Mini Case This Mini Case is available in MyFinanceLab. Phillips Petroleum is an integrated oil and gas company with headquarters in Bartlesville Oklahoma, where it was founded in 1917. The company engages in petroleum explora. tion and production worldwide. In addition, it engages in natural gas gathering and pro- cessing, as well as petroleum refining and marketing primarily in the United States. The company has three operating groups: Exploration and Production, Gas and Gas Liquids. and Downstream Operations, which encompasses Petroleum Products and Chemicals. UAAPIER 14. Short-Term Financial Planning 485 In the mid-1980s, Phillips engaged i takeover attempts, one led by T. Boone ructuring resulted in a $4 5 billion plan to exchange a packas curities for roughly half the company's shares and to se Phillips's long-term debt increase illips engaged in a major restructuring following two failed e led by T. Boone Pickins and the other by Carl Ichan. The re- billion plan to exchange a package of cash and debt se ompany's shares and to sell $2 billion worth of assets. of increased from $3.4 billion in late 1984 to a peak of $8.6 billion April 1998-term half the billion ple Pickins and structuring for During 1992, Phillips was able to strengther Its subsidiary Phillips Gas Company A 9.32% cumulative preferred stoc reductions, the company lowered its long-ter ing 5 years from 75 percent to 55 percent. In ada dollars of its debt at reduced rates. A company spokesman said, ratio is still on the high side, and we'll ke debt is manageable, and we're bey else we do. *** ps was able to strengthen its financial structure dramatically. Ps Gas Company completed an offering of $345 million of Series cumulative preferred stock. As a result of this action and prior years do company lowered its long-term debt-to-capital ratio over the preced- percent to 55 percent. In addition, the firm refinanced over a billion rates. A company spokesman said, "Our debt-to-capital on the high side, and we'll keep working to bring it down. But the cost of Seable, and we're beyond the point where debt overshadows everything ighlights of the data reflect highlights of Phillips's financial e dition from 1996 to 1992 are found in the ac- companying table. These data reflect the company's financial restructuring following Information for Phillips Petroleum Corporation: 1986-1992 (in Millions of Dollars Bicept for Per Share wnsizing and reorganization of Phillips's operations begun in the mid-1980s. 1986 1987 1988 1989 1990 1991 $10,018.00 $10.917.00 $11.49000 $12192.00 $13.975.00 $13.259.00 income 228.00 35 35.00 $12,140.00 650. 00 2 19. 00 5 41.00 98. 00 2 70.00 0.89 0. 062. 720. 90218 0.38 104 est assets 2,802.00 2,855.00 3.082.00 2.875.00 3,322.00 2.459.00 2349.00 Melassets 12,403.00 12.111.00 11.968.00 11.256.00 12,130.00 11.473.00 11,468.00 Curentabilities 2,234.00 2,402.00 2.468.00 2,70500 2 910.00 2.503.00 2.517.00 ung-term debt 8.175.00 7,887.00 7.387.00 6,418.00 6.505.00 6.113.00 5.894.00 italiabilities 10,409.00 10.289.00 9.855.00 9.124.00 9,411.00 8.716.00 8.411.00 Started stock 270.00 205.00 0.00 0.00 0.00 0.00 359.00 Common equity 1,724.00 1.617.00 2.113.00 2,132.00 2,719.00 2.757.00 2.698.00 utends per share 2. 02 1 . 73 1 .34 0.00 1.03 1.12 1.12 In Pills antal morts for 1986 to 1992 Phillips's managers are currently developing its financial plans for 1993 through 1997 and want to develop a forecast of its financing requirements. As a first approxi- mation, they have asked you to develop a model that can be used to make "ballpark estimates of the firm's financing needs under the proviso that existing relationships found in the firm's financial statements remain the same over the period. Of par- Hicular interest is whether Phillips will be able to further reduce its reliance on debt financing. You may assume that Phillips's projected sales for 1993 through 1997 are as follows: $13,000;$13,500; $14,000; S14,500; and $15,500. Periert net income for 1993 to 1997 using the percent of sales method based on a. Project net income an average of this ratio for 1986 to 1992 D iect total assets and current liabilities for 1993 to 1997 using the percent of b. sales method and your sales projections from part (a). Assuming that common equity increases only as a result of the retention of os and holding long-term debt and preferred stock equal to its 1992 bal- earnings and holding ons miest Phillips's discretionary financing needs for 1993 to 1997. (Hint: bat total assets and current liabilities vary as a percentage of sales as answers to part (b). In addition, assume that Phillips plans to con- its dividends of $1.12 per share in each of the next 5 years.) Assume that total assets and current liabili per your answers to part (b). In tinue to pay its dividends of $1.12 per she Mini Case This Mini Case is available in MyFinanceLab. Phillips Petroleum is an integrated oil and gas company with headquarters in Bartlesville Oklahoma, where it was founded in 1917. The company engages in petroleum explora. tion and production worldwide. In addition, it engages in natural gas gathering and pro- cessing, as well as petroleum refining and marketing primarily in the United States. The company has three operating groups: Exploration and Production, Gas and Gas Liquids. and Downstream Operations, which encompasses Petroleum Products and Chemicals. UAAPIER 14. Short-Term Financial Planning 485 In the mid-1980s, Phillips engaged i takeover attempts, one led by T. Boone ructuring resulted in a $4 5 billion plan to exchange a packas curities for roughly half the company's shares and to se Phillips's long-term debt increase illips engaged in a major restructuring following two failed e led by T. Boone Pickins and the other by Carl Ichan. The re- billion plan to exchange a package of cash and debt se ompany's shares and to sell $2 billion worth of assets. of increased from $3.4 billion in late 1984 to a peak of $8.6 billion April 1998-term half the billion ple Pickins and structuring for During 1992, Phillips was able to strengther Its subsidiary Phillips Gas Company A 9.32% cumulative preferred stoc reductions, the company lowered its long-ter ing 5 years from 75 percent to 55 percent. In ada dollars of its debt at reduced rates. A company spokesman said, ratio is still on the high side, and we'll ke debt is manageable, and we're bey else we do. *** ps was able to strengthen its financial structure dramatically. Ps Gas Company completed an offering of $345 million of Series cumulative preferred stock. As a result of this action and prior years do company lowered its long-term debt-to-capital ratio over the preced- percent to 55 percent. In addition, the firm refinanced over a billion rates. A company spokesman said, "Our debt-to-capital on the high side, and we'll keep working to bring it down. But the cost of Seable, and we're beyond the point where debt overshadows everything ighlights of the data reflect highlights of Phillips's financial e dition from 1996 to 1992 are found in the ac- companying table. These data reflect the company's financial restructuring following Information for Phillips Petroleum Corporation: 1986-1992 (in Millions of Dollars Bicept for Per Share wnsizing and reorganization of Phillips's operations begun in the mid-1980s. 1986 1987 1988 1989 1990 1991 $10,018.00 $10.917.00 $11.49000 $12192.00 $13.975.00 $13.259.00 income 228.00 35 35.00 $12,140.00 650. 00 2 19. 00 5 41.00 98. 00 2 70.00 0.89 0. 062. 720. 90218 0.38 104 est assets 2,802.00 2,855.00 3.082.00 2.875.00 3,322.00 2.459.00 2349.00 Melassets 12,403.00 12.111.00 11.968.00 11.256.00 12,130.00 11.473.00 11,468.00 Curentabilities 2,234.00 2,402.00 2.468.00 2,70500 2 910.00 2.503.00 2.517.00 ung-term debt 8.175.00 7,887.00 7.387.00 6,418.00 6.505.00 6.113.00 5.894.00 italiabilities 10,409.00 10.289.00 9.855.00 9.124.00 9,411.00 8.716.00 8.411.00 Started stock 270.00 205.00 0.00 0.00 0.00 0.00 359.00 Common equity 1,724.00 1.617.00 2.113.00 2,132.00 2,719.00 2.757.00 2.698.00 utends per share 2. 02 1 . 73 1 .34 0.00 1.03 1.12 1.12 In Pills antal morts for 1986 to 1992 Phillips's managers are currently developing its financial plans for 1993 through 1997 and want to develop a forecast of its financing requirements. As a first approxi- mation, they have asked you to develop a model that can be used to make "ballpark estimates of the firm's financing needs under the proviso that existing relationships found in the firm's financial statements remain the same over the period. Of par- Hicular interest is whether Phillips will be able to further reduce its reliance on debt financing. You may assume that Phillips's projected sales for 1993 through 1997 are as follows: $13,000;$13,500; $14,000; S14,500; and $15,500. Periert net income for 1993 to 1997 using the percent of sales method based on a. Project net income an average of this ratio for 1986 to 1992 D iect total assets and current liabilities for 1993 to 1997 using the percent of b. sales method and your sales projections from part (a). Assuming that common equity increases only as a result of the retention of os and holding long-term debt and preferred stock equal to its 1992 bal- earnings and holding ons miest Phillips's discretionary financing needs for 1993 to 1997. (Hint: bat total assets and current liabilities vary as a percentage of sales as answers to part (b). In addition, assume that Phillips plans to con- its dividends of $1.12 per share in each of the next 5 years.) Assume that total assets and current liabili per your answers to part (b). In tinue to pay its dividends of $1.12 per she