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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, 1994
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 1-7320
ANR PIPELINE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 38-1281775
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Renaissance Center
Detroit, Michigan 48243-1902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 496-0200
----------------------------------
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 29, 1994, there were outstanding 1,000 shares of common
stock of the Registrant, $100 par value per share, its only class of common
stock. None of the voting stock of the Registrant is held by non-affiliates.
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PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of ANR Pipeline Company and its subsidiaries
(the "Company" or "ANR Pipeline") are presented herein and are unaudited,
except for balances as of December 31, 1993, 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 natural gas deliveries.
ANR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION> March 31, December 31,
ASSETS 1994 1993
--------------- --------------
(Unaudited)
<S> <C> <C>
Property, Plant and Equipment, at cost . . . . . . . . . . . . . . . . $ 3,348.1 $ 3,170.1
Less Accumulated depreciation . . . . . . . . . . . . . . . . . . 2,189.9 2,174.3
----------- -----------
1,158.2 995.8
----------- -----------
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 59.7 33.9
Note receivable from affiliate . . . . . . . . . . . . . . . . . . . 181.1 285.5
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 116.3 82.5
Gas in underground storage, at FIFO cost . . . . . . . . . . . . . . 47.6 207.5
Materials and supplies, at average cost . . . . . . . . . . . . . . 41.3 40.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 .7
----------- -----------
446.5 650.7
----------- -----------
Other Assets:
Deferred charges and other . . . . . . . . . . . . . . . . . . . . . 137.9 115.6
Investment in pipeline partnerships . . . . . . . . . . . . . . . . 38.4 37.5
Assets related to excess gas supply . . . . . . . . . . . . . . . . 111.8 120.7
----------- -----------
288.1 273.8
----------- -----------
$ 1,892.8 $ 1,920.3
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
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ANR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
March 31, December 31,
STOCKHOLDERS' EQUITY AND LIABILITIES 1994 1993
--------------- --------------
(Unaudited)
<S> <C> <C>
Common Stock and Other Stockholder's Equity:
Common stock, $100 par value, authorized and outstanding
1,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . . $ .1 $ .1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 466.2 466.2
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 295.8 503.0
----------- -----------
762.1 969.3
----------- -----------
Mandatory Redemption Cumulative Preferred Stock, $1 par value,
authorized 10,000,000 shares, outstanding 1,086,640 shares . . . . . 26.0
----------- -----------
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480.7 356.6
----------- -----------
Obligation Under Capital Leases . . . . . . . . . . . . . . . . . . . . 16.6 17.4
----------- -----------
Current Liabilities:
Early redemption and sinking fund requirements of preferred stock . 33.7 7.7
Obligation under capital leases . . . . . . . . . . . . . . . . . . 3.0 3.0
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 201.0 207.3
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . 26.4 (15.8)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.0 52.3
----------- -----------
326.1 254.5
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Deferred Credits and Other:
Accumulated deferred income taxes . . . . . . . . . . . . . . . . . 217.1 217.1
Unamortized rate reductions for excess deferred federal income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6 12.6
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79.6 66.8
----------- -----------
307.3 296.5
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$ 1,892.8 $ 1,920.3
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----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
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ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED EARNINGS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1994 1993
--------- ---------
(Unaudited)
<S> <C> <C>
Revenues:
Storage and transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 195.6 $ 154.4
Gas sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.1 196.8
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7 10.9
--------- ---------
244.4 362.1
--------- ---------
Costs and Expenses:
Operation and maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.3 86.3
Cost of gas sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.3 176.0
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3 11.0
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 13.3
Taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.7 25.8
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195.8 312.4
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Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48.6 49.7
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . .8 1.1
--------- ---------
Earnings Available for Common Stockholder . . . . . . . . . . . . . . . . . . . . . $ 47.8 $ 48.6
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements.
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ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1994 1993
-------- --------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48.6 $ 49.7
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9 11.5
Net decrease (increase) in working capital . . . . . . . . . . . . 9.0 (29.2)
Net decrease in other assets/liabilities . . . . . . . . . . . . . 12.5 27.1
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . . . . . 34.4 9.4
-------- --------
Net cash provided by operating activities . . . . . . . . . . . . . 83.0 59.1
-------- --------
Cash Flows from Investing Activities:
Decrease (increase) in note receivable from affiliate . . . . . . . . . 104.4 (52.5)
Gas supply settlements and prepayments . . . . . . . . . . . . . . . . . .1 (.8)
Recovery of gas supply prepayments . . . . . . . . . . . . . . . . . . . 22.5
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . (30.1) (13.5)
-------- --------
Net cash provided by (used in) investing activities . . . . . . . . 74.4 (44.3)
-------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . 125.0 -
Retirement of long-term debt, capital lease obligations and
preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . (.8) (3.3)
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . (255.0) (11.3)
Preferred stock dividends paid . . . . . . . . . . . . . . . . . . . . . (.8) (1.1)
-------- --------
Net cash used in financing activities . . . . . . . . . . . . . . . (131.6) (15.7)
-------- --------
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . 25.8 (.9)
Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . 33.9 3.1
-------- --------
Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . $ 59.7 $ 2.2
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
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ANR PIPELINE COMPANY 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, 1993. Certain 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 results of operations or financial position.
The Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" ("FAS 112"),
effective January 1, 1994. The effects of the changes required by FAS 112
are not material to the Company.
Supplemental information relative to the Statement of Consolidated Cash
Flows includes the following: The Company made cash payments for interest,
net of interest capitalized, of $2.2 million and $3.1 million for the
three-month periods ended March 31, 1994 and 1993, respectively. Cash
payments (refunds) for income taxes amounted to ($14.8) million and $21.6
million for the three-month periods ended March 31, 1994 and 1993,
respectively. In March 1994, $162.1 million was transferred from "Gas in
underground storage" to "Property, Plant and Equipment" and included as part
of base gas, pending Federal Energy Regulatory Commission ("FERC") approval.
2. Income Taxes
<TABLE>
Provisions for income taxes were as follows (millions of dollars):
<CAPTION>
Three Months Ended
March 31,
------------------------
1994 1993
-------- --------
(Unaudited)
<S> <C> <C>
Federal Income Taxes:
Currently payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32.3 $ 11.6
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8.0) 12.2
-------- --------
24.3 23.8
State and City Income Taxes . . . . . . . . . . . . . . . . . . . . . . 2.4 2.0
-------- --------
$ 26.7 $ 25.8
-------- --------
-------- --------
</TABLE>
3. Common Stock
All of the issued and outstanding common stock of the Company is owned
by American Natural Resources Company, a wholly-owned subsidiary of Coastal
Natural Gas Company. Coastal Natural Gas Company is a wholly-owned
subsidiary of The Coastal Corporation. Therefore, earnings and cash
dividends per common share have no significance and are not presented.
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4. Litigation, Environmental and Regulatory Matters
Litigation
Numerous 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 effect on the Company's financial
position.
Environmental Matters
The Company's operations are subject to extensive federal, state and
local environmental laws and regulations which may affect such operations
and costs as a result of their effect on the construction and maintenance of
its pipeline facilities. Additionally, appropriate 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," as reauthorized, imposes liability, without
regard to fault or the legality of the original act, for disposal of a
"hazardous substance." The Company has been named as a potentially
responsible party in two "Superfund" waste disposal sites. At one site for
which the Environmental Protection Agency ("EPA") has developed sufficient
information to estimate total clean-up costs of approximately $1.8 million,
the Company estimates its pro-rata exposure is $15,000. At the other site,
the EPA is currently unable to provide the Company with an estimate of total
clean-up costs and, accordingly, the Company is unable to calculate its
share of those costs.
There are additional areas of environmental remediation
responsibilities which may fall on the Company. Future information and
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 liquidity or financial position.
Regulatory Matters
On March 10, 1992, the Company submitted to the FERC a comprehensive
Interim Settlement designed to resolve all outstanding issues resulting from
its 1989 rate case and its 1990 proposed service restructuring proceeding.
The Interim Settlement involved, inter alia, an array of new sales,
delivery, transportation and storage service alternatives and the
implementation of a gas inventory charge, designed to compensate the Company
for the costs of standing ready to serve its sales customers. The Interim
Settlement became effective November 1, 1992 and expired with the Company's
implementation of Order 636 on November 1, 1993. Under the Interim
Settlement, gas inventory demand charges were collected from the Company's
resale customers for the period November 1, 1992 through October 31, 1993.
This method of gas cost recovery required refunds for any over-collections,
and placed the Company at risk for under-collections. As required by the
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Interim Settlement, the Company filed with the FERC on April 29, 1994, a
reconciliation report showing over-collections and, therefore, proposed
refunds totaling $45.1 million. Such refund obligations were recorded at
December 31, 1993 and March 31, 1994, and are included in the Consolidated
Balance Sheet under "Deferred Credits and Other."
On April 8, 1992, the FERC issued Order 636, which required significant
changes in the services provided by interstate natural gas pipelines. The
Company and numerous other parties have sought judicial review of aspects of
Order 636. ANR Pipeline placed its restructured services under Order 636
into effect on November 1, 1993. The Company now offers a wide range of
"unbundled" storage, transportation and balancing services. Several persons,
including ANR Pipeline, have sought judicial review of aspects of the FERC's
orders approving the Company's restructuring filings. On March 24, 1994, the
FERC issued its "Fourth Order on Compliance Filing and Third Order on
Rehearing," which addressed numerous rehearing issues and confirmed that
after minor required tariff modifications, the Company is now fully in
compliance with Order 636 and the requirements of the orders on ANR
Pipeline's restructuring filings. ANR Pipeline filed the required tariff
modifications on April 8, 1994.
On December 17, 1992, the FERC issued a policy statement that outlined
changes on how pipelines may recover the costs of employees' postretirement
benefits other than pensions. The FERC's policy will be to recognize, as a
component of jurisdictional cost-based rates, allowances for Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106") costs of company
employees when determined on an accrual basis, provided certain conditions
are met.
On November 1, 1993, the Company filed a general rate increase with the
FERC. The increase represents higher plant investment, Order 636
restructuring costs, rate of return and tax rate changes and increased costs
related to the required adoption of recent accounting rule changes, i.e.,
FAS 106 and FAS 112. On March 23, 1994, the FERC issued an order granting
and denying various requests for summary disposition and establishing
hearing procedures for issues remaining to be investigated in the Company's
rate case proceeding at Docket No. RP94-43. The order required the reduction
or elimination of certain costs which resulted in revised rates such that
the revised rates reflect an $85.7 million increase in the cost of service
from that approved in the Interim Settlement and a $182.8 million increase
over the Company's approved rates for its restructured services under Order
636. On April 7, 1994, the Company submitted a compliance filing pursuant to
the requirements of the March 23, 1994 order. Further, on April 29, 1994,
the Company filed a motion with the FERC that placed the new rates into
effect May 1, 1994, subject to refund. The Company has also sought rehearing
and, if necessary, will seek judicial review of the March 23, 1994 order.
ANR Pipeline has executed a Settlement Agreement (the "Settlement
Agreement") with Dakota Gasification Company ("Dakota") and the Department
of Energy which resolves litigation concerning purchases of synthetic gas by
the Company from the Great Plains Coal Gasification Plant (the "Plant").
That litigation, originally filed in 1990 in the United States District
Court in North Dakota, involved claims regarding the Company's obligations
under certain gas purchase and transportation contracts with the Plant. The
Settlement Agreement resolves all disputes between the parties, amends the
gas purchase agreement between the Company and Dakota and terminates the
transportation contract. The Settlement Agreement is subject to FERC
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<PAGE> 9
approval, including an approval for the Company to recover the settlement
costs from its customers. It is anticipated that applications for such FERC
approvals will be filed shortly.
Order 636 provides mechanisms for recovery of transition costs
associated with compliance with that Order. The Company has estimated that
its transition costs will amount to approximately $150 million, which will
consist primarily of gas supply realignment costs, the cost of stranded
pipeline investment and the Dakota costs described above. As of March 31,
1994, the Company has incurred transition costs in the amount of $40.3
million. As a result of the recovery mechanisms provided under Order 636,
the Company anticipates that these transition costs will not have a material
effect on its financial position or its results of operations.
Certain regulatory issues remain unresolved among the Company, its
customers, its suppliers and the FERC. The Company has made provisions which
represent management's assessment of the ultimate resolution of these
issues. 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.
5. Take-or-Pay Obligations
"Assets related to excess gas supply" consists of $111.8 million and
$120.7 million at March 31, 1994 and December 31, 1993, respectively,
relating to prepayments for gas under gas purchase contracts with producers
and settlement payment amounts relative to the restructuring of gas purchase
contracts as negotiated with producers. Currently, FERC regulations allow
for the billing of a portion of the costs of take-or-pay settlements and
renegotiating gas purchase contracts. Prepayments are normally recoupable
through future deliveries of natural gas.
Contract reformation and take-or-pay costs incurred as a result of the
mandated Order 636 restructuring will be recovered under the transition cost
mechanisms of Order 636, as well as through negotiated agreements with the
Company's customers. The Company believes that these mechanisms provide
adequate coverage for such costs.
Several producers have instituted litigation arising out of take-or-pay
claims against the Company. In the Company's experience, producers' claims
are generally vastly overstated and do not consider all adjustments provided
for in the contract or allowed by law. The Company has resolved the majority
of the exposure with its suppliers for approximately 13% of the amounts
claimed. At December 31, 1993, the Company estimated that unresolved
asserted and unasserted producers' claims amounted to approximately $8
million. The remaining disputes will be settled where possible and litigated
if settlement is not possible.
At December 31, 1993, the Company was committed to make future
purchases under certain take-or-pay contracts with fixed, minimum or
escalating price provisions. Based on contracts in effect at that date, and
before considering reductions provided in the contracts or applicable law,
such commitments are estimated to be $37 million, $29 million, $22 million,
$14 million and $3 million for the years 1994-1998, respectively, and $4
million thereafter. Such commitments have also not been adjusted for all
amounts which may be assigned or released, or for the results of future
litigation or negotiation with producers.
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The Company has made provisions, which it believes are adequate, for
payments to producers that may be required for settlement of take-or-pay
claims and restructuring of future contractual commitments. In determining
the net loss relating to such provisions, the Company has also made accruals
for the estimated portion of such payments which would be recoverable
pursuant to FERC-approved settlements with customers.
6. Mandatory Redemption Cumulative Preferred Stock
On June 16, 1994, the Company will redeem all shares of its outstanding
Cumulative Preferred Stock. Of the 800,000 outstanding shares of the
publicly held $2.12 Series, 200,000 shares will be redeemed under sinking
fund provisions at $25.00 per share, and 600,000 shares will be redeemed
under optional redemption provisions at $25.318 per share. Of the 200,000
outstanding shares of the publicly held $2.675 Series, all shares will be
redeemed under sinking fund provisions at $25.00 per share. Of the 86,640
outstanding shares of the privately held $12.00 Series, all shares will be
redeemed under optional redemption provisions at $103.79 per share.
Redemption of these series include the payment of accrued dividends to June
16, 1994.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Notes to Consolidated Financial Statements contain information that
is pertinent to the following analysis.
Liquidity and Capital Resources
General. In February 1994, the Company completed an offering of $125
million in principal amount of 7-3/8% 30-year Debentures due February 2024.
The net proceeds from the sale of the Debentures were added to the
internally generated funds of the Company and were used for capital
expenditures and for other general corporate purposes, including the payment
of a $255 million dividend on its common stock in March 1994.
On June 16, 1994, the Company will redeem all shares of its outstanding
Cumulative Preferred Stock. For additional information regarding this
matter, see Note 6 of Notes to Consolidated Financial Statements, included
herein.
Management believes that the Company's stable financial position and
earnings ability will enable it to continue to generate and obtain capital
for financing needs in the foreseeable future.
Gas in Underground Storage. The decreases in "Gas in underground
storage" of $159.9 million is attributable to a transfer in the first
quarter of 1994 of $162.1 million from working gas to "Property, Plant and
Equipment." This transfer represents the reclassification of working gas to
recoverable base gas, which is not depreciable, pending FERC approval.
Environmental. Information concerning environmental matters is set
forth in Note 4 of the Notes to Consolidated Financial Statements included
herein.
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<PAGE> 11
Results of Operations
In the fourth quarter of 1993, the Company implemented its Order 636
restructuring (see Note 4 of Notes to Consolidated Financial Statements),
and now offers an array of "unbundled" storage, transportation and balancing
service options. Under Order 636, the Company no longer offers a merchant
service. Because of this, a significant portion of the Company's gas
purchase contracts have been bought out or assigned. The Company is
continuing to negotiate the termination of a number of gas purchase contract
obligations which still exist and believes it will recover any costs
associated with the resolution of these negotiations with no significant
financial impact. In 1994, gas sales revenues reflect amounts related to the
auctioning of purchases required under these existing gas purchase
contracts, in addition to purchased gas adjustment recoveries from
customers. While operating revenues have been reduced as a result of the
implementation of Order 636, purchases and other related costs have also
been reduced by a similar amount, thereby having little net impact on
earnings.
The change in the Company's earnings for the three-month period ended
March 31, 1994 in comparison to the same period in 1993 is a result of the
following:
Revenues. Storage and transportation revenues increased by 27% for the
three-month period ended March 31, 1994 as compared to the same period in
1993. The primary factors contributing to the increased revenue were
increased rates due to the implementation of Order 636 and colder weather
experienced in the first quarter of 1994 as compared to the same period in
1993, resulting in additional throughput.
Gas sales revenues and cost of gas sold both decreased by approximately
77% for the three-month period ended March 31, 1994 as compared to the same
period in 1993 largely as a result of elimination of the Company's merchant
service, as mentioned above.
Other revenues decreased by $5.2 million for the three-month period
ended March 31, 1994 as compared to the same period in 1993 primarily
because of a decrease in revenues from investments in pipeline partnerships.
Operation and Maintenance. The increase in operation and maintenance
expenses of $18 million for the three-month period ended March 31, 1994 as
compared to the same period in 1993 is largely due to an adjustment in 1993
to the estimated costs recorded in 1992 related to the settlement of the
Company's 1989 rate case and the Interim Settlement, and increased storage
expenses due to the addition of 42 billion cubic feet of storage capacity
provided by Blue Lake Gas Storage Company, commencing in April 1993.
Depreciation. The increase in depreciation expense of $1.3 million for
the three-month period ended March 31, 1994 as compared to the same period
in 1993 is primarily due to an increase in plant balances and a 1993
adjustment to depreciation rates relating to liquid separation facilities.
Interest Expense. Interest expense decreased by $1.1 million for the
three-month period ended March 31, 1994 as compared to the same period in
1993 due to a lower effective interest rate on long-term debt.
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<PAGE> 12
Recent Adoption of FASB Pronouncements
Information concerning the adoption of FAS 112 is set forth in Note 1
of Notes to Consolidated Financial Statements, included herein.
Other Developments
On March 25, 1994, the FERC issued an order approving, with conditions,
the acquisition of certain existing natural gas transmission facilities from
Arkla, Inc. ("Arkla"), subject to certain conditions and modifications. ANR
Pipeline and Arkla have requested rehearing of this order.
The FERC was informed on April 6, 1994, that as a result of revised
market forecasts, certain facility adjustments for both the proposed
Liberty
Pipeline project, as well as the related upstream pipelines, will be
required, thereby delaying the in-service date until late 1996.
The Canadian National Energy Board has denied the applications of
Interprovincial Pipe Line System Inc. and its subsidiary to own and operate
InterCoastal Pipe Line, a proposed natural gas pipeline in Southern Ontario.
The Company and the other project sponsors are currently evaluating the
viability of this project or other alternatives.
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<PAGE> 13
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The information required hereunder is incorporated by reference
into Part II of this Report from Notes 4 and 5 of the Notes to Consolidated
Financial Statements 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.
None.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on February 16, 1994.
The item reported was:
Item 7. Financial Statements and Exhibits.
(c) Exhibits
(1) Underwriting agreement dated February 14, 1994,
between the Company and Citicorp Securities,
Inc. as Representative of the Underwriters.
(12) Ratio of Earnings to Fixed Charges.
(28) Press release dated February 15, 1994
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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.
ANR PIPELINE COMPANY
(Registrant)
WILLIAM L. JOHNSON
Date: May 13, 1994 By: ------------------------------
William L. Johnson
Vice President
and Controller
(As Authorized Officer and
Chief Accounting Officer)
