================================================================================
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, 1999
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 charter)
Delaware 74-1734212
(State or other jurisdiction of (I.R.S. Employer
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 April 30, 1999, there were outstanding 212,862,075 shares of Common
Stock, 33-1/3(cent) par value per share, and 349,976 shares of Class A Common
Stock, 33-1/3(cent) par value per share, of the Registrant.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of The Coastal Corporation ("Coastal") and its
subsidiaries (collectively the "Company") are presented herein and are
unaudited, except for balances as of December 31, 1998, 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 and deliveries of natural gas and petroleum
products.
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 8.9 $ 106.9
Receivables, less allowance for doubtful accounts of $17.5 million
(1999) and $15.9 million (1998)...................................... 1,077.8 1,142.8
Inventories............................................................. 643.9 499.5
Prepaid expenses and other.............................................. 242.5 220.6
----------- -----------
Total Current Assets................................................. 1,973.1 1,969.8
----------- -----------
Property, Plant and Equipment - at cost:
Natural gas systems..................................................... 6,084.8 6,069.2
Refining, crude oil and chemical facilities............................. 2,450.9 2,424.2
Gas and oil properties - at full-cost................................... 3,026.4 2,870.8
Other................................................................... 454.2 366.6
----------- -----------
12,016.3 11,730.8
Accumulated depreciation, depletion and amortization.................... 3,790.2 3,706.9
----------- -----------
8,226.1 8,023.9
----------- -----------
Other Assets:
Goodwill................................................................ 466.0 470.8
Investments - equity method............................................. 1,082.4 970.8
Other................................................................... 897.0 868.8
----------- -----------
2,445.4 2,310.4
----------- -----------
$ 12,644.6 $ 12,304.1
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 1 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable........................................................... $ 141.0 $ 87.0
Accounts payable........................................................ 1,463.1 1,488.0
Accrued expenses........................................................ 326.9 305.0
Current maturities on long-term debt.................................... 127.4 126.5
---------- -----------
Total Current Liabilities............................................ 2,058.4 2,006.5
---------- -----------
Debt:
Long-term debt, excluding current maturities............................ 4,212.6 3,999.3
---------- -----------
Deferred Credits and Other:
Deferred income taxes................................................... 1,766.0 1,717.7
Other deferred credits.................................................. 608.0 704.8
---------- -----------
2,374.0 2,422.5
---------- -----------
Preferred Securities:
Company-obligated mandatory redemption
preferred securities of a consolidated trust......................... 300.0 300.0
Issued by subsidiaries.................................................. 100.0 100.0
---------- -----------
400.0 400.0
---------- -----------
Common Stock and Other Stockholders' Equity:
Cumulative preferred stock (with aggregate liquidation
preference of $7.6 million).......................................... - -
Class A common stock.................................................... .1 .1
Common stock............................................................ 72.3 72.2
Additional paid-in capital.............................................. 1,018.8 1,016.2
Retained earnings....................................................... 2,640.9 2,519.8
---------- -----------
3,732.1 3,608.3
Less common stock in treasury - at cost................................. 132.5 132.5
---------- -----------
3,599.6 3,475.8
---------- -----------
$ 12,644.6 $ 12,304.1
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
- 2 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED OPERATIONS
(Millions of Dollars, Except Per Share)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Operating Revenues...................................................................... $ 1,709.6 $ 1,956.5
--------- ---------
Operating Costs and Expenses:
Purchases............................................................................ 945.9 1,186.4
Operating and general expenses....................................................... 411.4 422.1
Depreciation, depletion and amortization............................................. 108.6 107.0
--------- ---------
1,465.9 1,715.5
--------- ---------
Other Income - net...................................................................... 25.3 22.3
--------- ---------
Earnings Before Interest and Income Taxes............................................... 269.0 263.3
--------- ---------
Interest and debt expense, less $7.4 million (1999)
and $5.5 million (1998) capitalized.................................................. 77.0 75.3
Taxes on income......................................................................... 57.5 63.2
--------- ---------
Earnings From Continuing Operations..................................................... 134.5 124.8
Loss from discontinued operations.................................................... - (1.9)
--------- ---------
Net Earnings............................................................................ 134.5 122.9
Dividends on Preferred Stock............................................................ .1 4.3
--------- ---------
Net Earnings Available
to Common Stockholders............................................................... $ 134.4 $ 118.6
========= =========
Basic Earnings Per Share:
From continuing operations........................................................... $ .63 $ .57
Discontinued operations.............................................................. - (.01)
--------- ---------
Net Basic Earnings Per Share......................................................... $ .63 $ .56
========= =========
Diluted Earnings Per Share:
From continuing operations........................................................... $ .62 $ .56
Discontinued operations.............................................................. - (.01)
--------- ---------
Net Diluted Earnings Per Share....................................................... $ .62 $ .55
========= =========
Cash Dividends Per Common Share......................................................... $ .0625 $ .05
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Thousand of Shares and Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
----------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Preferred stock, par value
33-1/3(cent) per share, authorized 50,000,000 shares:
Cumulative convertible preferred:
$1.19, Series A, redemption or liquidation
amount of $33 per share:
Beginning balance........................... 56 $ - 58 $ -
Converted to common......................... (2) - - -
----------- ---------- ----------- ----------
Ending balance.............................. 54 - 58 -
=========== ---------- =========== ----------
$1.83, Series B, redemption or liquidation
amount of $50 per share:
Beginning balance........................... 61 - 68 -
Converted to common......................... - - (2) -
----------- ---------- ----------- ----------
Ending balance.............................. 61 - 66 -
=========== ---------- =========== ----------
$5.00, Series C, redemption or liquidation
amount of $100 per share:
Beginning balance........................... 28 - 30 -
Converted to common......................... - - (1) -
----------- ---------- ----------- ----------
Ending balance.............................. 28 - 29 -
=========== ---------- =========== ----------
Cumulative preferred:
$2.125, Series H, liquidation amount
of $25 per share:
Beginning and ending balance................ - - 8,000 2.6
=========== ---------- =========== ----------
Class A common stock, par value 33-1/3(cent) per share,
authorized 2,700,000 shares:
Beginning balance................................ 354 .1 366 .1
Converted to common.............................. (3) - (3) -
----------- ---------- ----------- ----------
Ending balance................................... 351 .1 363 .1
=========== ---------- =========== ----------
Common stock, par value 33-1/3(cent) per share,
authorized 500,000,000 shares:
Beginning balance................................ 216,765 72.2 110,117 36.7
Conversion of preferred stock.................... 26 - 7 -
Conversion of Class A common stock............... 3 - 3 -
Two-for-one stock split.......................... - - 106,179 35.4
Exercise of stock options........................ 175 .1 85 -
----------- ---------- ----------- ----------
Ending balance................................... 216,969 $ 72.3 216,391 $ 72.1
=========== ---------- =========== ----------
</TABLE>
See Notes to Consolidated Financial Statements.
- 4 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY
(Thousands of Shares and Millions of Dollars)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
----------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Additional paid-in capital:
Beginning balance................................... $ 1,016.2 $ 1,243.6
Exercise of stock options........................... 2.6 2.5
Two-for-one stock split............................. - (35.4)
---------- ----------
Ending balance...................................... 1,018.8 1,210.7
---------- ----------
Retained earnings:
Beginning balance................................... 2,519.8 2,131.9
Net earnings for period............................. 134.5 122.9
Dividends on preferred stock........................ (.1) (4.3)
Dividends on common stock........................... (13.3) (10.6)
---------- ----------
Ending balance...................................... 2,640.9 2,239.9
---------- ----------
Less treasury stock - at cost.......................... 4,396 132.5 4,396 132.5
=========== ---------- =========== ----------
Total.................................................. $ 3,599.6 $ 3,392.9
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
- 5 -
<PAGE>
THE COASTAL CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
--------- --------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Earnings from continuing operations ........................................ $ 134.5 $ 124.8
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization................................. 109.6 107.9
Deferred income taxes.................................................... 47.7 34.9
Undistributed earnings from equity investments........................... (4.0) (9.4)
Working capital and other changes, excluding changes relating to cash and
nonoperating activities:
Accounts receivable................................................... 61.6 410.7
Inventories........................................................... (93.9) 140.9
Prepaid expenses and other............................................ (17.3) (10.6)
Accounts payable...................................................... (106.0) (581.1)
Accrued expenses...................................................... 21.1 83.5
Other................................................................. (29.1) (18.1)
--------- --------
124.2 283.5
--------- --------
Cash Flow From Investing Activities:
Purchases of property, plant and equipment.................................. (304.6) (287.2)
Proceeds from sale of property, plant and equipment......................... .9 .6
Additions to investments.................................................... (107.3) (37.7)
Proceeds from investments................................................... 12.4 .7
Net from discontinued operations............................................ (29.3) (8.0)
--------- --------
(427.9) (331.6)
--------- --------
Cash Flow From Financing Activities:
Increase in short-term notes ............................................... 104.0 194.0
Proceeds from issuing common stock.......................................... 2.7 2.5
Proceeds from long-term debt issues......................................... 200.9 .7
Payments to retire long-term debt........................................... (88.5) (134.7)
Dividends paid.............................................................. (13.4) (14.9)
--------- --------
205.7 47.6
--------- --------
Net Decrease in Cash and Cash Equivalents...................................... (98.0) (.5)
Cash and Cash Equivalents at Beginning of Period............................... 106.9 20.5
--------- --------
Cash and Cash Equivalents at End of Period..................................... $ 8.9 $ 20.0
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
- 6 -
<PAGE>
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, 1998. Prior period financial statements have been
restated to report the Company's 50% owned trucking operation as a discontinued
operation. In addition, certain minor reclassifications of prior period
statements have been made to conform with current reporting practices. The
effect of the reclassifications was not material to the Company's consolidated
results of operations, financial position or cash flows.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"), to be effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. FAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The accounting
for changes in the fair value of a derivative will depend on the intended use of
the derivative and the resulting designation. The Company is currently
evaluating the impact of FAS 133.
The Company adopted FASB Emerging Issues Task Force Issue No. 98-10,
"Accounting for Contracts in Energy Trading and Risk Management Activities," in
1999. The application of Issue No. 98-10 is not expected to have a material
effect on the Company's consolidated financial statements.
The Company adopted the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" ("SOP 98-5"), in 1999. The
application of SOP 98-5 did not have a material effect on the Company's
consolidated financial statements.
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 $60.4 million and $63.1 million
for the three months ended March 31, 1999 and 1998, respectively. The Company
made no cash payments for income taxes for the three months ended March 31, 1999
and a cash payment of $1.8 million for the three months ended March 31, 1998.
2. Inventories
Inventories were as follows (millions of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- --------------
(Unaudited)
<S> <C> <C>
Refined products, crude oil and chemicals............................... $ 454.0 $ 306.9
Natural gas in underground storage...................................... 33.9 32.0
Coal, materials and supplies............................................ 156.0 160.6
----------- ----------
$ 643.9 $ 499.5
=========== ==========
<FN>
Elements included in inventory cost are material, labor and manufacturing
expense.
</FN>
</TABLE>
3. Debt
At March 31, 1999, the Company had $591.0 million of outstanding
indebtedness to banks under short-term lines of credit. The Company's financial
statements at March 31, 1999 reflect $450.0 million of short-term borrowings
which have been reclassified as long-term, based on the availability of
committed credit lines with maturities in excess of one
- 7 -
<PAGE>
year and the Company's intent to maintain such amounts as long-term borrowings.
There was a similar reclassification of $400.0 million as of December 31, 1998.
The Company has $150.0 million of 8.75% Senior Notes which are due May 15,
1999. The financial statements at March 31, 1999, reflect this amount as
long-term, based on the availability of committed credit lines with maturities
in excess of one year and the Company's intent to refinance the debt on a
long-term basis.
In May 1999, the Company issued $200 million of 6.2% Notes due in 2004 and
$200 million of 6.5% Notes due in 2006. The net proceeds from the sale of the
notes will be used to retire the 8.75% Senior Notes due May 15, 1999 and to
repay floating rate indebtedness, including indebtedness of a subsidiary under a
revolving credit facility, and for general corporate purposes.
4. Common Stock
On March 31, 1999, 13,282,402 shares of Common Stock of the Company were
reserved for stock option plans, 1,237,822 shares were reserved for conversion
of the Series A, B, and C Preferred Stocks, 351,497 shares were reserved for
conversion of outstanding Class A Common Stock and 19,179 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 2,280 shares reserved for
employee stock option plans and 16,899 shares reserved for conversion of the
Series A, B, and C Preferred Stocks.
During the quarter ended March 31, 1999, the Company granted options to
purchase 1,744,250 common shares under stock option plans at an exercise price
of $32.72. The exercise price is equal to the market price of the common shares
at grant date.
5. Segment Information
The Company's operating revenues from external customers, intersegment
revenues and earnings (loss) before interest and income taxes for the three
months ended March 31, 1999 and 1998 are shown as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Operating Revenues From External Customers:
Natural gas....................................................................... $ 335.3 $ 413.3
Refining, marketing and chemicals................................................. 1,186.2 1,353.6
Exploration and production........................................................ 95.0 104.4
Coal.............................................................................. 64.8 53.8
Power............................................................................. 26.1 27.8
Corporate and other............................................................... 2.2 3.6
--------- ---------
$ 1,709.6 $ 1,956.5
========= =========
</TABLE>
- 8 -
<PAGE>
Intersegment revenues were as follows: Natural gas - $.6 million (1999),
$2.8 million (1998); Refining, marketing and chemicals - $.5 million (1999);
Exploration and production - $5.5 million (1999), $8.0 million (1998); and
Corporate and other - $2.1 million (1999), $2.7 million (1998).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Earnings (Loss) Before Interest and Income Taxes:
Natural gas....................................................................... $ 186.9 $ 193.8
Refining, marketing and chemicals................................................. 69.6 47.6
Exploration and production........................................................ 11.4 25.5
Coal.............................................................................. 4.3 2.8
Power............................................................................. 18.9 11.6
Corporate and other............................................................... (22.1) (18.0)
--------- ---------
$ 269.0 $ 263.3
========= =========
</TABLE>
6. Income Taxes
Provisions for income taxes were as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Current Income Taxes:
Federal........................................................................... $ 8.7 $ 20.8
Foreign........................................................................... 1.5 1.5
State............................................................................. (.4) 6.0
--------- ---------
9.8 28.3
--------- ---------
Deferred Income Taxes:
Federal........................................................................... 43.3 32.9
Foreign........................................................................... .8 .8
State............................................................................. 3.6 1.2
--------- ---------
47.7 34.9
--------- ---------
$ 57.5 $ 63.2
========= =========
<FN>
Interim period provisions for federal income taxes are based on estimated
effective annual income tax rates.
</FN>
</TABLE>
- 9 -
<PAGE>
7. Earnings Per Share
Earnings per share are calculated following Statement of Financial
Accounting Standards No. 128. The following data shows the amounts used in
computing basic earnings per share and the effects on income and the weighted
average number of shares of dilutive securities.
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
----------------------------------------------
Income Shares
(Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount
----------- ------------ ----------
(Unaudited)
<S> <C> <C> <C>
Earnings from continuing operations..................... $ 134.5
Less preferred stock dividends.......................... .1
--------------
Basic earnings per share
Income available to common stockholders.............. 134.4 212,784 $ .63
===========
Effect of dilutive securities
Options.............................................. - 2,044
Convertible preferred stock.......................... .1 1,272
-------------- -----------
Diluted earnings per share
Income available to common stockholders plus
assumed conversions.............................. $ 134.5 216,100 $ .62
============== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
----------------------------------------------
Income Shares
(Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount
----------- ------------ ---------
(Unaudited)
<S> <C> <C> <C>
Earnings from continuing operations..................... $ 124.8
Less preferred stock dividends.......................... 4.3
--------------
Basic earnings per share
Income available to common stockholders.............. 120.5 212,236 $ .57
===========
Effect of dilutive securities
Options.............................................. - 2,116
Convertible preferred stock.......................... .1 1,349
-------------- -----------
Diluted earnings per share
Income available to common stockholders plus
assumed conversions.............................. $ 120.6 215,701 $ .56
============== =========== ===========
</TABLE>
8. Litigation, Environmental and Regulatory Matters
Litigation Matters
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 of
royalties, 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 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
- 10 -
<PAGE>
asserted by CIG in the litigation. The lessors' motion for a new trial was
denied on July 18, 1997, and both parties filed appeals. On June 7, 1996, the
same plaintiffs sued CIG in state court in Amarillo, Texas, for underpayment of
royalties. CIG removed the second lawsuit to federal court which granted a stay
of the second suit pending the outcome of the first lawsuit. Oral arguments were
heard before the Fifth Circuit Court of Appeals on December 4, 1998, and the
parties are awaiting the Court's decision.
In October 1996, the Company, along with several subsidiaries, was named as
a defendant in a suit filed by several former and current African American
employees in the United States District Court, Southern District of Texas
("Texas suit"). The Texas suit alleges racially discriminatory employment
policies and practices. Coastal vigorously denies these allegations and has
filed responsive pleadings. Plaintiffs' counsel are seeking to have the Texas
suit certified as a class action of all former and current African American
employees and initially claimed compensatory and punitive damages of $400
million. In February 1999, in response to Coastal's motion to deny class
certification, plaintiffs' counsel obtained permission from the Court to delete
all claims for compensatory and punitive damages and to seek equitable relief
only.
In January 1998, the plaintiffs in the Texas suit amended their suit to
exclude ANR Pipeline Company ("ANR Pipeline") employees from the potential
class. A new suit was then filed in state court in Wayne County, Michigan,
seeking to have the Michigan suit certified as a class action of African
American employees of ANR Pipeline and seeking unspecified damages as well as
attorneys and expert fees. ANR Pipeline has filed responsive pleadings denying
these allegations.
In 1996, Jack Grynberg filed a claim under the False Claims Act on behalf
of the U.S. government in the U.S. District Court, District of Columbia, against
70 defendants, including ANR Pipeline and CIG. The suit sought damages for the
alleged underpayment of royalties due to the purported improper measurement of
gas. The 1996 suit was dismissed in March 1997 and the dismissal was affirmed by
the D.C. Court of Appeals in October 1998. In September 1997, Mr. Grynberg filed
77 separate, similar False Claims Act suits against natural gas transmission
companies and producers, gatherers, and processors of natural gas, seeking
unspecified damages. Coastal and several of its subsidiaries have been included
in two of the September 1997 suits. The suits were filed in both the U.S.
District Court, District of Colorado and the U.S. District Court, Eastern
District of Michigan. In April 1999, the United States Department of Justice
notified the Company that the United States will not intervene in these cases.
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 such 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. Compliance with such laws
and regulations can be costly. Additionally, 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," imposes liability for the release of a "hazardous
substance" into the environment. Superfund liability is imposed without regard
to fault and even if the waste disposal was in compliance with the then current
laws and regulations. With the joint and several liability imposed under
Superfund, a potentially responsible party ("PRP") may be required to pay more
than its proportional share of such costs. Certain subsidiaries of the Company
and a company in which Coastal owns a 50% interest have been named as a PRP in
several "Superfund" waste disposal sites. At the 12 sites for which there is
sufficient information, total cleanup costs are estimated to be approximately
$632 million, and the Company estimates its pro-rata exposure, to be paid over a
period of several years, is approximately $7.5 million and has made appropriate
provisions. At nine other sites, the Environmental Protection Agency ("EPA") is
currently unable to provide the Company with an estimate of total cleanup costs
and, accordingly, the Company is unable to calculate its share of those
- 11 -
<PAGE>
costs. Additionally, certain subsidiaries of the Company have been named as PRPs
in three state sites. At one site, the North Carolina Department of Health,
Environmental and Natural Resources has estimated the total cleanup costs to be
approximately $50 million, but the Company believes the subsidiary's activities
at this site were de minimis. At a second state site, the Florida Department of
Environmental Protection has demanded reimbursement of its costs, which total
$100,000, and suitable remediation. There is not sufficient information to
estimate the remedial costs or the Company's pro-rata exposure at this site. At
the third site, the owner of the California site has estimated the total cleanup
costs to be approximately $40 million, but the Company believes the subsidiary's
activities at this site were de minimis.
Future information and developments, including legislative and enforcement
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 consolidated financial position or results of operations.
Regulatory Matters
On July 29, 1998, the Federal Energy Regulatory Commission ("FERC") issued
a "Notice of Proposed Rulemaking," in which the FERC has proposed a number of
further significant changes to the industry, including, among other things,
removal of price caps in the short-term market (less than one year), capacity
auctions, changed reporting obligations, the ability to negotiate terms and
conditions of all services, elimination of the requirement of a matching term
cap on the renewal of existing contracts, and a review of its policies for
approving capacity construction. On the same day, the FERC also issued a "Notice
of Inquiry" soliciting industry input on various matters affecting the pricing
of long-term service and certificate pricing in light of changing market
conditions. The FERC has indicated that it may consider both proposals together
inasmuch as they raise several common issues. Comments on both of these matters
were due on April 22, 1999, and Coastal's interstate pipeline subsidiaries filed
comments with the FERC on that date, urging the FERC, among other things, to
modify its rate, service and certification policies for such pipelines.
On May 30, 1997, Wyoming Interstate Company, Ltd. ("WIC") filed with the
FERC to increase its rates by approximately $5.7 million annually. On June 27,
1997, the FERC accepted the filing effective as of December 1, 1997, subject to
refund. After the filing of testimony by WIC and other parties on July 2, 1998,
WIC filed a settlement offer which, if approved, would have resolved all of the
issues in the case. The settlement, however, was remanded to the Administrative
Law Judge ("ALJ") because of opposition to the settlement by certain parties. In
response to the remand, WIC and the parties have resubmitted a settlement offer
which contains the same substantive provisions, but provides for the FERC to
approve the settlement for some, if not all, parties, with the "severed" parties
being able to litigate their issues in the case. The ALJ has certified the new
settlement to the FERC, and briefs on the new settlement have been filed.
Certain other regulatory issues remain unresolved among CIG, ANR Pipeline,
ANR Storage Company and WIC, 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.
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. The forward-looking statements reflect the Company's expectations,
objectives and goals with respect to future events and financial performance,
and are based on assumptions and estimates which the Company believes are
reasonable. However, actual results could differ materially from anticipated
results. Important factors which may affect the actual results include, but are
not limited to, commodity prices, political developments, market and economic
conditions, industry competition, the weather, changes in financial markets,
changing legislation and regulations, and the impact of the Year 2000 issue. The
forward-looking statements contained
- 12 -
<PAGE>
in this Report are intended to qualify for the safe harbor provisions of Section
21E of the Securities Exchange Act of 1934, as amended.
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,
1999 1998
-------------- ----------------
(Unaudited)
<S> <C> <C>
Return on average common stockholders' equity.................. 14.6% 14.6%
Cash flow from operating activities to long-term debt.......... 23.4% 28.7%
Total debt to total capitalization............................. 52.8% 52.1%
Times interest earned (before tax)............................. 3.2 3.2
</TABLE>
The decrease in the cash flow from operating activities to long-term debt
ratio resulted primarily from changes in working capital and long-term debt.
In February 1999, the Company completed a public offering of $200 million
of 6.375% senior debentures due 2009. The net proceeds from the sale were used
to repay floating rate indebtedness of a subsidiary under a revolving credit
facility.
In May 1999, the Company issued $200 million of 6.2% Notes due in 2004 and
$200 million of 6.5% Notes due in 2006. The net proceeds from the sale of the
notes will be used to retire the 8.75% Senior Notes due May 15, 1999 and to
repay floating rate indebtedness, including indebtedness of a subsidiary under a
revolving credit facility, and for general corporate purposes.
In May 1999, the stockholders approved an increase in the authorized shares
of common stock from 250 million to 500 million common shares.
Financing for capital expansion, mandatory debt retirements and other
expenditures will be provided by internally generated funds, existing credit
lines, proceeds from the sale of selective non-core assets and new financings.
Funding for certain proposed projects is anticipated to be provided through
non-recourse project financings 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 is undertaking an aggressive and comprehensive program in 1999
to reduce costs and improve efficiencies, as well as continuing an emphasis on
divestment of less profitable non-core operations.
Unused lines of credit at March 31, 1999 were as follows (millions of
dollars):
Short-term..................................... $ 445.0
Long-term*..................................... 941.0
-----------
$ 1,386.0
===========
*$45.1 million of unused long-term credit lines is dedicated to a
specific use.
The FASB has issued FAS 133, to be effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. FAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position
- 13 -
<PAGE>
and measure those instruments at fair value. The accounting for changes in the
fair value of a derivative will depend on the intended use of the derivative and
the resulting designation. The Company is currently evaluating the impact of FAS
133.
Year 2000. Coastal, like most other companies, is addressing the Year 2000
issue. This issue is the result of computer programs written with two digits
rather than four to define the applicable year. Computer programs that have
date-sensitive software using two digits to define the applicable year may
recognize a date using "00" as the year 1900 instead of the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company's Year 2000 compliance project relates to both information
technology and embedded systems throughout the Company and focuses on all
technology hardware and software, external interfaces with customers and
suppliers, operations process control, automation and instrumentation systems.
Systems are being reviewed in an order of priority that includes an assessment
of the potential adverse effects of noncompliance as well as an assessment of
the complexity of the system. Assessment has been substantially completed for
all systems. It will be necessary to modify or replace certain noncompliant
software and hardware so that they will properly utilize dates beyond December
31, 1999. The Company believes that with such remediation, the Year 2000 issue
can be mitigated. Necessary remediation and testing activities have begun and
are planned to be completed for all material systems by mid-1999. Remaining
systems modifications, replacement and testing are planned to be completed
before the end of 1999.
The Company is continuing with a formal communications process with outside
entities with which the Company conducts business to determine the extent to
which those companies are addressing their Year 2000 compliance. In connection
with this process, the Company has been sending letters and questionnaires to
these parties and is evaluating the responses as received and is following up
with those parties that have not responded. The Company does not expect any
single noncompliant third party to have a material effect on the Company as it
does not rely to a material extent on any single customer or supplier, including
telecommunications providers, utilities and banks. However, the Company does not
control these parties and there can be no assurance that third-party systems
will be timely converted, or that any failure to convert would not have an
adverse effect on the Company's systems. The Company will continue to cooperate
and communicate with these parties to mitigate potential adverse effects.
The Company is currently preparing and will periodically update a Year 2000
contingency plan. The primary goals of the plan are to maintain continuity of
operations, timely resume any operations that have been interrupted, preserve
Company assets and protect the environment. Coastal's diversity and distribution
on a business unit, geographical and customer basis are expected to naturally
reduce the risk of major disruptions to worldwide operations due to any Year
2000-related occurrence. Similarly, the Company's distributed information
systems and wide scope of relationships with financial institutions, suppliers
and vendors will most likely aid in limiting and localizing any individual Year
2000 failure to specific operations or facilities. Also, in recent years the
Company has replaced or updated a significant portion of its computer hardware
and software. The plan will include possible manual intervention to operate
noncompliant facilities or systems until they can be modified or replaced.
Notwithstanding the foregoing, due to the nature of contingency planning, there
can be no assurance that such plans will acceptably mitigate the risk of
material impact to the Company's operations due to any Year 2000-related
incident.
The Company has been using both external and internal resources to
reprogram or replace its software and embedded systems for the Year 2000 issue.
While the Company has included the Year 2000 project in its overall information
systems planning process since 1996, certain systems were identified for
replacement prior to the organization of the Year 2000 project. These amounts
are not included in the Year 2000 project cost estimates, except where the
replacement date has been accelerated in order to address Year 2000 issues. To
date, the amounts incurred and expensed for developing and carrying out the plan
total approximately $14 million. The total remaining cost for addressing the
Year 2000 issue, which will be funded through operating cash flows, is currently
estimated by management to be approximately $3 million.
It should be noted that the ultimate amount of Year 2000 costs is difficult
to estimate due to possible disruptions in business arising from Year 2000
noncompliance of vendors, suppliers, customers and other third parties over whom
- 14 -
<PAGE>
the Company has no control. Notwithstanding the Company's efforts, disruptions
could occur in its business due to Year 2000 problems and such disruptions could
have an adverse effect.
Results of Operations
The changes in the Company's earnings for the three-month period ended
March 31, 1999 in comparison to the same period in 1998 are a result of the
following:
Operating Revenues. The operating revenues by segment were as follows
(millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas....................................................................... $ 335.9 $ 416.1
Refining, marketing and chemicals................................................. 1,186.7 1,353.6
Exploration and production........................................................ 100.5 112.4
Coal.............................................................................. 64.8 53.8
Power............................................................................. 26.1 27.8
Other............................................................................. 4.3 6.3
Adjustments and eliminations...................................................... (8.7) (13.5)
--------- ---------
$ 1,709.6 $ 1,956.5
========= =========
</TABLE>
Earnings (Loss) Before Interest and Income Taxes. The earnings (loss)
before interest and income taxes by segment was as follows (millions of
dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas....................................................................... $ 186.9 $ 193.8
Refining, marketing and chemicals................................................. 69.6 47.6
Exploration and production........................................................ 11.4 25.5
Coal ............................................................................. 4.3 2.8
Power............................................................................. 18.9 11.6
Corporate and other............................................................... (22.1) (18.0)
--------- ---------
$ 269.0 $ 263.3
========= =========
</TABLE>
Natural Gas. The decrease in operating revenues of $80.2 million for the
quarter can be primarily attributed to lower prices and volumes for gas sales
and a benefit of $38.7 million in 1998 from a rate case settlement.
Purchases decreased by $48.3 million in the first three months of 1999,
primarily due to lower natural gas costs and reduced volumes purchased. Gross
profit decreased by $31.9 million for the three-month period.
Earnings before interest and taxes ("EBIT") decreased by $6.9 million for
the first quarter as a result of the 1998 rate case settlement benefit of $38.7
million noted above and decreased transportation, storage and gathering revenues
of $3.7 million partially offset by reduced operating and general expenses of
$25.9 million, increased gross profit from gas sales of $4.6 million, increased
earnings from equity investments of $2.4 million and other increases of $2.6
million. The reduced operating and general expenses result from a 1998 provision
of $16.1 million for environmental compliance and other matters, decreased ad
valorem taxes and other decreases.
Refining, Marketing and Chemicals. Operating revenues decreased by $166.9
million in the 1999 first quarter due to decreased prices partially offset by
increased volumes. Purchases decreased by $194.7 million, also due to lower
- 15 -
<PAGE>
prices partially offset by increased volumes, resulting in a gross profit
increase of $27.8 million. The gross profit increase results from increased
volumes of $16.3 million; higher margins of $6.0 million; an increase of $3.3
million from the sale, trading and exchanging of third-party products and other
increases of $2.2 million.
The EBIT increase by $22.0 million resulted from the increased gross profit
of $27.8 million and other increases of $1.4 million partially offset by
increased operating expenses of $7.2 million. Operating and general expenses
increased primarily as a result of increased throughput at the Company's
refineries.
Exploration and Production. Operating revenues decreased by $11.9 million
in the 1999 first quarter as a result of lower prices and reduced crude and
condensate volumes being partially offset by increased natural gas volumes. The
EBIT decrease of $14.1 million results from decreased prices of $23.8 million
and lower crude and condensate volumes of $5.2 million being partially offset by
increased natural gas volumes of $7.1 million; decreased depreciation, depletion
and amortization of $1.8 million; and other increases of $6.0 million. The other
increases of $6.0 million result primarily from a business tax refund. The
depreciation, depletion and amortization decrease results from a lower rate
partially offset by increased volumes.
Coal. The operating revenue increase of $11.0 million for the three-month
period results from increased volumes being partially offset by lower prices.
EBIT increased by $1.5 million due to the revenue increase of $11.0 million
being partially offset by increased operating expenses of $8.6 million and other
decreases of $.9 million. Operating expenses, which include coal costs,
increased as a result of the additional volumes sold.
Power. Operating revenue decreased by $1.7 million in the 1999 first
quarter primarily due to decreased operating levels for the El Salvador
operations. The EBIT increase of $7.3 million results from increased earnings
from equity investments of $6.9 million and reduced operating and general
expenses of $2.1 million offset by the reduced revenues of $1.7 million. The
operating and general expense decrease results primarily from the reduced El
Salvador operating levels.
Corporate and Other. The EBIT for these operations, which include certain
real estate activities and corporate income and expense not allocated to the
operating segments, decreased primarily as a result of dividends on the
Company-obligated mandatory redemption preferred securities of a consolidated
trust.
Interest and Debt Expense. Interest and debt expense increased by $1.7
million due to higher average debt partially offset by reduced average interest
rates and increased capitalized interest.
Taxes on Income. Federal income taxes decreased by $1.7 million in the 1999
period as the result of a lower effective federal income tax rate partially
offset by increased earnings before income taxes. State income taxes decreased
by $4.0 million.
Loss from Discontinued Operations. The 1998 loss (net of income tax
benefits of $1.0 million) represents the operating results of the Company's 50%
owned trucking operation, which has been discontinued.
Environmental Matters
The Company's operations are subject to extensive and evolving federal,
state and local environmental laws and regulations. Compliance with such laws
and regulations can be costly. Additionally, 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," imposes liability for the release of a "hazardous
substance" into the environment. Superfund liability is imposed without regard
to fault and even if the waste disposal was in compliance with the then current
laws and regulations. With the joint and several liability imposed under
Superfund, a potentially responsible party ("PRP") may be required to pay more
than its proportional share of such costs. Certain subsidiaries of the Company
and a company in which Coastal owns a 50% interest have been named as a PRP in
several "Superfund" waste disposal sites. At the 12 sites for which there is
sufficient information, total cleanup costs are estimated to be approximately
$632 million, and the Company estimates
- 16 -
<PAGE>
its pro-rata exposure, to be paid over a period of several years, is
approximately $7.5 million and has made appropriate provisions. At nine other
sites, the Environmental Protection Agency ("EPA") is currently unable to
provide the Company with an estimate of total cleanup costs and, accordingly,
the Company is unable to calculate its share of those costs. Additionally,
certain subsidiaries of the Company have been named as PRPs in three state
sites. At one site, the North Carolina Department of Health, Environmental and
Natural Resources has estimated the total cleanup costs to be approximately $50
million, but the Company believes the subsidiary's activities at this site were
de minimis. At a second state site, the Florida Department of Environmental
Protection has demanded reimbursement of its costs, which total $100,000, and
suitable remediation. There is not sufficient information to estimate the
remedial costs or the Company's pro-rata exposure at this site. At the third
site, the owner of the California site has estimated the total cleanup costs to
be approximately $40 million, but the Company believes the subsidiary's
activities at this site were de minimis.
Future information and developments, including legislative and enforcement
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 consolidated financial position or results of operations.
- 17 -
<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 8 of the Notes to Consolidated Financial
Statements 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.
11 - Statement re Computation of Per Share Earnings.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
(1) A report on Form 8-K was filed on February 4, 1999. The item
reported was:
Item 7. Financial Statements and Exhibits.
(c) Exhibits. The following document is filed as an exhibit to
this current report.
99.1 Press release issued January 26, 1998, entitled
"Coastal Posts Record 1998 Earnings."
(2) A report on Form 8-K was filed on February 5, 1999. The item
reported was:
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
(12) Computation of Ratio of Earnings to Fixed Charges.
- 18 -
<PAGE>
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: May 13, 1999 By: COBY C. HESSE
-------------------------------
Coby C. Hesse
Executive Vice President
and Principal Accounting Officer
(As Authorized Officer and
Chief Accounting Officer)
- 19 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- ------------------------------------------------------------------------------
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
- 21 -
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
March 31,
---------------------
1999 1998
--------- ---------
(Unaudited)
<S> <C> <C>
BASIC EARNINGS PER SHARE
- ------------------------
Net earnings......................................................................... $ 134.5 $ 122.9
Dividends on preferred stock......................................................... .1 4.3
--------- ---------
Net earnings available to common stockholders........................................ $ 134.4 $ 118.6
========= =========
Average number of common shares outstanding............................................. 212,431 211,871
Average number of Class A common shares outstanding..................................... 353 365
--------- ---------
212,784 212,236
========= =========
Basic earnings per share:
From continuing operations........................................................... $ .63 $ .57
Discontinued operations.............................................................. - (.01)
--------- ---------
Net basic earnings per share......................................................... $ .63 $ .56
========= =========
DILUTED EARNINGS PER SHARE
- --------------------------
Net earnings used in calculating basic earnings per share............................ $ 134.4 $ 118.6
Dividends applicable to dilutive preferred stock:
Series A.......................................................................... - -
Series B.......................................................................... - -
Series C.......................................................................... .1 .1
--------- ---------
Income available to common shareholders plus
assumed conversions............................................................... $ 134.5 $ 118.7
========= =========
Average number of shares used in calculating basic earnings
per share............................................................................ 212,784 212,236
Effect of dilutive securities:
Options.............................................................................. 2,044 2,116
Series A, B and C preferred stock.................................................... 1,272 1,349
--------- ---------
216,100 215,701
========= =========
Diluted earnings per share:
From continuing operations........................................................... $ .62 $ .56
Discontinued operations.............................................................. - (.01)
--------- ---------
Net diluted earnings per share....................................................... $ .62 $ .55
========= =========
<FN>
- ------------------------------------
Convertible securities and options are not considered in the calculations if
the effect of the conversion is anti-dilutive.
</FN>
</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 MARCH 31, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 9
<SECURITIES> 0
<RECEIVABLES> 1,078
<ALLOWANCES> 0
<INVENTORY> 644
<CURRENT-ASSETS> 1,973
<PP&E> 12,016
<DEPRECIATION> 3,790
<TOTAL-ASSETS> 12,645
<CURRENT-LIABILITIES> 2,058
<BONDS> 4,213
400
0
<COMMON> 72
<OTHER-SE> 3,528
<TOTAL-LIABILITY-AND-EQUITY> 12,645
<SALES> 1,710
<TOTAL-REVENUES> 1,735
<CGS> 946
<TOTAL-COSTS> 1,466
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> 192
<INCOME-TAX> 57
<INCOME-CONTINUING> 135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135
<EPS-PRIMARY> .63
<EPS-DILUTED> .62
</TABLE>
