of these
statements.
23
25
BALANCE SHEETS
ALABAMA GAS CORPORATION
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993
=============================================================================
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility plant $464,593 $429,115
Less accumulated depreciation 231,327 215,892
- -----------------------------------------------------------------------------
Utility plant, net 233,266 213,223
- -----------------------------------------------------------------------------
Other property, net 183 83
- -----------------------------------------------------------------------------
CURRENT ASSETS
Cash 156 480
Accounts receivable
Gas 22,209 23,563
Merchandise 1,326 1,256
Other 1,512 1,011
Allowance for doubtful accounts (2,000) (1,800)
Inventories, at average cost
Storage gas inventory 24,363 --
Materials and supplies 5,688 5,851
Liquified natural gas in storage 3,349 3,636
Deferred gas costs 1,460 2,966
Deferred income taxes 5,724 2,587
Prepayments and other 2,595 2,520
=============================================================================
Total current assets 66,382 42,070
- -----------------------------------------------------------------------------
DEFERRED CHARGES AND OTHER ASSETS 9,074 9,172
- -----------------------------------------------------------------------------
TOTAL ASSETS $308,905 $264,548
=============================================================================
The accompanying Notes to Financial Statements are an integral part of these
statements.
24
26
BALANCE SHEETS
ALABAMA GAS CORPORATION
================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993
================================================================================================
CAPITAL AND LIABILITIES
CAPITALIZATION
Common shareholder's equity
Common stock, $0.01 par value; 3,000,000 shares authorized,
1,972,052 shares outstanding in 1994 and 1993 $ 20 $ 20
Premium on capital stock 31,682 21,682
Capital Surplus 2,802 2,802
Retained Earnings 81,087 74,886
- ------------------------------------------------------------------------------------------------
Total common shareholder's equity 115,591 99,390
Cumulative preferred stock, $0.01 par value, 120,000 shares
authorized -- --
Long-term debt 84,391 43,912
- ------------------------------------------------------------------------------------------------
Total capitalization 199,982 143,302
- ------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Long-term debt due within one year 2,823 3,193
Notes payable to banks 4,000 29,000
Accounts payable
Other 19,002 18,772
Affiliated companies 132 1,252
Accrued taxes 14,241 8,960
Customers' deposits 17,462 16,717
Supplier refunds due customers 832 740
Other amounts due customers 10,902 4,365
Accrued wages and benefits 5,659 5,261
Other 7,605 4,821
- ------------------------------------------------------------------------------------------------
Total current liabilities 82,658 93,081
- ------------------------------------------------------------------------------------------------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred income taxes 13,704 12,416
Accumulated deferred investment tax credits 4,590 5,077
Regulatory liability 6,960 7,717
Customer advances for construction and other 1,011 751
Other -- 2,204
- ------------------------------------------------------------------------------------------------
Total deferred credits and other liabilities 26,265 28,165
- ------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND LIABILITIES $308,905 $264,548
================================================================================================
The accompanying Notes to Financial Statements are an integral part of these
statements.
25
27
STATEMENTS OF RETAINED EARNINGS
ALABAMA GAS CORPORATION
========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
========================================================================================================
RETAINED EARNINGS AT BEGINNING OF YEAR $74,886 $69,907 $65,202
Add net income 14,896 13,024 12,420
Less cash dividends on common stock 8,695 7,975 7,630
Less cash dividends on preferred stock -- 70 85
- --------------------------------------------------------------------------------------------------------
RETAINED EARNINGS AT END OF YEAR $81,087 $74,886 $69,907
========================================================================================================
The accompanying Notes to Financial Statements are an integral part of these
statements.
26
28
STATEMENTS OF CASH FLOW
ALABAMA GAS CORPORATION
========================================================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
========================================================================================================
OPERATING ACTIVITIES
Net Income $ 14,896 $ 13,024 $ 12,420
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 17,941 17,206 17,154
Deferred income taxes, net (2,418) 1,530 1,945
Deferred investment tax credits (487) (528) (535)
Net change in:
Accounts receivable 896 (3,787) (1,888)
Inventories (23,913) (94) (306)
Accounts payable (890) 3,398 2,017
Other current assets and liabilities 17,268 968 (6,828)
Other, net (2,116) (1,536) (2,986)
- --------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,177 30,181 20,993
- --------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (37,853) (21,743) (20,003)
Net advances (to) from holding company 87 (87) --
Other, net 181 (320) 522
- --------------------------------------------------------------------------------------------------------
Net cash used in investing activities (37,585) (22,150) (19,481)
- --------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payment of dividends on common stock (8,695) (7,975) (7,630)
Payment of dividends on preferred stock -- (70) (85)
Reduction of long-term debt and preferred stock (9,891) (19,500) (4,822)
Proceeds from medium term notes 49,670 -- --
Proceeds from capital contribution 10,000 -- --
Net advances (to) from holding company -- (6,299) 6,050
Net change in short-term debt (25,000) 24,000 5,000
Other, net -- (101) --
- --------------------------------------------------------------------------------------------------------
Net cash used in (provided by) financing activities 16,084 (9,945) 1,487
- --------------------------------------------------------------------------------------------------------
Net change in cash (324) (1,914) 25
Cash at beginning of period 480 2,394 2,369
- --------------------------------------------------------------------------------------------------------
Cash at end of period $ 156 $ 480 $ 2,394
========================================================================================================
The accompanying Notes to Financial Statements are an integral part of these
statements.
27
29
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Alabama Gas Corporation (Alagasco), a wholly-owned subsidiary of Energen
Corporation, is the largest natural gas distribution utility in the State of
Alabama, serving customers primarily in central and north Alabama. The
following is a description of its significant accounting policies and
practices.
A. UTILITY PLANT AND DEPRECIATION
Utility plant is stated at original cost which includes an allowance for funds
used during construction. Maintenance is charged for the cost of normal
repairs and the renewal or replacement of an item of property which is less
than a retirement unit. When property which represents a retirement unit is
replaced or removed, the cost of such property is credited to utility plant
and, together with the cost of removal less salvage, is charged to the
accumulated reserve for depreciation.
Depreciation is provided on the straight-line method over the estimated useful
lives of utility property at rates established by the Alabama Public Service
Commission (APSC). Approved depreciation rates averaged approximately 4.3
percent in 1994 and 1993 and 4.4 percent in 1992.
B. OPERATING REVENUE AND GAS COSTS
In accordance with industry practice, Alagasco records revenue on a monthly and
cycle billing basis. The Company extends credit to its residential and
industrial utility customers which are located primarily in central and north
Alabama. The commodity cost of purchased gas applicable to gas delivered to
customers but not yet billed under the cycle billing method is deferred as a
current asset.
C. INCOME TAXES
Alagasco files a consolidated income tax return with its parent. The
consolidated income taxes are allocated to the appropriate subsidiaries using
the separate return method. Deferred income taxes reflect the impact of
temporary differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes, and are measured in
compliance with enacted tax laws. Investment tax credits have been deferred
and are being amortized over the lives of the related assets.
D. CASH EQUIVALENTS
Alagasco includes highly liquid marketable securities and debt instruments
purchased with an original maturity of three months or less in cash
equivalents.
28
30
2. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt consists of the following:
==============================================================================================
AS OF SEPTEMBER 30, (IN THOUSANDS) 1994 1993
==============================================================================================
First Mortgage Bonds, 11% Series H, due $1,500,000 annually
to January 15, 1999 $ 7,500 $ 9,000
Medium term notes, interest ranging from 5.4% to 7.2%, for notes
redeemable December 1, 1998 to December 15, 2023 50,000 --
9% debentures, due up to $1,200,000 annually to November 1, 2014 28,758 28,758
8.75% debentures, redeemed during fiscal year 1994 -- 8,299
Mortgage note payable, due $30,800 quarterly to April 1, 2002;
interest is variable 956 1,048
- ----------------------------------------------------------------------------------------------
Total 87,214 47,105
Less amounts due within one year 2,823 3,193
- ----------------------------------------------------------------------------------------------
Total $84,391 $43,912
==============================================================================================
Substantially all utility plant serves as collateral for the First Mortgage
Bonds. In addition, utility plant having a net book value of $1,703,000 serves
as collateral for the mortgage note payable which has a variable interest rate
of 1.47 percent above the 91-day U.S. Treasury Bill rate, adjusted quarterly.
The applicable year-end interest rate was 5.66 percent and 4.54 percent for
1994 and 1993, respectively.
The aggregate maturities of long-term debt for the next five years are as
follows:
===============================================================================
YEARS ENDING SEPTEMBER 30, (IN THOUSANDS)
===============================================================================
1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------
$2,823 $2,823 $2,823 $2,823 $8,173
===============================================================================
Alagasco is subject to various restrictions on the payment of dividends. The
most restrictive provision is, under the 9 percent debentures, utility
dividends or other distributions with respect to utility common stock may not
be made unless the utility maintains a consolidated tangible net worth, as
defined, of at least $50 million. At September 30, 1994, Alagasco had a
tangible net worth of $115,364,000.
Energen and Alagasco have short-term credit lines and other credit facilities
of $110 million available to either entity for working capital needs. The
following is a summary of information relating to notes payable to banks:
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31
======================================================================================
AS OF SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
======================================================================================
Amount outstanding $ 4,000 $ 29,000 $ 5,000
Other Energen outstanding 2,000 11,000 --
Available for borrowings 104,000 70,000 70,000
- --------------------------------------------------------------------------------------
Total $110,000 $110,000 $75,000
======================================================================================
Maximum amount outstanding at any month-end $ 60,000 $ 29,000 $25,000
Average daily amount outstanding $ 13,460 $ 23,071 $ 9,087
Weighted average interest rates based on:
Average daily amount outstanding 3.32% 3.41% 4.62%
Amount outstanding at year-end 5.17% 3.35% 3.63%
=======================================================================================
Total interest expense in 1994, 1993 and 1992 was $8,320,000, $7,487,000, and
$7,596,000, respectively.
3. REGULATORY
As an Alabama utility, Alagasco is subject to regulation by the APSC which, in
1983, established the Rate Stabilization and Equalization (RSE) rate-setting
process. RSE was extended for the third time on December 3, 1990, for a
three-year period. Under the terms of that extension, RSE shall continue
after November 30, 1993, unless, after notice to the Company, the Commission
votes to either modify or discontinue its operation. On October 4, 1993, the
Commission unanimously voted to extend RSE until such time as certain hearings
mandated by the Energy Policy Act of 1992 (Energy Act) in connection with
integrated resource planning and demand side management programs are completed.
The Energy Act proceedings are expected to conclude during fiscal 1995 at which
time it is expected that the Commission will begin reviewing Alagasco's RSE.
No time table for review has yet been established.
Under RSE as extended, the APSC conducts quarterly reviews to determine, based
on Alagasco's projections and fiscal year-to-date performance, whether
Alagasco's return on equity for the fiscal year will be within the allowed
range of 13.15 percent to 13.65 percent. Reductions in rates can be made
quarterly to bring the projected return within the allowed range; increases,
however, are allowed only once each fiscal year, effective December 1, and
cannot exceed 4 percent of prior-year revenues. RSE limits the utility's
equity upon which a return is permitted to 60 percent of total capitalization
and provides for certain cost control measures designed to monitor the
Company's operations and maintenance (O&M) expense. If O&M expense per
customer falls within 1.25 percentage points above or below the Consumer Price
Index For All Urban Customers (index range), no adjustment is required. If,
however, O&M expense per customer exceeds the index range, three-quarters of
the difference will be returned to the customers. To the extent O&M expense
per customer is less than the index range, the utility will benefit by one-half
of the difference through future rate adjustments. Effective December 15,
1990, the APSC approved a temperature adjustment to customers' monthly bills to
mitigate the effect of departures from normal temperature on Alagasco's
earnings. The calculation is performed monthly, and the adjustment to
customer's bills is made in the same month the weather variation occurs.
The Company's rate schedules for natural gas distribution charges contained a
Purchased Gas Adjustment (PGA) rider in 1993 which permitted the pass-through
of changes in gas costs to customers. The APSC approved, effective October 4,
1993, the replacement of the PGA rider with the new Gas Supply Adjustment rider
in order to accommodate changes in gas supply purchases resulting from
implementation of FERC Order 636, including gas supply realignment surcharges
imposed by the Company's suppliers.
30
32
In accordance with APSC-directed regulatory accounting procedures, Alagasco in
1989 began returning excess utility deferred taxes which resulted from a
reduction in the federal statutory tax rate from 46 percent to 34 percent using
the average rate assumption method. This method provides for the return to
ratepayers of excess deferred taxes over the lives of the related assets. In
1993 those excess taxes were reduced as a result of a federal tax rate increase
from 34 percent to 35 percent. Approximately $3.1 million of remaining excess
utility deferred taxes is being returned to ratepayers over approximately 16
years.
4. CAPITAL STOCK
Alagasco's authorized common stock consists of 3 million, $0.01 par value
common shares. At September 30, 1994 and 1993, 1,972,052 shares were issued
and outstanding. Alagasco is authorized to issue 120,000 shares of preferred
stock, par value $0.01 per share, in one or more series. On July 30, 1993, all
outstanding shares of Alagasco's $4.70 Series cumulative preferred stock were
redeemed.
5. INCOME TAXES
The components of income taxes consist of the following:
===================================================================================
FOR THE YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
===================================================================================
Taxes estimated to be payable currently:
Federal $ 9,664 $4,911 $4,337
State 959 496 440
- -----------------------------------------------------------------------------------
Total current 10,623 5,407 4,777
- -----------------------------------------------------------------------------------
Taxes deferred:
Federal (2,689) 867 1,230
State (216) 135 180
- -----------------------------------------------------------------------------------
Total deferred (2,905) 1,002 1,410
- -----------------------------------------------------------------------------------
Total income tax expense $ 7,718 $6,409 $6,187
===================================================================================
As discussed in Note 12, Alagasco adopted Statement of Financial Accounting
Standard (SFAS) No. 109 as of October 1, 1991.
Temporary differences which give rise to a significant portion of deferred tax
assets and liabilities for 1994 and 1993 are as follows:
31
33
======================================================================
AS OF SEPTEMBER 30, 1994 (IN THOUSANDS) 1994 1993
======================================================================
Deferred tax assets:
Deferred investment tax credits $ 1,567 $ 1,748
Regulatory liabilities 2,585 2,866
Deferred revenue 403 516
Self-insurance reserve 1,339 842
Unbilled revenue 1,454 1,426
Allowance for uncollectible accounts 878 669
Accrued vacation 981 903
Gas supply realignment costs 1,123 --
Other, net 1,170 430
- ----------------------------------------------------------------------
Subtotal 11,500 9,400
Valuation allowance -- --
- ----------------------------------------------------------------------
Total deferred tax assets $11,500 $ 9,400
======================================================================
Deferred tax liabilities:
Depreciation and basis differences $17,704 $16,893
Pension and other benefit costs 1,457 1,181
Purchased gas adjustment -- 988
Other, net 319 167
- ----------------------------------------------------------------------
Total deferred tax liabilities $19,480 $19,229
======================================================================
No valuation allowance with respect to deferred taxes is deemed necessary, as
the Company anticipates generating adequate future taxable income to realize
the benefits of all deferred tax assets on the balance sheet.
Total income tax expense differs from the amount which would be provided by
applying the statutory federal income tax rate to pretax earnings as
illustrated below:
==========================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
==========================================================================================
Income tax expense at statutory federal income tax rate $7,915 $6,729 $6,298
Increase (decrease) resulting from:
Investment tax credits -- deferred (487) (528) (535)
Return of utility excess deferred taxes (76) (172) --
State income taxes, net of federal income tax benefit 486 412 408
Other, net (120) (32) 16
- ------------------------------------------------------------------------------------------
Total income tax expense $7,718 $6,409 $6,187
==========================================================================================
There were no tax-related balances due from Alagasco to affiliates at September
30, 1994; the tax-related balance due to affiliates from Alagasco as of
September 30, 1993, was $1,239,000, and is included in the amounts payable to
affiliates in Note 13.
32
34
6. RETIREMENT INCOME PLANS AND OTHER BENEFITS
All information presented concerning retirement income and other benefit plans
includes other affiliates of Energen Corporation as well as Alagasco.
Energen has two defined benefit non-contributory pension plans which cover
substantially all employees. Benefits are based on years of service and final
earnings. The Company's policy is to use the "projected unit credit" actuarial
method for funding and financial reporting purposes. The expense (income) for
the plan covering the majority of employees for the years ended September 30,
1994, 1993 and 1992 was $15,000, $(118,000), and $(278,000), respectively. The
expense for the second plan covering employees under labor union agreements for
1994, 1993 and 1992 was $555,000, $557,000 and $503,000, respectively.
The funded status of the plans is as follows:
=====================================================================================================
ASSETS EXCEED ACCUMULATED BENEFITS
AS OF JUNE 30, (IN THOUSANDS) ACCUMULATED BENEFITS EXCEED ASSETS
=====================================================================================================
1994 1993 1994 1993
---- ---- ---- ----
Vested benefits $(48,354) $(46,513) $(12,860) $(12,258)
Nonvested benefits (5,530) (5,403) (2,253) (2,121)
- ----------------------------------------------------------------------------------------------------
Accumulated benefit obligation (53,884) (51,916) (15,113) (14,379)
Effects of salary progression (10,332) (9,803) -- --
- ----------------------------------------------------------------------------------------------------
Projected benefit obligation (64,216) (61,719) (15,113) (14,379)
Fair value of plan assets, primarily
equity and fixed income securities 72,004 73,576 11,863 11,815
Unrecognized net gain 2,646 (434) 1,034 124
Unrecognized prior service cost 46 51 1,554 1,696
Unrecognized net transition obligation (asset) (6,524) (7,332) 452 509
Additional minimum liability -- -- (3,040) (2,329)
- ----------------------------------------------------------------------------------------------------
Accrued pension asset (liability) $ 3,956 $ 4,142 $ (3,250) $ (2,564)
====================================================================================================
At September 30, 1994 and 1993, the discount rate used to measure the projected
benefit obligation was 7.5 percent for both plans, and the annual rate of
salary increase for the salaried plan was 5.5 percent. The expected long-term
rate of return on plan assets was 8.25 percent for both plans in 1994 and 8
percent in 1993.
33
35
The components of net pension costs for 1994, 1993 and 1992 were:
============================================================================================
FOR THE YEARS ENDED SEPTEMBER 30, ASSETS EXCEED ACCUMULATED BENEFITS
(IN THOUSANDS) ACCUMULATED BENEFITS EXCEED ASSETS
============================================================================================
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
Service cost $ 1,873 $ 1,678 $ 1,560 $ 224 $ 187 $ 176
Interest cost on projected
benefit obligation 4,550 4,097 3,807 1,042 1,018 970
Actual return on plan assets (504) (6,858) (6,123) (372) (1,048) (1,116)
Net amortization and deferral (5,904) 965 478 (339) 400 473
- --------------------------------------------------------------------------------------------
Net pension (income) expense $ 15 $ (118) $ (278) $ 555 $ 557 $ 503
============================================================================================
Energen has deferred compensation plan agreements for certain key executives
providing for payments upon retirement, death or disability. The deferred
compensation expense under these agreements for 1994, 1993 and 1992 was
$461,000, $650,000, and $528,000, respectively.
In addition to providing pension benefits, Energen provides certain
post-retirement health care and life insurance benefits. Substantially all of
Energen's employees may become eligible for such benefits if they reach normal
retirement age while working for the Company. In a prior year, the company
adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, with respect to the accrual of such costs for salaried
employees. During fiscal year 1994, the Company adopted SFAS 106 with respect
to such costs for employees under collective bargaining agreements. There is
no cumulative effect on the income statement resulting from the adoption of
SFAS 106 as the Company elected to amortize transition costs over a 20-year
period. On December 6, 1993, the APSC adopted Order 4-3454 which allows the
Company to recover all costs accrued under SFAS 106 through rates.
While the Company has not adopted a formal funding policy, all of its accrued
post-retirement liability was funded at year-end. The expense for salaried
employees for the years ended September 30, 1994, 1993 and 1992 was $2,319,000,
$2,677,000, and $2,439,000, respectively. Prior to 1994, the Company
recognized the cost of providing post-retirement benefits for union employees
on a "pay-as-you-go" basis. These benefits were provided through a
self-insurance arrangement and through insurance companies whose premiums were
based on the benefits paid during the year. In 1994 the expense for union
employees was $3,685,000, an increase of $2,246,000 over what would have been
recognized under the "pay-as-you-go" method. Expense of $982,000 and $882,000
was incurred during 1993 and 1992, respectively. The "projected unit credit"
actuarial method was used to determine the normal cost and actuarial liability.
A reconciliation of the estimated status of the obligation is as follows:
===============================================================================================
AS OF JUNE 30, (IN THOUSANDS) SALARIED EMPLOYEES UNION EMPLOYEES
===============================================================================================
1994 1993 1994 1993
---- ---- ---- ----
Accumulated post-retirement benefit obligation $(21,296) $(23,067) $(24,564) $ --
Plan assets 9,408 6,488 1,248 --
Unamortized amounts 11,751 14,567 21,357 --
- -----------------------------------------------------------------------------------------------
Accrued post-retirement benefit liability $ (137) $ (2,123) $ (1,959) $ --
===============================================================================================
34
36
Net periodic post-retirement benefit cost for the years ended September 30,
1994, 1993 and 1992, included the following:
========================================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) SALARIED EMPLOYEES UNION EMPLOYEES
========================================================================================================
1994 1993 1992 1994 1993 1992
---- ---- ---- ---- ---- ----
Service cost $ 450 $ 464 $ 321 $ 481 $ -- $ --
Interest cost on accumulated post-retirement
benefit obligation 1,726 1,457 1,276 1,920 -- --
Amortization of transition obligation 723 842 842 1,285 -- --
Amortization of actuarial gains and losses -- 49 -- -- -- --
Deferred asset (gain) loss (453) -- -- -- -- --
Actual return on plan assets (127) (135) -- (1) -- --
- --------------------------------------------------------------------------------------------------------
Net periodic post-retirement benefit expense $2,319 $2,677 $2,439 $3,685 $ -- $ --
========================================================================================================
The weighted average health care cost trend rate used in determining the
accumulated post-retirement benefit obligation was 8 percent in 1994 and in
1993 and 8.5 percent in 1992. That assumption has a significant effect on the
amounts reported. For example, with respect to salaried employees, increasing
the weighted average health care cost trend rate by 1 percent would increase
the accumulated post-retirement benefit obligation by 3.8 percent and the net
periodic post-retirement benefit cost by 4.7 percent. For union employees
increasing the weighted average health care cost trend rate by 1 percent with
respect to union employees would increase the accumulated post-retirement
benefit obligation by 5.8 percent and the net periodic post-retirement benefit
cost by 5.4 percent. The weighted average discount rate used in determining the
accumulated post-retirement benefit obligation was 7.5 percent in 1994 and 1993
and 8 percent in 1992.
Energen has a long-term disability plan covering most salaried employees.
Expense for the years ended September 30, 1994, 1993 and 1992 was $150,000,
$129,000, and $129,000, respectively.
7. COMMITMENTS
Alagasco has various firm gas supply and firm gas transportation contracts,
which expire at various dates through the year 2008. These contracts typically
contain minimum demand charge obligations on the part of Alagasco.
In January 1989, Alagasco entered into an agreement with a financial
institution whereby it can sell on an ongoing basis, with recourse, certain
installment receivables related to its merchandising program up to a maximum of
$15 million. During 1994 and 1993, Alagasco sold $6,784,000 and $5,608,000,
respectively, of installment receivables. At September 30, 1994 and 1993, the
balance of these installment receivables was $13,027,000 and $11,699,000,
respectively. Receivables sold under this agreement are considered financial
instruments with off-balance-sheet risk. Alagasco's exposure to credit loss in
the event of non-performance by customers is represented by the balance of
installment receivables.
35
37
8. LEASES
Total payments related to leases included as operating expense in the
accompanying statements of income amounted to $2,147,000, $2,332,000, and
$2,447,000 in 1994, 1993 and 1992, respectively. Minimum future rental
payments (in thousands) required after 1994 under leases with initial or
remaining noncancelable lease terms in excess of one year are as follows:
======================================================================================
1995 1996 1997 1998 1999 2000 and thereafter
======================================================================================
$1,758 $1,694 $475 $75 $76 $173
======================================================================================
9. ENVIRONMENTAL MATTERS
Alagasco is in the chain of title of eight former manufactured gas plant sites,
of which it still owns four, and five manufactured gas distribution sites, of
which it still owns one. A preliminary investigation of the sites does not
indicate the present need for remediation activities. Management expects that,
should remediation of any such sites be required in the future, Alagasco's
share, if any, of such costs will not materially affect the results of
operations or financial condition of Alagasco.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information concerning cash flow activities is as follows:
===================================================================================
FOR THE YEAR ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
===================================================================================
Interest paid, net of amount capitalized $7,762 $8,726 $8,829
Income taxes paid $9,097 $5,844 $6,823
Noncash investing activities:
Capitalized depreciation $ 155 $ 187 $ 175
Allowance for funds used during construction $ 465 $ 163 $ 50
Noncash financing activities (debt issuance costs) $ 330 $ -- $ --
===================================================================================
36
38
11. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following data summarize operating results for the four quarters of 1994
and 1993. Alagasco's business is seasonal in character and strongly influenced
by weather conditions.
===================================================================================
1994 FISCAL QUARTERS
(IN THOUSANDS) FIRST SECOND Third Fourth
===================================================================================
Operating revenues $78,993 $158,268 $66,070 $41,306
Operating income (loss) $ 2,945 $ 18,485 $ 3,580 $(2,711)
Net income (loss) available for common $ 696 $ 16,688 $ 1,799 $(4,287)
===================================================================================
===================================================================================
1993 FISCAL QUARTERS
(IN THOUSANDS) FIRST SECOND Third Fourth
===================================================================================
Operating revenues $76,866 $142,314 $69,452 $41,928
Operating income (loss) $ 2,553 $ 17,207 $ 2,693 $(2,481)
Net income (loss) available for common $ 864 $ 15,299 $ 1,016 $(4,225)
===================================================================================
12. ACCOUNTING CHANGE
As discussed more fully in Note 6, the Company adopted SFAS 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, with respect to the
accrual of such costs for all employees under labor union agreements effective
October 1, 1993. The Company adopted SFAS 106 with respect to salaried
employees in a prior year.
Effective October 1, 1991, Alagasco elected early adoption of SFAS No. 109,
Accounting for Income Taxes, which was required to be adopted no later than its
fiscal year ending September 30, 1994. Changes in Alagasco's deferred income
taxes arising from the adoption have no effect on income, since the changes
represent income taxes returnable through future rates over the life of the
related assets and have been recorded as a regulatory liability on the balance
sheets.
13. TRANSACTIONS WITH RELATED PARTIES
Alagasco purchased natural gas from affiliates amounting to $4,134,000,
$4,874,000, and $6,332,000, in 1994, 1993, and 1992, respectively. These
amounts are included in gas purchased for resale. Alagasco had payables to
affiliates of $132,000 at September 30, 1994, and $1,252,000 at September 30,
1993.
37
39
14. FINANCIAL INSTRUMENTS
In accordance with the requirements of SFAS No. 107 (Disclosures about Fair
Value of Financial Instruments), the estimated fair values of Alagasco's
financial instruments at September 30, 1994, were as follows:
======================================================================
Carrying Fair
AS OF SEPTEMBER 30, 1994 (IN THOUSANDS) Amount Value
======================================================================
Cash and cash equivalents $ 156 $ 156
Receivables, net of allowance account $23,047 $23,047
Short-term debt $ 4,000 $ 4,000
Long-term debt (including current maturities) $87,214 $81,021
======================================================================
The following methods and assumptions were used to estimate the fair value of
financial instruments:
- - CASH AND CASH EQUIVALENTS: Fair value was considered to be the same
as the carrying amount.
- - RECEIVABLES: The Company believes that, in the aggregate, current and
non-current net receivables were not materially different from the
fair value of those receivables.
- - SHORT-TERM DEBT: The fair value was determined to be the same as the
carrying amount.
- - LONG-TERM DEBT: The fair value of fixed-rate long-term debt was based
on the market value of debt with similar maturities and with interest
rates currently trading in the marketplace; the carrying amount of
variable rate long-term debt was assumed to approximate fair value.
38
40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF ENERGEN CORPORATION:
Our report on the consolidated financial statements of Energen Corporation and
subsidiaries has been incorporated by reference in this Form 10-K from page 53
of the 1994 Annual Report to Stockholders of Energen Corporation and
subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedules listed in the index
on page 16 and 17 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects the information required to be
included therein.
Coopers & Lybrand L.L.P.
Birmingham, Alabama
October 26, 1994
39
41
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ENERGEN CORPORATION AND SUBSIDIARIES
(In thousands)
=========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1993 AT COST OR SALES CHANGES 1994
=========================================================================================
UTILITY PLANT:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 98 -- -- -- 98
Storage plant 14,072 1,094 19 -- 15,147
Transmission plant 21,556 5,401 12 -- 26,945
Distribution plant 318,485 18,566 1,121 527 336,457
General plant 53,478 8,596 2,191 53 59,936
Construction in process 2,589 4,638 -- -- 7,227
Utility plant purchased 1,086 178 -- (1,264) --
Acquisition adjustment 17,432 -- -- 1,032 18,464
- -----------------------------------------------------------------------------------------
Total utility plant 429,115 38,473 3,343 348 464,593
OIL AND GAS PROPERTIES 86,077 6,456 178 -- 92,355
OTHER 21,172 1,234 8,346 -- 14,060
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $536,364 $46,163 $11,867 $ 348 $571,008
=========================================================================================
40
42
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ENERGEN CORPORATION AND SUBSIDIARIES
(In thousands)
=========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1992 AT COST OR SALES CHANGES 1993
=========================================================================================
UTILITY PLANT:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 1,194 -- 1,096 -- 98
Storage plant 14,020 83 31 -- 14,072
Transmission plant 21,425 16 -- 115 21,556
Distribution plant 305,054 14,818 1,272 (115) 318,485
General plant 50,818 4,156 1,496 -- 53,478
Construction in process 655 1,934 -- -- 2,589
Utility plant purchased -- 1,086 -- -- 1,086
Acquisition adjustment 17,432 -- -- -- 17,432
- -----------------------------------------------------------------------------------------
Total utility plant 410,917 22,093 3,895 -- 429,115
OIL AND GAS PROPERTIES 65,622 21,052 597 -- 86,077
OTHER 21,020 891 739 -- 21,172
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $497,559 $44,036 $5,231 $ -- $536,364
=========================================================================================
41
43
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ENERGEN CORPORATION AND SUBSIDIARIES
(In thousands)
=========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1991 AT COST OR SALES CHANGES 1992
=========================================================================================
UTILITY PLANT:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 1,211 -- 17 -- 1,194
Storage plant 12,777 1,243 -- -- 14,020
Transmission plant 20,863 -- 7 569 21,425
Distribution plant 291,967 13,659 930 358 305,054
General plant 48,659 4,045 2,111 225 50,818
Construction in process 381 274 -- -- 655
Utility plant purchased -- 1,007 -- (1,007) --
Acquisition adjustment 17,187 -- -- 245 17,432
- -----------------------------------------------------------------------------------------
Total utility plant 393,364 20,228 3,065 390 410,917
OIL AND GAS PROPERTIES 82,678 1,397 18,453 -- 65,622
OTHER 21,000 1,133 1,113 -- 21,020
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $497,042 $22,758 $22,631 $ 390 $497,559
=========================================================================================
42
44
SCHEDULE VI -- ACCUMULATED DEPRECIATION
ENERGEN CORPORATION AND SUBSIDIARIES
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
UTILITY PLANT
Balance at beginning of year $215,892 $202,684 $187,490
- -----------------------------------------------------------------------------
Additions:
Charged to expense:
Operation 309 500 508
Depreciation 16,781 15,876 15,826
Charged to clearing accounts 221 208 200
Contribution received 521 136 717
Plant acquisition 348 -- 389
Acquisition adjustment -- -- --
Acquisition adjustment amortization 851 830 820
- -----------------------------------------------------------------------------
19,031 17,550 18,460
- -----------------------------------------------------------------------------
Retirements or sales, including removal
costs, less salvage (3,596) (4,342) (3,266)
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $231,327 $215,892 $202,684
=============================================================================
OIL AND GAS PROPERTIES
Balance at beginning of year $ 35,150 $ 29,485 $ 27,023
Additions charged to expense 8,080 5,852 6,157
Retirements (178) (187) (3,695)
Other changes -- -- --
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 43,052 $ 35,150 $ 29,485
=============================================================================
OTHER
Balance at beginning of year $ 12,225 $ 10,760 $ 8,990
Additions charged to expense 1,907 2,072 2,813
Retirements (4,685) (607) (1,043)
Other changes -- -- --
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 9,447 $ 12,225 $ 10,760
=============================================================================
43
45
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
ENERGEN CORPORATION AND SUBSIDIARIES
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance at beginning of year $1,927 $1,927 $1,943
- -----------------------------------------------------------------------------
Additions:
Charged to income: 1,825 1,656 1,419
Recoveries and adjustments 153 81 120
- -----------------------------------------------------------------------------
1,978 1,737 1,539
- -----------------------------------------------------------------------------
Less uncollectible accounts written off 1,868 1,737 1,555
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $2,037 $1,927 $1,927
=============================================================================
44
46
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
ENERGEN CORPORATION AND SUBSIDIARIES
CHARGED TO COSTS AND EXPENSES
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
TAXES, OTHER THAN PAYROLL AND INCOME TAXES
Utility:
City privilege $12,479 $11,350 $ 8,903
Gross receipts 7,539 7,190 6,770
Other 3,066 2,500 2,457
Oil and gas 991 955 719
Other 159 199 178
- -----------------------------------------------------------------------------
TOTAL $24,234 $22,194 $19,027
=============================================================================
Other items related to Schedule X are omitted, as the required information is
included in the financial statements or notes thereto or are not present in
amounts sufficient to require inclusion.
45
47
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ALABAMA GAS CORPORATION
(In thousands)
========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1993 AT COST OR SALES CHANGES 1994
========================================================================================
Utility Plant:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 98 -- -- -- 98
Storage plant 14,072 1,094 19 -- 15,147
Transmission plant 21,556 5,401 12 -- 26,945
Distribution plant 318,485 18,566 1,121 527 336,457
General plant 53,478 8,596 2,191 53 59,936
Construction in process 2,589 4,638 -- -- 7,227
Utility plant purchased 1,086 178 -- (1,264) --
Acquisition adjustment 17,432 -- -- 1,032 18,464
- -----------------------------------------------------------------------------------------
Total utility plant 429,115 38,473 3,343 348 464,593
Other property 83 101 -- (1) 183
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $429,198 $38,574 $3,343 $ 347 $464,776
=========================================================================================
46
48
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ALABAMA GAS CORPORATION
(In thousands)
=========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1992 AT COST OR SALES CHANGES 1993
=========================================================================================
Utility Plant:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 1,194 -- 1,096 -- 98
Storage plant 14,020 83 31 -- 14,072
Transmission plant 21,425 16 -- 115 21,556
Distribution plant 305,054 14,818 1,272 (115) 318,485
General plant 50,818 4,156 1,496 -- 53,478
Construction in process 655 1,934 -- -- 2,589
Utility plant purchased -- 1,086 -- -- 1,086
Acquisition adjustment 17,432 -- -- -- 17,432
- -----------------------------------------------------------------------------------------
Total utility plant 410,917 22,093 3,895 -- 429,115
Other property 69 14 -- -- 83
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $410,986 $22,107 $3,895 $ -- $429,198
=========================================================================================
47
49
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
ALABAMA GAS CORPORATION
(In thousands)
========================================================================================
BALANCE BALANCE
OCT. 1, ADDITIONS RETIREMENTS OTHER SEPT. 30,
CLASSIFICATION 1991 AT COST OR SALES CHANGES 1992
========================================================================================
Utility Plant:
Organization and other
intangible plant $ 319 $ -- $ -- $ -- $ 319
Manufactured gas production
plant 1,211 -- 17 -- 1,194
Storage plant 12,777 1,243 -- -- 14,020
Transmission plant 20,863 -- 7 569 21,425
Distribution plant 291,967 13,659 930 358 305,054
General plant 48,659 4,045 2,111 225 50,818
Construction in process 381 274 -- -- 655
Utility plant purchased -- 1,007 -- (1,007) --
Acquisition adjustment 17,187 -- -- 245 17,432
- -----------------------------------------------------------------------------------------
Total utility plant 393,364 20,228 3,065 390 410,917
Other property 70 -- -- (1) 69
- -----------------------------------------------------------------------------------------
TOTAL PROPERTY, PLANT
AND EQUIPMENT $393,434 $20,228 $3,065 $ 389 $410,986
=========================================================================================
48
50
SCHEDULE VI -- ACCUMULATED DEPRECIATION
ALABAMA GAS CORPORATION
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
UTILITY PLANT
Balance at beginning of year $215,892 $202,684 $187,490
- -----------------------------------------------------------------------------
Additions:
Charged to expense:
Operation 309 500 508
Depreciation 16,781 15,876 15,826
Charged to clearing accounts 221 208 200
Contribution received 521 136 717
Plant acquisition 348 -- 389
Acquisition adjustment -- -- --
Acquisition adjustment amortization 851 830 820
- -----------------------------------------------------------------------------
19,031 17,550 18,460
- -----------------------------------------------------------------------------
Retirements or sales, including removal
costs, less salvage (3,596) (4,342) (3,266)
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $231,327 $215,892 $202,684
=============================================================================
49
51
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
ALABAMA GAS CORPORATION
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Balance at beginning of year $1,800 $1,800 $1,800
- -----------------------------------------------------------------------------
Additions:
Charged to income: 1,805 1,613 1,370
Recoveries and adjustments 263 78 113
- -----------------------------------------------------------------------------
2,068 1,691 1,483
- -----------------------------------------------------------------------------
Less uncollectible accounts written off 1,868 1,691 1,483
- -----------------------------------------------------------------------------
BALANCE AT END OF YEAR $2,000 $1,800 $1,800
=============================================================================
50
52
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
ALABAMA GAS CORPORATION
CHARGED TO COSTS AND EXPENSES
=============================================================================
YEARS ENDED SEPTEMBER 30, (IN THOUSANDS) 1994 1993 1992
=============================================================================
TAXES, OTHER THAN PAYROLL AND INCOME TAXES
Utility:
City privilege $12,479 $11,350 $ 8,903
Gross receipts 7,539 7,190 6,770
Other 3,066 2,500 2,457
- -----------------------------------------------------------------------------
TOTAL $23,084 $21,040 $18,130
=============================================================================
Other items related to Schedule X are omitted, as the required information is
included in the financial statements or notes thereto or are not present in
amounts sufficient to require inclusion.
51