Chesapeake Energy 1996 Annual Report Download - page 48

action. Results for hedging transactions are reflected in
oil and gas sales to the extent related to the company's oil
and gas production.
Debt Issue Costs
Other assets relate primarily to debt issue costs associ-
ated with the issuance of the 12% Senior Notes on March
31, 1994, the 10.5% Senior Notes on May 25, 1995,
and the 9.125% Senior Notes on April 9, 1996 (see Note
2). The remaining unamortized costs on these issuances
of Senior Notes at June 30, 1996 totaled $8.7 million
and are being amortized over the life of the Senior Notes.
Stock Options
In October 1995, the Financial Accounting Standards
Board issued Statement No. 123 ("SFAS 123"), "Account-
ing for Stock Based Compensation". As permitted by
SFAS 123, the company plans to continue to retain its
current method of accounting for stock compensation
and adopt the disclosure requirements of this Statement
in fiscal 1997.
Reclassification s
Certain reclassifications have been made to the con-
solidated financial statements for the years ended June
30, 1995 and 1994 to conform to the presentation used
for the June 30, 1996 consolidated financial statements.
2. SENIOR NOTES
On April 9, 1996, the company completed an offer-
ing of$ 120 million principal amount of 9.125% Senior
Notes due 2006 ("9.125% Senior Notes"). The 9.125%
Senior Notes are redeemable at the option of the com-
pany at any time at the redemption or make-whole prices
set forth in the indenture. The company may also re-
deem at its option at any time on or prior to April 15,
1999 up to $42 million of the 9.125% Senior Notes at
109.125% of the principal amount thereof with the pro-
ceeds of an equity offering.
On May 25, 1995, the company completed a private
offering of $90 million principal amount of 10.5% Se-
nior Notes due 2002 ("10.5% Senior Notes"). The 10.5%
Senior Notes are redeemable at the option of the com-
pany at any time on or after June 1, 1999. The company
may also redeem at its option any time prior to June 1,
1998 up to $30 million of the 10.5% Senior Notes at
110% of the principal amount thereof with the proceeds
of an equity offering. In September 1995, the company
exchanged the 10.5% Senior Notes for substantially iden-
CHESAPEAKE ENERGY CORPORATION
tical notes in a registered exchange offer (also referred to
as the "10.5% Senior Notes").
On March 31, 1994, the company completed a pri-
vate offering of 47,500 Units consisting of an aggregate
of $47.5 million principal amount of 12% Senior Notes
due 2001 ("12% Senior Notes") and warrants ("War-
rants") to purchase 2,190,937 shares of the company's
Common Stock at an aggregate exercise price of $4,870.
The Warrants were valued at $3 million creating a dis-
count on the 12% Senior Notes. All of the Warrants were
subsequently exercised. In exchange for 8,000 Units, the
company acquired from Trust Company of the West
("TCW") 576,923 shares of the company's 9% cumula-
tive convertible preferred stock and all rights to dividends
thereon, warrants to purchase 1,404,004 shares of the
company's Common Stock and 50% of an outstanding
overriding royalty interest held by TCW. The 12% Se-
nior Notes are redeemable at the option of the company
at any time on or after March 1, 1998 at an initial pre-
mium of 106% of the principal amount thereof, declin-
ing to no premium in 2000. The company is required to
redeem $11,875,000 principal amount of 12% Senior
Notes on each of March 1, 1998, 1999 and 2000. In
November 1994, the company exchanged the 12% Se-
nior Notes for substantially identical notes in a registered
exchange offer (also referred to as the "12% Senior
Notes").
The company is a holding company and owns no
operating assets and has no significant operations inde-
pendent of its subsidiaries. The company's obligations
under the 12% Senior Notes, the 10.5% Senior Notes
and the 9.125% Senior Notes have been fully and un-
conditionally guaranteed, on a joint and several basis, by
each of the company's "Restricted Subsidiaries" (as de-
fined in the respective Indentures governing the Notes):
COT, LOF, STCO, Whitmire Dozer Service, Inc. and
CEX (collectively, the "Subsidiary Guarantors"). The only
subsidiaries of the company that are not Subsidiary Guar-
antors are CGDC and CEMI (together, the "Non-Guar-
antor Subsidiaries"). Each of the Subsidiary Guarantors
is a direct or indirect wholly-owned subsidiary of the
company. The securities of the Subsidiary Guarantors
have been pledged to secure performance of the company's
obligations under the 12% Senior Notes. The only affili-
ate securities constituting a substantial portion of the
collateral for the 12% Senior Notes are the partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS