================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 2-50853
THE COASTAL CORPORATION
THRIFT PLAN
(Full title of the plan)
THE COASTAL CORPORATION
Coastal Tower
Nine Greenway Plaza
Houston, Texas 77046-0995
(Name of issuer of the securities held pursuant to
the plan and address of its principal executive office)
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<PAGE>
INDEPENDENT AUDITORS' REPORT
Administrator
The Coastal Corporation Thrift Plan
Houston, Texas
We have audited the accompanying statements of net assets available for plan
benefits of The Coastal Corporation Thrift Plan (the "Plan") as of December 31,
1998 and 1997, and the related statements of changes in net assets available for
plan benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1998 and 1997, and the changes in net assets available for plan benefits for the
years then ended in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules 1 through 9
and Items 27a and 27d are presented for the purpose of additional analysis and
are not a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, as amended. These schedules are the responsibility of the Plan's
management. Such schedules have been subjected to the auditing procedures
applied in our audit of the basic 1998 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Houston, Texas
June 18, 1999
<PAGE>
THE COASTAL CORPORATION THRIFT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
December 31,
---------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
ASSETS
Investments, at market:
Securities of The Coastal Corporation:
Common Stock........................................................ $ 490,707,350 $ 451,536,295
Class A Common Stock................................................ 378,261 827,312
$1.83 Cumulative Convertible Preferred Stock, Series B.............. 99,682 94,329
Valero Energy Corporation Common Stock................................. 416,925 734,402
Pacific Gas & Electric Corporation Common Stock........................ 342,405 392,250
Intelect Communications, Inc. Common Stock............................. 5,684 24,906
Diversified Fund....................................................... 27,376,139 26,097,217
Short Term Investments................................................. 47,176,213 52,216,948
--------------- --------------
Total Investments......................................................... 566,502,659 531,923,659
--------------- --------------
Receivables:
Contributions.......................................................... 20,231 2,230
Dividends.............................................................. 917,602 780,477
Interest............................................................... 218,216 255,164
--------------- --------------
Total Receivables......................................................... 1,156,049 1,037,871
--------------- --------------
Cash .................................................................... 2 6
--------------- --------------
TOTAL ASSETS........................................................ 567,658,710 532,961,536
--------------- --------------
LIABILITIES
Payable to participants................................................... 3,904,325 9,173,609
--------------- --------------
TOTAL LIABILITIES................................................... 3,904,325 9,173,609
--------------- --------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS.................................... $ 563,754,385 $ 523,787,927
=============== ==============
</TABLE>
See Notes and Schedules to Financial Statements.
-2-
<PAGE>
THE COASTAL CORPORATION THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
For the Year Ended
December 31,
---------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
ADDITIONS:
Investment income:
Dividends.............................................................. $ 4,041,081 $ 3,651,771
Interest............................................................... 2,737,022 3,106,336
--------------- --------------
Total investment income................................................ 6,778,103 6,758,107
--------------- --------------
Realized gains on investments (Note 6).................................... 2,755,691 7,556,948
--------------- --------------
Net change in unrealized appreciation
of investments (Note 7)................................................ 59,072,855 100,137,323
--------------- --------------
Contributions:
Employer............................................................... 20,008,426 19,606,321
Forfeitures............................................................ (432,085) (373,344)
--------------- --------------
Net employer contributions.......................................... 19,576,341 19,232,977
Rollover from other plans.............................................. 133,480 51,556
Participants........................................................... 22,132,071 21,673,515
--------------- --------------
Total contributions.................................................... 41,841,892 40,958,048
--------------- --------------
DEDUCTIONS:
Withdrawals............................................................... (70,482,083) (91,681,157)
--------------- --------------
TRANSFERS:
Transfer from the Derby Refining Company Thrift Plan...................... - 551,336
--------------- --------------
Net increase .......................................................... 39,966,458 64,280,605
--------------- --------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of Year...................................................... 523,787,927 459,507,322
--------------- --------------
End of Year............................................................ $ 563,754,385 $ 523,787,927
=============== ==============
</TABLE>
See Notes and Schedules to Financial Statements.
-3-
<PAGE>
THE COASTAL CORPORATION THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
1. Description of the Plan
General
The Coastal Corporation Thrift Plan (the "Plan") is primarily an employee
stock purchase plan which is registered under the Securities Act of 1933, as
amended, and designed to provide a systematic means whereby the contributions of
eligible employees of The Coastal Corporation and participating subsidiaries
("Coastal" or "Company") and matching contributions of the Company may be
invested for the benefit of the participating employees. The Plan is
administered by Coastal, and pursuant to the provisions of the Plan, an
Administrative Committee comprised of employees of Coastal has been appointed to
carry out certain duties under the Plan. Chase Bank of Texas National
Association (the "Trustee") is the Trustee of the Plan Trust (the "Trust"). All
employees eligible for participation in the Plan receive a prospectus and an
employee handbook, which may be updated by supplements from time to time,
containing a general description of the Plan. The Trustee holds the investment
assets of the Plan and executes transactions relating thereto.
Termination of the Plan
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). In the event of termination,
participants will become 100 percent vested in their accounts.
Amendment
The Plan was amended on June 20, 1997 and on December 31, 1997 to conform
to statutory changes and to merge the Derby Refining Company Thrift Plan into
the Plan as of December 31, 1997.
On December 19, 1998, the Plan was amended and restated as of January 1,
1999 to conform to statutory changes; to provide participants in the Company's
coal operations with (i) a Company-matching contribution of 2% of a
participant's basic compensation and (ii) the option to contribute to the Plan
on an after-tax basis; to provide credit for determining eligibility to join the
Plan for employees of certain facilities for such employees' employment at such
facilities prior to the acquisition by the Company of the facilities; to permit
a participant's benefit to be reduced to satisfy liabilities of the participant
to the Plan due to conviction of a crime involving the Plan or certain
settlements involving violations of fiduciary provisions of law with respect to
the Plan; and to convert certain of the Section 401(k) provisions of the Plan to
employee stock ownership plan ("ESOP") provisions.
2. Summary of Significant Accounting Policies
Accounting Basis
The financial statements of the Plan are prepared on the accrual basis of
accounting.
Marketable Securities
Securities valuations are based on the last recorded sales price at
December 31, 1998 and 1997, as reported by the principal securities exchange on
which the security is traded, or the average of the bid and the asked price if
sold over the counter. Realized gains and losses reported on the sale or
withdrawal of securities by participants are based on the difference between
market values of the securities sold and/or transferred to participants at the
effective dates and the market value at the beginning of the year and cost of
securities purchased during the year.
-4-
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Actual results could differ from the estimates and assumptions
used.
Federal Income Taxes
The Company received its most recent determination letter dated June 26,
1996 from the Internal Revenue Service which states the Plan meets the exemption
requirements of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"); and therefore, the Trust is exempt from taxation under Section
501(a) of the Code. Since that determination, certain amendments have been made.
It is the opinion of management that, on the basis of the Internal Revenue
Service's prior determination, and existing federal income tax laws, the Plan,
as amended, continues to be exempt from taxation. Accordingly, no provision has
been made for federal income taxes.
Reclassification of Prior Period Statements
Certain minor reclassifications have been made to conform with current
reporting practices. The effect of the reclassifications was not material to the
Plan's Statement of Net Assets Available for Plan Benefits, Statement of Changes
in Net Assets Available for Plan Benefits or supplemental schedules.
3. Contributions to the Plan
Employee Contributions
Upon enrollment, a participant may elect to contribute to the Plan on a
before- or after-tax basis (except that participants in Canada may contribute to
the Plan only on an after-tax basis), by means of regular payroll deductions,
from two percent (2%) to eight percent (8%), in increments of one percent (1%),
of the participant's basic compensation up to a maximum amount of $160,000 for
1998 and 1997, or such greater amount as may be allowed by Section 401(a) of the
Code. Generally, "basic compensation" means fixed salaries or wages per hour,
sales commissions, and truck mileage and loading which are paid by the Company
to the participant, excluding compensation for bonuses, overtime and other
incentive compensation.
Before-tax contributions are made pursuant to salary reduction agreements.
Salary reduction contributions for ESOP participants constitute and are treated
as an ESOP.
Employee contributions to the Plan, except those contributed as elective
deferrals (including salary reduction contributions) pursuant to Section 401(k)
(as limited by Section 402(g)(3)) of the Code, are taxed at ordinary income tax
rates as a part of their salary. The Company matching contributions, investment
income, employee contributions under provisions of Section 401(k) of the Code,
and unrealized appreciation are not taxable to the employee until withdrawal.
Employer Contributions
The Company will make Company matching contributions for the account of
the participant at an amount equal to the employee's contributions subject to a
maximum rate of two percent (2%) of the employee's basic compensation (as
defined above) during the first and second year of active participation in the
Plan; thereafter, the Company matching contributions are increased to not more
than four percent (4%) during the third and fourth years of active
participation, six percent (6%) during the fifth and sixth years of active
participation and eight percent (8%) after six years of active participation in
the Plan. However, participants in the Company's coal operations are eligible
for Company matching contributions to a maximum of two percent (2%) of an
employee's basic compensation.
-5-
<PAGE>
Vesting
A participant's balance in the Trust attributable to the employee's
contributions is vested in such participant at all times. The Company's
contributions and appreciation and earnings thereon in the participant's balance
vest at the rate of 20% upon completion of each twelve months of Active
Participation (as defined in the Plan); such vesting continues, on a cumulative
basis, until a participant becomes fully vested in all contributions and
appreciation and earnings thereon (usually 6 years, comprised of the initial
year of employment plus five years of Active Participation). Any period of time
during which a participant has declined to contribute to the Plan is not
included in the determination of vesting of Company contributions.
4. Investment Programs(*)
Funds in Which Current Employee Contributions Are Invested:
The Coastal Common Stock Fund is a fund invested in the common stock of
Coastal. Cash dividends thereon are reinvested in such Common Stock Fund. All
Company matching contributions are invested in the Coastal Common Stock Fund
only.
The Interest Income Fund is an unsegregated fund invested in interest
bearing investments such as bonds, notes, debentures, savings accounts, savings
certificates, commercial paper, obligations of the United States of America,
deposit accounts maintained by one or more legal reserve life insurance
companies which provide for the payment of fixed or variable rates of interest
for specified periods of time, and other similar types of investments. A portion
of the Interest Income Fund may be retained in cash.
The Diversified Fund is an unsegregated fund invested in capital stocks of
issuers (other than Coastal or any related employer or subsidiary thereof),
notes, bonds, debentures, and other similar types of investments. A portion of
the Diversified Fund may be retained in cash or invested temporarily in
obligations of the United States of America or in commercial paper.
Funds in Which Current Employee Contributions Are Not Invested:
The Coastal Class A Common Stock Fund is a fund invested in Class A Common
Stock of Coastal which was received as a stock dividend in 1984. Dividends
declared on Coastal Class A Common Stock are invested in the Coastal Common
Stock Fund. A participant may have the Class A Common Stock in his account
converted to Coastal Common Stock. Class A Common Stock attributable to a
participant's own contributions and earnings may be converted into Coastal
Common Stock, the Common Stock sold and the proceeds invested in the Diversified
Fund or the Interest Income Fund.
The Coastal Preferred Stock Fund is a fund established to hold $1.83
Cumulative Convertible Preferred Stock, Series B of Coastal. Dividends declared
on such Preferred Stock are invested in the Coastal Common Stock Fund. Each
participant may elect to convert his interest in this fund into Coastal Common
Stock.
The Valero Stock Fund is a fund established to hold the common stock of
Valero Energy Corporation ("Valero") received as a result of the spin-off of
Valero by Coastal. A participant may direct the sale of Valero common stock in
his account and have the proceeds invested in the Diversified Fund or the
Coastal Common Stock Fund, or to have Valero common stock attributable to the
participant's contributions and earnings sold, and the proceeds invested in the
Interest Income Fund. Dividends or other cash realized from the Valero common
stock are invested in the Coastal Common Stock Fund unless the participant
elects to have such cash invested in the Diversified Fund.
The PG&E Stock Fund is a fund established to hold common stock of Pacific
Gas & Electric Corporation ("PG&E") which was received as a dividend to holders
of Valero common stock in 1997. A participant may direct the sale of PG&E common
stock in his account and have the proceeds invested in the Diversified Fund or
the Coastal
- -----------------------
(*) For the Statement of Changes in Net Assets Available for Plan
Benefits by Fund, refer to Schedule 9.
-6-
<PAGE>
Common Stock Fund, or to have PG&E common stock attributable to the
participant's contributions and earnings sold, and the proceeds invested in the
Interest Income Fund. Dividends or other cash realized from the PG&E common
stock are invested in the Coastal Common Stock Fund unless the participant
elects to have such cash invested in the Diversified Fund.
The Intelect Stock Fund is a fund established to hold the common stock of
Intelect Communications, Inc. ("Intelect"), issued as a result of a spin-off by
Coastal. A participant may direct the sale of Intelect common stock in his
account and have the proceeds invested in the Coastal Common Stock Fund or the
Diversified Fund or to have Intelect common stock attributable to the
participant's contributions and earnings sold, and the proceeds invested in the
Interest Income Fund. Dividends or other cash realized from Intelect common
stock are invested in the Coastal Common Stock Fund.
A Diversified Fund was established in the Derby Refining Company Thrift
Plan prior to its merger into the Plan, and only the account balances
transferred from the Derby Refining Company Thrift Plan may be invested in this
fund. This fund has investments in Chase Bank of Texas Fixed Income and Equity
Funds.
The Government Bond Fund is an unsegregated fund which is invested in
obligations issued or guaranteed by the United States of America or by any
agency or instrumentality thereof and in savings deposits in any bank (including
the Trustee) to the extent they are fully guaranteed by the Federal Deposit
Insurance Corporation. This fund was established in the Derby Refining Company
Thrift Plan prior to its merger into the Plan, and only the account balances
transferred from the Derby Refining Company Thrift Plan may be invested in this
fund.
5. Administrative Costs
All administrative Plan expenses, including fees and Trustee expenses, are
paid by Coastal or its participating subsidiaries. Brokerage fees, taxes and
other transaction fees are paid from Plan assets.
-7-
<PAGE>
6. Realized Gains on Investments
The following is a summary of realized gains (losses) on investments for
the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------ ---------------------------------------
Sales Proceeds Aggregate Realized Sales Proceeds Aggregate Realized
or Market Value Carrying Gain or Market Value Carrying Gain
Securities of Withdrawals Amount (Loss) of Withdrawals Amount (Loss)
- -------------------------- -------------- ----------- ----------- --------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Coastal Common Stock Fund:
The Coastal Corporation
Common Stock $30,829,001 $28,957,888 $1,871,113 $34,800,513 $31,327,999 $3,472,514
Diversified Fund:
Unaffiliated marketable
securities 28,424,826 27,541,444 883,382 21,951,897 17,944,133 4,007,764
Coastal Class A Common Stock
Fund:
The Coastal Corporation
Class A Common Stock 1,829 1,735 94 219,814 203,398 16,416
Coastal Preferred Stock Fund:
The Coastal Corporation
$1.83 Cumulative Convertible
Preferred Stock, Series B 7,641 6,467 1,174 68,884 69,000 (116)
Valero Stock Fund:
Valero Energy Corporation
Common Stock 122,640 125,591 (2,951) 213,137 154,083 59,054
PG&E Stock Fund:
Pacific Gas & Electric
Corporation
Common Stock 69,471 67,051 2,420 - - -
Intelect Stock Fund:
Intelect Communications, Inc.
Common Stock 4,884 4,425 459 8,646 7,330 1,316
---------- ----------- ---------- ----------- ----------- ----------
$59,460,292 $56,704,601 $2,755,691 $57,262,891 $49,705,943 $7,556,948
=========== =========== ========== =========== =========== ==========
</TABLE>
7. Net Change in Unrealized Appreciation of Investments
During 1998 and 1997 the fair value of investments (including investments
bought and sold, as well as held during the year) appreciated (depreciated) as
follows:
<TABLE>
<CAPTION>
1998 1997
------------- --------------
<S> <C> <C>
Coastal Common Stock $ 57,486,806 $ 97,015,844
Coastal Class A Common Stock 3,537 165,720
Coastal Preferred Stock 11,820 15,327
Valero Common Stock (189,269) 403,329
PG&E Common Stock 14,588 42,831
Intelect Common Stock (15,545) 2,899
Diversified Fund 1,760,918 2,491,373
------------- --------------
$ 59,072,855 $ 100,137,323
============= ==============
</TABLE>
-8-
<PAGE>
8. Unit Values
For the funds which assign units to participants, the following table sets
forth the number of units and unit values:
<TABLE>
<CAPTION>
1998 1997
------------------------------------ -----------------------------------
Employee Net Asset Employee Net Asset
Units Value Units Value
Outstanding Per Unit Outstanding Per Unit
----------------- ------------- ----------------- ------------
<S> <C> <C> <C> <C>
Diversified Fund - Coastal 1,870,865 $ 14.6065 2,029,739 $ 12.8134
Diversified Fund - Derby 19,441 2.5384 19,454 2.1481
Interest Income Fund 45,729,359 1.0000 49,532,995 1.0000
Government Bond Fund 3,004 1.4900 3,004 1.4150
</TABLE>
The Plan's Diversified Fund Unit Values are based on the value of the
underlying common and preferred stocks reported in Schedule 7. The unit values
are computed monthly and are adjusted for realized gains or losses from sales of
stocks, unrealized gains or losses based on changes in value of securities held,
and interest and dividends credited to the funds. The unit value is calculated
by dividing the value of these securities, as adjusted, by the total number of
units credited to participants in the fund.
The Plan's Interest Income Fund Unit Values are based on $1.00 per unit.
The unit values for the Diversified Fund transferred into the Plan from
the Derby Refining Company Thrift Plan are based on the values established by
the fund managers for the Chase Bank of Texas Funds reported in Schedule 7,
under Fixed Income Funds and Equity Funds. The Government Bond Fund is currently
invested in the Chase Bank of Texas Short Term Money Market Group Fund which
establishes the unit values.
-9-
<PAGE>
Schedule 1 - Investments *
------------------------
Coastal Common Stock Fund
-------------------------
<TABLE>
<CAPTION>
Security Shares Cost Market Value
- -------- ---------- --------------- ---------------
<S> <C> <C> <C>
The Coastal Corporation
Common Stock:
December 31, 1998(1) 13,970,316 $ 147,958,849 $ 490,707,350
=============== ===============
December 31, 1997(1)** 14,490,336 $ 144,365,695 $ 451,536,295
=============== ===============
</TABLE>
Schedule 2 - Investments
------------------------
Coastal Class A Common
Stock Fund
----------------------
<TABLE>
<CAPTION>
Shares Cost Market Value
---------- --------------- ---------------
<S> <C> <C> <C>
The Coastal Corporation
Class A Common Stock:
December 31, 1998 10,769 $ 60,311 $ 378,261
=============== ===============
December 31, 1997 12,691 $ 142,151 $ 827,312
=============== ===============
</TABLE>
Schedule 3 - Investments *
------------------------
Coastal Preferred Stock Fund
----------------------------
<TABLE>
<CAPTION>
Shares Cost Market Value
---------- --------------- ---------------
<S> <C> <C> <C>
The Coastal Corporation
$1.83 Cumulative Convertible
Preferred Stock, Series B:
December 31, 1998 394 $ 11,079 $ 99,682
=============== ===============
December 31, 1997 423 $ 11,894 $ 94,329
=============== ===============
</TABLE>
Schedule 4 - Investments *
------------------------
Valero Stock Fund
------------------------
<TABLE>
<CAPTION>
Shares Cost Market Value
---------- --------------- ---------------
<S> <C> <C> <C>
Valero Energy Corporation
Common Stock:
December 31, 1998 19,620 $ 67,725 $ 416,925
=============== ===============
December 31, 1997 23,615 $ 81,516 $ 734,402
=============== ===============
<FN>
- ------------------------------------
* See also Schedule 8.
** Adjusted for two-for-one stock split in 1998.
(1) Exceeds 5% of net assets.
</FN>
</TABLE>
-10-
<PAGE>
Schedule 5 - Investments *
------------------------
PG&E Stock Fund
-------------------------
<TABLE>
<CAPTION>
Shares Cost Market Value
---------- --------------- ---------------
<S> <C> <C> <C>
Pacific Gas & Electric
Common Stock:
December 31, 1998 10,870 $ 31,687 $ 342,405
=============== ===============
December 31, 1997 13,082 $ 38,135 $ 392,250
=============== ===============
</TABLE>
Schedule 6 - Investments *
------------------------
Intelect Stock Fund
-------------------------
<TABLE>
<CAPTION>
Shares Cost Market Value
---------- --------------- ---------------
<S> <C> <C> <C>
Intelect Communications Inc.
Common Stock:
December 31, 1998 3,789 $ 1,954 $ 5,684
=============== ===============
December 31, 1997 4,515 $ 1,618 $ 24,906
=============== ===============
<FN>
- ------------------------------------
* See also Schedule 8.
</FN>
</TABLE>
-11-
<PAGE>
Schedule 7 - Investments *
------------------------
Diversified Fund
---------------------------
<TABLE>
<CAPTION>
Security - December 31, 1998 Shares Cost Market Value
- -------- --------- --------------- -------------
<S> <C> <C> <C>
Common Stocks
- -------------
AT&T 3,700 $ 280,552 $ 280,552
Aluminum Co. America 6,500 445,527 484,653
American General Corp. 9,000 409,223 702,026
American Home Products Corp. 10,400 328,832 586,300
Ameritech Corp. 9,900 486,239 627,412
Aon Corp. 6,307 194,276 349,250
Bank One Corp. 10,378 514,656 529,921
Bankamerica Corp. 9,531 654,092 573,051
Bankboston Corp. 8,200 246,696 319,283
Baxter International Inc. 9,100 431,832 585,239
Bell Atlantic Corp. 8,000 377,152 432,000
Bestfoods 13,700 654,092 729,525
Browning Ferris Industries Inc. 12,400 441,204 352,619
Chevron Corp. 6,900 556,687 572,265
Chubb Corp. 7,200 504,695 466,200
Cooper Industries Inc. 7,000 364,223 333,809
Deere & Co. 11,300 431,291 371,487
Dominion Resources Inc. 11,600 544,506 542,300
Du Pont E I De Nemours & Company 8,050 445,986 427,149
Emerson Electric Co. 9,600 545,597 580,800
First Union Corp. 9,620 423,627 585,011
Ford Motor Company 9,200 243,719 539,920
Fortune Brands Inc. 14,500 487,447 458,563
Frontier Corp 17,500 434,296 595,000
GTE Corporation 9,900 511,681 643,500
General Motors Corp 5,600 327,087 400,747
H J Heinz Co. 9,900 459,334 560,588
Kimberly Clark Corp. 14,400 684,451 784,800
Lockheed Martin Corp. 4,700 497,917 398,325
May Department Stores Company 8,500 428,305 513,188
McGraw Hill Companies Inc. 8,520 352,062 867,975
Mellon Bank Corporation 7,300 304,123 501,875
Mobil Corp 4,100 286,146 357,213
PPG Industries Inc. 5,300 365,089 308,391
Pacificorp 15,900 315,953 334,886
Penney J C Inc. 9,400 618,653 440,625
Pharmacia Upjohn Inc 13,100 498,720 741,788
Pitney Bowes Incorporated 13,100 359,012 865,412
St. Paul Companies Inc. 11,700 457,739 407,300
Southern Co. 14,200 384,422 412,680
Summit Bancorp 8,550 211,811 373,524
Tenneco Inc. 18,200 720,183 619,928
Texas Utilities Company 12,000 509,388 560,244
Thomas &Betts Corporation 7,470 304,821 323,541
USX Marathon Group 10,200 305,413 307,275
<FN>
- ------------------------------------
* See also Schedule 8.
</FN>
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Security - con't Shares Cost Market Value
- -------- --------- --------------- -------------
<S> <C> <C> <C>
Union Camp Corp. 9,100 457,531 610,838
Wells Fargo Company 12,600 440,280 503,206
Williams Companies Inc. 14,500 340,594 452,212
Xerox Corp. 3,100 296,009 365,800
--------------- ---------------
Total Common Stock 20,883,171 24,680,196
--------------- ---------------
Foreign Stocks
- --------------
British Airways PLC 5,800 378,050 393,310
British Petroleum PLC 4,414 313,326 400,571
Cable & Wireless PLC Co. ADR 9,100 256,770 334,425
Glaxo Welcome PLC Sponsored 6,100 295,603 423,950
Imperial Chemical Industries PLC ADR 17,500 895,008 611,398
Royal Dutch Petroleum 9,900 473,142 473,963
Zeneca Group PLC Sponsored ADR 200 8,026 8,975
--------------- ---------------
Total Foreign Stocks 2,619,925 2,646,592
--------------- ---------------
Fixed Income Funds
- ------------------
CBT Managed Bond Group Fund 447 4,831 6,241
CBT Limited Term Bond Group Fund 1,226 12,797 15,677
--------------- ---------------
Total Fixed Income Funds 17,628 21,918
--------------- ---------------
Equity Funds
- ------------
CBT Special Equity Group Fund 21 888 2,360
CBT Equity Income Group Fund 38 2,279 6,099
CBT American Core Equity Group Fund 213 3,798 9,601
CBT International Equity Group Fund 96 1,099 2,291
CBT Equity Growth Group Fund 252 2,429 7,082
--------------- ---------------
Total Equity Funds 10,493 27,433
--------------- ---------------
GRAND TOTAL $ 23,531,217 $ 27,376,139
=============== ===============
</TABLE>
-13-
<PAGE>
Schedule 7A - Investments *
-------------------------
Diversified Fund
--------------------------
<TABLE>
<CAPTION>
Security - December 31, 1997 Shares Cost Market Value
- -------- --------- --------------- -------------
<S> <C> <C> <C>
Common Stocks
- -------------
Allegheny Teledyne Inc. 13,900 $ 415,735 $ 359,663
American General Corporation 6,300 234,547 340,591
American Home Products Corp.** 20,600 571,742 787,950
Anheuser Busch Cos Inc. 9,600 415,987 422,400
AON Corporation 9,107 280,525 533,898
Atlantic Richfield Co. 5,800 414,186 464,725
Bank One Corp. 3,000 135,205 162,936
Bank of Boston Corporation** 11,600 309,481 544,835
Bankers Trust New York Corp. 2,900 335,145 326,067
Bausch & Lomb Inc. 6,100 230,972 241,713
Baxter International Inc. 12,000 513,998 605,244
Block H & R Incorporated 3,100 103,199 138,917
Bristol Myers Squibb Co. 900 38,896 85,163
Browning Ferris Industries Inc. 18,764 643,824 694,268
CIGNA Corp. 1,500 187,103 258,563
CPC International Inc. 7,200 692,138 781,320
Chase Manhattan Corporation 3,100 237,029 339,450
Chevron Corp. 4,500 375,581 346,500
Consolidated Natural Gas Co. 6,400 363,024 387,200
Corestates Financial Corp. 4,600 292,809 370,300
Crestar Financial Corporation 9,500 254,885 541,500
Du Pont E I De Nemours & Company 7,050 258,711 423,437
Eaton Corp. 2,500 163,575 223,125
Emerson Electric Co. 7,200 379,932 406,346
First Chicago NBD Corp. 3,000 247,716 250,500
Fleet Financial Group Inc. 5,700 335,986 428,213
Ford Motor Company 10,800 322,441 524,470
Fortune Brands Inc. 12,800 413,749 474,394
Frontier Corp. 18,000 431,200 432,000
GTE Corporation 6,600 316,873 344,850
General Dynamics Corporation** 7,000 179,717 303,625
General Mills Inc. 1,500 101,084 107,438
General Motors Corp. 4,100 238,144 249,075
Georgia Pacific Group 2,000 163,553 121,500
Georgia Pacific Timber Group 2,200 54,240 49,911
Hartford Financial Services Group Inc. 2,700 167,407 252,617
Heinz H J Company 7,300 266,976 370,928
Hercules Inc. 6,800 345,182 340,422
Kimberly Clark Corp. 1,800 86,026 88,762
May Department Stores Company 9,300 440,696 489,989
McGraw Hill Companies Inc. 11,020 396,360 815,480
Mellon Bank Corporation 8,600 298,883 521,375
Mercantile Bancorp Inc. 6,450 197,568 396,675
Merck & Co. Inc. 1,900 179,264 201,400
<FN>
- ------------------------------------
* See also Schedule 8.
** Adjusted for stock split in 1998.
</FN>
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
Security - con't. Shares Cost Market Value
- -------- --------- --------------- -------------
<S> <C> <C> <C>
Minnesota Mining & Manufacturing Company 3,440 264,924 282,293
Mobil Corp. 3,400 195,734 245,436
National City Corp. 3,600 231,900 236,700
Norfolk Southern Corporation 10,800 330,443 329,400
PNC Bank Corp. 5,500 269,213 313,154
Pharmacia Upjohn Inc. 12,500 467,690 457,813
Philip Morris Companies Inc. 9,200 382,316 416,300
Pitney Bowes Incorporated** 17,200 417,477 773,458
RJR Nabisco Holdings Corp. 7,320 234,011 274,500
SBC Communications Inc.** 8,200 245,463 300,325
Safeco Corp. 6,400 310,418 312,000
St. Paul Companies Incorporated** 4,400 168,576 180,536
Summit Bancorp 11,450 245,296 605,419
Temple Inland Inc. 4,500 213,520 235,404
Thomas & Betts Corporation 8,870 369,824 419,108
USX Marathon Group 7,400 167,479 249,750
Union Camp Corporation 5,500 318,115 295,279
Union Pacific Corporation 6,600 331,628 413,325
Whirlpool Corp. 4,600 245,590 253,000
Williams Companies Inc. 16,500 321,411 470,250
--------------- ---------------
Total Common Stocks 18,762,322 23,613,185
--------------- ---------------
Foreign Stocks
- --------------
BCE Inc. 10,600 207,092 353,107
British Petroleum PLC 6,514 381,458 519,081
Cable & Wireless PLC Co. ADR 11,700 330,132 318,088
Glaxo Welcome PLC Sponsored 10,200 361,889 488,325
Imperial Chemical Industries PLC ADR 9,600 561,122 623,395
Zeneca Group PLC Sponsored ADR 1,300 132,975 140,400
--------------- ---------------
Total Foreign Stocks 1,974,668 2,442,396
--------------- ---------------
Fixed Income Funds
- ------------------
CBT Limited Term Group Fund 1,226 12,797 14,684
CBT Managed Bond Group Fund 447 4,831 5,656
--------------- ---------------
Total Fixed Income Funds 17,628 20,340
--------------- ---------------
Equity Funds
- ------------
CBT American Core Equity Fund 213 3,798 7,237
CBT Equity Income Group Fund 38 2,280 4,798
CBT International Equity Group Fund 95 1,099 1,915
CBT Special Equity Group Fund 20 888 2,401
CBT Equity Growth Group Fund 252 2,429 4,945
--------------- ---------------
Total Equity Funds 10,494 21,296
--------------- ---------------
GRAND TOTAL $ 20,765,112 $ 26,097,217
=============== ===============
<FN>
- ------------------------------------
** Adjusted for stock split in 1998.
</FN>
</TABLE>
-15-
<PAGE>
Schedule 8 - Investments
------------------------
Short Term Investments
----------------------
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1998 1997
---------------------- ---------------------
Chase Bank of Chase Bank of
Texas Short Term Texas Short Term
Money Market Money Market
Group Fund (1) Group Fund (1)
--------------------- --------------------
<S> <C> <C>
Coastal Common Stock Fund $ 926,064 $ 1,810,034
Diversified Fund 509,716 267,214
Interest Income Fund 45,729,359 50,128,486
Coastal Preferred Stock Fund 274 122
Valero Common Stock Fund 6,128 6,521
PG&E Common Stock Fund - -
Intelect Common Stock Fund 178 323
Government Bond Fund 4,494 4,248
--------------- ---------------
Total $ 47,176,213 $ 52,216,948
=============== ===============
</TABLE>
Schedule 9 - Statement of Changes
in Net Assets Available For Plan
Benefits by Fund
----------------------------------
<TABLE>
<CAPTION>
Beginning of Year Change 1998 End of Year
----------------- ----------- -----------
<S> <C> <C> <C>
Coastal Common Stock Fund $ 445,835,406 $ 43,594,646 $ 489,430,052
Diversified Fund 26,338,294 1,085,298 27,423,592
Interest Income Fund 49,550,436 (3,894,529) 45,655,907
Coastal Preferred Stock Fund 94,452 5,505 99,957
Valero Common Stock Fund 718,995 (303,027) 415,968
PG&E Common Stock Fund 394,868 (55,016) 339,852
Intelect Common Stock Fund 23,902 (18,173) 5,729
Coastal Class A Common Stock Fund 827,323 (448,492) 378,831
Government Bond Fund 4,251 246 4,497
--------------- --------------- ---------------
Total $ 523,787,927 $ 39,966,458 $ 563,754,385
=============== =============== ===============
<FN>
- ------------------------------------
(1) Exceeds 5% of net assets
</FN>
</TABLE>
-16-
<PAGE>
Item 27a - Schedule of Assets Held For Investment Purposes
Employer Identification No.: 74-1734212; Plan No. 003
Form 5500: Year Ended December 31, 1998
<TABLE>
<CAPTION>
(c)
(b) Description of Investment
including Maturity Date, Rate (d) (e)
(a) Identity of Issue, Borrower, of Interest, Collateral, Par Cost of Market
Lessor or Similar Party or Maturity Value Acquisition Value
- ---- -------------------------------------------- ------------------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
* The Coastal Corporation (1) 13,970,316 shares common stock $ 147,958,849 $ 490,707,350
10,769 shares Class A common stock (2) 60,311 378,261
394 shares $1.83 convertible preferred
stock, Series B 11,079 99,682
Valero Energy Corporation 19,620 shares common stock 67,725 416,925
Pacific Gas & Electric Corporation 10,870 shares common stock 31,687 342,405
Intelect Communications, Inc. 3,789 shares common stock 1,954 5,684
Chase Bank of Texas Short Term Money
Market Group Fund (1) Money market 47,176,213 47,176,213
See Schedule 7 for list of See Schedule 7 for list of
investment entities. investments. 23,531,217 27,376,139
-------------- --------------
$ 218,839,035 $ 566,502,659
============= ==============
<FN>
- ------------------------------------
* Party-In-Interest.
(1) Exceeds 5% of net assets.
(2) Class A Common Stock may be distributed to employee participants, but cannot
be transferred to other individuals or organizations.
</FN>
</TABLE>
-17-
<PAGE>
Item 27d - Schedule of Reportable Transactions
Series Transactions, When Aggregated, Involving an Amount in Excess of
Five Percent of the Current Value of Plan Assets
Employer Identification No.: 74-1734212; Plan No. 003
Form 5500: Year Ended December 31, 1998
<TABLE>
<CAPTION>
(b)
Description of Asset
(a) (including interest (c) (d) (e) (f)
Identity of rate and maturity Purchase Selling Cost of Current (g)
Party Involved in case of loan) Price Price(1) Asset Value Net Gain
- ------------------------- --------------------------- -------------- ------------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
* The Coastal Corporation Common Stock:
Sales & distributions
(636,675 shares) $ 30,829,001 $ 28,957,888 $ 1,871,113
<FN>
- ------------------------------------
* Party-In-Interest
(1) Or distribution value.
</FN>
</TABLE>
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Administrative Committee has duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly authorized.
THE COASTAL CORPORATION
THRIFT PLAN
Date: June 25, 1999 By: AUSTIN M. O'TOOLE
--------------------------------------
Austin M. O'Toole
Member of the Administrative Committee
-19-
