<PAGE> 1
================================================================================
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, 1997, 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, 1997:
Common Stock, par value $.01 per share: 10,300,000
================================================================================
<PAGE> 2
INDEX TO FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1997
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.................... 9
SIGNATURE ................................................... 10
ii
<PAGE> 3
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Earnings declined by $7.8 million and $14.0 million for the 1997 quarter
and twelve-month periods, respectively. The decreases reflect lower gross
margins resulting from reduced gas sales and end user transportation deliveries
due to warmer weather, as well as higher operating expenses.
EARNINGS COMPONENTS (IN MILLIONS)
COMPARING 1997 TO 1996
<TABLE>
<CAPTION>
Quarter Twelve Months
------- -------------
$ Change % Change $ Change % Change
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues........................ $(3.9) (0.7) $ 64.4 5.4
Cost of Gas............................... 4.6 1.5 68.6 12.0
Gross Margin.............................. (8.5) (3.7) (4.2) (0.7)
Operation and Maintenance................. 5.3 7.8 13.7 4.8
Depreciation and Depletion................ 1.1 4.5 7.9 8.6
Property and Other Taxes.................. (0.8) (4.4) 1.8 3.1
Other Income and Deductions............... (0.1) (0.8) 1.5 3.3
Income Tax Provision...................... (6.1) (15.9) (14.8) (29.5)
</TABLE>
GROSS MARGIN
Gross margin (operating revenues less cost of gas) decreased in the 1997
quarter and twelve-month periods reflecting lower gas deliveries resulting from
warmer weather as previously discussed. The decline for the twelve-month
period was partially offset by increased revenues as a result of the continued
growth in intermediate transportation services.
EFFECT OF WEATHER ON GAS MARKETS AND EARNINGS
<TABLE>
<CAPTION>
Quarter Twelve Months
------------- --------------
1997 1996 1997 1996
-------- --------- ----- ------
<S> <C> <C> <C> <C>
Percentage Colder (Warmer) than
Normal......................................... (3.3)% 5.7% 1.0% 6.0%
Increase (Decrease) from Normal In:
Gas Markets(Bcf)....................... (3.1) 5.4 2.4 12.2
Net Income(Millions)........................... $(2.8) $4.9 $2.2 $11.1
</TABLE>
1
<PAGE> 4
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The decline in gas sales revenue for the 1997 twelve-month period
attributable to reduced sales volumes was more than offset by higher revenue
necessary to recover higher gas costs, as subsequently discussed. Gas sales and
end user transportation volumes decreased in the 1997 quarter- and twelve-month
periods as compared to the 1996 periods due primarily to warmer weather. The
decrease in end user transportation revenue for the 1997 twelve-month period
was partially offset by increased deliveries to a cogeneration facility under a
long-term transportation contract.
<TABLE>
<CAPTION>
Quarter Twelve Months
------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
GAS MARKETS (IN BCF)
Gas Sales............................. 93.3 102.2 208.8 219.8
End User Transportation............... 44.3 47.4 143.6 149.2
Intermediate Transportation........... 140.6 148.6 519.4 384.3
----- ----- ----- -----
278.2 298.2 871.8 753.3
===== ===== ===== =====
</TABLE>
The decrease in intermediate transportation deliveries in the 1997 quarter
is due primarily to lower volumes transported for two major fixed-fee
customers. Although volumes associated with these fixed-fee customers may
vary, the related revenues are not significantly affected. The increase in
intermediate transportation deliveries in the 1997 twelve-month period was
primarily the result of additional volumes transported in connection with the
recently expanded northern Michigan gathering system along with higher volumes
transported for fixed-fee customers. The expansion of the northern Michigan
gathering system enabled MichCon to transport an additional 2.3 Bcf and 81.5
Bcf in the 1997 quarter and twelve-month periods, respectively.
Other operating revenues decreased in the 1997 twelve-month period due to
a decrease in conservation revenue resulting from the discontinuation of
MichCon's conservation programs. As discussed in the "Operation and
Maintenance" section that follows, this decrease is offset by a corresponding
decrease in expenses related to the conservation programs. The decrease in
operating revenues is partially offset by an increase in gas processing
revenues from the Michigan pipeline operations which were transferred from MCN
Energy Group Inc. (MCN) to MichCon at the beginning of 1996.
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 is allowed
timely recovery of 100% of its prudently and reasonably incurred cost of gas
sold. Therefore, fluctuations in total gas costs have little or no effect on
gross margins and earnings.
Cost of gas sold increased in the 1997 quarter- and twelve-month periods
due to higher spot market prices paid for natural gas purchases. The increase
in market prices paid for gas resulted in an increase in the cost of gas sold
per thousand cubic feet of $.37 (13%) and $.46 (17%) in the 1997 quarter and
twelve-month periods, respectively, from the comparable 1996 periods.
2
<PAGE> 5
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATION AND MAINTENANCE
Operation and maintenance expenses for the 1997 first quarter increased
from the comparable 1996 period due primarily to increased uncollectibles
expense. This increase was partially offset by a decrease in benefit costs,
primarily pension and retiree health care costs. For the 1997 twelve-month
period, operation and maintenance expenses increased from the comparable 1996
period due to increased uncollectibles expense and additional operating
expenses related to the transfer of the Michigan pipeline operation from MCN to
MichCon. These increases were offset by lower employee benefit costs, primarily
pension and retiree health care costs and a decrease in expenses related to the
conservation program, which was discontinued as noted above in Gross Margin.
Management continues to evaluate company processes for potential operating cost
reductions.
DEPRECIATION AND DEPLETION
The increase in depreciation and depletion for the 1997 quarter and
twelve-month periods is due to higher plant balances reflecting capital
expenditures of $448.4 million over the past two calendar years. Depreciation
and depletion expenses are expected to increase in future years due to
additional capital investments. MichCon filed an application with the MPSC to
lower its depreciation rates which could partially offset the anticipated
increase in depreciation expense in 1997 and future years.
INCOME TAX PROVISION
Income taxes decreased for the 1997 quarter and twelve-month periods
primarily as a result of decreased earnings. Income taxes were also reduced by
$2.7 million and $1.1 million during the 1997 and 1996 twelve-month periods,
respectively, due to the favorable resolution of prior years' tax issues.
CAPITAL RESOURCES AND LIQUIDITY
OPERATING ACTIVITIES
MichCon's cash flow from operating activities totaled $146.9 million for
the first quarter of 1997, increasing $52.6 million from the comparable 1996
period. The increase was due primarily to lower working capital requirements,
offset by lower net income after adjusting for depreciation and deferred taxes.
Operating cash flows were sufficient for the payment of cash dividends on
common stock and a portion of capital investments.
FINANCING ACTIVITIES
Cash and cash equivalents increased by $5.3 million during the first
quarter 1997. 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 heating sales. During the latter part of the year,
short-term debt is generally incurred to finance increases in gas inventories
and customers accounts receivable. To meet its seasonal short-term borrowing
needs, MichCon normally issues commercial paper
3
<PAGE> 6
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
which is backed by credit lines with several banks. MichCon has established
credit lines to allow for borrowings of up to $150 million under a 364-day
revolving credit facility and up to $150 million under a three-year revolving
credit facility. During the first three months of 1997, MichCon repaid $79.2
million of commercial paper, leaving a balance of $159.1 million outstanding
under this program at March 31, 1997.
MichCon filed a shelf registration with the Securities and Exchange
Commission in the fourth quarter of 1996, which allows the company to issue, in
conjunction with its remaining existing shelf registration, up to $300 million
of debt securities over the next several years. MichCon anticipates the
issuance of $85 million of first mortgage bonds under its shelf registrations
in the second quarter of 1997. The funds from this issuance will be used to
repay short-term debt which was used to retire first mortgage bonds in May
1997, fund capital expenditures and for general corporate purposes. MichCon's
capital requirements and general market conditions will affect the timing and
amount of future issuances.
During April 1997, subsidiaries of MichCon borrowed $40 million under a
non-recourse credit agreement that matures in 2005. Proceeds were used to
finance the expansion of its northern Michigan pipeline system.
MichCon has available a Trust Demand Note program which allows it to
borrow up to $25 million. As of March 31, 1997 there were no borrowings
outstanding under this program.
MichCon's capitalization objective is to maintain a ratio of approximately
50% debt and 50% equity. At March 31, 1997, the common equity ratio was 53.2%
of total capitalization.
INVESTING ACTIVITIES
MichCon's capital expenditures totaled $23.7 million during the first
quarter of 1997 and are anticipated to be approximately $175 million by the end
of the year. These investments will be made to add new customers, develop new
gas transportation markets, make improvements to existing storage and
transmission systems and to improve its information systems.
It is management's opinion that MichCon will have sufficient capital
resources, both internal and external, to meet anticipated capital
requirements.
OUTLOOK
MichCon's strategy is to grow revenues and reduce its costs in order to
maintain strong returns and provide customers with quality service at
competitive prices. Revenue growth will be achieved through the expansion of
MichCon's 1.2 million residential, commercial and industrial customer base. In
1997, MichCon will concentrate on adding new customers in current service areas
and increase penetration of previous expansion projects. MichCon will continue
initiatives to increase productivity and improve customer services in order to
strengthen its competitive position in the gas industry. Management is
continually assessing ways to improve cost competitiveness. Among cost savings
initiatives, MichCon and other Michigan utilities are exploring opportunities
to share the cost of common, duplicative functions in order to obtain greater
efficiencies and increase value to customers.
4
<PAGE> 7
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,
---------------------- -----------------------
1997 1996 1997 1996
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATING REVENUES........................... $527,445 $531,392 $1,254,838 $1,190,393
-------- -------- ---------- ----------
OPERATING EXPENSES
Cost of gas................................ 303,273 298,716 641,151 572,541
Operation and maintenance.................. 74,105 68,771 299,615 285,866
Depreciation and depletion................. 25,501 24,393 99,255 91,370
Property and other taxes................... 17,794 18,608 60,948 59,118
-------- -------- ---------- ----------
Total operating expenses................. 420,673 410,488 1,100,969 1,008,895
-------- -------- ---------- ----------
OPERATING INCOME............................. 106,772 120,904 153,869 181,498
-------- -------- ---------- ----------
EQUITY IN EARNINGS OF JOINT VENTURES......... 310 235 961 750
-------- -------- ---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Interest income............................ 1,209 585 4,524 3,630
Interest on long-term debt................. (10,740) (9,656) (41,787) (38,024)
Other interest expense..................... (2,891) (2,835) (8,068) (6,916)
Minority interest.......................... (338) (348) (978) (348)
Other...................................... 201 (408) (1,147) (4,278)
-------- -------- ---------- ----------
Total other income and (deductions)...... (12,559) (12,662) (47,456) (45,936)
--------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES................... 94,523 108,477 107,374 136,312
INCOME TAX PROVISION......................... 32,330 38,437 35,379 50,159
-------- -------- ---------- ----------
NET INCOME................................... 62,193 70,040 71,995 86,153
DIVIDENDS ON PREFERRED STOCK................. - 18 - 179
-------- -------- --------- ----------
NET INCOME AVAILABLE FOR COMMON STOCK........ $ 62,193 $ 70,022 $ 71,995 $ 85,974
======== ======== ========= ==========
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- ----------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Balance - Beginning of Period................ $336,305 $267,744 $330,766 $251,792
Add - Net income........................... 62,193 70,040 71,995 86,153
-------- -------- -------- --------
398,498 337,784 402,761 337,945
Deduct - Cash dividends declared:
Preferred stock.......................... - 18 - 179
Common stock............................. 15,000 7,000 19,263 7,000
-------- -------- -------- --------
Balance - End of Period...................... $383,498 $330,766 $383,498 $330,766
======== ======== ======== ========
</TABLE>
The notes to the consolidated financial statements are an integral part of
these statements.
5
<PAGE> 8
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
---------------------------- -------------
1997 1996 1996
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents, at cost (which approximates market value) ... $ 15,284 $ 9,554 $ 10,010
Accounts receivable, less allowance for doubtful accounts of
$24,398, $17,064 and $17,707, respectively ............................ 256,692 263,670 169,436
Accrued unbilled revenues .............................................. 71,507 72,382 107,377
Gas in inventory (Note 1) .............................................. 21,419 13,665 67,910
Property taxes assessed applicable to future periods ................... 49,300 47,062 60,592
Accrued gas cost recovery revenues ..................................... 21,500 35,362 27,672
Other .................................................................. 29,292 36,601 23,025
---------- --------- ----------
464,994 478,296 466,022
----------- --------- ----------
DEFERRED CHARGES AND OTHER ASSETS
Investment in and advances to joint ventures ........................... 19,865 20,043 19,479
Deferred postretirement benefit costs 4,099 11,582 4,863
Deferred environmental costs 28,116 28,016 28,233
Prepaid benefit costs 60,228 48,896 64,307
Other 52,679 47,934 50,206
----------- --------- ----------
164,987 156,471 167,088
----------- --------- ----------
PROPERTY, PLANT and EQUIPMENT, AT COST ................................... 2,685,456 2,500,764 2,668,294
Less - Accumulated depreciation and depletion .......................... 1,265,095 1,177,584 1,243,060
----------- ----------- -----------
1,420,361 1,323,180 1,425,234
----------- ----------- -----------
$ 2,050,342 $ 1,957,947 $ 2,058,344
=========== =========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable ....................................................... $ 95,299 $ 117,060 $ 130,725
Notes payable .......................................................... 160,958 144,919 265,126
Current portion of long-term debt, capital lease obligations
and redeemable cumulative preferred stock ............................. 53,286 3,143 53,232
Gas inventory equalization (Note 1) .................................... 96,197 82,393 -
Federal income, property and other taxes payable ....................... 89,578 82,048 84,788
Deferred income taxes - current ........................................ 6,166 17,353 13,342
Customer deposits ...................................................... 12,630 10,818 12,860
Other .................................................................. 45,728 58,012 49,967
----------- ----------- -----------
559,842 515,746 610,040
----------- ----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES
Accumulated deferred income taxes ...................................... 75,846 81,830 76,523
Unamortized investment tax credit ...................................... 34,127 35,975 34,588
Tax benefits amortizable to customers .................................. 115,897 113,968 116,313
Accrued environmental costs ............................................ 32,000 32,000 32,000
Minority interest ...................................................... 17,738 17,805 17,604
Other .................................................................. 41,695 56,438 43,954
----------- ----------- -----------
317,303 338,016 320,982
----------- ----------- -----------
LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS (NOTE 2) ........... 549,000 532,720 550,318
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
COMMON SHAREHOLDER'S EQUITY
Common stock ........................................................... 10,300 10,300 10,300
Additional paid-in capital ............................................. 230,399 230,399 230,399
Retained earnings ...................................................... 383,498 330,766 336,305
----------- ----------- -----------
624,197 571,465 577,004
----------- ----------- -----------
$ 2,050,342 $ 1,957,947 $ 2,058,344
=========== =========== ===========
</TABLE>
The notes to the consolidated financial statements are an integral part of this
statement.
6
<PAGE> 9
MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1996
---------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 62,193 $ 70,040
Adjustments to reconcile net income to net cash flow provided
from operating activities:
Depreciation and depletion
Per statement of income 25,501 24,393
Charged to other accounts 1,913 1,865
Deferred income taxes - current (7,176) 8,974
Deferred income taxes and investment tax credit - net (1,554) 11,348
Other (766) (629)
Changes in assets and liabilities, exclusive of changes
shown separately 66,748 21,695
--------- --------
Net cash provided from operating activities 146,859 94,296
--------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Notes payable - net (104,168) (51,716)
Additional paid-in-capital - 1,614
Cash dividend paid:
Common stock (15,000) (7,000)
Preferred stock - (54)
Retirement of long-term debt and preferred stock (1,297) (3,974)
--------- --------
Net cash used for financing activities (120,465) (61,130)
--------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (23,702) (29,616)
Other - net 2,582 (2,465)
--------- --------
Net cash used for investing activities (21,120) (32,081)
--------- --------
Net Increase in Cash and Cash Equivalents 5,274 1,085
Cash and Cash Equivalents, January 1 10,010 8,469
--------- --------
Cash and Cash Equivalents, March 31 $ 15,284 $ 9,554
========= ========
CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES
SHOWN SEPARATELY
Accounts receivable - net $ (88,130) $(82,006)
Gas inventory equalization 96,197 82,393
Accrued/deferred gas cost recovery revenues 6,172 (35,940)
Accrued unbilled revenues 35,870 18,752
Gas in inventory 46,491 26,526
Property taxes assessed applicable to future periods 11,292 11,097
Accounts payable (35,426) 7,846
Federal income, property and other taxes payable 4,790 (5,164)
Other current assets and liabilities (10,736) (2,471)
Deferred and prepaid benefit costs (4,843) (22,668)
Deferred assets and liabilities (4,615) (20,060)
--------- --------
$ 66,748 $(21,695)
========= ========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest, net of amounts capitalized $ 9,889 $ 7,004
========= ========
Federal income taxes $ 11,303 $ 3,724
========= ========
Noncash financing activities:
Transfer of pipeline net assets from MCN $ - $ 17,008
========= ========
</TABLE>
The notes to the consolidated financial statements are an integral part of this
statement.
7
<PAGE> 10
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 23.6 billion cubic feet
(Bcf) and 22.3 Bcf of gas was included in inventory at March 31, 1997 and 1996,
respectively.
2. CAPITALIZATION
During April 1997, MichCon subsidiaries borrowed $40,000,000 under a
non-recourse credit agreement at an average interest rate of 6.45%. Under
terms of the agreement, certain alternative variable interest rates are
available at the borrowers option during the life of the agreement. Quarterly
principal payments commence in June 1997 with final installment due November
2005. The loan is secured by a pledge of the stock of the borrowers and a
security interest in certain of their assets.
3. COMMITMENTS AND CONTINGENCIES
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. GENERAL
There have been no changes in MichCon's principal accounting policies from
those set forth in MichCon's 1996 Annual Report on Form 10-K. Certain
reclassifications have been made to the prior year's financial statements to
conform with the 1997 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.
8
<PAGE> 11
OTHER INFORMATION
EXHIBITS
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
12-1 Computation of Ratio of Earnings to Fixed Charges.
27-1 Financial Data Schedule.
99-1 MichCon Investment and Stock Ownership Plan, as amended
(Exhibit 99-1 to MCN's March 31, 1997 Form 10-Q).
99-2 MCN Energy Group Savings and Stock Ownership Plan, as amended
(Exhibit 99-2 to MCN's March 31, 1997 Form 10-Q).
9
<PAGE> 12
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 8, 1997 By: /s/ Howard L. Dow III
--------------------------
Howard L. Dow III
Vice President and
Chief Financial Officer
10
<PAGE> 13
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
12-1 Computation of Ratio of Earnings to Fixed Charges
27-1 Financial Data Schedule
<PAGE> 1
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, 1997 December 31, 1996 December 31, 1995
------------------- ------------------- -------------------
<S> <C> <C> <C>
EARNINGS AS DEFINED (1)
Pre-tax income (2) ...................... $107,832 $122,239 $112 727
Fixed charges ........................... 55,011 53,831 45,637
-------- -------- --------
Earnings as defined $162,843 $176,070 $158,364
======== ======== ========
FIXED CHARGES AS DEFINED (1)
Interest on long-term debt .............. $ 44,364 $ 43,163 $ 35,820
Interest on other borrowed funds ........ 8,068 8,012 7,053
Amortization of debt discounts, premium
and expense ............................ 1,087 1,081 996
Interest implicit in rentals (3) ........ 1,492 1,575 1,768
-------- -------- --------
Fixed charges as defined ............... $ 55,011 $ 53,831 $ 45,637
======== ======== ========
Ratio of Earnings to Fixed Charges ...... 2.96 3.27 3.47
======== ======== ========
</TABLE>
Notes:
(1) Earnings and fixed charges are defined and computed in accordance with
Item 503 of Regulation S-K.
(2) This amount represents the aggregate of (a) the pre-tax income of
MichCon, (b) MichCon's share of pre-tax income of its 50% owned
companies and (c) any income actually received from less than 50% owned
companies.
(3) 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>
<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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 15,284
<SECURITIES> 0
<RECEIVABLES> 281,090
<ALLOWANCES> 24,398
<INVENTORY> 21,419
<CURRENT-ASSETS> 464,994
<PP&E> 2,685,456
<DEPRECIATION> 1,265,095
<TOTAL-ASSETS> 2,050,342
<CURRENT-LIABILITIES> 559,842
<BONDS> 549,000
0
0
<COMMON> 10,300
<OTHER-SE> 613,897
<TOTAL-LIABILITY-AND-EQUITY> 2,050,342
<SALES> 0
<TOTAL-REVENUES> 527,445
<CGS> 0
<TOTAL-COSTS> 420,673
<OTHER-EXPENSES> 137
<LOSS-PROVISION> 10,890
<INTEREST-EXPENSE> 13,631
<INCOME-PRETAX> 94,523
<INCOME-TAX> 32,330
<INCOME-CONTINUING> 62,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 62,193
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
