================================================================================
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 September 30, 1997
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
incorporation or organization) Identification No.)
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 October 31, 1997, 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, 1996, 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>
September 30, December 31,
ASSETS 1997 1996
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash.................................................................... $ 769 $ 539
Notes receivable from affiliates........................................ 261,259 139,390
Receivables............................................................. 55,721 51,961
Receivables from affiliates............................................. 37,414 51,056
Materials and supplies.................................................. 9,160 9,671
Prepaid expenses........................................................ 166 417
Current portion of deferred income taxes................................ 27,718 26,782
--------------- --------------
392,207 279,816
--------------- --------------
Plant, Property and Equipment, at cost:
Gas pipeline............................................................ 1,157,250 1,134,592
Gas and oil properties, at full-cost.................................... 124,256 125,024
--------------- --------------
1,281,506 1,259,616
Accumulated depreciation, depletion and amortization.................... 688,994 676,873
--------------- --------------
592,512 582,743
--------------- --------------
Other Assets:
Investments............................................................. 44,713 41,056
Other deferred charges.................................................. 7,011 5,307
--------------- --------------
51,724 46,363
--------------- --------------
$ 1,036,443 $ 908,922
=============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
COLORADO INTERSTATE GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
LIABILITIES AND STOCKHOLDER'S EQUITY 1997 1996
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses................................... $ 146,928 $ 132,641
Accounts payable to affiliates.......................................... 29,769 25,356
Taxes on income......................................................... 3,943 13,162
Dividends Payable....................................................... 37,500 -
------------- ------------
218,140 171,159
------------- ------------
Debt:
Long-term debt.......................................................... 279,428 229,373
------------- ------------
Deferred Credits:
Deferred income taxes................................................... 95,020 85,849
Other................................................................... 6,336 5,889
------------- ------------
101,356 91,738
------------- ------------
Common Stock and Other Stockholder's 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 19,037
Retained earnings....................................................... 390,921 370,054
------------- ------------
437,519 416,652
------------- ------------
$ 1,036,443 $ 908,922
============= ============
</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 Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Operating revenues:
Nonaffiliates............................................. $ 82,575 $ 88,532 $ 253,257 $ 266,372
Affiliates................................................ 29,724 14,749 80,366 39,473
---------- ---------- --------- ---------
112,299 103,281 333,623 305,845
Other income - net........................................... 3,767 3,350 8,788 10,232
---------- ---------- --------- ---------
116,066 106,631 342,411 316,077
---------- ---------- --------- ---------
Costs and Expenses:
Cost of gas sold:
Nonaffiliates............................................. 24,345 17,625 67,998 45,214
Affiliates................................................ 2,607 3,111 7,742 4,682
---------- ---------- --------- ---------
26,952 20,736 75,740 49,896
Operation and maintenance.................................... 40,471 43,998 126,206 118,617
Depreciation, depletion and amortization..................... 10,708 10,635 32,922 31,178
Interest expense............................................. 6,549 4,680 17,832 13,599
Taxes on income.............................................. 10,341 9,223 31,344 35,054
---------- ---------- --------- ---------
95,021 89,272 284,044 248,344
---------- ---------- --------- ---------
Net Earnings.................................................... $ 21,045 $ 17,359 $ 58,367 $ 67,733
========== ========== ========= =========
</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>
Nine Months Ended
September 30,
---------------------------
1997 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings .................................................................. $ 58,367 $ 67,733
Add items not requiring cash:
Depreciation, depletion and amortization.................................... 32,922 31,178
Deferred income taxes....................................................... 7,122 5,806
Producer contract reformation cost recoveries............................... 14 101
Other....................................................................... 1,744 3,221
Working capital and other changes, excluding changes relating to cash and
non-operating activities:
Receivables.............................................................. (3,760) 5,184
Receivables from affiliates.............................................. 13,642 (5,806)
Materials and supplies................................................... 511 439
Prepaid expenses......................................................... 245 -
Accounts payable and accrued expenses.................................... 14,287 11,435
Accounts payable to affiliates........................................... 4,413 576
Taxes on income.......................................................... (9,219) 6,718
----------- ----------
120,288 126,585
----------- ----------
Cash Flow from Investing Activities:
Purchases of plant, property and equipment..................................... (48,980) (81,144)
Proceeds from sale of plant, property and equipment............................ 9,659 3,950
Increase in gas stored......................................................... (4,857) (719)
Investments.................................................................... (3,657) (8)
Net (increase) decrease in notes receivable from affiliates.................... (121,869) 20,336
Recovery of gas supply prepayments............................................ 6 11
----------- ----------
(169,698) (57,574)
----------- ----------
Cash Flow from Financing Activities:
Redemption of preferred stock.................................................. - (556)
Gain on redemption of preferred stock.......................................... - 2
Issuance of senior debentures.................................................. 99,640 -
Preferred dividends paid....................................................... - (15)
Common dividends paid.......................................................... - (118,900)
Notes payable - banks.......................................................... (50,000) 50,000
------------ ----------
49,640 (69,469)
----------- ----------
Net Increase (Decrease) in Cash................................................... 230 (458)
Cash at Beginning of Period....................................................... 539 883
----------- ----------
Cash at End of Period............................................................. $ 769 $ 425
=========== ==========
</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, 1996. 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, financial position or cash flows.
The Company is regulated by, and subject to, the regulations and accounting
procedures of the Federal Energy Regulatory Commission ("FERC") and had
historically followed the reporting and accounting requirements of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects of Certain
Types of Regulation" ("FAS 71"). Effective November 1, 1996, Colorado
discontinued the application of FAS 71. This accounting change has no direct
effect on either the Company's ability to include the deferred items in future
rate proceedings or on its ability to collect the rates set thereby. The Company
believes this accounting change results in financial reporting which better
reflects the results of operations in the economic environment in which it
operates.
Materials and supplies inventories are carried principally at average cost.
The Company adopted Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" in 1997. The application of the new standard did not have a
material effect on the Company's consolidated results of operations, financial
position or cash flows.
The Company adopted Statement of Position 96-1 on Environmental Remediation
Liabilities in 1997. The application of the new statement is not expected to
have a material effect on the Company's consolidated results of operations,
financial position or cash flows.
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 $11.0 million and $9.1 million
for the nine months ended September 30, 1997 and 1996, respectively. Cash
payments for income taxes amounted to $32.5 million and $23.4 million for the
nine months ended September 30, 1997 and 1996, respectively.
2. Income Taxes
Provisions for income taxes are composed of the following (thousands of
dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Income Taxes:
Federal................................................... $ 2,050 $ 7,322 $ 22,647 $ 28,277
State..................................................... 37 290 1,575 971
---------- ---------- --------- ---------
2,087 7,612 24,222 29,248
---------- ---------- --------- ---------
Deferred Income Taxes
Federal................................................... 7,469 1,301 6,542 4,951
State..................................................... 785 310 580 855
---------- ---------- --------- ---------
8,254 1,611 7,122 5,806
---------- ---------- --------- ---------
Taxes on Income.............................................. $ 10,341 $ 9,223 $ 31,344 $ 35,054
========== ========== ========= =========
</TABLE>
Interim period provisions for income taxes are based on estimated effective
annual income tax rates.
- 5 -
<PAGE>
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 of 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 new trial was denied on July 18, 1997 and both parties have filed appeals.
On June 7, 1996, the same Plaintiffs sued Colorado in state court in Amarillo,
Texas for underpayment of royalties. Colorado removed the second lawsuit to
federal court which granted a stay of the second lawsuit pending the outcome of
the first lawsuit.
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,
results of operations or cash flows.
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.
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.
- 6 -
<PAGE>
Regulatory Matters
On March 29, 1996, Colorado filed with the FERC under Docket No. RP96-190
to increase its rates by approximately $30 million annually, to realign certain
transportation services and to add tariff language that would allow Colorado to
enter into "negotiated rates" (rates which could exceed the Company's
"cost-based" rates) in certain circumstances, subject to FERC policies. On April
25, 1996, the FERC accepted the rate change filing and the transportation
service realignment to become effective October 1, 1996, subject to refund, and
also accepted the "negotiated rate" tariff provision to become effective May 1,
1996. Certain parties sought judicial review of the acceptance of the
"negotiated rate" tariff provisions. On October 16, 1997, the FERC approved an
unopposed settlement filed by Colorado that resolves all issues in this general
rate case except the issues that are on appeal relating to the "negotiated rate"
tariff provisions. The final settlement modifies the services provided by
Colorado, and the charges for those services. The final settlement does not take
effect until the conclusion of any period for rehearing at the FERC or judicial
review in the courts with respect to the FERC's order approving the settlement.
Petitions for rehearing are due to be filed with the FERC on or before November
17, 1997. On October 16, 1997, the FERC also approved an unopposed interim
settlement that implements (on an interim basis) the terms of the final
settlement. The final settlement supersedes the interim settlement once the
final settlement takes effect.
In July 1996, the United States Court of Appeals for the D.C. Circuit
upheld the basic structure of the FERC's Order 636 (issued in April 1992) but
remanded to the FERC, for further consideration, certain limited aspects of the
Order, including the 20-year term established in Order 636 as the "cap" to be
applied to evaluation of bids for renewal contracts on existing facilities. On
remand in February 1997, the FERC reduced the term "cap" to five years. Colorado
and others have sought rehearing of this change and on other aspects of the
Order on remand. Colorado argued in its rehearing request inter alia that its
FERC-approved settlement of its Order 636 compliance proceeding precludes
applying this change to Colorado's existing contracts entered into pursuant to
Colorado's FERC-approved tariff.
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. As a result, the Company anticipates that
these regulatory matters will not have a material adverse effect on its
consolidated financial position, results of operations or cash flows. 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.
5. Long-term Debt
In June 1997, the Company issued $100.0 million of 6.85% senior debentures
due in 2037. The net proceeds from the sale of the debentures were used to
retire the Company's $50.0 million senior term loan and for general corporate
purposes. The 6.85% senior debentures are not redeemable at the option of the
Company prior to maturity; but each holder of such senior debentures has the
right to require the Company to redeem such debentures, in whole or in part, on
June 15, 2007, at a redemption price equal to 100% of the aggregate principal
amount thereof plus accrued and unpaid interest.
- 7 -
<PAGE>
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, including natural gas prices, market conditions, industry
competition 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
------------------------------
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities to capital expenditures
and debt service requirements........................................... 191.2% 130.9%
Debt to total capitalization............................................... 39.0% 35.5%
Times interest earned (before tax)......................................... 5.8 7.5
</TABLE>
The increase in the cash flow from operating activities to capital
expenditures and debt service requirements ratio is due mainly to reduced
capital expenditures. The increase in the total debt to total capitalization
ratio is due to the issuance, in June 1997, of $100.0 million of senior
debentures (used in part to retire the Company's $50.0 million senior term
loan), partially offset by retained earnings resulting from the first nine
months of 1997 earnings. The decrease in the times interest earned ratio can be
attributed to decreased earnings before taxes and increased interest expense.
In June 1997, the Company issued $100.0 million of 6.85% senior debentures
due in 2037. The net proceeds from the sale of the debentures were used to
retire the Company's $50.0 million senior term loan dated August 27, 1996 and
for general corporate purposes. The 6.85% senior debentures are not redeemable
at the option of the Company prior to maturity; but each holder of such senior
debentures has the right to require the Company to redeem such debentures, in
whole or in part, on June 15, 2007, at a redemption price equal to 100% of the
aggregate principal amount thereof plus accrued and unpaid interest.
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 and nine month periods
ended September 30, 1997, in comparison to the corresponding periods in 1996, is
a result of the following:
Operating Revenues. The operating revenues by segment were as follows
(thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas.................................................. $ 110,743 $ 100,556 $ 326,626 $ 296,661
Exploration and production................................... 4,082 4,468 16,805 13,167
Adjustments and eliminations................................. (2,526) (1,743) (9,808) (3,983)
---------- ---------- --------- ---------
$ 112,299 $ 103,281 $ 333,623 $ 305,845
========== ========== ========= =========
</TABLE>
Operating revenues from natural gas operations for the three month period
ended September 30, 1997, increased $10.2 million from the comparable 1996
period due to an $8.2 million increase related to average transportation rates,
a $7.7 million increase related to transportation volumes, a $3.0 million
increase related to gas sales volumes and a $3.0 million increase related to
average gathering rates offset by a $9.2 million increase in reservations and
other net decreases of $2.5 million. The segment's operating revenues for the
nine month period ended September 30, 1997, increased $30.0 million from the
comparable 1996 period due to a $16.8 million increase related to average
transportation rates, a $16.5 million increase related to average gas sales
rates, a $15.5 million increase related to higher gas sales volumes and an $11.4
million increase due to transportation volumes offset by an increase in
reservations of $26.3 million and other net decreases of $3.9 million.
The $3.6 million increase in exploration and production operating revenues
for the nine month period ended September 30, 1997 compared to the same period
in 1996 resulted primarily from increased natural gas prices.
Other Income -- Net. The $1.4 million decrease for the nine month period
ended September 30, 1997 as compared to the same period in 1996 is due primarily
to decreased interest income from affiliates.
Cost of Gas Sold. The $6.2 million increase for the three month period
ended September 30, 1997, as compared with the same period last year is due to
an $8.1 million increase related to purchased natural gas volumes and other
increases of $1.1 million offset by a $3.0 million decrease in net system
balancing requirements. The $25.8 million increase for the nine month period
ended September 30, 1997 when compared to the same period in 1996 resulted from
a $24.4 million increase in average natural gas purchase prices, a $11.5 million
increase attributable to purchased gas volumes and other increases of $2.8
million partially offset by a $12.9 million decrease related to net system
balancing requirements.
Operation and Maintenance. Expenses for the three month period ended
September 30, 1997 decreased $3.5 million from the same period in 1996 due to a
$2.8 million decrease in materials and supplies expenses, a $1.4 million
decrease in professional and outside service expenses and other net decreases of
$.5 million partially offset by $1.2 million in increased gas used in
operations. The $7.6 million increase for the nine month period ended September
30, 1997 compared to the same period in 1996 is a result of an $8.5 million
increase in gas used in operations offset by other net decreases of $.9 million.
Depreciation, Depletion and Amortization. The increases for the three month
and nine month periods ended September 30, 1997 over their respective periods in
1996 are due primarily to an increase in the natural gas segment's depreciable
plant balance.
- 9 -
<PAGE>
Operating Profit (Loss). The operating profit (loss) by segment was as
follows (thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
---------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas.................................................. $ 35,932 $ 29,355 $ 100,440 $ 110,183
Exploration and production................................... (329) (222) 2,636 (199)
---------- ---------- --------- ---------
$ 35,603 $ 29,133 $ 103,076 $ 109,984
========== ========== ========= =========
</TABLE>
The natural gas segment's operating profit increased by $6.6 million for
the three month period ended September 30, 1997, as compared with the same
period for 1996 due to an increase in operating revenues of $10.2 million
resulting mainly from higher average transportation rates and increased
transportation volumes and other net increases of $2.6 million offset by a $6.2
million increase in natural gas purchase costs resulting largely from higher
natural gas purchase volumes. The segment's decrease of $9.7 million for the
nine month period ended September 30, 1997, as compared with the same period in
1996 is a result of a $25.8 million increase in gas purchase costs resulting
mainly from increases in average natural gas purchase prices, a $6.9 million
increase in operation and maintenance expenses due mainly to increased gas used
in operations and other net changes of $7.0 million partially offset by a $30.0
million increase in operating revenues due primarily to increased average
transportation rates and volumes and higher average gas sales prices and
volumes, net of increased reservations.
The $2.8 million increase in the exploration and production segment's
operating profit for the nine month period ended September 30, 1997 compared
with the same period in 1996 is due to a $3.6 million increase in operating
revenues due primarily to higher average natural gas prices offset by a $.8
million increase in operating expenses.
Interest Expense. The increases in the three and nine month periods ended
September 30, 1997 as compared to their respective periods in 1996 are primarily
a result of interest on a $50.0 million senior term loan entered into on August
27, 1996, and the issuance of $100.0 million of 6.85% senior debentures in June
1997. See discussion under "Liquidity and Capital Resources" pertaining to the
issuance and retirement of debt.
Taxes on Income. The increase for the three month period ending September
30, 1997 compared with the same period in 1996 is due primarily to increased
earnings before income taxes. The decrease for the nine month period ending
September 30, 1997 as compared to the same period in 1996 is primarily due to
decreased earnings before 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.
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.
- 10 -
<PAGE>
Item 2.B. Other Developments.
During the third quarter of 1997, Colorado completed construction and
placed into service additional compression at its Muddy Gap, Wyoming location.
This compression, along with the 18 mile Cave Gulch Lateral placed in service
last year, increased Colorado's capacity on its Wind River Lateral by 68 million
cubic feet per day ("MMcf/d").
On September 24, 1997, Colorado filed an application with the FERC for
authorization to construct the Campo Lateral, a new 115-mile, 16-inch pipeline
connecting the Company's Picketwire Lateral near Trinidad, Colorado, with the
Company's mainline in Baca County, Colorado. The cost of the project is
estimated to be approximately $20.7 million, with an initial transportation
capacity of 100 MMcf/d out of the Raton Basin in southern Colorado. The
projected in-service date of the full expansion is during the third quarter of
1998, subject to receipt of satisfactory regulatory approvals.
- 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 September 30,
1997.
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)
DAN A. HOMEC
Date: November 11, 1997 By:--------------------------------
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
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM COLORADO INTERSTATE GAS COMPANY FORM
10-Q QUARTERLY REPORT FOR THE PERIOD ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 769
<SECURITIES> 0
<RECEIVABLES> 93,135
<ALLOWANCES> 0
<INVENTORY> 9,160
<CURRENT-ASSETS> 392,207
<PP&E> 1,281,506
<DEPRECIATION> 688,994
<TOTAL-ASSETS> 1,036,443
<CURRENT-LIABILITIES> 218,140
<BONDS> 279,428
0
0
<COMMON> 27,561
<OTHER-SE> 409,958
<TOTAL-LIABILITY-AND-EQUITY> 1,036,443
<SALES> 333,623
<TOTAL-REVENUES> 342,411
<CGS> 75,740
<TOTAL-COSTS> 234,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,832
<INCOME-PRETAX> 89,711
<INCOME-TAX> 31,344
<INCOME-CONTINUING> 58,367
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,367
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
