<PAGE>
===============================================================================
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, 1996, 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 1-7310
MICHIGAN CONSOLIDATED GAS COMPANY
(Exact name of registrant as specified in its charter)
MICHIGAN 38-0478040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 GRISWOLD STREET, DETROIT, MICHIGAN 48226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 313-965-2430
NO CHANGES
(Former name, former address and former fiscal year, if changed since last
report.)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
-----
Number of shares outstanding of each of the registrant's classes of common
stock, as of April 30, 1996:
Common Stock, par value $.01 per share: 10,300,000
================================================================================
<PAGE>
INDEX TO FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1996
PAGE
NUMBER
------
COVER............................................................... i
INDEX............................................................... ii
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.. ................ 1
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................ 10
SIGNATURE........................................................... 11
ii
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Earnings for the first quarter of 1996 were $70 million, an increase of
$14.5 million from the first quarter of 1995. For the twelve-month period ended
March 31, 1996, earnings were $86 million, an increase of $35.9 million from the
comparable 1995 period. The increase in earnings for both 1996 periods reflects
higher gas sales resulting from colder weather and increased transportation
deliveries. Lower operating costs also contributed to the 1996 increases,
reflecting corporate initiatives to reduce costs.
<TABLE>
<CAPTION>
EFFECT OF WEATHER ON GAS MARKETS AND EARNINGS
---------------------------------------------
Quarter Twelve Months
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Percentage Colder (Warmer) than Normal 5.7% (5.8)% 6.0% (11.0)%
Increase (Decrease) from Normal in:
Gas Markets (Bcf) 5.4 (5.2) 12.2 (17.4)
Net Income (Millions) $ 4.9 $ (4.7) $ 11.1 $ (15.8)
</TABLE>
<TABLE>
<CAPTION>
EARNINGS COMPONENTS (IN MILLIONS)
COMPARING 1996 TO 1995
Quarter Twelve Months
------------------- -------------------
$ Change % Change $ Change % Change
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues $109.6 26.0% $191.3 19.1%
Cost of Gas 88.6 42.2 133.1 30.3
Gross Margin 21.0 9.9 58.2 10.4
Operation and Maintenance (8.6) (11.1) (18.4) (6.1)
Depreciation and Depletion 2.2 10.1 6.2 7.3
Property and Other Taxes 2.1 12.8 3.2 5.7
Other Income and Deductions 1.6 14.9 5.3 13.1
Income Tax Provision 9.2 31.3 26.2 109.5
</TABLE>
GROSS MARGIN
Gross margin (operating revenues less cost of gas) increased for the 1996
quarter and twelve-month period reflecting increased gas sales resulting from
colder weather and increased transportation deliveries.
<TABLE>
<CAPTION>
Gas Markets
<S> <C> <C> <C> <C>
Quarter 12 Months
------------ ------------
GAS MARKETS (Bcf) 1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Gas Sales.................... 102.2 89.3 219.8 186.2
End User Transportation...... 47.4 43.5 149.2 138.4
Intermediate Transportation.. 148.0 105.9 383.7 301.8
----- ----- ----- -----
297.6 238.7 752.7 626.4
===== ===== ===== =====
</TABLE>
Gas sales increased in both the 1996 quarter and twelve-month period as
compared to the 1995 periods due mainly to colder weather as well as
1
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED)
market expansion through the addition of over 5,000 new customers during the
1996 quarter and over 17,000 since March of 1995. End user transportation
deliveries for the 1996 quarter and twelve-month period increased from the 1995
period due to colder weather as well as higher levels of gas usage by large-
volume commercial and industrial customers, including gas cogeneration
facilities. Deliveries to the Michigan Power project, a 123 megawatt
cogeneration plant in which MCN has a 50% interest, represented three Bcf and
five Bcf of the increase during the 1996 quarter and twelve month period,
respectively. MichCon provides end user transportation deliveries of natural gas
to fuel the plant, which became operational in October 1995.
The increases in intermediate transportation in the 1996 quarter and
twelve-month period are primarily the result of increased transportation of
Antrim gas for Michigan gas producers and brokers. MichCon recently expanded the
transportation capacity of its northern Michigan gathering system. A significant
portion of the project was completed in 1995, and the remainder is expected to
be completed by mid-1996. This expansion enabled MichCon to transport an
additional 20.3 Bcf and 36.5 Bcf in the 1996 quarter and twelve-month period,
respectively.
In January 1996, MCN transferred its Michigan pipeline operations to
MichCon in order to consolidate MCN's Michigan gathering pipeline activities
within one business unit. This pipeline operation contributed 3.2 Bcf to the
increase in volumes transported during the 1996 periods. Profit margins on
intermediate transportation services are considerably less than margins on gas
sales or for end user transportation markets.
Cost of Gas
Cost of gas is affected by variations in sales volumes and cost of gas
rates. Through the Gas Cost Recovery (GCR) mechanism, MichCon's rates are set to
recover 100% of prudently and reasonably incurred gas costs. Therefore,
significant fluctuations in total gas costs have little or no effect on gross
margins or earnings.
Cost of gas sold increased in the 1996 quarter and twelve-month period due
to higher sales volumes resulting primarily from the colder weather, as well as
the higher prices paid for natural gas in the spot market. The increase in
market prices paid for gas resulted in an increase in the cost of gas sold per
thousand cubic feet of $.51 (21.5%) and $.28 (11.7%) in the 1996 quarter and
twelve-month period, respectively from the comparable 1995 periods.
OPERATION AND MAINTENANCE
Operation and maintenance expenses were lower in the 1996 quarter due to a
reduction in labor costs and lower employee benefit costs, primarily pension and
retiree health care costs. Operation and maintenance expenses decreased for the
1996 twelve-month period primarily due to lower benefit costs. Management's
continuing efforts to reduce operating costs also contributed to the decreases.
2
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONTINUED)
DEPRECIATION AND DEPLETION
The increases in depreciation and depletion for the 1996 quarter and
twelve-month period were due to higher plant balances, reflecting capital
expenditures of $381.2 million over the past two calendar years.
PROPERTY AND OTHER TAXES
Property and other taxes for the 1996 quarter and twelve-month period
reflect an increase in property taxes due to higher property balances, and
higher Michigan single business taxes due primarily to increased earnings.
OTHER INCOME AND DEDUCTIONS
The increase in other income and deductions for the 1996 quarter and
twelve-month period reflects additional interest expense relating to an increase
in the average amount of long-term debt outstanding.
INCOME TAX PROVISION
Income taxes increased for the 1996 quarter and twelve-month period
due primarily to increased earnings.
CAPITAL RESOURCES AND LIQUIDITY
OPERATING ACTIVITIES
MichCon's cash flow from operating activities totaled $94.3 million for the
first quarter of 1996, decreasing $38.2 million from the comparable 1995
quarter. The decrease was due primarily to higher working capital requirements
offset by higher net income and deferred taxes.
FINANCING ACTIVITIES
Cash and cash equivalents increased by $1.1 million during the first quarter
of 1996. Cash and cash equivalents normally increase and short-term debt is
reduced in the first part of each year as gas inventories are depleted and funds
are received from winter heating sales. During the first quarter of 1996,
MichCon repaid $51.7 million of short-term debt, including commercial paper.
During the latter part of the year, cash and cash equivalents normally decrease
as funds are used to finance increases in gas inventories and customer accounts
receivable. To meet its seasonal short-term borrowing needs, MichCon normally
issues commercial paper which is backed by credit lines with several banks.
MichCon has established credit lines to allow for borrowings of up to $100
million under a 364-day revolving credit facility and up to $150 million under a
three-year revolving credit facility. Commercial paper of $118 million was
outstanding as of March 31, 1996 under these lines.
3
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS - (CONCLUDED)
During 1995, MichCon renewed its Trust Demand Note program which allows
MichCon to borrow up to $25 million through April 1996. As of March 31, 1996,
borrowings of $25 million were outstanding under this program, and the note was
repaid in April 1996.
MichCon's capital requirements for 1996 are anticipated to be approximately
$220 million. These investments will be made to add new customers, develop new
gas transportation markets and make improvements to existing storage and
transmission systems. These capital requirements and general financial market
conditions will affect the timing and amount of future debt issuances.
INVESTING ACTIVITIES
MichCon's capital expenditures during the first quarter of 1996 totaled
$29.6 million primarily consisting of the construction of pipelines to transport
gas and the construction of new distribution lines to reach communities not
previously served by MichCon. This amount represents an increase of $1.4 million
from the first quarter of 1995.
In January 1996, MichCon began construction of a 59-mile loop of its
existing Milford to Belle River Pipeline. The pipeline is anticipated to be
completed in early 1997 at a cost of approximately $80 million. The pipeline
will improve the overall reliability and efficiency of MichCon's gas storage and
transmission system by serving as a back-up means of transportation in the event
of disruption in the operation of the existing pipeline or other facilities used
to supply gas to MichCon's system.
It is management's opinion that MichCon will have sufficient capital
resources, both internal and external, to meet anticipated capital requirements.
4
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
--------------------------------- -------------
1996 1995 1995
---------- ---------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents, at cost (which approximates market value) $ 9,554 $ 6,933 $ 8,469
Accounts receivable, less allowance for doubtful accounts of
$17,064, $20,816, and $13,250, respectively....................... 263,670 193,942 175,103
Accrued unbilled revenues........................................... 72,382 59,532 91,134
Gas in inventory (Note 1)........................................... 13,665 28,911 40,191
Property taxes assessed applicable to future periods................ 47,062 41,850 56,949
Accrued gas cost recovery revenues.................................. 35,362 - -
Other............................................................... 36,601 24,514 32,498
---------- ---------- ----------
478,296 355,682 404,344
---------- ---------- ----------
Deferred Charges and Other Assets
Investment in and advances to joint ventures........................ 20,043 20,535 20,318
Deferred postretirement benefit costs............................... 11,582 19,095 12,372
Deferred environmental costs (Note 3a).............................. 28,016 - 32,000
Prepaid benefit costs............................................... 48,896 11,224 25,438
Other............................................................... 47,934 39,833 42,061
---------- ---------- ----------
156,471 90,687 132,189
---------- ---------- ----------
Property, Plant and Equipment, at cost................................ 2,500,764 2,214,163 2,413,120
Less - Accumulated depreciation and depletion....................... 1,177,584 1,092,497 1,151,160
---------- ---------- ----------
1,323,180 1,121,666 1,261,960
---------- ---------- ----------
$1,957,947 $1,568,035 $1,798,493
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable.................................................... $ 117,060 $ 69,487 $ 108,208
Notes payable ...................................................... 144,919 79,681 196,635
Current portion of long-term debt, capital lease obligations
and redeemable cumulative preferred stock......................... 3,143 3,873 3,969
Gas inventory equalization (Note 1)................................. 82,393 67,806 -
Federal income, property and other taxes payable.................... 82,048 84,533 85,195
Customer deposits................................................... 10,818 10,467 11,531
Deferred income taxes - current..................................... 17,353 - 8,379
Other............................................................... 58,012 59,132 56,208
---------- ---------- ----------
515,746 374,979 470,125
---------- ---------- ----------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes................................... 81,830 61,308 61,146
Unamortized investment tax credit................................... 35,975 37,830 36,437
Tax benefits amortizable to customers............................... 113,968 113,179 114,487
Accrued postretirement benefit costs................................ - 6,596 12,661
Accrued environmental costs (Note 3a)............................... 32,000 - 32,000
Minority interest (Note 2).......................................... 17,805 - -
Other............................................................... 56,438 59,416 65,252
---------- ---------- ----------
338,016 278,329 321,983
---------- ---------- ----------
Long-Term Debt, including capital lease obligations................... 532,720 447,858 516,564
---------- ---------- ----------
Commitments and Contingencies (Note 3)
Common Shareholder's Equity
Common stock........................................................ 10,300 10,300 10,300
Additional paid-in capital (Note 2)................................. 230,399 204,777 211,777
Retained earnings................................................... 330,766 251,792 267,744
---------- ---------- ----------
571,465 466,869 489,821
---------- ---------- ----------
$1,957,947 $1,568,035 $1,798,493
========== ========== ===========
</TABLE>
The notes to the consolidated financial statements are an
integral part of this statement.
5
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------------ --------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues.......................... $531,392 $421,812 $1,190,393 $999,134
-------- -------- ---------- --------
Operating Expenses
Cost of gas............................... 298,716 210,137 572,541 439,440
Operation and maintenance................. 68,771 77,329 285,866 304,294
Depreciation and depletion................ 24,393 22,151 91,370 85,191
Property and other taxes.................. 18,608 16,502 59,118 55,951
-------- -------- ---------- --------
Total operating expenses................ 410,488 326,119 1,008,895 884,876
-------- -------- ---------- --------
Operating Income............................ 120,904 95,693 181,498 114,258
-------- -------- ---------- --------
Equity in Earnings of Joint Ventures........ 235 224 750 831
-------- -------- ---------- --------
Other Income and (Deductions)
Interest income........................... 585 938 3,630 3,610
Interest on long-term debt................ (9,768) (8,253) (37,335) (29,660)
Other interest expense.................... (2,835) (2,972) (6,916) (9,826)
Minority interest......................... (348) - (348) -
Other..................................... (296) (738) (4,967) (4,750)
-------- -------- ---------- --------
Total other income and (deductions)..... (12,662) (11,025) (45,936) (40,626)
-------- -------- ---------- --------
Income Before Income Taxes.................. 108,477 84,892 136,312 74,463
Income Tax Provision........................ 38,437 29,282 50,159 23,947
-------- -------- ---------- --------
Net Income.................................. 70,040 55,610 86,153 50,516
Dividends on Preferred Stock................ 18 74 179 419
-------- -------- ---------- --------
Net Income Available for Common Stock....... $ 70,022 $ 55,536 $ 85,974 $ 50,097
======== ======== ========== ========
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------------ ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance - Beginning of Period............... $267,744 $202,756 $251,792 $208,195
Add - Net income.......................... 70,040 55,610 86,153 50,516
-------- -------- -------- --------
337,784 258,366 337,945 258,711
Deduct - Cash dividends declared:
Preferred stock......................... 18 74 179 419
Common stock............................ 7,000 6,500 7,000 6,500
-------- -------- -------- --------
Balance - End of Period..................... $330,766 $251,792 $330,766 $251,792
======== ======== ======== ========
The notes to the consolidated financial statements are an integral part of these statements.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Cash Flow from Operating Activities
Net income.................................................................... $ 70,040 $ 55,610
Adjustments to reconcile net income to net cash flow provided
from operating activities:
Depreciation and depletion
Per statement of income................................................... 24,393 22,151
Charged to other accounts................................................. 1,865 1,853
Deferred income taxes - current............................................. 8,974 (1,409)
Deferred income taxes and investment tax credit - net....................... 11,348 6,252
Other....................................................................... (629) 313
Changes in assets and liabilities, exclusive of changes shown separately.... (21,695) 47,760
-------- --------
Net cash provided from operating activities............................... 94,296 132,530
-------- --------
Cash Flow from Financing Activities
Notes payable - net........................................................... (51,716) (88,776)
Additional paid-in-capital (Note 2)........................................... 1,614 -
Cash dividend paid:
Common stock................................................................ (7,000) (6,500)
Preferred stock............................................................. (54) (115)
Retirement of long-term debt and preferred stock.............................. (3,974) (3,471)
-------- --------
Net cash used for financing activities.................................... (61,130) (98,862)
-------- --------
Cash Flow from Investing Activities
Capital expenditures.......................................................... (29,616) (28,209)
Other - net................................................................... (2,465) 169
-------- --------
Net cash used for investing activities.................................... (32,081) (28,040)
-------- --------
Net Increase in Cash and Cash Equivalents....................................... 1,085 5,628
Cash and Cash Equivalents, January 1............................................ 8,469 1,305
-------- --------
Cash and Cash Equivalents, March 31............................................. $ 9,554 $ 6,933
======== ========
Changes in Assets and Liabilities, Exclusive of Changes Shown Separately
Accounts receivable - net..................................................... $(82,006) $(59,057)
Gas inventory equalization.................................................... 82,393 67,806
Accrued/deferred gas cost recovery revenues................................... (35,940) 14,905
Accrued unbilled revenues..................................................... 18,752 22,701
Gas in inventory.............................................................. 26,526 48,932
Property taxes assessed applicable to future periods.......................... 11,097 10,313
Accounts payable.............................................................. 7,846 (11,184)
Federal income, property and other taxes payable.............................. (5,164) (1,273)
Other current assets and liabilities.......................................... (2,471) (26,591)
Deferred assets and liabilities............................................... (42,728) (18,792)
-------- --------
$(21,695) $ 47,760
======== ========
Supplemental Disclosures
Cash paid for:
Interest, net of amounts capitalized........................................ $ 7,004 $ 4,938
======== ========
Federal income taxes........................................................ $ 3,724 $ 171
======== ========
Noncash financing activities:
Transfer of pipeline net assets to MichCon (Note 2) ........................ $ 17,008 -
======== ========
</TABLE>
The notes to the consolidated financial statements are an integral
part of this statement.
7
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GAS IN INVENTORY
Inventory gas is priced on a last-in, first-out (LIFO) basis. In
anticipation that interim inventory reductions will be replaced prior to year
end, the cost of gas for net withdrawals from inventory is recorded at the
estimated average purchase rate for the calendar year. The excess of these
charges over the LIFO cost is credited to the gas inventory equalization
account. During interim periods when there are net injections to inventory, the
equalization account is reversed. Approximately 22.3 Bcf and 29.4 Bcf of gas
was included in inventory at March 31, 1996 and 1995, respectively.
2. TRANSFER OF SUBSIDIARIES
In January 1996, MCN Corporation (MCN), parent company of MichCon,
transferred its Michigan pipeline operations, at book value, to MichCon in order
to consolidate MCN's Michigan gathering pipeline activities within one business
unit. Net assets transferred to MichCon totaled approximately $18,600,000,
including cash of $1,614,000 and long-term debt of $17,600,000. Contributions
from these pipeline operations to MichCon's consolidated net income for the
three-months ended March 31, 1996 were approximately $378,000.
3. COMMITMENTS AND CONTINGENCIES
A. ENVIRONMENTAL MATTERS
As described in MichCon's 1995 Annual Report on Form 10-K, MichCon
accrued an additional environmental remediation liability and corresponding
regulatory asset of $32,000,000 in the fourth quarter of 1995. MichCon has
notified current and former insurance carriers of the environmental
conditions and is pursing claims against these carriers. In the first
quarter of 1996, MichCon received its first settlement from insurance
carriers and expects additional insurance recoveries over the next several
years. On March 31, 1996, the reserve balance is approximately $35,400,000,
of which $3,400,000 is classified as current.
B. OTHER
MichCon is involved in certain legal and administrative proceedings
before various courts and governmental agencies concerning claims arising
in the ordinary course of business. Management cannot predict the final
disposition of such proceedings, but believes that adequate provision has
been made for probable losses. It is management's belief, after discussion
with legal counsel, that the ultimate resolution of those proceedings still
pending will not have a material adverse effect on MichCon's financial
statements.
4. ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 123, "Accounting for Stock-Based Compensation" in
October 1995. The statement requires certain disclosures about stock-based
employee compensation in the financial statements and encourages, but does not
require, a fair-value-based method of accounting for such compensation. MichCon
currently awards
8
<PAGE>
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (CONCLUDED)
performance units to selected employees under its long term incentive plan. Each
performance unit is equivalent to a share of MCN common stock. MCN is currently
evaluating whether to adopt the fair-value-based method of accounting and its
impacts.
5. GENERAL
There have been no changes in MichCon's principal accounting policies from
those set forth in MichCon's 1995 Annual Report on Form 10-K. Certain
reclassifications have been made to the prior year's financial statements to
conform with the 1996 presentation.
The unaudited information furnished herein, in the opinion of management,
reflects all adjustments (consisting of only recurring adjustments or accruals)
necessary for a fair presentation of the results of operations during the
periods.
Because of seasonal and other factors, revenues, expenses and net income
for the interim periods should not be construed as representative of revenues,
expenses and net income for all or any part of the balance of the current year
or succeeding periods.
9
<PAGE>
OTHER INFORMATION
EXHIBITS
(a) Exhibits
Exhibit
Number Description
------ -----------
12-1 Computation of Ratio of Earnings to Fixed Charges
27-1 Financial Data Schedule.
10
<PAGE>
SIGNATURE
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.
MICHIGAN CONSOLIDATED GAS COMPANY
Date: May 10, 1996 By: /s/ David R. Nowakowski
---------------------------
David R. Nowakowski
Controller, Treasurer and
Chief Accounting Officer
11
<PAGE>
EXHIBIT 12-1
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months Ended Twelve Months Ended
------------------- ------------------- -------------------
March 31, 1996 December 31, 1995 December 31, 1994
------------------- ------------------- -------------------
<S> <C> <C> <C>
EARNINGS AS DEFINED (1)
Net Income............................... $ 86,153 $ 71,723 $ 59,868
Federal and other income taxes........... 50,159 41,004 29,839
Fixed charges............................ 47,420 45,637 39,663
-------- -------- --------
Earnings as defined.................... $183,732 $158,364 $129,370
======== ======== ========
FIXED CHARGES AS DEFINED (1)
Interest on long-term debt............... $ 37,335 $ 35,820 $ 27,948
Interest on other borrowed funds......... 6,916 7,053 9,093
Amortization of debt discounts, premium
and expense............................ 1,074 996 950
Interest implicit in rentals (2)......... 2,095 1,768 1,672
-------- -------- --------
Fixed charges as defined............... $ 47,420 $ 45,637 $ 39,663
======== ======== ========
Ratio of Earnings to Fixed Charges....... 3.88 3.47 3.26
======== ======== ========
</TABLE>
Notes:
- -----
(1) Earnings and fixed charges are defined and computed in accordance with
Item 503 of Regulation S-K.
(2) This amount is estimated to be a reasonable approximation of the interest
portion of rentals.
MichCon is a guarantor of certain other debt. Fixed charges related to such debt
are deemed to be immaterial and therefore have been excluded from the above
ratios.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Consolidated Statement of Income and the Consolidated Statement of Financial
Position and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,554
<SECURITIES> 0
<RECEIVABLES> 280,734
<ALLOWANCES> 17,064
<INVENTORY> 13,665
<CURRENT-ASSETS> 478,296
<PP&E> 2,500,764
<DEPRECIATION> 1,177,584
<TOTAL-ASSETS> 1,957,947
<CURRENT-LIABILITIES> 515,746
<BONDS> 532,720
<COMMON> 10,300
0
0
<OTHER-SE> 561,165
<TOTAL-LIABILITY-AND-EQUITY> 1,957,947
<SALES> 531,392
<TOTAL-REVENUES> 531,392
<CGS> 298,716
<TOTAL-COSTS> 410,488
<OTHER-EXPENSES> 644
<LOSS-PROVISION> 7,314
<INTEREST-EXPENSE> 12,603
<INCOME-PRETAX> 108,477
<INCOME-TAX> 38,437
<INCOME-CONTINUING> 70,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,022
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
