Amendments Have No Effect on Cash Flow, Total Assets, Total Liabilities And
Total Stockholders' Equity (Deficit) but Increases Non-Cash Earnings
HOUSTON, Dec. 31 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) reported
today that it has been advised by its outside auditors that their earlier
advice regarding the Company's treatment of the adoption of Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
("SFAS No. 133") was incorrect. Accordingly, the Company has restated its
2001 quarterly financial statements and has filed amended Forms 10-Q/A with
the Securities and Exchange Commission.
Upon adoption of SFAS No. 133 on January 1, 2001, the Company recorded a
liability of $43.8 million representing the fair market value of its
derivative instruments. All of the Company's derivative instruments that
existed at January 1, 2001 were scheduled to expire during the first quarter
of 2001 or were terminated in connection with the Company's emergence from
Chapter 11 in February 2001. The Company elected not to designate its
existing derivatives as hedges and reported the $43.8 million ($28.5 million
after-tax) currently through earnings, as a cumulative effect of an accounting
change.
The outside auditors now believe that the Company's initial adoption of
SFAS No. 133 was incorrectly reported through earnings as a traditional
cumulative-effect type component of net income at January 1, 2001. Rather,
the outside auditors have advised the Company that their current view is that
SFAS No. 133 requires the Company's derivative instruments that had been
designated as cash flow hedges under accounting principles generally accepted
prior to the initial application of SFAS No. 133 continue to be accounted for
as cash flow hedges with a transition adjustment reported as a cumulative-
effect-type adjustment to accumulated other comprehensive income, a component
of stockholders' equity, and not recognized currently through earnings.
Under the provisions of SFAS No. 133, if a derivative instrument accounted
for as a flow hedge is sold, terminated or exercised, the net gain or loss
shall remain in accumulated other comprehensive income and be reclassified
into earnings in the same period or periods during which the hedged
anticipated transaction affects earnings. Accordingly, even though all of the
Company's derivatives that existed at January 1, 2001 either expired or were
terminated during the first quarter of 2001, accumulated other comprehensive
income will be reclassified into earnings over the original term of the
derivative instruments, which extended through August 2005. For the quarters
ended March 31, 2001, June 30, 2001 and September 30, 2001, the components of
accumulated comprehensive income attributable to this reclassification were,
respectively, $16.9 million, $15.6 million and $14.2 million (after tax) of
the loss realized upon termination of derivative instruments.
The restatement has no effect on cash flow, total assets, total
liabilities and total stockholders' equity (deficit) but does have a non-cash
impact on earnings as outlined below:
Condensed Statement of Consolidated
Operations for the Three Months Ended
March 31, 2001 Restated As Reported Change
Oil and gas revenues $56,673 $74,476 $(17,803)
Federal and state income tax benefit 6,231 - 6,231
Cumulative effect of accounting change,
net of tax - (28,451) 28,451
Net Income 40,980 24,101 16,879
Basic earnings per share of common stock 1.38 0.81 0.57
Diluted earnings per share of common stock 1.21 0.71 0.50
Condensed Consolidated Balance Sheet
at March 31, 2001
Current assets 83,074 83,074 -
Current liabilities 42,838 42,838 -
Retained (deficit) earnings (208,174) (225,053) 16,879
Accumulated other comprehensive income (16,782) 97 (16,879)
Total common stockholders'
(deficit) equity (85,524) (85,524) -
Condensed Statement of Consolidated Cash
Flows for the Three Months Ended
March 31, 2001
Net cash provided by operating
activities 137,999 137,999 -
Net Increase in cash and cash
equivalents 4,671 4,671 -
Condensed Statement of Consolidated
Operations for the Three Months
Ended June 30, 2001 Restated As Reported Change
Oil and gas revenues $48,561 $50,588 $(2,027)
Net income 19,228 20,546 $(1,318)
Basic earnings per share of common
stock 0.63 0.68 $(0.05)
Diluted earnings per share of common
stock 0.48 0.51 $(0.03)
Condensed Statement of Consolidated
Operations for the Six Months Ended
June 30, 2001
Oil and gas revenues 105,234 125,064 (19,830)
Federal and state income tax benefit 6,940 - 6,940
Cumulative effect of accounting change,
net of tax - (28,451) 28,451
Net income 60,208 44,647 15,561
Basic earnings per share of common
stock 2.01 1.49 0.52
Diluted earnings per share of common
stock 1.62 1.20 0.42
Condensed Consolidated Balance Sheet at
June 30, 2001
Current assets 72,102 72,102 -
Current liabilities 52,730 52,730 -
Retained (deficit) earnings (189,276) (204,837) 15,561
Accumulated other comprehensive
income (14,564) 997 (15,561)
Total common stockholders' (deficit)
equity (60,244) (60,244) -
Condensed Statement of Consolidated
Cash Flows for the Six Months Ended
June 30, 2001
Net cash provided by operating
activities 163,028 163,028 -
Net decrease in cash and cash
equivalents (8,917) (8,917) -
Restated As Reported Change
Condensed Statement of
Consolidated Operations
for the Three Months
Ended September 30, 2001
Oil and gas revenues $38,747 $40,774 $(2,027)
Net income 8,999 10,317 (1,318)
Basic earnings per share
of common stock 0.27 0.31 (0.04)
Diluted earnings per share
of common stock 0.22 0.26 (0.04)
Condensed Statement of
Consolidated Operations
for the Nine Months ended
September 30, 2001
Oil and gas revenues 143,981 165,838 (21,857)
Federal and state income
tax benefit 7,649 -- 7,649
Cumulative effect of
accounting change,
net of tax -- (28,451) 28,451
Net income 69,207 54,964 14,243
Basic earnings per
share of common stock 2.23 1.77 0.46
Diluted earnings per share
of common stock 1.81 1.44 0.37
Condensed Consolidated Balance
Sheet September 30, 2001
Current assets 62,312 62,312 --
Current liabilities 48,745 48,745 --
Retained (deficit) earnings (180,525) (194,768) 14,243
Accumulated other
comprehensive income (10,492) 3,751 (14,243)
Total common stockholders'
(deficit) equity (38,188) (38,188) --
Condensed Statement of
Consolidated Cash Flows
for the Nine Months Ended
September 30, 2001
Net cash provided by
operating activities 174,194 174,194 --
Net decrease in cash and
cash equivalents (14,837) (14,837) --
KCS is an independent energy company engaged in the acquisition,
exploration and production of natural gas and crude oil with operations in the
Mid-Continent and Gulf Coast regions. The Company also purchases reserves
(priority rights to future delivery of oil and gas) through its Volumetric
Production Payment program. For more information on KCS Energy, Inc., please
visit the Company's web site at http://www.kcsenergy.com .
This press release contains forward-looking statements that involve a
number of risks and uncertainties. Among the important factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements are delays and difficulties in developing currently
owned properties, the failure of exploratory drilling to result in commercial
wells, delays due to the limited availability of drilling equipment and
personnel, fluctuations in oil and gas prices, general economic conditions and
the risk factors detailed from time to time in the Company's periodic reports
and registration statements filed with the Securities and Exchange Commission.
SOURCE KCS Energy, Inc.
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Related links:
http://www.kcsenergy.com
CONTACT:
James W. Christmas, President and CEO, of KCS
Energy, +1-713-877-8006; or General Info, Marilynn Meek,
+1-212-445-8451, Media, Judith Sylk-Siegel, +1-212-445-8431, or
Analysts, Beth Lewis, +1-617-369-9242, all of FRB Weber Shandwick
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