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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 18, 1996
MCN CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 1-10070 38-2820658
State of Incorporation (Commission File (I.R.S. Employer
Number) Identification No.)
500 GRISWOLD STREET, DETROIT, MICHIGAN 48226
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(313) 256-5500
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ITEM 5. OTHER EVENTS
On July 18, 1996 MCN Corporation issued the following press release;
[MCN CORPORATION LETTERHEAD]
MCN CORPORATION REPORTS HIGHER SECOND QUARTER EARNINGS
Detroit, July 18, 1996 - MCN Corporation (NYSE:MCN) today reported earnings
from continuing operations of $5.2 million for the second quarter of 1996,
an increase of $3.6 million from $1.6 million in the second quarter of
1995. Earnings per share from continuing operations for the second quarter
were $0.08 compared to $0.03 in the second quarter of last year. Income
from discontinued operations was $36.8 million or $0.55 per share, which
includes a gain from the sale of MCN's computer services subsidiary.
Alfred R. Glancy III, MCN Chairman, President and Chief Executive Officer
said, "MCN continued its profitable growth in the second quarter of 1996."
He concluded, "Our return on common equity remains strong at 16.8% and we
are on track for another record-setting level of earnings in 1996."
For the six months ended June 30, 1996, earnings from continuing operations
were $84.2 million or $1.26 per share, compared to $62.2 million or $0.98
per share for the first half of 1995. Additionally, discontinued
operations contributed $37.8 million or $0.57 per share in 1996 and $1.7
million or $0.03 per share in the first half of 1995.
Earnings from continuing operations were $115.3 million or $1.73 per share
in the twelve months ended June 30, 1996, compared to $65.6 million or
$1.07 per share in the comparable 1995 period. Additionally, income from
discontinued operations was $39.6 million or $0.60 per share and $3.5
million or $0.05 per share in the twelve month periods ended June 30, 1996
and 1995, respectively.
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GAS DISTRIBUTION
The Gas Distribution group earned $0.8 million during the second quarter of
1996, up $3.6 million from a loss in the second quarter of 1995. This
business group contributed earnings per share of $0.01 for the second
quarter of 1996, compared to a loss of $0.04 per share for the second
quarter of 1995. For the Gas Distribution group, the second quarter is
typically a break-even or loss quarter due to seasonally lower demand for
gas sales. The increase in earnings primarily reflects higher gas sales
from unusually cold weather and lower operating expenses. The colder
weather resulted in a $2.2 million or $0.03 per share improvement in the
quarter's earnings compared to the 1995 quarter.
For the first six months of 1996, Gas Distribution earned $72.0 million or
$1.08 per share, compared to $54.4 million or $.86 per share during the
first half of 1995. Colder weather in 1996 compared to 1995 increased gas
market volumes 13.3 Bcf and contributed $11.9 million or $0.18 per share to
the increased earnings. Lower operating expenses also contributed to
higher earnings. For the twelve months ended June 30, 1996, Gas
Distribution earned $93.3 million or $1.40 per share, compared to $52.3
million or $0.85 per share in the comparable 1995 twelve month ended
period.
DIVERSIFIED ENERGY
The Diversified Energy group reported second quarter earnings of $4.4
million or $0.07 per share, unchanged from the second quarter of 1995.
EXPLORATION AND PRODUCTION - Operating income increased to $6.6 million for
the quarter, more than double the $2.9 million earned in the second quarter
of 1995. Gas and oil production was 14.3 Bcf equivalent (Bcfe) in the
quarter, an increase of 7.1
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Bcfe or nearly double the comparable 1995 quarter. Increased production is
the result of the company's acquisition of coalbed methane properties in
late 1995 and its ongoing developmental drilling activities in the Midwest,
Mid-continent and Gulf Coast regions.
GAS MARKETING AND COGENERATION - Operating and joint venture results were a
loss of $3.8 million, compared to income of $2.0 million in the second
quarter of 1995. The decrease primarily reflects lower gross margins on gas
sales due to the timing of gas inventory costs and other expenses. In the
second half of the year, the pattern of these costs will change such that
we anticipate this business unit will report improved results over 1995.
Quarterly gas sales were 42.7 Bcf compared to 32.6 Bcf a year earlier, a
31% increase.
GAS GATHERING AND PROCESSING - Operating and joint venture income
increased to $1.9 million from $0.2 million in the 1995 quarter due to the
acquisition of interests in two gas gathering systems in late 1995 and
early 1996. Volumes transported were 14.7 Bcf, up significantly from 1995.
These results reflect MCN's expansion of its gathering and processing
investments outside of Michigan.
GAS STORAGE - Joint venture income for the quarter was $1.4 million,
unchanged from the second quarter of 1995.
For the six months ended June 30, 1996, Diversified Energy earned $12.2
million or $0.18 per share, compared to $7.8 million or $0.12 per share for
the six months ended June 30, 1995. For the twelve months ended June 30,
1996, Diversified Energy earned $22.0 million or $0.33 per share, compared
to $13.3 million or $0.22 per share during the comparable 1995 twelve month
period.
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DISCONTINUED OPERATIONS
Net income from discontinued operations for the second quarter of 1996 was
$36.8 million or $0.55 per share, compared to $0.7 million or $0.01 per
share in the second quarter of 1995. Income for the 1996 quarter includes
an after-tax gain of $36.2 million or $0.54 per share for the June sale of
MCN's computer operations subsidiary, The Genix Group, Inc.
MCN Corporation is a $3.1 billion (assets) diversified natural gas holding
company with gas markets and investments throughout North America. Its
principal subsidiaries are Michigan Consolidated Gas Company (MichCon), a
natural gas distribution and transmission company serving 1.2 million
customers in more than 500 communities throughout Michigan, and MCN
Investment Corporation (MCNIC). MCNIC owns subsidiaries involved in
exploration and production, gas marketing, cogeneration, gas storage, and
gathering and processing.
###
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MCN CORPORATION AND SUBSIDIARIES
NEWS RELEASE STATISTICS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------- --------------- -------------------
1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ----
(in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES...................... $ 356,930 $ 262,343 $ 1,150,148 $ 788,431 $ 1,856,949 $ 1,364,934
OPERATING EXPENSES...................... 341,661 252,454 997,637 673,310 1,631,330 1,224,688
--------- --------- ----------- --------- ----------- -----------
OPERATING INCOME (LOSS)
Gas Distribution...................... 11,341 5,281 134,620 104,436 196,503 122,032
Diversified Energy:
Gas Services:
Exploration & Production.......... 6,651 2,866 13,168 6,984 24,644 15,957
Gas Marketing & Cogeneration...... (3,137) 2,231 3,272 4,820 4,235 4,184
Gas Gathering & Processing........ 878 145 2,409 176 2,609 300
Corporate & Other................... (464) (634) (958) (1,295) (2,372) (2,227)
--------- --------- ----------- --------- ----------- -----------
Total Diversified Energy............ 3,928 4,608 17,891 10,685 29,116 18,214
--------- --------- ----------- --------- ----------- -----------
Total Operating Income................ 15,269 9,889 152,511 115,121 225,619 140,246
--------- --------- ----------- --------- ----------- -----------
EQUITY IN EARNINGS (LOSS) OF JOINT
VENTURES
Gas Storage........................... 1,439 1,416 2,823 3,147 5,592 5,852
Gas Marketing & Cogeneration.......... (615) (237) (398) (592) (692) (1,080)
Gas Gathering & Processing............ 1,002 41 1,978 128 2,478 901
Other................................. 1,480 (397) 1,426 (616) 1,629 (1,105)
--------- --------- ----------- --------- ----------- -----------
Total................................. 3,306 823 5,829 2,067 9,007 4,568
--------- --------- ----------- --------- ----------- -----------
OTHER INCOME AND (DEDUCTIONS)........... (16,495) (12,010) (39,177) (29,299) (74,853) (60,342)
--------- --------- ----------- --------- ----------- -----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES........ 2,080 (1,298) 119,163 87,889 159,773 84,472
--------- --------- ----------- --------- ----------- -----------
INCOME TAXES
Current and Deferred Provision
(Benefit)............................. 825 (399) 42,788 30,545 58,844 28,100
Gas Production Tax Credits............ (3,952) (2,504) (7,886) (4,822) (14,335) (9,213)
--------- --------- ----------- --------- ----------- -----------
(3,127) (2,903) 34,902 25,723 44,509 18,887
--------- --------- ----------- --------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS....... 5,207 1,605 84,261 62,166 115,264 65,585
--------- --------- ----------- --------- ----------- -----------
Discontinued Operations, Net of Taxes (1)
Income From Operations................ 582 707 1,595 1,736 3,446 3,486
Gain On Sale.......................... 36,176 - 36,176 - 36,176 -
--------- --------- ----------- --------- ----------- -----------
36,758 707 37,771 1,736 39,622 3,486
--------- --------- ----------- --------- ----------- -----------
NET INCOME.............................. $ 41,965 $ 2,312 $ 122,032 $ 63,902 $154,886 $ 69,071
========= ========= =========== ========= =========== ===========
EARNINGS (LOSS) PER SHARE
Continuing Operations:
Gas Distribution...................... $ .01 $ (.04) $ 1.08 $ .86 $ 1.40 $ .85
Diversified Energy.................... .07 .07 .18 .12 .33 .22
--------- --------- ----------- --------- ----------- -----------
.08 .03 1.26 .98 1.73 1.07
--------- --------- ----------- --------- ----------- -----------
Discontinued Operations (1):
Income From Operations................ .01 .01 .03 .03 .06 .05
Gain On Sale.......................... .54 - .54 - .54 -
--------- --------- ----------- --------- ----------- -----------
.55 .01 .57 .03 .60 .05
--------- --------- ----------- --------- ----------- -----------
$ .63 $ .04 $ 1.83 $ 1.01 $ 2.33 $ 1.12
========= ========= =========== ========= =========== ===========
AVERAGE COMMON SHARES OUTSTANDING....... 66,893 65,884 66,730 63,254 66,467 61,409
========= ========= =========== ========= =========== ===========
DIVIDENDS PAID PER SHARE................ $ .2325 $ .2225 $ .4650 $ .4450 $ .9200 $ .8825
========= ========= =========== ========= =========== ===========
</TABLE>
<PAGE> 7
MCN CORPORATION AND SUBSIDIARIES
NEWS RELEASE STATISTICS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
--------------------- ------------------- ----------------------
1996 1995 1996 1995 1996 1995
------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
GAS MARKETS (MMcf)
Gas Distribution:
Gas Sales............................... 34,574 31,950 138,145 122,402 225,559 192,377
End User Transportation................. 32,067 32,278 79,528 75,923 149,366 140,468
Intermediate Transportation............. 110,295 71,903 258,323 184,473 448,278 324,059
-------- -------- -------- -------- --------- --------
Total................................... 176,936 136,131 475,996 382,798 823,203 656,904
-------- -------- -------- -------- --------- --------
Diversified Energy:
Gas Sales:
Gas Marketing & Cogeneration.......... 42,721 32,603 113,516 76,089 208,095 147,298
Exploration & Production (2).......... 8,484 3,083 17,196 6,339 27,050 11,157
Transportation.......................... 14,653 64 30,824 612 31,303 794
-------- -------- -------- -------- --------- --------
Total................................... 65,858 35,750 161,536 83,040 266,448 159,249
-------- -------- -------- -------- --------- --------
Less Intercompany Transactions............ 5,083 2,260 19,140 6,311 28,951 10,549
-------- -------- -------- -------- --------- --------
Total..................................... 237,711 169,621 618,392 459,527 1,060,700 805,604
======== ======== ======== ======== ========= =======
GAS PRODUCTION - DIVERSIFIED ENERGY (MMcf).. 13,156 6,743 25,633 13,140 43,913 23,559
======== ======== ======== ======== ========= ========
OIL PRODUCTION - DIVERSIFIED ENERGY (Mbbl).. 196 85 361 146 603 216
======== ======== ======== ======== ========= ========
EFFECT OF WEATHER
Degree Days............................... 983 885 4,569 4,044 7,302 6,109
Percent Colder (Warmer) than Normal....... 13.6% 2.5% 7.3% (4.1)% 7.4% (9.6)%
Increase (Decrease) from Normal in:
Gas Markets (MMcf)...................... 3,205 540 8,636 (4,708) 14,832 (15,475)
Net Income (000)........................ $ 2,886 $ 677 $ 7,816 $ (4,062) $ 13,295 $ (13,902)
Earnings Per Share...................... $ .04 $ .01 $ .12 $ (.06) $ .20 $ ( .23)
Current and Deferred Provision (Benefit)
MMcf - million cubic feet
Mbbl - thousand barrels
</TABLE>
Notes: (1) Represents operations and gain on sale of The Genix Group, Inc.,
formerly MCN's computer operations subsidiary.
(2) Represents gas sales made directly to third parties by MCN's
exploration & production (E&P) operations. Other E&P production
is sold to affiliated companies for marketing.
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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 hereunto duly authorized.
MCN CORPORATION
By /s/ Sebastian Coppola
------------------------------
Sebastian Coppola
Vice President and Treasurer
Date: July 19, 1996
