================================================================================
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, 2000
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 28, 2000, there were outstanding 213,581,904 shares of Common
Stock, 33-1/3 (cent) par value per share, and 342,562 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, 1999, 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 2000 1999
------------- --------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................... $ 58.6 $ 44.4
Receivables, less allowance for doubtful accounts of $17.3 million
(2000) and $17.4 million (1999)...................................... 1,594.6 1,932.5
Inventories............................................................. 809.7 732.7
Prepaid expenses and other.............................................. 222.2 213.9
----------- -----------
Total Current Assets................................................. 2,685.1 2,923.5
----------- -----------
Property, Plant and Equipment - at cost:
Natural gas systems..................................................... 6,362.8 6,328.7
Refining, crude oil and chemical facilities............................. 2,582.0 2,555.0
Gas and oil properties - at full-cost................................... 4,250.0 3,832.0
Other................................................................... 606.8 581.5
----------- -----------
13,801.6 13,297.2
Accumulated depreciation, depletion and amortization.................... 4,067.0 3,959.8
----------- -----------
9,734.6 9,337.4
----------- -----------
Other Assets:
Goodwill................................................................ 447.0 451.8
Investments - equity method............................................. 1,491.7 1,434.9
Other................................................................... 1,007.2 975.4
----------- -----------
2,945.9 2,862.1
----------- -----------
$ 15,365.6 $ 15,123.0
=========== ===========
</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 2000 1999
--------------- --------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable........................................................... $ 117.7 $ 105.9
Accounts payable........................................................ 2,059.1 2,350.1
Accrued expenses........................................................ 470.6 420.0
Current maturities on long-term debt.................................... 132.0 161.6
---------- -----------
Total Current Liabilities............................................ 2,779.4 3,037.6
---------- -----------
Debt:
Long-term debt, excluding current maturities............................ 5,129.4 4,798.2
---------- -----------
Deferred Credits and Other:
Deferred income taxes................................................... 1,829.1 1,814.2
Other deferred credits.................................................. 778.2 785.2
---------- -----------
2,607.3 2,599.4
---------- -----------
Securities of Subsidiaries:
Company-obligated mandatory redemption
preferred securities of a consolidated trust......................... 300.0 300.0
Preferred stock issued by subsidiaries.................................. 165.0 165.0
Consolidated joint venture.............................................. 285.9 285.9
---------- -----------
750.9 750.9
---------- -----------
Common Stock and Other Stockholders' Equity:
Cumulative preferred stock (with aggregate liquidation
preference of $7.3 million).......................................... - -
Class A common stock.................................................... .1 .1
Common stock............................................................ 72.6 72.5
Additional paid-in capital.............................................. 1,033.1 1,031.7
Retained earnings....................................................... 3,125.3 2,965.1
---------- -----------
4,231.1 4,069.4
Less common stock in treasury - at cost................................. 132.5 132.5
---------- -----------
4,098.6 3,936.9
---------- -----------
$ 15,365.6 $ 15,123.0
========== ===========
</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,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Operating Revenues...................................................................... $ 2,927.6 $ 1,709.6
--------- ---------
Operating Costs and Expenses:
Purchases............................................................................ 2,004.1 945.9
Operating and general expenses....................................................... 474.0 411.4
Depreciation, depletion and amortization............................................. 142.5 108.6
--------- ---------
2,620.6 1,465.9
--------- ---------
Other Income - net...................................................................... 31.6 25.3
--------- ---------
Earnings Before Interest and Income Taxes............................................... 338.6 269.0
--------- ---------
Interest and debt expense, less $12.6 million (2000)
and $7.4 million (1999) capitalized.................................................. 90.2 77.0
Taxes on income......................................................................... 74.8 57.5
--------- ---------
Net Earnings............................................................................ 173.6 134.5
Dividends on Preferred Stock............................................................ .1 .1
--------- ---------
Net Earnings Available
to Common Stockholders............................................................... $ 173.5 $ 134.4
========= =========
Basic Earnings Per Share................................................................ $ .81 $ .63
========= =========
Diluted Earnings Per Share.............................................................. $ .80 $ .62
========= =========
Cash Dividends Per Common Share......................................................... $ .0625 $ .0625
========= =========
</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,
------------------------------------------------------
2000 1999
------------------------ ------------------------
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........................... 53 $ - 56 $ -
Converted to common......................... - - (2) -
----------- ---------- ----------- ----------
Ending balance.............................. 53 - 54 -
=========== ---------- =========== ----------
$1.83, Series B, redemption or liquidation
amount of $50 per share:
Beginning balance........................... 58 - 61 -
Converted to common......................... (1) - - -
----------- ---------- ----------- ----------
Ending balance.............................. 57 - 61 -
=========== ---------- =========== ----------
$5.00, Series C, redemption or liquidation
amount of $100 per share:
Beginning balance........................... 27 - 28 -
Converted to common......................... - - - -
----------- ---------- ----------- ----------
Ending balance.............................. 27 - 28 -
=========== ---------- =========== ----------
Class A common stock, par value 33-1/3 (cent) per
share, authorized 2,700,000 shares:
Beginning balance................................ 345 .1 354 .1
Converted to common.............................. (2) - (3) -
----------- ---------- ----------- ----------
Ending balance................................... 343 .1 351 .1
=========== ---------- =========== ----------
Common stock, par value 33-1/3(cent) per share,
authorized 500,000,000 shares:
Beginning balance................................ 217,705 72.5 216,765 72.2
Conversion of preferred stock.................... 9 - 26 -
Conversion of Class A common stock............... 2 - 3 -
Exercise of stock options........................ 124 .1 175 .1
----------- ---------- ----------- ----------
Ending balance................................... 217,840 $ 72.6 216,969 $ 72.3
=========== ---------- =========== ----------
</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,
------------------------------------------------------
2000 1999
------------------------ ------------------------
Shares Amount Shares Amount
----------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Additional paid-in capital:
Beginning balance................................... $ 1,031.7 $ 1,016.2
Exercise of stock options........................... 1.4 2.6
---------- ----------
Ending balance...................................... 1,033.1 1,018.8
---------- ----------
Retained earnings:
Beginning balance................................... 2,965.1 2,519.8
Net earnings for period............................. 173.6 134.5
Dividends on preferred stock........................ (.1) (.1)
Dividends on common stock........................... (13.3) (13.3)
---------- ----------
Ending balance...................................... 3,125.3 2,640.9
---------- ----------
Less treasury stock - at cost.......................... 4,398 132.5 4,396 132.5
=========== ---------- =========== ----------
Total.................................................. $ 4,098.6 $ 3,599.6
========== ==========
</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,
--------------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Net Cash Flow From Operating Activities:
Net earnings................................................................ $ 173.6 $ 134.5
Add (subtract) items not requiring (providing) cash:
Depreciation, depletion and amortization................................. 143.0 109.6
Deferred income taxes.................................................... 42.2 47.7
Undistributed earnings from equity investments........................... (17.2) (4.0)
Working capital and other changes, excluding changes
relating to cash and nonoperating activities:
Accounts receivable................................................... 344.5 61.6
Inventories........................................................... (63.1) (93.9)
Prepaid expenses and other............................................ (27.4) (17.3)
Accounts payable...................................................... (321.4) (106.0)
Accrued expenses...................................................... 48.8 21.1
Other................................................................. (49.1) (29.1)
--------- --------
273.9 124.2
--------- --------
Cash Flow From Investing Activities:
Purchases of property, plant and equipment.................................. (545.0) (304.6)
Proceeds from sale of property, plant and equipment......................... 1.2 .9
Additions to investments.................................................... (103.1) (107.3)
Proceeds from investments................................................... 99.7 12.4
Net from discontinued operations............................................ .9 (29.3)
--------- --------
(546.3) (427.9)
--------- --------
Cash Flow From Financing Activities:
Increase in short-term notes ............................................... 211.8 104.0
Proceeds from issuing common stock.......................................... 1.5 2.7
Proceeds from long-term debt issues......................................... 434.3 200.9
Payments to retire long-term debt........................................... (347.6) (88.5)
Dividends paid.............................................................. (13.4) (13.4)
--------- --------
286.6 205.7
--------- --------
Net Increase (Decrease) in Cash and Cash Equivalents........................... 14.2 (98.0)
Cash and Cash Equivalents at Beginning of Period............................... 44.4 106.9
--------- --------
Cash and Cash Equivalents at End of Period..................................... $ 58.6 $ 8.9
========= ========
</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, 1999. 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.
Repair and maintenance costs incurred in connection with planned major
maintenance activities at certain refineries or plants are accrued as a
liability in a systematic and rational manner over the period of time until the
planned major maintenance activities occur. Any difference between the accrued
liability and the actual costs incurred in performing the accrual maintenance
activities are charged or credited to expense at the time the maintenance
occurs. At certain other refineries or plants, the cost of each major
maintenance activity is capitalized and amortized to expense in a systematic and
rational manner over the estimated period extending to the next planned major
maintenance activity.
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("FAS 133"), as amended by Statement of Financial
Accounting Standards No. 137, to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. 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.
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 $70.5 million and $60.4 million
for the three months ended March 31, 2000 and 1999, respectively. There were no
cash payments for income taxes for the three months ended March 31, 2000 and
March 31, 1999.
2. Inventories
Inventories were as follows (millions of dollars):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- --------------
(Unaudited)
<S> <C> <C>
Refined products, crude oil and chemicals............................... $ 648.0 $ 576.2
Coal, materials and supplies............................................ 161.7 156.5
----------- ----------
$ 809.7 $ 732.7
=========== ==========
<FN>
Elements included in inventory cost are material, labor and manufacturing
expense.
</FN>
</TABLE>
3. Debt
At March 31, 2000, the Company had $792.7 million of outstanding
indebtedness under the Company's commercial paper program and indebtedness to
banks under short-term lines of credit. The Company's financial statements at
March 31, 2000 reflect $675 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 year and the Company's intent to
- 7 -
<PAGE>
maintain such amounts as long-term borrowings. There was a similar
reclassification of $475 million as of December 31, 1999.
In March 2000, the Company issued $400 million of floating rate notes due
in 2002. The notes bear interest at a rate equal to the three-month London
Interbank Offered Rate plus 0.45%. The net proceeds from the sale of the notes
are being used for general corporate purposes, including the repayment of
indebtedness of Coastal and its subsidiaries.
4. Common Stock
On March 31, 2000, 12,463,172 shares of Common Stock of the Company were
reserved for stock option plans, 1,190,381 shares were reserved for conversion
of the Series A, B, and C Preferred Stocks, 342,946 shares were reserved for
conversion of outstanding Class A Common Stock and 16,252 shares were reserved
for conversion of Class A Common Stock subject to future issuance. The Class A
Common Stock reserved for future issuance is for conversion of the Series A, B,
and C Preferred Stocks.
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, 2000 and 1999 are shown as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Operating Revenues From External Customers:
Natural gas....................................................................... $ 395.4 $ 335.3
Refining, marketing and chemicals................................................. 2,189.5 1,186.2
Exploration and production........................................................ 225.3 95.0
Power............................................................................. 46.1 26.1
Coal.............................................................................. 69.5 64.8
Corporate and other............................................................... 1.8 2.2
--------- ---------
$ 2,927.6 $ 1,709.6
========= =========
</TABLE>
Intersegment revenues were as follows: Natural gas - $3.5 million (2000),
$.6 million (1999); Refining, marketing and chemicals - $1.8 million (2000), $.5
million (1999); Exploration and production - $12.6 million (2000), $5.5 million
(1999); and Corporate and other - $2.0 million (2000), $2.1 million (1999).
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Earnings (Loss) Before Interest and Income Taxes:
Natural gas....................................................................... $ 192.3 $ 186.9
Refining, marketing and chemicals................................................. 39.3 69.6
Exploration and production........................................................ 101.1 11.4
Power............................................................................. 42.5 18.9
Coal.............................................................................. 3.2 4.3
Corporate and other............................................................... (39.8) (22.1)
--------- ---------
$ 338.6 $ 269.0
========= =========
</TABLE>
- 8 -
<PAGE>
6. Income Taxes
Provisions for income taxes were as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Current Income Taxes:
Federal........................................................................... $ 25.0 $ 8.7
Foreign........................................................................... 2.7 1.5
State............................................................................. 4.9 (.4)
--------- ---------
32.6 9.8
--------- ---------
Deferred Income Taxes:
Federal........................................................................... 42.5 43.3
Foreign........................................................................... .9 .8
State............................................................................. (1.2) 3.6
--------- ---------
42.2 47.7
--------- ---------
$ 74.8 $ 57.5
========= =========
<FN>
Interim period provisions for federal income taxes are based on estimated
effective annual income tax rates.
</FN>
</TABLE>
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, 2000
-----------------------------------------------
Income Shares
(Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount
-------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Net earnings............................................ $ 173.6
Less preferred stock dividends.......................... .1
--------------
Basic earnings per share
Income available to common stockholders.............. 173.5 213,685 $ .81
===========
Effect of dilutive securities
Options.............................................. - 2,545
Convertible preferred stock.......................... .1 1,210
-------------- -----------
Diluted earnings per share
Income available to common stockholders plus
assumed conversions.............................. $ 173.6 217,440 $ .80
============== =========== ===========
</TABLE>
- 9 -
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1999
-----------------------------------------------
Income Shares
(Numerator) (Denominator) Per-Share
(Millions) (Thousands) Amount
-------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Net earnings............................................ $ 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>
8. Litigation, Environmental and Regulatory Matters
Litigation Matters
In December 1992, certain of Colorado Interstate Gas Company's ("Colorado"
or "CIG") natural gas lessors in the West Panhandle Field filed a complaint in
the U.S. District Court, 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 and the releases are valid
and dismissing all tort claims and claims for breach of any duty of disclosure.
The remaining claim for underpayment of royalties was tried to a jury which, in
May 1995, made findings favorable to CIG. On June 7, 1995, the trial court
entered a judgment that the lessors recover no monetary damages from CIG and
permanently estopping the lessors from asserting any claim based on an
interpretation of the contract different than that asserted by CIG in the
litigation. The lessors' motion for a new trial 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 U.S. 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 August 1999, the court denied plaintiffs' motion to have
the Michigan suit certified as a class action. Plaintiffs filed with the
Michigan Court of Appeals an application for leave to appeal the denial of the
class certification. On November 5, 1999, the Michigan Court of Appeals denied
the application for leave to appeal.
- 10 -
<PAGE>
Two legal proceedings, one in federal court and the other in state court,
have been instituted against a number of gas pipeline companies and their
affiliates, including Coastal and several of its subsidiaries. The plaintiffs in
each suit seek damages for the alleged undermeasurement of the heating value and
the volume of natural gas. In the federal proceeding, Jack Grynberg filed 77
separate False Claim Act suits in September 1997 against natural gas
transmission companies and producers, gatherers, and processors of natural gas,
seeking unspecified damages which could include treble damages for the maximum
period permitted by law (potentially as much as ten years) and penalties of up
to $10,000 per false claim. In addition to the measurement claims, these suits
also allege that the defendants undervalued the gas in paying royalties. The
Coastal defendants were sued in the U.S. District Courts of Colorado and the
Eastern District of Michigan. In April 1999, the U.S. Department of Justice
notified the Company that the United States would not intervene in these cases
at that time. The MultiDistrict Litigation Panel has consolidated the Grynberg
suits with several other Grynberg cases for pre-trial proceedings in Wyoming.
The defendants filed a motion to dismiss which was argued in March 2000, and the
parties are awaiting the Court's decision.
In the state proceedings, the Quinque Operating Company, on behalf of
itself and subclasses of gas producers, royalty owners, overriding royalty
owners, and state taxing authorities, in May 1999 instituted a legal proceeding
in State Court in Stevens County, Kansas against over 200 gas companies,
including several Coastal subsidiaries. The Quinque suit seeks unspecified
actual, punitive and treble damages for the alleged undermeasurement of all
natural gas measured in the United States from non-federal and non-Indian lands
since 1974. The plaintiffs are seeking certification of a national class of all
similarly situated gas producers, royalty owners, overriding royalty owners, and
state taxing authorities. The suit was removed to the U.S. District Court for
the District of Kansas. The plaintiffs filed a motion to remand the case back to
the state court. The MultiDistrict Litigation Panel has transferred the Quinque
suit to Wyoming and consolidated it with the Grynberg proceedings as a result of
a motion filed by several of the defendants in the Quinque suit.
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
various "Superfund" waste disposal sites. At the ten sites for which there is
sufficient information, total cleanup costs are estimated to be approximately
$611 million, and the Company estimates its pro-rata exposure, to be paid over a
period of years, is approximately $8 million and has made appropriate
provisions. At nine other sites, the U.S. 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,
- 11 -
<PAGE>
which total approximately $300,000, and suitable remediation, with approximately
$100,000 potentially attributable to the Coastal subsidiary's activities. At the
third site, the Texas Natural Resource Conservation Commission has estimated the
total cleanup costs to be approximately $2 million, but the Company believes the
subsidiary's activities at this site were de minimis. At a California site, the
Company settled the matter for a de minimis amount.
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
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. On February 9, 2000, the FERC issued a final rule implementing
certain of the changes that were discussed in these two proposals. Among other
things, the final rule: (a) removes the price ceilings for short-term secondary
market capacity releases for a trial period through September 30, 2002; (b)
permits pipelines to propose seasonally and term-differentiated rates; (c)
revises requirements relating to pipeline scheduling procedures, capacity
segmentation and penalties; (d) narrows the right-of- first-refusal granted to
long-term shippers to retain their capacity; and (e) expands pipeline reporting
requirements. Coastal's interstate pipeline subsidiaries and others have sought
clarification of certain aspects of the final rule.
On September 15, 1999, the FERC issued a Policy Statement addressing the
certification and pricing of new pipeline construction projects. Under the
Policy Statement, applicants must first satisfy a threshold pricing requirement
of demonstrating that their projects can be constructed without subsidies from
existing customers. Second, the applicants must show that any adverse impacts of
the project on identified interests (existing customers of the applicant, other
existing pipelines and their captive customers, landowners and the surrounding
communities) are outweighed by its benefits, i.e., balancing of adverse impacts
and benefits. On October 19, 1999, Coastal's interstate pipeline subsidiaries
sought clarification and/or rehearing of the Policy Statement insofar as it does
not apply directly to those projects filed for approval under the FERC's
"optional certificate" regulations. Other parties also sought rehearing of this
and other aspects of the Policy Statement. On February 9, 2000, the FERC issued
an order which, among other things, held that the Policy Statement balancing
criteria would apply to new optional certificate applications while it receives
comments on a companion FERC notice proposing to eliminate the current optional
certificate regulations.
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. The FERC staff and certain participants in the proceeding raised a
number of issues relating to WIC's rates, revenue requirements and the treatment
of an "exit fee" which WIC had received in conjunction with the termination of a
transportation service agreement. WIC and most of the parties subsequently
reached a settlement resolving all issues in the case. That settlement was
ultimately approved by the FERC on June 21, 1999 (the "June 1999 Order"). Two
parties opposed the settlement and the FERC initially severed them from the
settlement and ordered a separate hearing on their issues. However, on October
13, 1999, the FERC determined that the settlement should also apply to those
parties as well, inasmuch as WIC had filed a new rate case (discussed below)
which would become effective before any decision could be reached and
implemented (the "October 1999 Order"). The FERC denied rehearing of the October
1999 Order on December 21, 1999 (the "December 1999 Order"). The two parties who
had objected to the settlement have sought judicial review of all of the 1999
orders. No briefing schedule has been
- 12 -
<PAGE>
established to date. In February 2000, based on the June, October and
December 1999 Orders, WIC issued customer refunds, for which adequate reserves
had been made.
On July 1, 1999, WIC filed with the FERC a new rate case to increase its
rates by approximately $8 million annually (based on the rates determined under
the June 1999 Order). On July 29, 1999, the FERC issued its order accepting
the rate filing and suspending it for five months to become effective on January
1, 2000. The order also set the case for hearing, which is currently scheduled
to commence in the second half of 2000. WIC has filed to place its new rates
into effect on January 1, 2000, and is collecting those rates subject to refund.
In April 2000, WIC filed an offer of settlement to resolve all issues in the
case for most, if not all, parties to the proceeding. The comment period on the
settlement offer ends on May 25, 2000.
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.
9. Merger
Coastal and El Paso Energy Corporation ("El Paso Energy") announced on
January 18, 2000 the execution of definitive agreements for the merger of
Coastal and El Paso Energy. On May 5, 2000, the merger was approved by the
shareholders of Coastal and El Paso Energy. Each share of Coastal common stock
and Class A common stock will be converted on a tax-free basis (except for cash
paid in lieu of fractional shares) into 1.23 shares of El Paso Energy common
stock. The outstanding convertible preferred stock of Coastal will be exchanged
tax free (except for cash paid in lieu of fractional shares) for El Paso Energy
common stock on the same basis as if the preferred stock had been converted into
Coastal common stock immediately prior to the merger. It is expected that the
merger will be completed during the fourth quarter of 2000 and be accounted for
as a pooling of interests. The merger is subject to various conditions,
particularly federal regulatory approval.
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 and
changing legislation and regulations. The forward-looking statements contained
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.
- 13 -
<PAGE>
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,
2000 1999
-------------- --------------
(Unaudited)
<S> <C> <C>
Return on average common stockholders' equity.................. 14.1% 13.5%
Cash flow from operating activities to long-term debt.......... 23.3% 21.8%
Total debt to total capitalization............................. 52.6% 51.9%
Times interest earned (before tax)............................. 3.2 3.1
</TABLE>
The increase in the cash flow from operating activities to long-term debt
ratio resulted primarily from increased earnings in the first quarter of 2000
and changes in working capital.
In March 2000, the Company issued $400 million of floating rate notes due
in 2002. The notes bear interest at a rate equal to the three-month London
Interbank Offered Rate plus 0.45%. The net proceeds from the sale of the notes
are being used for general corporate purposes, including the repayment of
indebtedness of Coastal and its subsidiaries.
The Company has entered into hedging transactions to manage price risk
relating to a portion of the Company's future natural gas production. At March
31, 2000, the Company had entered into hedging contracts on 206 billion cubic
feet ("Bcf") of remaining year 2000 natural gas production and on 165 Bcf of
year 2001 natural gas production. Average monthly prices on these contracts
average from $2.52 to $2.76 per thousand cubic feet (based on the Henry Hub
price).
Financing for capital expansion, mandatory debt retirements and other
expenditures will be provided by internally generated funds, existing credit
lines 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.
Unused lines of credit at March 31, 2000 were as follows (millions of
dollars):
Short-term..................................... $ 815.5
Long-term*..................................... 1,657.2
-----------
$ 2,472.7
===========
*$507.2 million of unused long-term credit lines is dedicated to a
specific use.
The FASB has issued FAS 133, as amended by Statement of Financial
Accounting Standards No. 137, to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. 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.
Results of Operations
The changes in the Company's earnings for the three-month period ended
March 31, 2000 in comparison to the same period in 1999 are a result of the
following:
- 14 -
<PAGE>
Operating Revenues. The operating revenues by segment were as follows
(millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas....................................................................... $ 398.9 $ 335.9
Refining, marketing and chemicals................................................. 2,191.3 1,186.7
Exploration and production........................................................ 237.9 100.5
Power............................................................................. 46.1 26.1
Coal.............................................................................. 69.5 64.8
Other............................................................................. 3.8 4.3
Adjustments and eliminations...................................................... (19.9) (8.7)
--------- ---------
$ 2,927.6 $ 1,709.6
========= =========
</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,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
Natural gas....................................................................... $ 192.3 $ 186.9
Refining, marketing and chemicals................................................. 39.3 69.6
Exploration and production........................................................ 101.1 11.4
Power............................................................................. 42.5 18.9
Coal ............................................................................. 3.2 4.3
Corporate and other............................................................... (39.8) (22.1)
--------- ---------
$ 338.6 $ 269.0
========= =========
</TABLE>
Natural Gas. The increase in operating revenues of $63.0 million for the
quarter can be attributed to increased volumes of natural gas liquids, primarily
as a result of gas processing plants acquired during 1999, higher prices for
natural gas and natural gas liquids, and increased transportation and storage
revenues. Purchases increased by $45.8 million in the first three months of
2000, primarily due to higher natural gas prices and increased costs for the gas
processing plants. Gross profit increased by $17.2 million for the quarter.
Earnings before interest and taxes ("EBIT") increased by $5.4 million for
the 2000 first quarter as a result of the increased gross profit of $17.2
million, increased earnings from equity investments of $7.7 million and other
increases of $.6 million partially offset by higher operating and general
expenses of $20.1 million. Operating and general expenses increased as a result
of higher expenses for the gas processing plants and gas transportation charges.
Refining, Marketing and Chemicals. Operating revenues increased by $1,004.6
million in the first quarter of 2000 due to increased prices partially offset by
decreased volumes. Purchases increased by $1,023.5 million, also due to
increased prices partially offset by decreased volumes, resulting in a gross
profit decrease of $18.9 million. The gross profit decrease results from
decreased margins of $14.8 million; lower volumes of $1.5 million; a decrease of
$1.4 million from the selling, trading and exchanging of third-party products
and other decreases of $1.2 million.
- 15 -
<PAGE>
Exploration and Production. The operating revenue increase of $137.4
million in the first quarter of 2000 results from higher production volumes and
prices for natural gas, crude oil and condensate. EBIT increased by $89.7
million due to increased prices of $93.2 million and higher volumes of $55.0
million, partially offset by increased depreciation, depletion and amortization
of $32.8 million; higher operating and general expenses of $13.9 million and
other decreases of $11.8 million. Included in the other decreases is a business
tax refund of $7.8 million in 1999. The increases for depreciation, depletion
and amortization and operating and general expenses result primarily from the
increased production volumes.
Power. Operating revenues increased by $20.0 million in the 2000 first
quarter due to a gain of $16.5 million from the disposition of the Company's
interest in a Guatemala power facility and increased revenues from the
Rensselaer cogeneration power plant which was purchased in March 1999. The EBIT
increase of $23.6 million results from the $16.5 million gain noted above,
increased earnings from equity investments of $5.5 million and other of $1.6
million. The increased earnings from equity investments results from an
additional interest acquired in the Midland Cogeneration Venture Limited
Partnership and new projects.
Coal. The operating revenue increase of $4.7 million for the three-month
period ended March 31, 2000 results from increased volumes partially offset by
lower prices. EBIT decreased by $1.1 million due to increased operating and
general expenses of $4.9 million and other decreases of $.9 million, which more
than offset the increased revenues of $4.7 million. Operating and general
expenses, which include coal costs, increased as a result of the additional
volumes sold.
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 increased dividends/
expenses related to the securities of subsidiaries, merger-related charges and
increased expenses from financing activities.
Interest and Debt Expense. Interest and debt expense increased by $13.2
million due to higher average debt and increased average interest rates
partially offset by increased capitalized interest.
Taxes on Income. Federal income taxes increased by $15.5 million in the
2000 first-quarter period as a result of increased earnings before income taxes.
State and foreign income taxes increased by $1.8 million
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
various "Superfund" waste disposal sites. At the ten sites for which there is
sufficient information, total cleanup costs are estimated to be approximately
$611 million, and the Company estimates its pro-rata exposure, to be paid over a
period of years, is approximately $8 million and has made appropriate
provisions. At nine other sites, the 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
- 16 -
<PAGE>
a second state site, the Florida Department of Environmental Protection has
demanded reimbursement of its costs, which total approximately $300,000, and
suitable remediation, with approximately $100,000 potentially attributable to
the Coastal subsidiary's activities. At the third site, the Texas Natural
Resource Conservation Commission has estimated the total cleanup costs to be
approximately $2 million, but the Company believes the subsidiary's activities
at this site were de minimis. At a California site, the Company settled the
matter for a de minimis amount.
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 January 18, 2000. The
item reported was:
Item 5. Other Events.
(c) Exhibits. The following document was filed as an
exhibit to the Form 8-K.
99.1 Press release dated January 18, 2000
(incorporated by reference to Exhibit 99.1 of
Form 8-K filed by El Paso Energy Corporation on
January 18, 2000).
Item 7. Financial Statements and Exhibits.
(2) A report on Form 8-K was filed on January 20, 2000. The
item reported was:
Item 7. Financial Statements and Exhibits
(c) Exhibits. The following document was filed as an
exhibit to the Form 8-K.
99.1 Analysts' Presentation relating to the proposed
merger of El Paso Merger Company, a wholly
owned subsidiary of El Paso Energy Corporation,
with and into The Coastal Corporation
(incorporated by reference to Exhibit 99.1 of
Form 8-K/A filed by El Paso Energy Corporation
on January 20, 2000).
- 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 11, 2000 By: COBY C. HESSE
----------------------------------
Coby C. Hesse
Senior 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
- 20 -
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,
---------------------
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
BASIC EARNINGS PER SHARE
- ------------------------
Net earnings............................................................................ $ 173.6 $ 134.5
Dividends on preferred stock............................................................ .1 .1
--------- ---------
Net earnings available to common stockholders........................................... $ 173.5 $ 134.4
========= =========
Average number of common shares outstanding............................................. 213,341 212,431
Average number of Class A common shares outstanding..................................... 344 353
--------- ---------
213,685 212,784
========= =========
Basic earnings per share................................................................ $ .81 $ .63
========= =========
DILUTED EARNINGS PER SHARE
- --------------------------
Net earnings used in calculating basic earnings per share............................... $ 173.5 $ 134.4
Dividends applicable to dilutive preferred stock:
Series A............................................................................. - -
Series B............................................................................. - -
Series C............................................................................. .1 .1
--------- ---------
Income available to common shareholders plus
assumed conversions.................................................................. $ 173.6 $ 134.5
========= =========
Average number of shares used in calculating basic earnings
per share............................................................................ 213,685 212,784
Effect of dilutive securities:
Options.............................................................................. 2,545 2,044
Series A, B and C preferred stock.................................................... 1,210 1,272
--------- ---------
217,440 216,100
========= =========
Diluted earnings per share.............................................................. $ .80 $ .62
========= =========
<FN>
- ------------------------------------
Convertible securities and options are not considered in the calculations if
the effect of the conversion is anti-dilutive.
</FN>
</TABLE>
- 21 -
<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, 2000
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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 1,595
<ALLOWANCES> 0
<INVENTORY> 810
<CURRENT-ASSETS> 2,685
<PP&E> 13,802
<DEPRECIATION> 4,067
<TOTAL-ASSETS> 15,366
<CURRENT-LIABILITIES> 2,779
<BONDS> 5,129
0
0
<COMMON> 73
<OTHER-SE> 4,026
<TOTAL-LIABILITY-AND-EQUITY> 15,366
<SALES> 2,928
<TOTAL-REVENUES> 2,959
<CGS> 2,004
<TOTAL-COSTS> 2,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 248
<INCOME-TAX> 74
<INCOME-CONTINUING> 174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174
<EPS-BASIC> .81
<EPS-DILUTED> .80
</TABLE>
