<PAGE>
<PAGE 1>
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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 June 30, 1995
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 1-7176
THE COASTAL CORPORATION
(Exact name of registrant as specified in its character)
Delaware 74-1734212
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-1400
---------------------
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 July 31, 1995, there were outstanding 104,454,218 shares of
Common Stock, 33-1/3 cents par value per share, and 410,330 shares of Class
A Common Stock, 33-1/3 cents par value per share, of the Registrant.
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<PAGE>
<PAGE 2>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of The Coastal Corporation and its
subsidiaries (the "Company") are presented herein and are unaudited, except
for balances as of December 31, 1994, 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 sales of natural gas and petroleum products.
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
--------------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 29.8 $ 73.5
Receivables, less allowance for doubtful accounts of $21.6 million
(1995) and $19.0 million (1994) . . . . . . . . . . . . . . . . . 1,158.5 1,306.0
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . 840.8 818.1
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 185.8 230.3
---------- ----------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . 2,214.9 2,427.9
---------- ----------
Property, Plant and Equipment - at cost:
Natural gas systems . . . . . . . . . . . . . . . . . . . . . . . . 5,789.3 5,763.7
Refining, crude oil and chemical facilities . . . . . . . . . . . . 1,962.5 2,005.7
Gas and oil properties - at full-cost . . . . . . . . . . . . . . . 1,319.0 1,283.7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748.0 722.8
---------- ----------
9,818.8 9,775.9
Accumulated depreciation, depletion and amortization . . . . . . . . 3,530.4 3,441.2
---------- ----------
6,288.4 6,334.7
---------- ----------
Other Assets:
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 535.1 544.5
Investments - equity method . . . . . . . . . . . . . . . . . . . . 404.5 378.3
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 802.1 849.2
---------- ----------
1,741.7 1,772.0
---------- ----------
$ 10,245.0 $ 10,534.6
---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
<PAGE 3>
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
--------------- ------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28.5 $ 57.2
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,592.6 1,942.0
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 325.9 329.1
Current maturities on long-term debt . . . . . . . . . . . . . . . . 302.7 185.3
----------- -----------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . 2,249.7 2,513.6
----------- -----------
Debt:
Long-term debt, excluding current maturities . . . . . . . . . . . . 3,586.5 3,520.5
Subordinated long-term debt . . . . . . . . . . . . . . . . . . . . - 199.7
----------- -----------
3,586.5 3,720.2
----------- -----------
Deferred Credits and Other:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 1,457.2 1,473.9
Other deferred credits . . . . . . . . . . . . . . . . . . . . . . . 407.8 369.1
----------- -----------
1,865.0 1,843.0
----------- -----------
Mandatory Redemption Preferred Stock:
Issued by subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .6 .6
----------- -----------
Common Stock and Other Stockholders' Equity:
Cumulative preferred stock (with aggregate liquidation preference
of $209.5 million) . . . . . . . . . . . . . . . . . . . . . . . 2.7 2.7
Class A common stock . . . . . . . . . . . . . . . . . . . . . . . . .1 .1
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.3 36.2
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 1,215.5 1,214.7
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 1,421.1 1,336.0
----------- -----------
2,675.7 2,589.7
Less common stock in treasury - at cost . . . . . . . . . . . . . . 132.5 132.5
----------- -----------
2,543.2 2,457.2
----------- -----------
$ 10,245.0 $ 10,534.6
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE 4>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Millions of Dollars, Except Per Share)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Operating Revenues . . . . . . . . . . . . . . . . . . . $ 2,613.5 $ 2,486.9 $ 5,231.8 $ 5,187.7
--------- --------- --------- ---------
Operating Costs and Expenses:
Purchases . . . . . . . . . . . . . . . . . . . . . . 1,880.6 1,800.4 3,777.8 3,721.0
Operating expenses . . . . . . . . . . . . . . . . . . 453.5 442.1 896.7 905.5
Depreciation, depletion and
amortization . . . . . . . . . . . . . . . . . . . 93.5 88.4 187.3 182.2
--------- --------- --------- ---------
2,427.6 2,330.9 4,861.8 4,808.7
--------- --------- --------- ---------
Operating Profit . . . . . . . . . . . . . . . . . . . . 185.9 156.0 370.0 379.0
--------- --------- --------- ---------
Other Income - net . . . . . . . . . . . . . . . . . . . 6.9 20.4 24.3 36.4
--------- --------- --------- ---------
Other Expenses:
General and administrative . . . . . . . . . . . . . . 13.7 12.9 27.9 26.4
Interest and debt expense, less $1.4 million (1995)
and $2.5 million (1994) three months and
$3.2 million (1995) and $4.1 million (1994)
six months capitalized . . . . . . . . . . . . . . 102.9 97.0 212.5 199.5
Taxes on income . . . . . . . . . . . . . . . . . . . 19.0 23.4 39.1 65.3
--------- --------- --------- ---------
135.6 133.3 279.5 291.2
--------- --------- --------- ---------
Net Earnings . . . . . . . . . . . . . . . . . . . . . . 57.2 43.1 114.8 124.2
Dividends on Preferred Stock . . . . . . . . . . . . . . 4.4 4.3 8.7 8.7
--------- --------- --------- ---------
Net Earnings Available
to Common Stockholders . . . . . . . . . . . . . . $ 52.8 $ 38.8 $ 106.1 $ 115.5
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Earnings Per Common
and Common Equivalent Share . . . . . . . . . . . . $ .50 $ .37 $ 1.01 $ 1.10
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash Dividends Per Common Share . . . . . . . . . . . . . $ .10 $ .10 $ .20 $ .20
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE 5>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Millions of Dollars and Thousands of Shares)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------
1995 1994
------------------------ -----------------------
Shares Amount Shares Amount
---------- ----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Preferred stock, par value
33-1/3 cents per share, authorized 50,000,000 shares:
Cumulative convertible preferred:
$1.19, Series A, redemption or liquidation
amount of $33 per share:
Beginning balance . . . . . . . . . . . 63 $ - 65 $ -
Converted to common . . . . . . . . . . (1) - (1) -
---------- ---------- ---------- ----------
Ending balance . . . . . . . . . . . . . 62 - 64 -
---------- ---------- ---------- ----------
---------- ----------
$1.83, Series B, redemption or liquidation
amount of $50 per share:
Beginning balance . . . . . . . . . . . 84 .1 89 .1
Converted to common . . . . . . . . . . (3) - (3) -
---------- ---------- ---------- ----------
Ending balance . . . . . . . . . . . . . 81 .1 86 .1
---------- ---------- ---------- ----------
---------- ----------
$5.00, Series C, redemption or liquidation
amount of $100 per share:
Beginning balance . . . . . . . . . . . 34 - 35 -
Converted to common . . . . . . . . . . - - - -
---------- ---------- ---------- ----------
Ending balance . . . . . . . . . . . . . 34 - 35 -
---------- ---------- ---------- ----------
---------- ----------
Cumulative preferred:
$2.125, Series H, liquidation amount
of $25 per share:
Beginning and ending balance 8,000 2.6 8,000 2.6
---------- ---------- ---------- ----------
---------- ----------
Class A common stock, par value 33-1/3 cents per share,
authorized 2,700,000 shares:
Beginning balance . . . . . . . . . . . . . . 416 .1 423 .1
Converted to common . . . . . . . . . . . . . (10) - (15) -
Conversion of preferred stock and
exercise of stock options . . . . . . . . . 5 - 13 -
---------- ---------- ---------- ----------
Ending balance . . . . . . . . . . . . . . . 411 .1 421 .1
---------- ---------- ---------- ----------
---------- ----------
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE 6>
Common stock, par value 33-1/3 cents per share, authorized
250,000,000 shares:
Beginning balance . . . . . . . . . . . . . . 108,726 36.2 108,512 36.2
Conversion of preferred stock . . . . . . . . 18 - 18 -
Conversion of Class A common stock . . . . . 10 - 15 -
Exercise of stock options . . . . . . . . . . 78 .1 152 -
---------- ---------- ---------- ----------
Ending balance . . . . . . . . . . . . . . . 108,832 $ 36.3 108,697 $ 36.2
---------- ---------- ---------- ----------
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE 7>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Millions of Dollars and Thousands of Shares)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------------
1995 1994
------------------------ -----------------------
Shares Amount Shares Amount
---------- ----------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Additional paid-in capital:
Beginning balance . . . . . . . . . . . . . . . $ 1,214.7 $ 1,209.3
Exercise of stock options . . . . . . . . . . . .8 4.8
---------- -----------
Ending balance . . . . . . . . . . . . . . . . . 1,215.5 1,214.1
---------- -----------
Retained earnings:
Beginning balance . . . . . . . . . . . . . . . 1,336.0 1,162.7
Net earnings for period . . . . . . . . . . . . 114.8 124.2
Dividends on preferred stock . . . . . . . . . . (8.7) (8.7)
Dividends on common stock . . . . . . . . . . . (21.0) (20.9)
---------- -----------
Ending balance . . . . . . . . . . . . . . . . . 1,421.1 1,257.3
---------- -----------
Less treasury stock - at cost . . . . . . . . . . . 4,395 (132.5) 4,395 (132.5)
---------- ---------- ---------- ----------
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . $ 2,543.2 $ 2,377.9
---------- -----------
---------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
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<PAGE 8>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------
1995 1994
-------- --------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 114.8 $ 124.2
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization . . . . . . . . . . . . . 189.2 184.5
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 13.4 15.9
Amortization of producer contract reformation costs . . . . . . . . 14.7 17.9
Undistributed earnings from equity investments . . . . . . . . . . (2.8) (8.3)
Working capital and other changes, excluding changes
relating to cash and non-operating activities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 138.6 19.5
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (22.7) (118.0)
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . 29.8 .2
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (336.2) (87.2)
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . (22.2) 62.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.2 15.7
-------- --------
172.8 227.0
-------- --------
Cash Flow From Investing Activities:
Purchases of property, plant and equipment . . . . . . . . . . . . . . (224.3) (199.1)
Proceeds from sale of property, plant and equipment . . . . . . . . . 89.5 12.0
Additions to investments . . . . . . . . . . . . . . . . . . . . . . . (56.1) (3.1)
Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . 47.9 46.3
Recovery of gas supply prepayments . . . . . . . . . . . . . . . . . . .3 .4
-------- --------
(142.7) (143.5)
-------- --------
Cash Flow From Financing Activities:
Decrease in short-term notes . . . . . . . . . . . . . . . . . . . . (28.7) (114.0)
Redemption of mandatory redemption preferred stock . . . . . . . . . . - (33.7)
Proceeds from issuing common stock . . . . . . . . . . . . . . . . . . .9 5.2
Proceeds from issuing long-term debt . . . . . . . . . . . . . . . . . 190.0 133.8
Payments to retire long-term debt . . . . . . . . . . . . . . . . . . (206.3) (112.1)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29.7) (29.6)
-------- --------
(73.8) (150.4)
-------- --------
Net Decrease in Cash and Cash Equivalents . . . . . . . . . . . . . . . . (43.7) (66.9)
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . 73.5 159.2
-------- --------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . $ 29.8 $ 92.3
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
<PAGE 9>
THE COASTAL CORPORATION 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, 1994. 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 results of operations or financial condition.
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 $228.7 million and $207.8
million for the six months ended June 30, 1995 and 1994, respectively. Cash
payments for income taxes amounted to $30.2 million and $80.3 million for
the six months ended June 30, 1995 and 1994, respectively.
2. Inventories
<TABLE>
Inventories were as follows (millions of dollars):
<CAPTION>
June 30, December 31,
1995 1994
-------------- --------------
(Unaudited)
<S> <C> <C>
Refined products, crude oil and chemicals . . . . . . . . . . . . . $ 624.6 $ 596.5
Natural gas in underground storage . . . . . . . . . . . . . . . . . 30.4 34.8
Coal, materials and supplies . . . . . . . . . . . . . . . . . . . . 185.8 186.8
---------- ---------
$ 840.8 $ 818.1
---------- ---------
---------- ---------
</TABLE>
The excess of replacement cost over the carrying value of natural gas
in underground storage carried by the last-in, first-out method was
approximately $13.5 million at June 30, 1995 and $31.2 million at December
31, 1994.
3. Common Stock
On June 30, 1995, 4,020,205 shares of Common Stock of the Company were
reserved for employee stock option plans, 759,294 shares were reserved for
conversion of the Series A, B, and C Preferred Stocks, 411,178 shares were
reserved for conversion of outstanding Class A Common Stock and 39,192
shares were reserved for conversion of Class A Common Stock subject to
future issuance. The Class A Common Stock reserved for future issuance
consists of 18,172 shares reserved for employee stock option plans and
21,020 shares reserved for conversion of the Series A, B, and C Preferred
Stocks.
- 8 -
<PAGE>
<PAGE 10>
4. Income Taxes
<TABLE>
Provisions for federal and state income taxes were as follows (millions
of dollars):
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Current Income Taxes:
Federal . . . . . . . . . . . . . . . . . . . . . . $ 9.1 $ 17.4 $ 23.3 $ 46.5
State . . . . . . . . . . . . . . . . . . . . . . . 2.3 (1.0) 2.4 2.9
--------- --------- --------- ---------
11.4 16.4 25.7 49.4
--------- --------- --------- ---------
Deferred Income Taxes:
Federal . . . . . . . . . . . . . . . . . . . . . . 9.0 3.0 15.0 12.0
State . . . . . . . . . . . . . . . . . . . . . . . (1.4) 4.0 (1.6) 3.9
--------- --------- --------- ---------
7.6 7.0 13.4 15.9
--------- --------- --------- ---------
$ 19.0 $ 23.4 $ 39.1 $ 65.3
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
Interim period provisions for federal income taxes are based on estimated effective annual income tax
rates.
</FN>
</TABLE>
5. Litigation, Regulatory and Environmental Matters
Litigation
A subsidiary of Coastal initiated a suit against TransAmerican Natural
Gas Corporation ("TransAmerican") in the District Court of Webb County,
Texas for breach of two gas purchase agreements. In February 1993,
TransAmerican filed a Third Party Complaint and a Counterclaim in this
action against Coastal and certain subsidiaries. TransAmerican alleged
breach of contract, fraud, conspiracy, duress, tortious interference and
violations of the Texas Free Enterprises and Anti-trust Act arising out of
the gas purchase agreements. Final judgment in this matter was entered April
22, 1994. The subsidiary was awarded approximately $2.0 million, including
pre-judgment interest and attorney fees. All of TransAmerican's claims and
causes of action were denied. The judgment has been appealed by
TransAmerican and the case is presently pending before the Court of Appeals
for the Fourth Judicial District at San Antonio, Texas.
In December 1992, certain of Colorado Interstate Gas Company's ("CIG")
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 CIG 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
- 9 -
<PAGE>
<PAGE 11>
of CIG, 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 CIG. On June 7, 1995, the Trial Court entered a
judgment that the lessors recover no monetary damages from CIG and
permanently estopping the lessors from asserting any claim based on an
interpretation of the contract different than that asserted by CIG in the
litigation. The lessors' motion for a new trial is pending.
Numerous 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.
Regulatory Matters
On April 8, 1992, the Federal Energy Regulatory Commission ("FERC")
issued Order No. 636 ("Order 636"), which required significant changes in
the services provided by interstate natural gas pipelines. Subsidiaries of
the Company and numerous other parties have sought judicial review of
aspects of Order 636. The case is currently in the briefing phase before the
United States Court of Appeals for the D.C. Circuit.
On November 1, 1993, ANR Pipeline Company ("ANR Pipeline") placed its
Order 636 restructured services and rates into effect. Several persons,
including ANR Pipeline, have sought judicial review of aspects of the FERC's
orders approving ANR Pipeline's restructuring filings. Those appeals have
been held in abeyance by the United States Court of Appeals for the D.C.
Circuit, pending further order. On March 24, 1994, the FERC issued its
"Fourth Order on Compliance Filing and Third Order on Rehearing," which
addressed numerous rehearing issues and confirmed that after minor required
tariff modifications, ANR Pipeline is now fully in compliance with Order 636
and the requirements of the orders on its restructuring filings. The FERC
issued a further order regarding certain compliance issues on July 1, 1994.
In accordance with this order, ANR Pipeline filed revised tariff sheets on
July 18, 1994, which were accepted by order issued April 12, 1995.
On March 10, 1992, ANR Pipeline submitted to the FERC a comprehensive
Interim Settlement designed to resolve all outstanding issues resulting from
its 1989 rate case and its 1990 proposed service restructuring proceeding.
The Interim Settlement became effective November 1, 1992 and expired with
ANR Pipeline's implementation of Order 636 on November 1, 1993. Under the
Interim Settlement, gas inventory demand charges were collected from ANR
Pipeline's resale customers for the period November 1, 1992 through October
31, 1993. This method of gas cost recovery required refunds for any over-
collections and placed ANR Pipeline at risk for under-collections. As
required by the Interim Settlement, ANR Pipeline filed with the FERC on
April 29, 1994, a reconciliation report showing over-collections and,
therefore, proposed refunds totaling $45.1 million. Certain customers have
disputed the level of those refunds. By an order issued February 27, 1995,
the FERC approved ANR Pipeline's refund allocation methodology, and directed
ANR Pipeline to make immediate refunds of $45.1 million, together with
applicable interest, subject to further investigation of the claims which
the customers have made. On May 2, 1995, the FERC issued a further order
setting these issues for an evidentiary hearing. Applicable refunds,
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<PAGE>
<PAGE 12>
including interest, were paid on March 29, 1995. Certain customers have also
sought judicial review before the United States Court of Appeals for the
D.C. Circuit of the FERC's approval of the refund allocation methodology.
On November 1, 1993, ANR Pipeline filed a general rate increase with
the FERC under Docket No. RP94-43. The increase represents the effects of
higher plant investment, Order 636 restructuring costs, rate of return and
tax rate changes and increased costs related to the required adoption of
recent accounting rule changes, i.e., Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions" and Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits." On March 23, 1994, the
FERC issued an order granting and denying various requests for summary
disposition and establishing hearing procedures for issues remaining to be
investigated in this proceeding. The order required the reduction or
elimination of certain costs which resulted in revised rates that reflect an
$85.7 million increase in the cost of service from that approved in the
Interim Settlement and a $182.8 million increase over ANR Pipeline's
approved rates for its restructured services under Order 636. On April 29,
1994, ANR Pipeline filed a motion with the FERC that placed the new rates
into effect May 1, 1994, subject to refund. On September 21, 1994, the FERC
accepted ANR Pipeline's filing in compliance with the March 23, 1994 order,
subject to further modifications including an additional reduction in cost
of service of approximately $5 million. ANR Pipeline submitted its
compliance filing to the FERC on October 6, 1994, which the FERC accepted by
order issued February 8, 1995, subject to a further compliance filing
requirement. This compliance filing was submitted by ANR Pipeline on March
10, 1995, and was accepted by order issued May 3, 1995, subject to one
additional compliance filing requirement, which ANR Pipeline filed on May
18, 1995 and which was accepted by order issued on June 30, 1995. Further,
on December 8, 1994, the FERC issued its order denying rehearing of the
March 23, 1994 order. On January 26, 1995, ANR Pipeline sought judicial
review of these orders before the U.S. Court of Appeals for the D.C.
Circuit. The FERC has also issued orders in ANR Pipeline's rate proceeding
that apply a new policy governing the order of attribution of revenues
received by ANR Pipeline related to transition costs under Order 636. ANR
Pipeline has also sought rehearing of certain aspects of those orders, and
has also sought judicial review before the United States Court of Appeals
for the D.C. Circuit.
ANR Pipeline has executed a Settlement Agreement (the "Settlement
Agreement") with Dakota Gasification Company ("Dakota") and the Department
of Energy which resolves litigation concerning purchases of synthetic gas by
ANR Pipeline from the Great Plains Coal Gasification Plant (the "Plant").
That litigation, originally filed in 1990 in the United States District
Court in North Dakota, involved claims regarding ANR Pipeline's obligations
under certain gas purchase and transportation contracts with the Plant. The
Settlement Agreement resolves all disputes between the parties, amends the
gas purchase agreement between ANR Pipeline and Dakota and terminates the
transportation contract. The Settlement Agreement is subject to final FERC
approval, including an approval for ANR Pipeline to recover the settlement
costs from its customers. On August 3, 1994, ANR Pipeline filed a petition
with the FERC requesting: (a) that the Settlement Agreement be approved; (b)
an order approving ANR Pipeline's proposed tariff mechanism for the recovery
of the costs incurred to implement the Settlement Agreement; and (c) an
order dismissing a proceeding currently pending before the FERC, wherein
certain of ANR Pipeline's customers have challenged Dakota's pricing under
the original gas supply contract. On October 18, 1994, the FERC issued an
order consolidating ANR Pipeline's petition with similar petitions of three
other pipeline companies and setting the Settlement Agreement and other
Dakota-related proceedings for limited hearing before an Administrative Law
Judge who must render an initial decision by December 31, 1995. On December
- 11 -
<PAGE>
<PAGE 13>
20, 1994, ANR Pipeline filed its testimony, and has responded to numerous
discovery requests. Intervenors from the ratepayer group submitted their
answering testimony on March 28, 1995. The hearing was conducted from June
20, 1995 to July 14, 1995, and briefs will now be submitted to the
Administrative Law Judge.
Order 636 provides mechanisms for recovery of transition costs
associated with compliance with that Order. ANR Pipeline has estimated that
its transition costs will amount to approximately $150 million, which will
consist primarily of gas supply realignment costs, the cost of stranded
pipeline investment and the Dakota costs described above. As of June 30,
1995, ANR Pipeline has incurred transition costs in the amount of $49.8
million. ANR Pipeline has filed for recovery of approximately $44.5 million
of these transition costs, which have been accepted and made effective by
the FERC, subject to refund and further proceedings. In addition, ANR
Pipeline has filed for recovery of approximately $90 million of costs
associated with the Settlement Agreement, as discussed above. Additional
transition costs filings will be made by ANR Pipeline in the future.
On March 31, 1993, CIG filed with the FERC under Docket RP93-99 to
increase its rates and such filing became effective subject to refund on
October 1, 1993. On November 10, 1994, the FERC approved a settlement offer
submitted by CIG which resolved all of the issues in the proceeding. CIG has
implemented the rates established in the settlement for prospective
application and was required to make refunds as a result of the approval of
the settlement. Such refunds were distributed in March and April 1995 and
totalled approximately $22 million, inclusive of interest. CIG had fully
accrued for these refunds and, therefore, such refunds did not have an
adverse effect on its consolidated financial position or results of
operations.
CIG, ANR Pipeline, ANR Storage Company and Wyoming Interstate Company,
Ltd., subsidiaries of the Company, are regulated by the FERC. Certain of the
above regulatory matters and other regulatory issues remain unresolved among
these companies, their customers, their 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.
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations. The Company anticipates
capital expenditures of $70 million in 1995 to comply with such laws and
regulations. The majority of the 1995 expenditures is attributable to
construction projects on the sulfur recovery units at two of the Company's
refineries. The Company currently anticipates capital expenditures for
environmental compliance for the years 1996 through 1998 of $20 to $40
million per year. 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." Certain subsidiaries of the Company have been named
as a potentially responsible party ("PRP") in several "Superfund" waste
- 12 -
<PAGE>
<PAGE 14>
disposal sites. At 18 sites for which the Environmental Protection Agency
("EPA") has developed sufficient information to estimate total clean-up
costs of approximately $400 million, the Company estimates its pro-rata
exposure, to be paid over a period of several years, is approximately $5
million and has made appropriate provisions. At six other sites, the EPA is
currently unable to provide the Company with an estimate of total clean-up
costs and, accordingly, the Company is unable to calculate its share of
those costs. Finally, at six other sites, the Company has paid amounts to
other PRPs or to the EPA as its proportional share of associated clean-up
costs. As to these latter sites, the Company believes that its activities
were de minimis.
There are additional areas of environmental remediation
responsibilities which may fall on the Company. 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. Coastal is also supplying reduced-emission reformulated
gasoline in all markets where it is required or optionally requested.
In March 1995, the California Regional Water Quality Control Board
brought an administrative action against Pacific Refining Company ("PRC"),
in which Coastal has an indirect 50% interest, alleging that PRC violated
the California Water Code by failing to comply with its discharge water
permit from January 1990 through March 1995. In July 1995, the parties
agreed to a penalty amount of $300,000.
Future information and developments will require the Company to
continually reassess the expected impact of these environmental matters.
However, the Company has evaluated its total environmental exposure based on
currently available data, including its potential joint and several
liability, and believes that compliance with all applicable laws and
regulations will not have a material adverse impact on the Company's
liquidity, financial position or results of operations.
- 13 -
<PAGE>
<PAGE 15>
Item 2.A. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Notes to Consolidated Financial Statements contain information that
is pertinent to the following analysis.
Liquidity and Capital Resources
<TABLE>
The Company uses the following consolidated ratios to measure liquidity
and its ability to meet future funding needs and debt service requirements.
<CAPTION>
Twelve Months Ended
--------------------------------
June 30, December 31,
1995 1994
-------------- ----------------
(Unaudited)
<S> <C> <C>
Net return on average common stockholders' equity . . . . 9.2% 10.0%
Cash flow from operating activities to long-term debt . . 17.1% 18.0%
Total debt to total capitalization . . . . . . . . . . . 60.6% 61.7%
Times interest earned (before tax) . . . . . . . . . . . 1.7 1.8
</TABLE>
The reduction in the net return on average common stockholders equity
ratio results from increased equity. The decrease in the cash flow from
operating activities to long-term debt ratio is due to working capital
changes and a reduction in long-term debt. A decrease in total debt and
increased equity account for the change in the total debt to total
capitalization ratio.
In June 1995, ANR Pipeline, a subsidiary of the Company, completed an
offering of $75.0 million of 7% Debentures due June 1, 2025. The net
proceeds from the sale will be used for the repayment of certain outstanding
debt which matures in the fourth quarter of 1995 and for general corporate
purposes.
Financing for capital expansion, mandatory debt retirements and other
expenditures will be provided by internally generated funds, existing credit
lines and other new financings.
Funding for certain proposed projects is anticipated to be provided
through non-recourse project financing in which the projects' assets and
contracts will be pledged as collateral. Equity participation by other
entities will be considered. To the extent required, cash for equity
contributions to projects will be from general corporate funds.
The Company continues to maintain a financial position that will enable
it to generate and obtain capital for financing needs in the foreseeable
future. Unused lines of credit at June 30, 1995 were as follows (millions of
dollars):
<TABLE>
<CAPTION>
<S> <C>
Short-term . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 426.6
Long-term* . . . . . . . . . . . . . . . . . . . . . . . . . . . 832.4
---------
$ 1,259.0
---------
---------
- 14 -
<PAGE>
<PAGE 16>
<FN>
*$235 million of unused long-term credit lines is dedicated to a specific use.
</FN>
</TABLE>
Results of Operations
The changes in the Company's earnings for the three and six month
periods ended June 30, 1995 in comparison to the same periods in 1994 are a
result of the following:
<TABLE>
Operating Revenues. The operating revenues by segment were as follows
(millions of dollars):
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas . . . . . . . . . . . . . . . . . . . . $ 716.4 $ 806.9 $ 1,509.1 $ 1,683.7
Refining and marketing . . . . . . . . . . . . . . 1,712.6 1,513.9 3,358.7 3,183.0
Exploration and production . . . . . . . . . . . . 67.3 76.1 130.7 157.8
Coal . . . . . . . . . . . . . . . . . . . . . . . 111.7 110.8 225.7 220.2
Other . . . . . . . . . . . . . . . . . . . . . . . 47.2 60.7 97.0 107.6
Adjustments and eliminations . . . . . . . . . . . (41.7) (81.5) (89.4) (164.6)
--------- --------- --------- ---------
$ 2,613.5 $ 2,486.9 $ 5,231.8 $ 5,187.7
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE>
Operating Profit. The operating profit by segment was as follows
(millions of dollars):
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Natural gas . . . . . . . . . . . . . . . . . . . . $ 83.3 $ 102.6 $ 215.8 $ 231.4
Refining and marketing . . . . . . . . . . . . . . 72.2 17.0 96.1 84.8
Exploration and production . . . . . . . . . . . . 4.5 7.8 7.4 12.8
Coal . . . . . . . . . . . . . . . . . . . . . . . 25.7 25.5 50.0 49.7
Other . . . . . . . . . . . . . . . . . . . . . . . .2 3.1 .7 .3
--------- --------- --------- ---------
$ 185.9 $ 156.0 $ 370.0 $ 379.0
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Natural Gas. The decreases in operating revenues of $90.5 million for
the three month period and $174.6 million for the six month period ended
June 30, 1995 can be primarily attributed to decreased prices more than
offsetting increased volumes for the gas marketing companies. Also
- 15 -
<PAGE>
<PAGE 17>
contributing to the revenue decreases was a reduction in the volumes of gas
auctioned by ANR Pipeline on the open market. Transportation and storage
revenues decreased in both periods. The revenue decreases reflect increased
competition in the natural gas industry, magnified by last winter's warm
weather.
Purchases decreased $82.5 million and $152.8 million in the three month
and six month periods, respectively, as reduced prices more than offset
increased volumes for the gas marketing companies. Gross profit decreased
$8.0 million and $21.8 million in the second quarter and six month period,
respectively.
The operating profit decrease of $19.3 million in the second quarter of
1995 results from reduced margins of $10.1 million, increased operating
expenses of $12.4 million and decreased storage and transportation revenue
of $1.6 million offset by reduced depreciation, depletion and amortization
of $1.0 million and other increases of $3.8 million. Operating profit
decreased by $15.6 million in the six month period as reduced margins of
$10.8 million and decreased storage and transportation revenues of $15.1
million were partially offset by decreased operating expenses of $6.1
million, volume increases of $2.3 million and other of $1.9 million. The
operating expense increase in the second quarter results from increased gas
used in operations and non-recurring 1994 expense reductions of $9.6 million
relating primarily to revisions of certain estimated costs. The decrease for
the six month period results from reductions for gas and gas liquids
handling, gas used in operations and taxes offset by the 1994 non-recurring
expense reductions noted above. Storage and transportation revenues
decreased primarily a result of increased competition in the natural gas
industry.
Refining and Marketing. Operating revenues increased by $198.7 million
in the second quarter and $175.7 million in the six months ended June 30,
1995 as higher prices more than offset lower sales volumes. Purchases
increased by $140.6 and $169.7 million for the three month and six month
periods, respectively, resulting in gross profit increases of $58.1 million
for the second quarter and $6.0 million for the six month period.
The operating profit increase of $55.2 million in the second quarter
results from increased margins of $26.9 million, increased volumes of $12.6
million, a gain of $17.0 million from the sale of interests in certain
liquid pipeline assets and other increases of $1.8 million offset by
increased depreciation, depletion and amortization of $3.1 million. For the
six months ended June 30, 1995, operating profit increased by $11.3 million
as increased volumes of $6.2 million, the $17.0 million gain noted above,
reduced operating expenses of $10.8 million and other increases of $5.2
million were partially offset by decreased margins of $22.5 million and
increased depreciation, depletion and amortization of $5.4 million. Expanded
petrochemical operations, primarily at the Company's paraxylene facility in
Montreal East, Quebec, and enhanced petrochemical yields at its refineries
enabled this segment to report the increased operating profit for both
periods. The reduced operating expenses result primarily from reduced
refinery throughput. The increased depreciation, depletion and amortization
expense results from plant expansion and the purchase of additional
convenience stores in the second quarter.
Exploration and Production. Operating revenues decreased by $8.8
million in the three months and $27.1 million in the six months ended June
30, 1995, respectively, as reduced natural gas prices and decreased revenues
from natural gas marketing activities were partially offset by increased
volumes and higher prices for crude oil and condensate.
- 16 -
<PAGE>
<PAGE 18>
Operating profit decreased by $3.3 million in the three months ended
June 30, 1995 as lower natural gas prices of $7.4 million; reduced gross
profit from natural gas marketing activities of $.8 million; increased
operating expenses of $.9 million; increased depreciation, depletion and
amortization of $1.3 million and other decreases of $1.2 million were
partially offset by increased volumes of $4.6 million and higher crude oil
and condensate prices of $3.7 million. The decrease in operating profit for
the six months of $5.4 million results from lower natural gas prices of
$18.7 million and increased operating expenses of $3.5 million partially
offset by increased volumes of $3.4 million; increased crude oil and
condensate prices of $7.5 million; decreased depreciation, depletion and
amortization of $1.9 million and other increases of $4.0 million. Operating
expenses increased in both periods as a result of additional wells being
operated. The other increase of $4.0 million in the six month period is
primarily due to various settlements. Even with part of production shut-in,
production volumes increased over the 1994 volumes.
Coal. Operating revenues increased by $.9 million and $5.5 million
in the three month and six month periods ended June 30, 1995, respectively,
as increased volumes more than offset lower prices. Operating profit
increased by $.2 million in the three month period as the revenue increase
of $.9 million and decreased operating expenses of $.7 million were
partially offset by increased depreciation, depletion and amortization of
$1.4 million. The increase in operating profit of $.3 million for the six
month period can be attributed to increased revenue of $5.5 million offset
by increased operating expenses of $3.9 million and increased depreciation,
depletion and amortization of $1.3 million. The depreciation, depletion and
amortization expense increases for both periods and the six month operating
expense increase are due to volume increases. Production from the Company's
mines increased by approximately 6% in the 1995 six month period.
Other. The operating revenue decreases of $13.5 million for the
three month period and $10.6 million for the six month period ended June 30,
1995 resulted primarily from decreased rates and volumes for the trucking
operations. Operating profit decreased by $2.9 million in the three month
period as decreased revenues of $13.5 million were partially offset by
reduced expenses of $10.6 million. The operating profit increase of $.4
million for the six months ended June 30, 1995 primarily results from
reduced revenues of $10.6 million being more than offset by decreased
expenses of $11.0 million. The reduced expenses are primarily a result of
lower volumes for the trucking activities.
Other Income-Net. The decreases of $13.5 million for the second
quarter and $12.1 million for the first six month period of 1995 result from
a $10.0 million provision for suspension of operations at the 50% owned
Pacific Refining Company and a non-recurring 1994 gain of $9.4 million
related to the disposition of investments in oil and gas properties in
Argentina offset by increased equity income from unconsolidated
subsidiaries.
Interest and Debt Expense. Interest and debt expense increased by
$5.9 million in the second quarter and $13.0 million in the six months ended
June 30, 1995 as higher rates on variable rate debt were partially offset by
lower debt levels.
Taxes on Income. Federal income taxes decreased by $2.3 million in
the 1995 second quarter as a result of a lower effective federal income tax
rate partially offset by increased earnings, while the six month decrease of
$20.2 million is due to a lower effective federal income tax rate and
reduced earnings. State income taxes decreased by $2.1 million and $6.0
million in the three and six month periods, respectively.
- 17 -
<PAGE>
<PAGE 19>
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations. The Company anticipates
capital expenditures of $70 million in 1995 to comply with such laws and
regulations. The majority of the 1995 expenditures is attributable to
construction projects on the sulfur recovery units at two of the Company's
refineries. The Company currently anticipates capital expenditures for
environmental compliance for the years 1996 through 1998 of $20 to $40
million per year. 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." Certain subsidiaries of the Company have been named
as a PRP in several "Superfund" waste disposal sites. At 18 sites for which
the EPA has developed sufficient information to estimate total clean-up
costs of approximately $400 million, the Company estimates its pro-rata
exposure, to be paid over a period of several years, is approximately $5
million and has made appropriate provisions. At six other sites, the EPA is
currently unable to provide the Company with an estimate of total clean-up
costs and, accordingly, the Company is unable to calculate its share of
those costs. Finally, at six other sites, the Company has paid amounts to
other PRPs or to the EPA as its proportional share of associated clean-up
costs. As to these latter sites, the Company believes that its activities
were de minimis.
There are additional areas of environmental remediation
responsibilities which may fall on the Company. 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. Coastal is also supplying reduced-emission reformulated
gasoline in all markets where it is required or optionally requested.
Future information and developments will require the Company to
continually reassess the expected impact of these environmental matters.
However, the Company has evaluated its total environmental exposure based on
currently available data, including its potential joint and several
liability, and believes that compliance with all applicable laws and
regulations will not have a material adverse impact on the Company's
liquidity, financial position or results of operations.
Item 2.B. Other Developments.
In August 1994, the Company announced a subsidiary's plans to build and
operate a 91 megawatt power plant in El Salvador. Electricity from the plant
will be sold to the Salvadoran national utility under a 20 year power
purchase agreement. Construction of this phase of the power plant is
expected to be completed by August 1995. In July 1995, the Company announced
a 53 megawatt expansion of the power plant, with the additional power
becoming available mid 1996.
In June 1995, the Company announced a subsidiary's purchase of 48.5% of
the stock of Compania de Electricidad de Puerto Plata, S.A., an independent
power company in the Dominican Republic with a capacity of 66.5 megawatts,
of which 50 megawatts are barge mounted and 16.5 megawatts are land based.
Power generated by the project is sold under a long-term contract to the
Dominican national utility.
- 18 -
<PAGE>
<PAGE 20>
In June 1995, Pacific Refining Company ("PRC") suspended processing
operations at its California refinery. Coastal has an indirect 50% interest
in PRC through a joint venture with Sinochem, a state-owned corporation of
the People's Republic of China. The refinery will continue limited
operations as a product distribution terminal.
In July 1995, the liquids pipeline assets of a subsidiary of the
Company were placed in a limited partnership. The limited partnership is
owned 65% by three institutional investors and 35% by Coastal affiliates.
The assets transferred to the partnership include a natural gas liquids
pipeline connecting South Texas with Corpus Christi and the Houston and
Texas City areas; a refined products system consisting of three pipelines
connecting Corpus Christi to San Antonio, Pasadena, and McAllen, Texas; and
a crude oil pipeline system that transports crude oil from producing fields
near Cotulla, Texas, to Corpus Christi. A Coastal subsidiary will operate
the assets on behalf of the partnership and a Coastal affiliate will serve
as the general partner.
ANR Pipeline filed an application with the FERC to construct, at a cost
of $15.3 million, approximately 12 miles of new pipeline in the State of
Michigan (the "Link Project") which will interconnect to approximately 8
miles of new pipeline to be constructed by Niagara Gas Transmission, Ltd.
("Niagara"), a wholly-owned subsidiary of Consumers' Gas Company
("Consumers") at the Canadian-United States border. On March 27, 1995,
Niagara filed an application with the National Energy Board of Canada for
regulatory authorization for the Canadian segment of the Link Project. ANR
Pipeline's application for regulatory approval, originally filed with the
FERC on November 9, 1994, was amended on July 7, 1995. The amendment
includes executed precedent agreements with two firm shippers (Consumers and
Michigan Consolidated Gas Company) and a change in the in-service date to
November 1, 1996.
The Company has announced that its trucking subsidiary, ANR Freight
System, Inc. ("ANR Freight"), and the Milwaukee-based Advance Transportation
Company ("Advance") have signed a letter of intent to combine operations and
merge. Under the terms of the merger, the surviving company will be renamed
ANR Advance Transportation Company and will be owned 50% by a subsidiary of
Coastal and 50% by certain principal stockholders of Advance. Upon
completion of the merger, the combined company will have a fleet of 1,700
tractors and 4,500 pieces of trailing equipment and will serve an area
including 15 states as well as Canada and Mexico. Completion of this merger
is subject to certain conditions, including completing definitive agreements
and obtaining regulatory approvals.
- 19 -
<PAGE>
<PAGE 21>
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 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.
On May 4, 1995, the 1995 Annual Meeting of Stockholders of the
Company was held. At such meeting all four directors nominated as a Class
III director were elected uncontested: (i) 96,435,225 votes were cast for
the election of James F. Cordes and 750,909 votes were withheld; (ii)
131,628,736 votes were cast for the election of Roy L. Gates and 433,698
votes were withheld; (iii) 131,192,176 votes were cast for the election of
Kenneth O. Johnson and 870,258 votes were withheld; and (iv) 130,356,740
votes were cast for the election of Thomas R. McDade and 1,705,694 votes
were withheld.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 - Statement re Computation of Per Share Earnings.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
June 30, 1995.
- 20 -
<PAGE>
<PAGE 22>
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.
THE COASTAL CORPORATION
(Registrant)
Date: August 11, 1995 By: COBY C. HESSE
Coby C. Hesse
Senior Vice President
and Controller
(As Authorized Officer and
Chief Accounting Officer)
- 21 -
<PAGE>
<PAGE 23>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------------------------------------------------------------------------------------------------------
<S> <C>
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
- 18 -
<PAGE>
<PAGE 24>
EXHIBIT 11
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(Millions of Dollars, Except Per Share Amounts,
and Thousands of Shares)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
COMMON STOCK AND EQUIVALENTS:
Net earnings applicable to common stock and
common stock equivalents . . . . . . . . . . . . . $ 52.8 $ 38.8 $ 106.1 $ 115.5
--------- --------- --------- ---------
--------- --------- --------- ---------
Average number of common shares outstanding . . . . . . . 104,412 104,266 104,382 104,212
Class A common shares . . . . . . . . . . . . . . . . . . 413 424 414 424
Common share equivalents:
$1.19 Cumulative Convertible Preferred, Series A . 231 238 231 238
Dilutive effect of outstanding stock options after
application of treasury stock method . . . . . . . 293 294 247 334
--------- --------- --------- ---------
Average common and common equivalent shares . . . . . . . 105,349 105,222 105,274 105,208
--------- --------- --------- ---------
--------- --------- --------- ---------
Net earnings per average common and common
equivalent share outstanding . . . . . . . . . . . $ .50 $ .37 $ 1.01 $ 1.10
--------- --------- --------- ---------
--------- --------- --------- ---------
ASSUMING FULL DILUTION:
Net earnings applicable to common stock and
common stock equivalents . . . . . . . . . . . . . $ 52.8 $ 38.8 $ 106.1 $ 115.5
Dividends applicable to dilutive preferred stock:
Series B . . . . . . . . . . . . . . . . . . . . . - - .1 .1
Series C . . . . . . . . . . . . . . . . . . . . . .1 .1 .1 .1
--------- --------- --------- ---------
Adjusted net earnings assuming full dilution . . . . . . $ 52.9 $ 38.9 $ 106.3 $ 115.7
--------- --------- --------- ---------
--------- --------- --------- ---------
Average number of common shares outstanding . . . . . . . 104,412 104,266 104,382 104,212
Class A common shares . . . . . . . . . . . . . . . . . . 413 424 414 424
Common and Class A common share equivalents:
Series A preferred stock . . . . . . . . . . . . . 231 238 231 238
Equivalent common and Class A common shares from
Series B and C Preferred Stock . . . . . . . . . . 549 574 549 574
Dilutive effect of outstanding stock options after
application of treasury stock method . . . . . . . 300 294 300 349
--------- --------- --------- ---------
Fully diluted shares . . . . . . . . . . . . . . . . . . 105,905 105,796 105,876 105,797
--------- --------- --------- ---------
--------- --------- --------- ---------
Fully diluted earnings per share: . . . . . . . . . . . . $ .50 $ .37 $ 1.00 $ 1.09
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COASTAL
CORPORATION FORM 10-Q QUARTERLY REPORT FOR THE PERIOD ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 30
<SECURITIES> 0
<RECEIVABLES> 1,158
<ALLOWANCES> 0
<INVENTORY> 841
<CURRENT-ASSETS> 2,215
<PP&E> 9,819
<DEPRECIATION> 3,531
<TOTAL-ASSETS> 10,245
<CURRENT-LIABILITIES> 2,250
<BONDS> 3,587
<COMMON> 36
0
3
<OTHER-SE> 2,504
<TOTAL-LIABILITY-AND-EQUITY> 10,245
<SALES> 5,232
<TOTAL-REVENUES> 5,256
<CGS> 3,778
<TOTAL-COSTS> 4,862
<OTHER-EXPENSES> 28
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 212
<INCOME-PRETAX> 154
<INCOME-TAX> 39
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.00
