Acquisition of Working Interests in Natural Gas Properties

12 Months Ended

Dec. 31, 2012

Acquisition of Working Interests in Natural Gas Properties

2. Acquisition of Working Interests in Natural Gas Properties

On October 31, 2012, Zena Energy LLC, a subsidiary within our Chemical Business, acquired working interests (“Working Interests”) in certain natural gas properties located in Wyoming County, Pennsylvania, within the Marcellus Shale. Our Chemical Business acquired from Clearwater Enterprises, LLC an average working interest of 9.7% (7.7% net revenue interest) in 14 proved, developed producing natural gas wells, 7 proved, developed non-producing natural gas wells and 36 proved undeveloped future drilling locations identified on the leasehold. Our Chemical Business purchases a significant amount of natural gas as a feedstock for the production of anhydrous ammonia. Management considers this acquisition as an economic hedge against a potential rise in natural gas prices in the future for a portion of our future natural gas production requirements. This acquisition was accounted for in accordance with ASC 805 – Business Combinations. The purchase price was approximately $50 million. The purchase price and acquisition-related costs were funded by utilizing cash on hand. Subsequently, we financed a portion of the acquisition price (see discussion in Note 21 – Subsequent Events). Our 2012 operating results include net sales of $1.4 million and pre-tax income of $0.9 million (including $0.2 million of acquisition-related costs classified as SG&A) associated with the Working Interests for the two-month period following the date of acquisition. We report the Working Interests as part of the Chemical Business reportable segment.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

Accounts receivable	$	1,107
Property, plant and equipment		49,317
Total assets acquired		50,424
Accounts payable		126
Noncurrent accrued and other liabilities		79
Total liabilities assumed		205
Net assets acquired	$	50,219

For financial reporting and income tax purposes, no goodwill was recognized relating to this acquisition. In addition, this acquisition did not include any identifiable intangible assets.

The following table summarizes unaudited pro forma information for the periods presented as if the acquisition of the Working Interests occurred on January 1, 2011. These amounts have been calculated after applying our accounting policies and adjusting the results of the Working Interests to reflect the acquisition-related costs in 2011, and after including the impact of adjustments for additional DD&A assuming the acquisition price paid at October 31, 2012 would have been paid at January 1, 2011 and, in each case, the related income tax effects using the respective effective rate in 2012 and 2011.

	2012		2011
	(In Thousands, Except Per Share Amounts)
Net sales—as reported	$	759,031	$	805,256
Net sales—pro forma	$	764,362	$	808,710
Income from continuing operations—as reported	$	58,786	$	83,984
Income from continuing operations—pro forma	$	60,750	$	84,956
Basic income per common share—as reported	$	2.61	$	3.80
Basic income per common share—pro forma	$	2.70	$	3.85
Diluted income per common share—as reported	$	2.49	$	3.58
Diluted income per common share—pro forma	$	2.57	$	3.62

The pro forma results are not necessarily indicative of our operating results had we owned the Working Interests for the entire periods presented.