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LNCO > SEC Filings for LNCO > Form 10-Q on 26-Oct-2012All Recent SEC Filings

Show all filings for LINNCO LLC

Form 10-Q for LINNCO LLC


Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

LinnCo, LLC ("LinnCo" or the "Company") is a Delaware limited liability company formed on April 30, 2012, under the Delaware Limited Liability Company Act, that has elected to be treated as a corporation for federal income tax purposes. Linn Energy, LLC ("LINN"), an independent oil and natural gas company traded on the NASDAQ Global Select Market under the symbol "LINE," owns LinnCo's sole voting share.
At no time after LinnCo's formation and prior to the IPO did LinnCo have any operations or own any interest in LINN. After the IPO, LinnCo's sole purpose is to own LINN units and it expects to have no assets or operations other than those related to its interest in LINN.
Results of Operations
General and Administrative Expenses
The Company's results of operations consist of general and administrative expenses associated with managing the business and affairs of LinnCo. For the three months ended September 30, 2012, and for the period from April 30, 2012 (inception) to September 30, 2012, LinnCo incurred total general and administrative expenses of approximately $351,000 and $506,000, respectively, of which approximately $416,000 had been paid by LINN on LinnCo's behalf as of September 30, 2012. General and administrative expenses for the three months ended September 30, 2012, and for the period from April 30, 2012 (inception) to September 30, 2012, include approximately $238,000 and $310,000, respectively, related to services provided by LINN necessary for the conduct of LinnCo's business, including accounting, legal, tax, information technology and other expenses. The remaining general and administrative expenses for the same periods are primarily related to third-party professional services expenses. Since all general and administrative expenses reported by LinnCo on its statement of operations are actually paid by LINN on LinnCo's behalf, no cash for these expenses is disbursed by LinnCo.
Liquidity and Capital Resources
LinnCo's authorized capital structure consists of two classes of interests:
(1) shares with limited voting rights, which were issued in the IPO and (2) voting shares, 100% of which are held by LINN. At September 30, 2012, LinnCo's issued capitalization consisted of $1,000 contributed by LINN in connection with LinnCo's formation and in exchange for its voting share. Additional classes of equity interests may be created upon approval by the Board and the holders of a majority of the outstanding shares and voting shares, voting as separate classes. On October 17, 2012, LinnCo closed its IPO as discussed in Note 6, and used all of the net proceeds, after deducting the underwriting discount and structuring fee, to purchase 34,787,500 units from LINN which equal the number of LinnCo shares issued and sold. LinnCo's limited liability company agreement requires it to maintain a one-to-one ratio between the number of LinnCo shares outstanding and the number of LINN units it owns. When LINN makes distributions on its units, LinnCo will pay a dividend on its shares of the cash LinnCo receives in respect of its LINN units, net of reserves for income taxes payable by LinnCo. On October 23, 2012, LINN's Board declared a cash distribution of $0.725 per unit with respect to the third quarter of 2012. The distribution attributable to LinnCo's interest in LINN, totaling approximately $25.2 million, will be paid to LinnCo on November 14, 2012. On October 23, 2012, the Company's Board declared a cash dividend of $0.71 per common share with respect to the third quarter of 2012, which is net of a tax reserve of $0.015 per common share from the LINN distribution of $0.725 per unit. The dividend, totaling approximately $24.7 million after deducting the estimated income tax reserve of approximately $522,000, will be paid on November 15, 2012, to shareholders of record as of the close of business on November 6, 2012.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Continued

LINN has agreed to provide to LinnCo, or to pay on LinnCo's behalf, any legal, accounting, tax advisory, financial advisory and engineering fees, printing costs or other administrative and out-of-pocket expenses incurred by LinnCo, along with any other expenses incurred in connection with any public offering of shares or incurred as a result of being a publicly traded entity, including costs associated with annual, quarterly and other reports to holders of LinnCo shares, tax return and Form 1099 preparation and distribution, NASDAQ listing fees, printing costs, independent auditor fees and expenses, legal counsel fees and expenses, limited liability company governance and compliance expenses and registrar and transfer agent fees.
The Company expects neither to generate nor to require significant cash in its ongoing business. Any cash received from the sale of additional shares will be immediately used to purchase additional LINN units. Accordingly, the Company does not anticipate any other sources or needs for additional liquidity. Cautionary Statement

This Quarterly Report on Form 10-Q contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Company's control. Because substantially all of LinnCo's assets will consist of its interests in LINN's units, these risks and uncertainties primarily relate to LINN's business which include the following:
business strategy;

acquisition strategy;

financial strategy;

drilling locations;

oil, natural gas and NGL reserves;

realized oil, natural gas and NGL prices;

production volumes;

lease operating expenses, general and administrative expenses and development costs;

future operating results;

plans, objectives, expectations and intentions; and


All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements. These forward-looking statements may be found in Item 2. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "could," "should," "expect," "plan," "project," "intend," "anticipate," "believe," "estimate," "predict," "potential," "pursue," "target," "continue," the negative of such terms or other comparable terminology.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company management. These estimates and assumptions reflect management's best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management's assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and it cannot assure any reader that such statements will be realized or the forward-looking statements or events will occur. Actual results may differ materially from those anticipated or implied in forward-looking statements in this Quarterly Report on Form 10-Q. The forward-looking statements speak only as of the date made and, other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. For additional discussion of such risks, uncertainties and assumptions, see LinnCo's Prospectus filed with the Securities and Exchange Commission under Rule 424(b)(4) on October 12, 2012.

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