================================================================================
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, 1998
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 April 30, 1998, 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, 1997, 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 1998 1997
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash.................................................................... $ 1,124 $ 3,508
Notes receivable from affiliates........................................ 272,257 219,655
Receivables............................................................. 47,311 63,319
Receivables from affiliates............................................. 35,089 39,057
Materials and supplies.................................................. 8,632 8,841
Prepaid expenses........................................................ 1,093 93
Current portion of deferred income taxes................................ 32,798 38,626
--------------- --------------
398,304 373,099
--------------- --------------
Plant, Property and Equipment, at cost:
Gas pipeline............................................................ 1,177,346 1,162,907
Gas and oil properties, at full-cost.................................... 136,264 130,500
--------------- --------------
1,313,610 1,293,407
Accumulated depreciation, depletion and amortization.................... 698,622 689,690
--------------- --------------
614,988 603,717
--------------- --------------
Other Assets:
Investments in related parties.......................................... 45,035 44,217
Other deferred charges.................................................. 42,468 42,397
--------------- --------------
87,503 86,614
--------------- --------------
$ 1,100,795 $ 1,063,430
=============== ==============
</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,
LIABILITIES AND STOCKHOLDER'S EQUITY 1998 1997
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses................................... $ 136,417 $ 138,708
Accounts payable to affiliates.......................................... 26,749 26,460
Taxes on income......................................................... 14,336 5,429
------------- ------------
177,502 170,597
------------- ------------
Debt:
Long-term debt.......................................................... 279,465 279,447
------------- ------------
Deferred Credits:
Deferred income taxes................................................... 111,724 112,063
Other................................................................... 43,940 41,947
------------- ------------
155,664 154,010
------------- ------------
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....................................................... 441,566 412,778
------------- ------------
488,164 459,376
------------- ------------
$ 1,100,795 $ 1,063,430
============= ============
</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,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Revenues:
Operating revenues:
Nonaffiliates..................................................................... $ 101,880 $ 96,548
Affiliates........................................................................ 27,614 21,885
--------- ---------
129,494 118,433
Other income - net................................................................... 3,690 2,376
--------- ---------
133,184 120,809
Costs and Expenses:
Cost of gas sold:
Nonaffiliates..................................................................... 28,570 27,503
Affiliates........................................................................ 4,145 2,292
--------- ---------
32,715 29,795
Operation and maintenance............................................................ 40,269 41,403
Depreciation, depletion and amortization............................................. 8,761 11,186
Interest expense..................................................................... 6,184 5,585
Taxes on income...................................................................... 16,467 11,650
--------- ---------
104,396 99,619
Net Earnings............................................................................ $ 28,788 $ 21,190
========= =========
</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,
--------------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings ............................................................... $ 28,788 $ 21,190
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization................................. 8,761 11,186
Deferred income taxes.................................................... 5,440 (1,142)
Other.................................................................... 2,386 1,845
Working capital and other changes, excluding changes relating to cash
and non-operating activities:
Receivables........................................................... 16,008 1,471
Receivables from affiliates........................................... 3,968 23,271
Materials and supplies................................................ 209 47
Prepaid expenses...................................................... (1,000) 245
Accounts payable and accrued expenses................................. (2,291) (5,235)
Accounts payable to affiliates........................................ 289 (3,108)
Taxes on income....................................................... 8,907 4,213
--------- --------
71,465 53,983
--------- --------
Cash Flow from Investing Activities:
Purchases of plant, property and equipment.................................. (18,777) (8,296)
Proceeds from sale of plant, property and equipment......................... 586 93
Increase in gas stored...................................................... (2,238) (6,639)
Investments in related parties.............................................. (818) (829)
Net increase in notes receivable from affiliates............................ (52,602) (37,931)
--------- --------
(73,849) (53,602)
Net Increase (Decrease) in Cash................................................ (2,384) 381
Cash at Beginning of Period.................................................... 3,508 539
--------- --------
Cash at End of Period.......................................................... $ 1,124 $ 920
========= ========
</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, 1997. 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. In 1997, the Company
reexamined the useful lives of its assets. Effective October 1997, the
depreciation rates for certain of the Company's assets were revised. For the
three months ended March 31, 1998, this revision had the effect of increasing
net earnings by $1.1 million.
Materials and supplies are carried principally at average cost.
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" in 1998. The application of the new standard
did not have a material effect on the Company's consolidated financial
statements as the Company currently does not have any material items of other
comprehensive income.
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131") in 1998. See Note 4.
The Company adopted Statement of Financial Accounting Standards No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" ("FAS
132") in 1998. FAS 132, which revises employer disclosures regarding pension
plans and other postretirement plans, is not expected to have a material effect
on the Company's consolidated financial statements.
The Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants ("AICPA") has issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"), to be effective for periods beginning after December
15, 1998. The Company adopted SOP 98-1 in 1998. SOP 98-1 establishes standards
for the treatment of costs associated with software developed or obtained for
internal use. SOP 98-1 is not expected to have a material effect on the
Company's consolidated financial statements.
The AICPA has issued Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5"), to be effective for periods beginning after
December 15, 1998. SOP 98-5 provides guidance on accounting for costs incurred
to open new facilities, conduct business in new territories or otherwise
commence some new operation. The application of SOP 98-5 is not expected to have
a material effect on the Company's consolidated financial statements.
Supplemental information relative to the Statement of Consolidated Cash
Flows includes the following: cash payments the Company made for interest and
financing fees, net of amounts capitalized, were not material for the three
months ended March 31, 1998, and $.7 million for the three months ended March
31, 1997. Cash payments for income taxes amounted to $3.0 million for the three
months ended March 31, 1998 and $8.6 million for the three months ended March
31, 1997.
- 5 -
<PAGE>
2. Income Taxes
Provisions for income taxes are composed of the following (thousands of
dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Current Income Taxes:
Federal........................................................................ $ 10,051 $ 11,978
State.......................................................................... 976 814
--------- ---------
11,027 12,792
Deferred Income Taxes
Federal........................................................................ 4,828 (976)
State.......................................................................... 612 (166)
--------- ---------
5,440 (1,142)
Taxes on Income................................................................... $ 16,467 $ 11,650
========= =========
</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. Segment Information
The Company adopted FAS 131 in 1998. FAS 131 establishes standards for the
way that public business enterprises report information about operating segments
and requires those companies to report selected information about the operating
segments (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
(Unaudited)
--------------------------------------------
Exploration
and
Natural Gas Production Total
----------- ------------ -----------
<S> <C> <C> <C>
Operating Revenues from External Customers.................... $ 127,829 $ 1,665 $ 129,494
Intersegment Revenues......................................... - 4,590 4,590
Earnings Before Interest and Income Taxes..................... 50,301 1,138 51,439
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
(Unaudited)
--------------------------------------------
Exploration
and
Natural Gas Production Total
----------- ------------ ------------
<S> <C> <C> <C>
Operating Revenues from External Customers.................... $ 115,616 $ 2,817 $ 118,433
Intersegment Revenues......................................... - 6,015 6,015
Earnings Before Interest and Income Taxes..................... 34,193 4,232 38,425
</TABLE>
- 6 -
<PAGE>
5. 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 or
results of operations.
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
consolidated financial position or results of operations.
Regulatory Matters
On January 31, 1996, the Federal Energy Regulatory Commission ("FERC")
issued a "Statement of Policy and Request for Comments" ("Policy Statement").
Under this Policy Statement, (i) a pipeline and a customer are allowed to
negotiate a contract 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"), and (ii) a pipeline
must also make subsequent tariff filings each time the pipeline negotiates a
rate for service which is outside of the minimum and maximum range for the
pipeline's cost-based
- 7 -
<PAGE>
recourse rates. To implement this Policy Statement, a pipeline must make an
initial tariff filing with the FERC to indicate that it intends to contract for
services under this Policy Statement. The FERC is also considering comments on
whether this "negotiated 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, to realign certain
transportation services and to add tariff language that would allow Colorado to
enter into "negotiated rates" (rates which could exceed Colorado'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.
On October 16, 1997, the FERC approved an unopposed settlement filed by Colorado
that resolved all issues in the general rate case except the issues that are on
appeal relating to the "negotiated rate" tariff provisions discussed above. The
final settlement became effective on November 17, 1997, and is no longer subject
to review by the FERC or subject to any judicial review. Colorado has now made
refunds of amounts collected which were in excess of the final settlement rates.
Certain parties sought judicial review of the acceptance of the "negotiated
rate" tariff provisions. That appeal has been consolidated with other similar
appeals, and the FERC has sought to have the appeal dismissed. No action has
been taken by the court on the FERC's dismissal request. Colorado has filed for
judicial review of the FERC's holding that pipelines which have entered into
"negotiated rate" contracts will not be allowed discount adjustments in
connection with such contracts. Colorado's appeal of the "negotiated rate"
provision has been consolidated with other appeals involving the same issues,
and is being held in abeyance by the United States Court of Appeals for the D.C.
Circuit. Pending completion of judicial review, the "negotiated rate" tariff
provisions are fully effective. During 1997, Colorado did not enter into any
"negotiated rate" transactions.
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 in 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 or results of operations. 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.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
This report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, includes certain forward-looking statements
reflecting the Company's expectations and objectives in the near future;
however, many factors which may affect the actual results, including natural gas
and liquids prices, market and economic conditions, industry competition and
changing regulations, are difficult to predict. Accordingly, there is no
assurance that the Company's expectations and objectives will be realized. The
forward-looking statements contained herein are intended to qualify for the safe
harbor provisions of Section 21E of the Securities Exchange Act of 1934.
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,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flow from operating activities to capital expenditures
and debt service requirements........................................... 189.9% 193.2%
Total debt to total capitalization......................................... 36.4% 37.8%
Times interest earned (before tax)......................................... 6.5 6.1
</TABLE>
The decrease in the cash flow from operating activities to capital
expenditures and debt service requirements ratio is due mainly to increased
capital expenditures partially offset by increased earnings. The decrease in the
total debt to total capitalization ratio is due to increased retained earnings
resulting from 1998 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. Capital
expenditures, debt retirements and other cash needs as well as the sources of
capital to finance these expenditures are summarized in the Statement of
Consolidated Cash Flows. 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, pursuing innovative
marketing strategies and applying strict cost-cutting measures.
The AICPA has issued SOP 98-5, to be effective for periods beginning after
December 15, 1998. SOP 98-5 provides guidance on accounting for costs incurred
to open new facilities, conduct business in new territories or otherwise
commence some new operation. The application of SOP 98-5 is not expected to have
a material effect on the Company's consolidated financial statements.
- 9 -
<PAGE>
Results of Operations
The change in the Company's earnings for the three month period ended March
31, 1998, in comparison to the corresponding period in 1997, 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,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas.......................................................................... $ 127,829 $ 115,616
Exploration and production........................................................... 6,255 8,832
Eliminations......................................................................... (4,590) (6,015)
--------- ---------
$ 129,494 $ 118,433
========= =========
</TABLE>
Earnings Before Interest and Income Taxes. The earnings before interest and
income taxes by segment was as follows (thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas.......................................................................... $ 50,301 $ 34,193
Exploration and production........................................................... 1,138 4,232
--------- ---------
$ 51,439 $ 38,425
========= =========
</TABLE>
Natural Gas. The increase in operating revenues of $12.2 million for the
three months ended March 31, 1998 from the comparable 1997 period is due to a
$14.5 million increase related to increased gas sales volumes, an $8.3 million
increase related to gas transportation rates and a $4.5 million increase due to
gas transportation volumes, partially offset by a $12.3 million decrease due to
average gas sales prices and other miscellaneous net decreases of $2.8 million.
Other income increased $1.1 million for the three months ended March 31,
1998 from the comparable 1997 period due to increased interest income from
affiliates.
Cost of gas sold increased by $1.5 million for the three month period ended
March 31, 1998 from the comparable period in 1997 primarily as the result of
$16.5 million from increases in gas purchase volumes and net system balancing
requirements of $4.3 million offset by an $18.4 million decrease related to
decreased average gas purchase rates and other net decreases of $.9 million.
Operation and maintenance expenses decreased by $1.4 million for the three
month period ended March 31, 1998 from the comparable period in 1997 due
primarily to a $1.9 million decrease in gas used in operations, a $1.1 million
decrease in materials and supplies expenses and other miscellaneous decreases of
$.8 million offset by a $2.4 million increase in property taxes.
Depreciation, depletion and amortization decreased $2.9 million for the
three month period ended March 31, 1998 from the comparable period in 1997 due
primarily to depreciation rate adjustments pursuant to the Company's settlement
of FERC Docket No. RP96-190 and the revision of depreciation rates as discussed
in Note 1 of Notes to Consolidated Financial Statements.
Exploration and Production. The decrease in operating revenues of $2.6
million for the three months ended March 31, 1998 from the comparable 1997
period is primarily due to decreased average natural gas prices of $3.5 million
and other net decreases of $.6 million offset by a $1.5 million increase related
to higher gas sales volumes.
- 10 -
<PAGE>
Other income increased by $.2 million for the three months ended March 31,
1998 from the comparable 1997 period as a result of increased interest income
from affiliates.
Operation and maintenance expenses increased by $.3 million for the three
months ended March 31, 1998 from the comparable 1997 period primarily as a
result of increased property taxes.
Depreciation, depletion and amortization expenses increased by $.5 million
for the three months ended March 31, 1998 from the comparable 1997 period due to
higher production volumes and higher depreciation rates.
Interest Expense. The increase in 1998 from the comparable 1997 period is
due primarily to interest on a $100 million, 6.85% senior debenture issued in
June 1997 used in part to retire a $50 million senior term loan.
Taxes on Income. The income tax increase in 1998 as compared to the same
period in 1997 is due primarily to increased 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
consolidated financial position or results of operations.
- 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 5 of the Notes to Consolidated Financial
Statements set forth in Part I of this Report and from Item 2., "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, 1998.
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, 1998 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
- 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 MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
0
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</TABLE>
