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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 September 30, 1995
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 Identification No.)
incorporation or organization)
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 October 31, 1995, 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 nonaffiliates.
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<PAGE>
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, 1994, 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>
September 30, December 31,
ASSETS 1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Property, Plant and Equipment, at cost..................................... $ 3,443.4 $ 3,421.3
Less - Accumulated depreciation......................................... 2,264.0 2,226.1
----------- -----------
1,179.4 1,195.2
----------- -----------
Current Assets:
Cash and cash equivalents............................................... 23.2 22.0
Note receivable from related party...................................... 410.9 235.2
Accounts receivable:
Others............................................................... 88.1 65.4
Related parties...................................................... 22.6 23.5
Materials and supplies, at average cost................................. 40.8 41.1
Other................................................................... .7 .8
----------- -----------
586.3 388.0
----------- -----------
Other Assets:
Assets related to excess gas supply..................................... 68.3 90.8
Investment in pipeline partnerships..................................... 39.3 41.2
Deferred charges and other.............................................. 76.5 143.4
----------- -----------
184.1 275.4
----------- -----------
$ 1,949.8 $ 1,858.6
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Millions of Dollars)
<TABLE>
<CAPTION>
September 30, December 31,
STOCKHOLDER'S EQUITY AND LIABILITIES 1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Common Stock and Other Stockholder's Equity:
Common stock, $100 par value, authorized, issued and outstanding
1,000 shares......................................................... $ .1 $ .1
Additional paid-in capital.............................................. 466.2 466.2
Retained earnings....................................................... 407.5 322.2
----------- -----------
873.8 788.5
----------- -----------
Long-Term Debt and Capital Lease Obligations............................... 510.0 437.0
----------- -----------
Current Liabilities:
Maturities and sinking fund requirements of long-term debt
and capital lease obligations........................................ 61.1 61.1
Accounts payable:
Others............................................................... 113.5 168.8
Related parties...................................................... 3.9 7.4
Taxes on income......................................................... 27.1 2.5
Other taxes............................................................. 21.5 23.9
Provision for regulatory matters........................................ 56.2 38.1
Other................................................................... 38.2 28.6
----------- -----------
321.5 330.4
----------- -----------
Deferred Credits and Other:
Accumulated deferred income taxes....................................... 214.5 229.2
Other................................................................... 30.0 73.5
----------- -----------
244.5 302.7
----------- -----------
$ 1,949.8 $ 1,858.6
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED EARNINGS
(Millions of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------0---------
1995 1994 1995 1994
---------- ---------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Storage and transportation:
Others.................................................... $ 180.1 $ 165.0 $ 533.4 $ 519.9
Related parties........................................... 1.9 4.5 5.9 15.1
Gas sales:
Others.................................................... 3.0 3.5 18.5 20.5
Related parties........................................... 9.3 18.3 30.2 67.8
Other revenues:
Others.................................................... 13.1 2.8 18.6 8.4
Related parties........................................... 6.2 3.4 22.6 12.8
---------- ---------- --------- ---------
213.6 197.5 629.2 644.5
---------- ---------- --------- ---------
Costs and Expenses:
Operation and maintenance:
Others.................................................... 79.9 75.0 209.8 211.0
Related parties........................................... 23.9 25.2 76.6 77.0
Cost of gas.................................................. 25.2 26.9 79.0 98.7
Depreciation................................................. 13.1 12.4 37.6 37.0
Interest expense............................................. 15.9 14.4 44.6 40.3
Taxes on income.............................................. 21.2 17.2 66.2 62.2
---------- ---------- --------- ---------
179.2 171.1 513.8 526.2
---------- ---------- --------- ---------
Net Earnings.................................................... 34.4 26.4 115.4 118.3
Dividends on preferred stock................................. - - - 1.5
---------- ---------- --------- ---------
Earnings Available for Common Stockholder....................... $ 34.4 $ 26.4 $ 115.4 $ 116.8
========== ========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
ANR PIPELINE COMPANY AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED CASH FLOWS
(Millions of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings................................................................ $ 115.4 $ 118.3
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation.......................................................... 39.4 38.8
Net (increase) decrease in working capital:
Others.............................................................. (27.7) 56.2
Related parties..................................................... (2.6) (23.9)
Net decrease in other assets/liabilities.............................. 33.3 16.5
--------- --------
Total adjustments................................................... 42.4 87.6
--------- --------
Net cash provided by operating activities............................. 157.8 205.9
--------- --------
Cash Flows from Investing Activities:
(Increase) decrease in note receivable from related party................... (175.7) 88.0
Capital expenditures........................................................ (24.7) (51.8)
Other....................................................................... .9 .3
--------- --------
Net cash (used in) provided by investing activities................... (199.5) 36.5
--------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt.................................... 75.0 125.0
Retirement of long-term debt and capital lease obligations.................. (2.0) (2.3)
Early retirement of preferred stock......................................... - (34.0)
Common stock dividends paid................................................. (30.1) (331.0)
Preferred stock dividends paid.............................................. - (1.8)
--------- --------
Net cash provided by (used in) financing activities................... 42.9 (244.1)
--------- --------
Net Increase (Decrease) in Cash and Cash Equivalents........................... 1.2 (1.7)
Cash and Cash Equivalents at Beginning of Period............................... 22.0 33.9
--------- --------
Cash and Cash Equivalents at End of Period..................................... $ 23.2 $ 32.2
========= ========
</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
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, 1994. 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 consolidated
financial position or results of operations.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("FAS No. 121"), to be
effective in 1996. Provisions of this statement will require the Company to
review long-lived assets and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. FAS No. 121 also requires that a rate-regulated
enterprise recognize an impairment for the amount of costs that a regulator
excludes from the enterprise's allowable costs. If it is determined that an
impairment has occurred, the amount of the impairment should be charged to
earnings.The Company is in the process of reviewing the effects of FAS No. 121.
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 $32.0 million and $27.1 million for the nine-month
periods ended September 30, 1995 and 1994, respectively. Cash payments for
income taxes amounted to $56.7 million and $31.2 million for the nine-month
periods ended September 30, 1995 and 1994, respectively.
2. Income Taxes
Provisions for income taxes were as follows (millions of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Federal Income Taxes:
Currently payable.................................... $ 29.3 $ 22.2 $ 81.2 $ 63.5
Deferred............................................. (10.2) (6.4) (18.1) (4.1)
-------- ------- ------- -------
19.1 15.8 63.1 59.4
State and City Income Taxes............................. 2.1 1.4 3.1 2.8
-------- ------- ------- -------
$ 21.2 $ 17.2 $ 66.2 $ 62.2
======== ======= ======= =======
</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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<PAGE>
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 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 which may affect such
operations and costs as a result of their effect on the construction, operation
and maintenance of its pipeline facilities. The Company anticipates annual
capital expenditures of $2 million over the next several years aimed at
maintaining compliance with such laws and regulations. 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
seven Superfund waste disposal sites. At the six sites for which the
Environmental Protection Agency has developed sufficient information to estimate
total cleanup costs of approximately $49.1 million, the Company estimates its
pro-rata exposure is approximately $.9 million. At the seventh site, the Company
has been named a de minimis potentially responsible party. Since no estimate has
been made of the total cleanup costs, 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. The states have regulatory programs that mandate
waste cleanup. The Clean Air Act Amendments of 1990 include new permitting
regulations which will result in increased operating expenditures.
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, consolidated
financial position or results of operations.
Regulatory Matters
On March 10, 1992, the Company submitted to the Federal Energy Regulatory
Commission ("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 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 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. Certain customers have disputed the
level of those refunds. By an order issued February 27, 1995, the FERC approved
the Company's refund allocation methodology, and directed the Company to make
immediate refunds of $45.1 million, together with applicable interest, subject
to further investigation of the claims which the customers have made. On May 2,
1995, the FERC issued a further order setting these issues for an evidentiary
hearing. Initial testimony has been filed, and the parties are conducting
discovery. The hearing is set to commence in May 1996. Undisputed refunds,
including interest, were paid on March 29, 1995. Certain customers have also
sought judicial review before the United States Court of Appeals for the D.C.
Circuit of the FERC's approval of the refund allocation methodology.
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<PAGE>
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. The case is currently in the briefing phase before the United States
Court of Appeals for the D.C. Circuit. ANR Pipeline placed its restructured
services under Order 636 into effect on November 1, 1993. As a result, the
Company no longer provides a merchant service and now offers a wide range of
"unbundled" transportation, storage and balancing services. However, the Company
still purchases a residual quantity of gas under certain remaining gas purchase
contracts. The Company's Order 636 restructured tariff provides a transitional
mechanism for the purpose of recovering from, or refunding to, its customers any
pricing differential between costs incurred to purchase this gas and the amount
the Company recovers through the auctioning of such gas on the open market in
producing areas. Several persons, including ANR Pipeline, have sought judicial
review of aspects of the FERC's orders approving the Company's restructuring
filings. Those appeals have been held in abeyance by the United States Court of
Appeals for the D.C. Circuit, pending further order. 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.
The FERC issued a further order regarding certain compliance issues on July 1,
1994. In accordance with this order, the Company filed revised tariff sheets on
July 18, 1994, which were accepted by order issued April 12, 1995.
On November 1, 1993, the Company filed a general rate increase with the
FERC under Docket No. RP94-43. The increase represents the effects of 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., Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." 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 this proceeding. The order
required the reduction or elimination of certain costs which resulted in revised
rates that 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. The
Company sought rehearing of various aspects of the 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. On September 21, 1994, the FERC accepted
the Company's filing in compliance with the March 23, 1994 order, subject to
further modifications including an additional reduction in cost of service of
approximately $5 million. The Company submitted its compliance filing to the
FERC on October 6, 1994, which the FERC accepted by order issued February 8,
1995, subject to a further compliance filing requirement. This compliance filing
was submitted by the Company on March 10, 1995, and was accepted by order issued
May 3, 1995, subject to one additional compliance filing requirement, which the
Company filed on May 18, 1995 and which was accepted by order issued on June 30,
1995. On December 8, 1994, the FERC issued its order denying rehearing of the
March 23, 1994 order. On January 26, 1995, the Company sought judicial review of
these orders before the United States Court of Appeals for the D.C. Circuit,
which the Court dismissed as premature. The FERC has also issued a series of
orders and orders on rehearing in the Company's rate proceeding that apply a new
policy governing the order of attribution of revenues received by the Company
related to transition costs under Order 636. Under that new policy, the Company
is required to first attribute the revenues it receives for its services to the
recovery of its transition costs under Order 636. In its rate proceeding, the
revenues the Company receives for its services in its pending rate proceeding
were first attributed to the recovery of its base cost of service. The FERC's
change in its revenue attribution policy has the effect of understating its
currently effective maximum rates and has accelerated the Company's amortization
of transition costs. In light of the Commission's policy, the Company intends to
file with the FERC to increase its discount recovery adjustment in its pending
rate proceeding. The Company has also sought judicial review of these orders
before the United States Court of Appeals for the D.C. Circuit.
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
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<PAGE>
Settlement Agreement is subject to final FERC approval, including an
approval for the Company to recover the settlement costs from its customers. On
August 3, 1994, the Company filed a petition with the FERC requesting: (a) that
the Settlement Agreement be approved; (b) an order approving ANR Pipeline's
proposed tariff mechanism for the recovery of the costs incurred to implement
the Settlement Agreement; and (c) an order dismissing a proceeding currently
pending before the FERC, wherein certain of ANR Pipeline's customers have
challenged Dakota's pricing under the original gas supply contract. On October
18, 1994, the FERC issued an order consolidating the Company's petition with
similar petitions of three other pipeline companies and setting the Settlement
Agreement and other Dakota-related proceedings for limited hearing before an
Administrative Law Judge who must render an initial decision by December 31,
1995. On December 20, 1994, ANR Pipeline filed its testimony, and has responded
to numerous discovery requests. Intervenors from the ratepayer group submitted
their answering testimony on March 28, 1995. The hearing was conducted from June
20, 1995 to July 14, 1995, and briefs have been submitted to the Adminstrative
Law Judge.
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, pricing differential costs and the Dakota costs
described above. As of September 30, 1995, the Company has incurred transition
costs in the amount of $51.7 million. The Company has filed for recovery of
approximately $43.9 million of these transition costs, which have been accepted
and made effective by the FERC, subject to refund and further proceedings. In
addition, the Company has filed for recovery of approximately $90 million of
costs associated with the Settlement Agreement, as discussed above. Additional
transition cost filings will be made by the Company in the future.
Certain of the above regulatory matters and other 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 the above 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.
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 June 1995, the Company completed a public offering of $75
million in principal amount of 7% Debentures due June 1, 2025, putable by the
holders for redemption at par on June 1, 2005. The net proceeds from the sale of
the Debentures were used for the repayment of outstanding Swiss franc bonds
which matured in October 1995 and for general corporate purposes. The 125
million Swiss franc bonds had a dollar equivalence of $58.1 million and an
effective interest rate of 10.7%.
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.
Environmental. Information concerning environmental matters is set forth in
Note 4 of Notes to Consolidated Financial Statements included herein.
Results of Operations
ANR Pipeline placed its restructured services under Order 636 into effect
on November 1, 1993 (see Note 4 of Notes to Consolidated Financial Statements).
As a result, the Company no longer offers a merchant service and has bought out
or assigned a significant portion of its gas purchase contracts. The Company is
continuing to negotiate the termination of the remaining gas purchase contract
obligations. The Company's Order 636 restructured tariff provides
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<PAGE>
mechanisms for the purpose of recovering from or refunding to its
transportation customers any pricing differential between costs incurred to
purchase gas under these contracts and the amounts recovered through auctioning
of such gas on the open market. As a result of Order 636 recovery mechanisms,
the Company believes it will recover any costs associated with the resolution of
these negotiations with no significant financial impact.
The change in the Company's earnings for the three-and nine-month periods
ended September 30, 1995 in comparison to the corresponding periods in 1994 is a
result of the following:
Revenues. Storage and transportation revenues increased for the three- and
nine-month periods ended September 30, 1995 as compared to the same periods in
1994 by $12.5 million and $4.3 million, respectively. Contributing to the
increased revenues were decreases in the provisions for rate related
contingencies associated with Docket No. RP94-43. Provisions were $1.1 million
and $14.2 million for the three- and nine-month periods ended September 30,
1995, respectively, while the same periods in 1994 included provisions of $9.5
million and $16 million. Storage and transportation contract settlements
increased revenues by $9.6 million and $10.6 million for the three- and
nine-month periods, respectively. Offsetting these increases were lower storage
and transportation revenues of $5.5 million and $8.1 million for the three- and
nine-month periods, respectively, resulting from continued, intensified
competition across the United States natural gas industry, particularly in the
midwest region in which the Company operates.
Gas sales revenues decreased for the three- and nine-month periods ended
September 30, 1995 as compared to the same periods in 1994 by $9.5 million and
$39.6 million, respectively, primarily as a result of decreases of $6.7 million
and $29.9 million for the three- and nine-month periods, respectively, related
to reductions in the quantity of gas auctioned on the open market, as discussed
above. Lower spot market prices also resulted in decreases in revenues of $1.7
million and $9.3 million for the three- and nine-month periods, respectively.
Other revenues increased for the three- and nine-month periods ended
September 30, 1995 as compared to the same periods in 1994 by $13.1 million and
$20 million, respectively. These increases include increased interest income
from a related party of $4.2 million and $8 million for the three- and
nine-month periods, respectively. Also contributing to the increases were
revenues from the sale of storage gas of $4.6 million and $5 million for the
three- and nine-month periods, respectively. The increases also reflect
adjustments to revenue reserves associated with certain transition cost recovery
mechanisms of $4 million and $5.2 million for the three- and nine-month periods,
respectively.
Operation and Maintenance. Operation and maintenance expenses increased
for the three-month period ended September 30, 1995 by $3.6 million and
decreased for the nine-month period ended September 30, 1995 by $1.6 million.
The increase in the three-month period was largely due to increased
transportation services provided by others. On a nine-month basis, the decrease
primarily results from a reduction of $5.5 million in transportation and storage
services provided by others and a decrease in ad valorem taxes of $4.8 million
largely due to adjustments for prior periods, partially offset by an $8.3
million benefit included in 1994 related to revisions of certain estimated
costs.
Cost of Gas. Cost of gas decreased for the three- and nine-month periods
ended September 30, 1995 as compared to the same periods in 1994 by $1.7 million
and $19.7 million, respectively. These variances primarily result from decreases
of $9.2 million and $41.8 million for the three- and nine-month periods,
respectively, due to reductions in the quantity of gas purchased under the
Company's remaining gas purchase contracts. The decreases in costs were
partially offset by increases in the amortization of previously deferred costs
associated with above market gas purchases of $7.1 million and $19.9 million for
the three- and nine-month periods, respectively, partially as a result of the
implementation of the FERC's policy governing the order of attribution of
revenues received by the Company related to transition costs under Order 636
(see Note 4 of Notes to Consolidated Financial Statements).
Taxes on Income. Income taxes increased for the three-month period ended
September 30, 1995 as compared to the same period in 1994 by $4 million
primarily due to an increase in pre-tax income.
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<PAGE>
Recent Pronouncements of the FASB
The Financial Accounting Standards Board has issued FAS No. 121, to be
effective in 1996. Provisions of this statement will require the Company to
review long-lived assets and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. FAS No. 121 also requires that a rate-regulated
enterprise recognize an impairment for the amount of costs that a regulator
excludes from the enterprise's allowable costs. If it is determined that an
impairment has occured, the amount of the impairment should be charged to
earnings.The Company is in the process of reviewing the effects of FAS No. 121.
- 10 -
<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 4 of 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.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
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)
Date: November 14, 1995 By: WILLIAM L. JOHNSON
-------------------------------------------
William L. Johnson
Vice President
and Controller
(As Authorized Officer and
Chief Accounting Officer)
- 11 -
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
27 Financial Data Schedule
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ANR PIPELINE COMPANY FORM 10-Q
QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 23
<SECURITIES> 0
<RECEIVABLES> 522
<ALLOWANCES> 0
<INVENTORY> 41
<CURRENT-ASSETS> 586
<PP&E> 3,443
<DEPRECIATION> 2,264
<TOTAL-ASSETS> 1,950
<CURRENT-LIABILITIES> 322
<BONDS> 510
<COMMON> 0
0
0
<OTHER-SE> 874
<TOTAL-LIABILITY-AND-EQUITY> 1,950
<SALES> 49
<TOTAL-REVENUES> 629
<CGS> 79
<TOTAL-COSTS> 403
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 181
<INCOME-TAX> 66
<INCOME-CONTINUING> 115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
