================================================================================
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 33-42696
COASTAL ARUBA REFINING COMPANY N.V.
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)
================================================================================
<PAGE>
INDEPENDENT AUDITORS' REPORT
Administrator
Coastal Aruba Refining Company N.V. Thrift Plan
Houston, Texas
We have audited the accompanying statements of net assets available for Plan
benefits of Coastal Aruba Refining Company N.V. 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 each of the three years in the period ended
December 31, 1998. Our audits also included the financial statement schedules on
pages 7 through 10. These financial statements and financial statement schedules
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance that 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 Plan benefits as of December 31, 1998 and
1997, and the changes in net assets available for Plan benefits for each of the
three years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Houston, Texas
March 10, 1999
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. 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 (cost: 1998-$2,286,912; 1997-$1,678,603).................... $ 4,074,361 $ 3,021,212
Other........................................................................ 143,276 159,975
----------- ------------
Total Investments............................................................... 4,217,637 3,181,187
----------- ------------
Receivables:
Dividends.................................................................... 5,074 3,382
Contributions................................................................ 18,331 4,442
----------- ------------
Total Receivables............................................................... 23,405 7,824
----------- ------------
TOTAL ASSETS........................................................... 4,241,042 3,189,011
----------- ------------
LIABILITIES:
Payable to employer.......................................................... 70,153 1,419
Payable to participants...................................................... 45,083 15,290
Other........................................................................ 716 1,286
----------- ------------
TOTAL LIABILITIES...................................................... 115,952 17,995
----------- ------------
NET ASSETS AVAILABLE FOR PLAN BENEFITS.......................................... $ 4,125,090 $ 3,171,016
=========== ============
</TABLE>
See Notes and Schedules to Financial Statements.
-2-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
<TABLE>
<CAPTION>
For the Years Ended December 31,
------------------------------------------------
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
ADDITIONS:
Investment income:
Dividends................................................. $ 18,082 $ 12,570 $ 10,706
Interest.................................................. 7,269 5,790 4,904
------------ ------------ -------------
Total Investment Income................................... 25,351 18,360 15,610
------------ ------------ -------------
Net changes in appreciation of investments (Note 6)........... 444,840 596,105 458,274
------------ ------------ -------------
Contributions:
Employer.................................................. 363,032 273,787 209,122
Employees................................................. 473,440 389,274 312,288
------------ ------------ -------------
Total Contributions....................................... 836,472 663,061 521,410
------------ ------------ -------------
DEDUCTIONS:
Withdrawals............................................... 352,589 234,832 227,505
------------ ------------ -------------
Increase in net assets available for Plan benefits............ 954,074 1,042,694 767,789
------------ ------------ -------------
NET ASSETS, JANUARY 1......................................... 3,171,016 2,128,322 1,360,533
------------ ------------ -------------
NET ASSETS, DECEMBER 31....................................... $ 4,125,090 $ 3,171,016 $ 2,128,322
============ ============ =============
</TABLE>
See Notes and Schedules to Financial Statements.
-3-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
NOTES TO FINANCIAL STATEMENTS
1. Description of the Plan
General
Coastal Aruba Refining Company N.V. Thrift Plan (the "Plan") is primarily
an employee stock purchase plan, registered under the Securities Act of 1933, as
amended, designed to provide a systematic means whereby the contributions of
eligible employees of Coastal Aruba Refining Company N.V. (the "Company") and
certain affiliates of The Coastal Corporation ("Coastal") may be invested for
the benefit of the participating employees. The Plan is administered by the
Management Board of the Coastal Aruba Thrift Foundation (the "Foundation"). The
effective date of the Plan was December 1, 1990; contributions for the full year
of participation commenced September 11, 1991. All employees eligible for
participation in the Plan receive a prospectus containing a general description
of the Plan. All participants are furnished a Plan prospectus which may be
updated by supplements from time to time. The Foundation holds the investment
assets of the Plan, and Caribbean Mercantile Bank N.V. and Chase Securities of
Texas, Inc. execute transactions relating thereto.
Amendment or 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. In the event of Plan termination, participants will become
100 percent vested in their Company matching accounts. The Management Board of
the Foundation, upon recommendation of the Company, may amend the Plan at any
time.
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, respectively, 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 issued at the
effective dates and the market value at the beginning of the year and cost of
securities purchased during the year.
Taxes
The Plan is not a qualified plan for purposes of the laws of the United
States of America pursuant to Section 401(a) of the Internal Revenue Code of
1986, as amended, nor is it subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
The Plan has been reviewed by the Centrale Bank van Aruba (the "Bank")
which concluded that the Plan is not subject to the prudential supervision of
the Bank because it is designed in accordance with United States customs and
does not conform to the requirements for a savings plan in Aruba.
Under the present United States tax laws, the purchase and sale of common
stock of Coastal ("Coastal Common Stock") by the Foundation is not subject to
income or withholding tax. However, dividends paid on Coastal Common Stock are
subject to withholding tax at a rate of 30% of the amount of the dividend.
-4-
<PAGE>
3. Contributions to the Plan
Employee Contributions
Upon enrollment, a participant may elect to contribute to the Plan, 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. Basic compensation means fixed salaries or wages per hour which
are paid by the Company to the participant, excluding compensation for bonuses,
overtime, commissions and incentive compensation.
Employer Contributions
The Company will make matching contributions for the account of the
participant at an amount equal to the employee contributions subject to a
maximum rate of 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 4%
during the third and fourth years of active participation, 6% during the fifth
and sixth years of active participation and 8% after six years of active
participation in the Plan.
4. Investment Programs
Funds in which current employee contributions are invested:
The Coastal Common Stock Fund is a fund invested in Coastal Common Stock.
Cash dividends thereon are reinvested in Coastal Common Stock.
The Interest Income Fund is an unsegregated fund invested in
interest-bearing investments such as bonds, notes, debentures, savings accounts,
savings certificates, commercial paper, 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 Common Stock), notes, bonds, debentures, and other
similar types of investments. A portion of the Diversified Fund may be retained
in cash or invested temporarily in commercial paper, certificates of deposit or
savings accounts.
The contributions attributable to the Interest Income Fund and the
Diversified Fund are temporarily held in a foreign currency in interest-bearing
accounts at the Caribbean Mercantile Bank N.V., which are translated into
dollars using the conversion rate at December 31, 1998 and 1997. See "SCHEDULE
I-2 - OTHER," page 7 hereof. Such contributions will remain in such accounts
pending a determination by the investment manager that sufficient funds have
accumulated to warrant other investments as described above for each fund.
All employer matched contributions are invested in the Coastal Common Stock
Fund only.
5. Expenses of the Plan
Generally, reasonable expenses of administering the Plan are paid by the
Company, although the Company is not obligated to do so. All taxes which may be
levied or assessed under future laws upon the assets or the income of the Plan
will be paid by the Plan.
-5-
<PAGE>
6. Net Changes in Appreciation of Investments
During 1998, 1997 and 1996, the fair value of investments (including
investments bought and sold, as well as held during the year) appreciated as
follows:
Coastal
Common Stock Fund
-----------------
Balance at December 31, 1995.................... $ 288,230
Change during 1996.............................. 458,274
------------
Balance at December 31, 1996.................... 746,504
Change during 1997.............................. 596,105
------------
Balance at December 31, 1997.................... 1,342,609
Change during 1998.............................. 444,840
------------
Balance at December 31, 1998.................... $ 1,787,449
============
7. Unit Values
The number of units and unit values are set forth in the following table:
<TABLE>
<CAPTION>
December 31, 1998
-----------------------------------------
Net Asset
Number of Units Value
Employees Outstanding per Unit
--------- ----------- ---------
<S> <C> <C> <C>
Interest Income Fund................................... 59 85,407 $ 1.00
Diversified Fund....................................... 55 73,425 $ 1.00
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-----------------------------------------
Net Asset
Number of Units Value
Employees Outstanding per Unit
--------- ----------- ---------
<S> <C> <C> <C>
Interest Income Fund................................... 46 69,199 $ 1.00
Diversified Fund....................................... 46 65,511 $ 1.00
</TABLE>
-6-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
SCHEDULE I-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................................... 115,996 $12,286,912 $ 4,074,361
=========== ============
December 31, 1997................................... 97,556* $ 1,678,603 $ 3,021,212
=========== ============
<FN>
*Restated for two-for-one stock split distributed in July 1998.
</FN>
</TABLE>
SCHEDULE I-2 - OTHER
<TABLE>
<CAPTION>
Market Value
--------------
<S> <C>
December 31, 1998
Short Term Investments of Caribbean Mercantile Bank N.V.:
Interest Income Fund............................................................ $ 78,399
Diversified Fund................................................................ 64,846
---------
143,245
Chase Securities of Texas, Inc. Money Market Fund:
Coastal Common Stock Fund....................................................... 31
---------
Total........................................................................... $ 143,276
=========
December 31, 1997:
Short Term Investments of Caribbean Mercantile Bank N.V.:
Interest Income Fund............................................................ $ 67,935
Diversified Fund................................................................ 63,201
---------
131,136
---------
Chase Securities of Texas, Inc. Money Market Fund:
Coastal Common Stock Fund....................................................... 28,839
---------
Total........................................................................... $ 159,975
=========
</TABLE>
-7-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
SCHEDULE II
ALLOCATION OF PLAN ASSETS AND LIABILITIES TO INVESTMENT PROGRAMS
<TABLE>
<CAPTION>
December 31, 1998
-------------------------------------------------------
Coastal Interest
Total Common Income Diversified
PLAN ASSETS: Plan Stock Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investments, at market:
Securities of The Coastal Corporation
Common Stock (Schedule I-1) (Cost $2,286,912)...... $ 4,074,361 $ 4,074,361 $ - $ -
Other (Schedule I-2)............................... 143,276 31 78,399 64,846
------------ ------------ ----------- -----------
4,217,637 4,074,392 78,399 64,846
------------ ------------ ----------- -----------
Receivables:
Dividends............................................ 5,074 5,074 - -
Contributions........................................ 18,331 - 8,150 10,181
------------ ------------ ----------- -----------
23,405 5,074 8,150 10,181
------------ ------------ ----------- -----------
Liabilities:
Payable to Employer.................................. 70,153 70,153 - -
Payable to Participants.............................. 45,083 42,339 1,142 1,602
Other................................................ 716 716 - -
------------ ------------ ----------- -----------
115,952 113,208 1,142 1,602
------------ ------------ ----------- -----------
Net Assets Available for Plan Benefits.................. $ 4,125,090 $ 3,966,258 $ 85,407 $ 73,425
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1997
-------------------------------------------------------
Coastal Interest
Total Common Income Diversified
PLAN ASSETS: Plan Stock Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investments, at market:
Securities of The Coastal Corporation
Common Stock (Schedule I-1) (Cost $1,678,603)...... $ 3,021,212 $ 3,021,212 $ - $ -
Other (Schedule I-2)............................... 159,975 28,839 67,935 63,201
------------ ------------ ----------- -----------
3,181,187 3,050,051 67,935 63,201
------------ ------------ ----------- -----------
Receivables:
Dividends............................................ 3,382 3,382 - -
Contributions........................................ 4,442 568 1,264 2,610
------------ ------------ ----------- -----------
7,824 3,950 1,264 2,610
------------ ------------ ----------- -----------
Liabilities:
Payable to Employer.................................. 1,419 1,419 - -
Payable to Participants.............................. 15,290 14,990 - 300
Other................................................ 1,286 1,286 - -
------------ ------------ ----------- -----------
17,995 17,695 - 300
------------ ------------ ----------- -----------
Net Assets Available for Plan Benefits.................. $ 3,171,016 $ 3,036,306 $ 69,199 $ 65,511
============ ============ =========== ===========
</TABLE>
-8-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
SCHEDULE III - ALLOCATION OF PLAN INCOME AND
CHANGES IN PLAN EQUITY TO INVESTMENT PROGRAMS
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
-------------------------------------------------------
Coastal Interest
Total Common Income Diversified
Plan Stock Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends............................................ $ 18,082 $ 18,082 $ - $ -
Interest............................................. 7,269 307 3,750 3,212
------------ ------------ ----------- -----------
Total Investment Income.............................. 25,351 18,389 3,750 3,212
------------ ------------ ----------- -----------
Appreciation of Investments:
The Coastal Corporation
Common Stock....................................... 444,840 444,840 - -
------------ ------------ ----------- -----------
Contributions:
Employer............................................. 363,032 363,032 - -
Employees............................................ 473,440 429,466 23,766 20,208
------------ ------------ ----------- -----------
Total Contributions.................................. 836,472 792,498 23,766 20,208
------------ ------------ ----------- -----------
Withdrawals............................................. 352,589 325,775 11,308 15,506
------------ ------------ ----------- -----------
Increase in Net Assets Available for Plan Benefits...... 954,074 929,952 16,208 7,914
------------ ------------ ----------- -----------
Net Assets Available for Plan Benefits:
Beginning of Year.................................... 3,171,016 3,036,306 69,199 65,511
------------ ------------ ----------- -----------
End of Year.......................................... $ 4,125,090 $ 3,966,258 $ 85,407 $ 73,425
============ ============ =========== ===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
-------------------------------------------- -----------
Coastal Interest
Total Common Income Diversified
Plan Stock Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends............................................ $ 12,570 $ 12,570 $ - $ -
Interest............................................. 5,790 167 2,901 2,722
------------ ------------ ----------- -----------
Total Investment Income.............................. 18,360 12,737 2,901 2,722
------------ ------------ ----------- -----------
Appreciation of Investments:
The Coastal Corporation
Common Stock....................................... 596,105 596,105 - -
------------ ------------ ----------- -----------
Contributions:
Employer............................................. 273,787 273,787 - -
Employees............................................ 389,274 349,687 20,477 19,110
------------ ------------ ----------- -----------
Total Contributions.................................. 663,061 623,474 20,477 19,110
------------ ------------ ----------- -----------
Withdrawals............................................. 234,832 221,561 7,716 5,555
------------ ------------ ----------- -----------
Increase in Net Assets Available for Plan Benefits...... 1,042,694 1,010,755 15,662 16,277
------------ ------------ ----------- -----------
Net Assets Available for Plan Benefits:
Beginning of Year.................................... 2,128,322 2,025,551 53,537 49,234
------------ ------------ ----------- -----------
End of Year.......................................... $ 3,171,016 $ 3,036,306 $ 69,199 $ 65,511
============ ============ =========== ===========
</TABLE>
-9-
<PAGE>
COASTAL ARUBA REFINING COMPANY N.V. THRIFT PLAN
SCHEDULE III - ALLOCATION OF PLAN INCOME AND
CHANGES IN PLAN EQUITY TO INVESTMENT PROGRAMS
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
-------------------------------------------------------
Coastal Interest
Total Common Income Diversified
Plan Stock Fund Fund Fund
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Dividends............................................ $ 10,706 $ 10,706 $ - $ -
Interest............................................. 4,904 116 2,580 2,208
------------ ------------ ----------- -----------
Total Investment Income.............................. 15,610 10,822 2,580 2,208
------------ ------------ ----------- -----------
Investment Transfer In.................................. 6,118 6,118 - -
------------ ------------ ----------- -----------
Appreciation of Investments:
The Coastal Corporation
Common Stock....................................... 458,274 458,274 - -
------------ ------------ ----------- -----------
Contributions:
Employer............................................. 209,122 209,122 - -
Employees............................................ 312,288 272,226 21,991 18,071
------------ ------------ ----------- -----------
Total Contributions.................................. 521,410 481,348 21,991 18,071
------------ ------------ ----------- -----------
Withdrawals............................................. 227,505 201,889 16,051 9,565
------------ ------------ ----------- -----------
Investment Transfer Out................................. 6,118 - 3,331 2,787
------------ ------------ ----------- -----------
Increase in Net Assets Available for Plan Benefits...... 767,789 754,673 5,189 7,927
------------ ------------ ----------- -----------
Net Assets Available for Plan Benefits:
Beginning of Year.................................... 1,360,533 1,270,878 48,348 41,307
------------ ------------ ----------- -----------
End of Year.......................................... $ 2,128,322 $ 2,025,551 $ 53,537 $ 49,234
============ ============ =========== ===========
</TABLE>
-10-
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the Management Board of the Coastal Aruba Thrift Foundation, as
Administrator, has duly caused this Annual Report to be signed on its behalf by
the undersigned hereunto duly authorized.
MANAGEMENT
BOARD OF THE COASTAL
ARUBA THRIFT FOUNDATION,
AS ADMINISTRATOR OF
COASTAL ARUBA REFINING COMPANY N.V.
THRIFT PLAN
Date: March 15, 1999 By: /S/ RONALD A. BROWNLEE
----------------------------------
Ronald A. Brownlee
Chairman
-11-
