<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-4874
COLORADO INTERSTATE GAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 84-0173305
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO NORTH NEVADA AVENUE
COLORADO SPRINGS, COLORADO 80903-1727
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 473-2300
------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
As of April 30, 1996, there were outstanding 10 shares of common stock of the
Registrant, $5.00 par value per share, its only class of common stock. None of
the voting stock of the Registrant is held by non-affiliates.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The financial statements of Colorado Interstate Gas Company and its
subsidiaries (the "Company" or "Colorado") are presented herein and are
unaudited, except for balances as of December 31, 1995, and therefore are
subject to year-end adjustments; however, all adjustments which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the periods covered have been made. The adjustments which have
been made are of a normal recurring nature. Such results are not necessarily
indicative of results to be expected for the year due to seasonal variations and
market conditions affecting natural gas sales and transportation services.
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Plant, Property and Equipment, at cost:
Gas pipeline.......................................... $1,069,060 $1,061,497
Gas and oil properties, at full-cost.................. 140,451 138,067
---------- ----------
1,209,511 1,199,564
Accumulated depreciation, depletion and amortization.. 668,726 658,327
---------- ----------
540,785 541,237
---------- ----------
Current Assets:
Cash.................................................. 167 883
Receivables........................................... 42,143 44,518
Receivables from affiliates........................... 265,357 221,784
Inventories........................................... 9,265 9,494
Prepaid expenses...................................... 315 280
Current portion of deferred income taxes.............. 24,141 25,359
---------- ----------
341,388 302,318
---------- ----------
Other Assets:
Other deferred charges................................ 17,267 17,893
---------- ----------
$ 899,440 $ 861,448
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
1
<PAGE>
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
STOCKHOLDERS' EQUITY AND LIABILITIES 1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Common Stock and Other Stockholders' Equity:
Common stock, $5 par value, authorized 10,000 shares; issued and
outstanding 10 shares at stated value........................... $ 27,561 $ 27,561
Additional paid-in capital........................................ 19,037 19,035
Retained earnings................................................. 445,171 413,212
-------- --------
491,769 459,808
-------- --------
Mandatory Redemption Preferred Stock, $100 par value, authorized
550,000 shares, outstanding 4,710 and 5,560 shares respectively:
5.50% Series.................................................... 471 556
-------- --------
Debt:
Long-Term Debt.................................................... 179,317 179,299
-------- --------
Current Liabilities:
Accounts payable and accrued expenses............................. 109,193 115,599
Accounts payable to affiliates.................................... 9,040 11,352
Taxes on income................................................... 15,848 1,594
-------- --------
134,081 128,545
-------- --------
Deferred Credits:
Deferred income taxes............................................. 88,711 88,298
Other............................................................. 5,091 4,942
-------- --------
93,802 93,240
-------- --------
$899,440 $861,448
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED EARNINGS
(Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
Revenues:
Operating revenues:
Nonaffiliates........................... $100,037 $ 88,118
Affiliates.............................. 13,103 15,077
-------- --------
113,140 103,195
Other income - net........................ 3,435 3,632
-------- --------
116,575 106,827
-------- --------
Costs and Expenses:
Cost of gas sold:
Nonaffiliates........................... 17,762 9,933
Affiliates.............................. 613 1,042
-------- --------
18,375 10,975
Operation and maintenance................. 35,686 38,727
Depreciation, depletion and amortization.. 10,195 9,114
Interest expense.......................... 4,459 4,423
Taxes on income........................... 15,895 15,327
-------- --------
84,610 78,566
-------- --------
Net Earnings............................... $ 31,965 $ 28,261
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Thousands of Dollars)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------
1996 1995
----------- ---------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings........................................................... $ 31,965 $ 28,261
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization............................. 10,195 9,114
Deferred income taxes................................................ 1,440 1,221
Producer contract reformation cost recoveries........................ 34 38
Other................................................................ 1,790 2,910
Working capital and other changes, excluding changes relating to cash
and non-operating activities:
Accounts receivable................................................. 2,375 31,158
Receivables from affiliates......................................... (4,556) (4,082)
Inventories......................................................... 229 (29)
Prepaid expenses.................................................... (35) 31
Accounts payable and accrued expenses............................... (6,406) (63,456)
Accounts payable to affiliates...................................... (2,312) 2,879
Taxes on income..................................................... 14,254 13,045
-------- --------
48,973 21,090
-------- --------
Cash Flow from Investing Activities:
Purchases of plant, property and equipment............................. (10,832) (12,369)
Proceeds from sale of plant, property and equipment.................... 253 340
Investments - other.................................................... (2) (1,337)
Net (increase) decrease in notes receivable from associated companies.. (39,017) 13,965
Recovery of gas supply prepayments..................................... - 19
-------- --------
(49,598) 618
-------- --------
Cash Flow from Financing Activities:
Redemption of preferred stock.......................................... (85) -
Gain on redemption of preferred stock.................................. 2 -
Preferred dividends paid............................................... (8) (15)
Common dividends paid.................................................. - (21,600)
-------- --------
(91) (21,615)
-------- --------
Net Increase (Decrease) in Cash......................................... (716) 93
Cash at Beginning of Period............................................. 883 372
-------- --------
Cash at End of Period................................................... $ 167 $ 465
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
For additional information relative to operations and financial position,
reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. Certain minor reclassifications of prior period
statements have been made to conform with current reporting practices. The
effect of the reclassifications was not material to the Company's consolidated
results of operations or financial position.
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" in 1996. The application of the new standard did not have a
material effect on the Company's consolidated results of operations or financial
position.
The Company is subject to the regulations and accounting procedures of the
Federal Energy Regulatory Commission ("FERC"). Colorado meets the criteria and,
accordingly, follows the reporting and accounting requirements of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" ("FAS 71"). FAS 71 provides that rate-regulated public
utilities account for and report assets and liabilities consistent with the
economic effect of the way in which regulators establish rates, if the rates
established are designed to recover the costs of providing the regulated service
and if the competitive environment makes it reasonable to assume that such rates
can be charged and collected. Although the accounting methods for companies
subject to rate regulation may differ from those used by non-regulated
companies, the accounting methods prescribed by the regulatory authority conform
to the generally accepted accounting principle of matching costs with the
revenue to which they apply.
Transactions which the Company has recorded differently than a non-regulated
entity include the following: the Company (i) has capitalized the cost of equity
funds used during construction, and, (ii) has deferred purchase gas costs,
contract reformation costs, postemployment/postretirement benefit costs and
income tax reductions related to changes in federal income tax rates. These
items are being, or are anticipated to be, recovered or refunded in rates
chargeable to customers.
The Company has applied FAS 71 and evaluates the applicability of regulatory
accounting and the recoverability of these assets through rate or other
contractual mechanisms on an ongoing basis. If FAS 71 accounting principles
should no longer be applicable to the Company's operations, an amount would be
charged to earnings as an extraordinary item. At March 31, 1996, this amount was
approximately $5.0 million, net of income taxes. The Company does not expect
that its cash flows would be affected by discontinuing application of FAS 71.
Any potential charge to earnings would be noncash and would have no direct
effect on the Company's ability to include the underlying deferred items in
future rate proceedings or on its ability to collect the rates set thereby.
Supplemental information relative to the Statement of Consolidated Cash Flows
includes the following: The Company made cash payments for interest and
financing fees, net of amounts capitalized, of $1.1 million for the three months
ended March 31, 1995. The amount for the three months ended March 31, 1996 was
immaterial. Cash payments for income taxes amounted to $.1 million for the three
months ended March 31, 1996. There were no cash payments for income taxes made
during the three months ended March 31, 1995.
Materials and supplies inventories are carried principally at average cost.
Gas stored underground is carried at last-in, first-out cost ("LIFO"). The
excess of replacement cost over the carrying value of gas in underground storage
carried by the LIFO method, which is classified as Plant, Property and
Equipment, was $43.7 million and $36.5 million at March 31, 1996 and December
31, 1995, respectively.
5
<PAGE>
2. INCOME TAXES
Provisions for income taxes are composed of the following (thousands of
dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Current Income Taxes:
Federal............... $14,306 $12,567
State................. 149 1,539
------- -------
14,455 14,106
------- -------
Deferred Income Taxes
Federal............... 1,222 1,034
State................. 218 187
------- -------
1,440 1,221
------- -------
Taxes on Income........ $15,895 $15,327
======= =======
</TABLE>
Interim period provisions for income taxes are based on estimated effective
annual income tax rates.
3. COMMON STOCK
All of the issued and outstanding common stock of the Company is owned by
Coastal Natural Gas Company, a wholly-owned subsidiary of The Coastal
Corporation. Therefore, earnings and cash dividends per common share have no
significance and are not presented.
4. LITIGATION, ENVIRONMENTAL AND REGULATORY MATTERS
Litigation Matters
In December 1992, certain of Colorado's natural gas lessors in the West
Panhandle Field filed a complaint in the U.S. District Court for the Northern
District of Texas, claiming underpayment, breach of fiduciary duty, fraud and
negligent misrepresentation. Management believes that Colorado has numerous
defenses to the lessors' claims, including (i) that the royalties were properly
paid, (ii) that the majority of the claims were released by written agreement,
and (iii) that the majority of the claims are barred by the statute of
limitations. In March 1995, the trial court granted a partial summary judgment
in favor of Colorado, holding that the four-year statute of limitations had not
been tolled, that the releases are valid, and dismissing all tort claims and
claims for breach of any duty of disclosure. The remaining claim for
underpayment of royalties was tried to a jury which, in May 1995, made findings
favorable to Colorado. On June 7, 1995, the Trial Court entered a judgment that
the lessors recover no monetary damages from Colorado and permanently estopping
the lessors from asserting any claim based on an interpretation of the contract
different than that asserted by Colorado in the litigation. The lessors' motion
for a new trial is pending.
Other lawsuits and other proceedings which have arisen in the ordinary course
of business are pending or threatened against the Company or its subsidiaries.
Although no assurances can be given and no determination can be made at this
time as to the outcome of any particular lawsuit or proceeding, the Company
believes there are meritorious defenses to substantially all of the above claims
and that any liability which may finally be determined should not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
6
<PAGE>
Environmental Matters
The Company's operations are subject to extensive and evolving federal, state
and local environmental laws and regulations which may affect such operations
and costs as a result of their effect on the construction, operation, and
maintenance of its pipeline facilities. The Company anticipates annual
environmental capital expenditures of $1 to $2 million over the next several
years aimed at maintaining compliance with such laws and regulations.
Additionally, appropriate governmental authorities may enforce the laws and
regulations with a variety of civil and criminal enforcement measures, including
monetary penalties and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund", as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." The Company is not presently, and has not been in the past, a
potentially responsible party ("PRP") in any "Superfund" waste disposal sites.
However, the Company has received notice from a committee formed from a group of
55 companies who are named as PRPs at one site requesting the Company pay a de
minimis share (approximately $36,000) of the associated clean-up costs.
There are additional areas of environmental remediation responsibilities to
which the Company may be subject. The states have regulatory programs that
mandate waste clean-up. The Clean Air Act Amendments of 1990 include new
permitting regulations which will result in increased operating expenditures.
Future information and developments will require the Company to continually
reassess the expected impact of all applicable environmental laws and
regulations. Compliance with all applicable environmental protection laws and
regulations is not expected to have a material adverse impact on the Company's
liquidity, consolidated financial position or results of operations.
Regulatory Matters
On October 31, 1995, Colorado filed an application with the FERC seeking
authority to transfer to CIG Field Services Company ("CFS"), a subsidiary of
Colorado, certain facilities presently used for the gathering of natural gas
that are subject to certificates of public convenience and necessity. In that
filing, Colorado requested that the FERC declare that in the hands of CFS the
transferred facilities will be considered "non-jurisdictional" gathering
facilities. The transferred facilities have a net book value of approximately
$36 million. Colorado has requested that the FERC issue an order approving the
application to be effective on September 30, 1996. The filing was protested by
certain parties, resulting in a technical conference with the FERC staff and
such protesting parties. Colorado filed an amendment addressing the issues of
concern. Such filing resulted in an adjusted net book value of approximately $33
million associated with the transferred facilities. Following receipt of
authorizations, Colorado will transfer the certificated and certain
noncertificated gathering facilities to CFS. The facilities to be transferred
comprise most, but not all, of the Company's current gathering and processing
assets. Under current FERC policies, once the facilities are transferred to CFS,
the terms and conditions of service performed by those facilities will cease to
be subject to the FERC's general jurisdiction under the Natural Gas Act of 1938,
as amended, although the FERC has indicated that, in certain very narrow
circumstances, it will assert regulatory jurisdiction over gathering by
affiliates of interstate pipelines such as CFS. As a condition of approving the
transfer of gathering facilities to pipeline affiliates, the FERC is requiring
that the affiliate assure existing customers of continued service for up to a 2-
year period. The FERC policy also limits what the gathering affiliate can charge
during that period to the maximum gathering rate which the pipeline could have
charged for the same service prior to the transfer. However, both the 2-year
service condition and the rate limitation can be overridden by a negotiated
agreement between the shipper and the gathering affiliate. The FERC's policy
with respect to the treatment of gathering affiliates of interstate pipelines is
on appeal at this time.
On January 31, 1996, the FERC issued a "Statement of Policy and Request for
Comments" in Docket Nos. RM95-6 and RM96-7 with respect to a pipeline's ability
to negotiate and charge rates for individual customers' services which would not
be limited to the "cost-based" rates established by the FERC in traditional rate
making. Under the Policy, a pipeline and a customer will be allowed to negotiate
a contract for service which provides for rates and charges that exceed the
pipeline's posted maximum tariff rates, provided that the shipper agreeing to
such negotiated rates has the ability to elect to receive service at the
pipeline's posted maximum rate (known as a "recourse rate"). In order to
implement this Policy, a pipeline must make an initial tariff filing with the
FERC to indicate that it intends to contract
7
<PAGE>
for services under this Policy, and subsequent tariff filings will indicate each
instance where the pipeline has negotiated a rate for service which exceeds the
posted maximum tariff rate. The FERC has also requested comments on whether this
"recourse rate" program should be extended to other terms and conditions of
pipeline transportation services.
On March 29, 1996, Colorado filed with the FERC under Docket No. RP96-190 to
increase its rates by approximately $30 million annually and to realign certain
transportation services. On April 25, 1996, the FERC accepted the filing to
become effective October 1, 1996, subject to refund. In this filing, Colorado
also established a new tariff provision to allow Colorado to enter into
negotiated rate arrangements. The FERC has also accepted this provision, subject
to refund, effective May 1, 1996. A technical conference has been scheduled in
this proceeding to be held on May 21, 1996.
Certain of the above regulatory matters and other regulatory issues remain
unresolved among the Company, its customers, its suppliers, and the FERC. The
Company has made provisions which represent management's assessment of the
ultimate resolution of these issues. While the Company estimates the provisions
to be adequate to cover potential adverse rulings on these and other issues, it
cannot estimate when each of these issues will be resolved.
ITEM 2.A. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes certain forward-looking statements reflecting the Company's
expectations in the near future; however, many factors which may affect the
actual results, especially natural gas prices and changing regulations, are
difficult to predict. Accordingly, there is no assurance that the Company's
expectations will be realized.
The Notes to Consolidated Financial Statements contain information that is
pertinent to the following analysis.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses the following consolidated ratios to measure liquidity and
its ability to meet future funding needs and debt service requirements.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
--------------------------
MARCH 31, DECEMBER 31,
1996 1995
----------- -------------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities to capital expenditures
and debt service requirements............................... 200.2% 147.5%
Debt to total capitalization................................. 26.7% 28.0%
Times interest earned (before tax)........................... 8.5 8.3
</TABLE>
The increase in the cash flow from operating activities to capital
expenditures and debt service requirements ratio is due mainly to working
capital changes. The decrease in the debt to total capitalization ratio is due
to increased retained earnings resulting from first quarter earnings. The
increase in the times interest earned ratio can be attributed to increased
earnings before tax.
The Company's primary needs for cash are capital expenditures and debt
service requirements. Management believes that the Company's stable financial
position and earnings ability will enable it to continue to generate and obtain
capital for financing needs in the foreseeable future.
The Company is responding to the extensive changes in the natural gas
industry by continuing to take steps to operate its facilities at their maximum
efficient capacity, renegotiating the remaining gas purchase contracts which are
above market in an effort to lower its cost of gas and reduce take-or-pay
obligations, pursuing innovative marketing strategies and applying strict cost-
cutting measures.
8
<PAGE>
RESULTS OF OPERATIONS
The change in the Company's earnings for the three-month period ended March
31, 1996, in comparison to the corresponding period in 1995, is a result of the
following:
OPERATING REVENUES. The operating revenues by segment were as follows
(thousands of dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas................. $109,766 $102,133
Exploration and production.. 4,757 2,906
Eliminations................ (1,383) (1,844)
-------- --------
$113,140 $103,195
======== ========
</TABLE>
Operating revenues from natural gas operations increased $7.6 million for the
three months ended March 31, 1996 from the comparable 1995 period due to a $5.7
million increase as a result of increased average gas sales prices and $2.4
million due to changes in reservations partially offset by net decreases of $.5
million.
The $1.9 million increase in exploration and production revenues is due
primarily to $.7 million resulting from increased natural gas sales volumes, a
1996 refund of $.6 million related to prior period transportation charges, $.3
million as a result of increased average gas sales prices and other net
increases of $.3 million.
OTHER INCOME-NET. The decrease in 1996 from the comparable 1995 period is
the result of decreased interest income from affiliates.
COST OF GAS SOLD. The $7.4 million increase in 1996 from the comparable 1995
period is due to a $3.8 million increase resulting from increased average gas
purchase rates, increased transportation, gathering and exchange gas - net of
$2.7 million, a $1.3 million increase as a result of higher average royalty
rates and increased gas used in operations of $1.0 million partially offset by a
$.7 million decrease as a result of reduced purchase volumes, a $.5 million
decrease in storage gas costs and other net decreases of $.2 million.
OPERATION AND MAINTENANCE. The $3.0 million decrease in 1996 from the
comparable 1995 period is due primarily to a $1.7 million decrease in property
taxes, a $1.0 million decrease for gas used in operations and maintenance and a
$.5 million decrease in professional and outside services partially offset by
other net increases of $.2 million.
DEPRECIATION, DEPLETION AND AMORTIZATION. These expenses increased $1.1
million in the 1996 period due to a $.7 million increase resulting primarily
from an increase in the natural gas segment's depreciable plant and a $.7
million increase as a result of increased production volumes in the exploration
and production segment partially offset by a $.3 million decrease as the result
of a lower average depreciation, depletion and amortization rate in the
exploration and production segment.
9
<PAGE>
OPERATING PROFIT (LOSS). The operating profit (loss) by segment was as
follows (thousands of dollars):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
Natural gas................. $49,437 $46,332
Exploration and production.. 607 (933)
------- -------
$50,044 $45,399
======= =======
</TABLE>
The natural gas segment's operating profit increased by $3.1 million for the
three months ended March 31, 1996 as increased operating revenues of $7.6
million and decreased operation and maintenance expense of $3.0 million were
partially offset by a $7.4 million increase in the cost of gas sold and other
income reductions of $.1 million.
The operating profit for the exploration and production segment increased by
$1.5 million as a result of a $1.9 million increase in operating revenues
partially offset by a $.4 million increase in depreciation, depletion and
amortization expense.
TAXES ON INCOME. The income tax increase in 1996 from the comparable 1995
period is due primarily to increased earnings before income taxes of $4.3
million partially offset by a 1996 adjustment of prior years state income taxes.
ENVIRONMENTAL MATTERS
The Company's operations are subject to extensive and evolving federal, state
and local environmental laws and regulations which may affect such operations
and costs as a result of their effect on the construction, operation, and
maintenance of its pipeline facilities. The Company anticipates annual
environmental capital expenditures of $1 to $2 million over the next several
years aimed at maintaining compliance with such laws and regulations.
Additionally, appropriate governmental authorities may enforce the laws and
regulations with a variety of civil and criminal enforcement measures, including
monetary penalties and remediation requirements.
The Comprehensive Environmental Response, Compensation and Liability Act,
also known as "Superfund", as reauthorized, imposes liability, without regard to
fault or the legality of the original act, for disposal of a "hazardous
substance." The Company is not presently, and has not been in the past, a
potentially responsible party ("PRP") in any "Superfund" waste disposal sites.
However, the Company has received notice from a committee formed from a group of
55 companies who are named as PRPs at one site requesting the Company pay a de
minimis share (approximately $36,000) of the associated clean-up costs.
There are additional areas of environmental remediation responsibilities to
which the Company may be subject. The states have regulatory programs that
mandate waste clean-up. The Clean Air Act Amendments of 1990 include new
permitting regulations which will result in increased operating expenditures.
Future information and developments will require the Company to continually
reassess the expected impact of all applicable environmental laws and
regulations. Compliance with all applicable environmental protection laws and
regulations is not expected to have a material adverse impact on the Company's
liquidity, consolidated financial position or results of operations.
ITEM 2.B. OTHER DEVELOPMENTS.
In January 1996, the Company announced an open season for interested parties
to request new transportation capacity on its Wind River Lateral. The lateral
has a current capacity of 195,000 Mcf per day and transports natural gas from
the Wind River Basin, where producers have increased natural gas production by
more than 25 percent since 1992. On March 29, 1996, Colorado filed an
application with the FERC to increase the capacity of the Wind River Lateral
10
<PAGE>
by 68 MMcf per day. The cost of the expansion is estimated to be approximately
$10.8 million. Colorado has requested authority to construct the new facilities
by September 1, 1996.
Colorado has executed a 10-year firm transportation agreement with Wyoming
Interstate Company, Ltd. ("WIC"), an affiliate, and execution of a comparable
agreement is expected soon with Trailblazer Pipeline Company for 99 thousand and
10 thousand dekatherms per day of firm transportation capacity, respectively.
Colorado has undertaken these commitments in order to: 1) provide current and
future customers of Colorado with direct access to points of delivery from these
pipeline systems without the customer having to contract separately for and
administer contracts on multiple pipeline systems; and 2) to enhance Colorado's
own operational reliability across the portion of its pipeline system which
generally parallels the WIC system. Colorado made the appropriate filings at the
FERC to hold this capacity on April 17, 1996.
In addition, Colorado recently signed five year agreements with its two
largest local distribution customers for transportation and storage services.
These two customers comprise about 90 percent of Colorado's traditional local
distribution customer markets. Colorado currently has no excess firm pipeline
capacity in its Rocky Mountain states marketing area.
11
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information required hereunder is incorporated by reference into Part
II of this Report from Note 4 of the Notes to Consolidated Financial Statements
set forth in Part I of this Report and from Item 2.A., "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Environmental
Matters," set forth in Part I of this Report.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March
31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLORADO INTERSTATE GAS COMPANY
(Registrant)
Date: May 13, 1996 By: DAN A. HOMEC
----------------------------------
Dan A. Homec
Assistant Vice President
and Controller
(As Authorized Officer and
Chief Accounting Officer)
12
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- --------------------------------------------------------------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COLORADO
INTERSTATE GAS COMPANY FORM 10-Q QUARTERLY REPORT FOR THE PERIOD ENDED MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 307,500
<ALLOWANCES> 0
<INVENTORY> 9,265
<CURRENT-ASSETS> 341,388
<PP&E> 1,209,511
<DEPRECIATION> 668,726
<TOTAL-ASSETS> 899,440
<CURRENT-LIABILITIES> 134,081
<BONDS> 179,317
471
0
<COMMON> 27,561
<OTHER-SE> 464,208
<TOTAL-LIABILITY-AND-EQUITY> 899,440
<SALES> 113,140
<TOTAL-REVENUES> 116,575
<CGS> 18,375
<TOTAL-COSTS> 64,256
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,459
<INCOME-PRETAX> 47,860
<INCOME-TAX> 15,895
<INCOME-CONTINUING> 31,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,965
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
