UNITED STATES 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 1-2745
SOUTHERN NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 63-0196650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
AMSOUTH-SONAT TOWER
BIRMINGHAM, ALABAMA 35203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (205) 325-7410
NO CHANGE
(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 _
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
COMMON STOCK, $3.75 PAR VALUE:
1,000 SHARES OUTSTANDING ON APRIL 30, 1997
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION
H(1) (a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH
THE REDUCED DISCLOSURE FORMAT.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
<S> <C>
March 31, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996 3
Notes to Condensed Consolidated Financial
Statements 4 - 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 12
PART II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(In Thousands)
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 727 $ 2,316
Notes receivable, primarily from affiliates 12,559 -
Accounts receivable 79,023 103,736
Inventories 23,846 24,197
Gas imbalance receivables 18,298 20,161
Other 6,744 6,112
---------- ----------
Total Current Assets 141,197 156,522
---------- ----------
Investments in Unconsolidated Affiliates and Other 56,582 50,367
---------- ----------
Plant, Property and Equipment 2,363,446 2,422,845
Less accumulated depreciation and amortization 1,488,098 1,539,984
---------- ----------
875,348 882,861
---------- ----------
Deferred Charges and Other:
Gas supply realignment costs 8,768 11,144
Other 123,442 130,251
---------- ----------
132,210 141,395
---------- ----------
$1,205,337 $1,231,145
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Long-term debt due within one year $ 6,964 $ 6,964
Notes payable to affiliates - 1,189
Accounts payable 37,567 62,516
Accrued income taxes 15,491 184
Other accrued taxes 7,118 8,031
Accrued interest 15,080 17,015
Gas imbalance payables 12,858 17,162
Other 6,468 8,217
---------- ----------
Total Current Liabilities 101,546 121,278
---------- ----------
Long-Term Debt 305,216 310,536
---------- ----------
Deferred Credits and Other:
Deferred income taxes 116,734 119,850
Reserves for regulatory matters 14,933 14,644
Other 94,673 97,656
---------- ----------
226,340 232,150
---------- ----------
Commitments and Contingencies
Stockholder's Equity:
Common stock and other capital 76,619 100,674
Retained earnings 495,616 466,507
---------- ----------
Total Stockholder's Equity 572,235 567,181
---------- ----------
$1,205,337 $1,231,145
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Thousands)
Revenues:
<S> <C> <C>
Natural gas sales $ 51,040 $ 60,224
Transportation and storage 93,764 95,561
Other 7,741 1,477
-------- --------
152,545 157,262
-------- --------
Costs and Expenses:
Natural gas cost 51,114 57,544
Transition cost recovery 2,265 (5,383)
Operating and maintenance 17,631 19,860
General and administrative 18,043 19,509
Depreciation and amortization 11,653 12,401
Taxes, other than income 5,197 5,138
-------- --------
105,903 109,069
-------- --------
Operating Income 46,642 48,193
Other Income, Net:
Equity in earnings of unconsolidated affiliates 2,696 2,555
Other 3,957 276
-------- --------
6,653 2,831
-------- --------
Interest:
Interest income, primarily from affiliates 146 1,924
Interest expense (7,311) (11,136)
Interest capitalized 508 85
-------- --------
(6,657) (9,127)
-------- --------
Income before Income Taxes 46,638 41,897
Income Tax Expense 17,972 16,076
-------- --------
Net Income $ 28,666 $ 25,821
======== ========
</TABLE>
See accompanying notes.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Thousands)
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 28,666 $ 25,821
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 11,653 12,401
Deferred income taxes 2,197 4,120
Equity in earnings of unconsolidated
affiliates, less distributions (2,696) (2,555)
Gain on disposal of assets (262) -
Reserves for regulatory matters 288 (910)
Gas supply realignment costs 2,375 (9,684)
Change in:
Accounts receivable 21,379 9,016
Inventories 111 (7,586)
Accounts payable (22,101) (13,224)
Accrued interest and income taxes, net 14,027 9,197
Other current assets and liabilities (6,096) (4,772)
Other (386) (16,721)
-------- --------
Net cash provided by operating activities 49,155 5,103
-------- --------
Cash Flows from Investing Activities:
Plant, property and equipment additions (31,766) (15,517)
Notes receivable, primarily from affiliates (10,000) 2,414
Proceeds from disposal of assets and other (2,470) (294)
-------- --------
Net cash used in investing activities (44,236) (13,397)
-------- --------
Cash Flows from Financing Activities:
Payments of long-term debt (5,320) (5,320)
Changes in short-term borrowings (1,188) 26,066
-------- --------
Net changes in debt (6,508) 20,746
Dividends paid - (12,400)
-------- --------
Net cash provided by (used in)
financing activities (6,508) 8,346
-------- --------
Net Increase (Decrease) in Cash (1,589) 52
Cash at Beginning of Period 2,316 711
-------- --------
Cash at End of Period $ 727 $ 763
======== ========
Supplemental Disclosures of Cash Flow Information
Cash Paid for:
Interest (net of amount capitalized) $ 8,421 $ 9,043
Income taxes, net $ 261 $ 869
</TABLE>
See accompanying notes.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Southern Natural Gas Company (Southern) is a wholly owned subsidiary of
Sonat Inc.
The accompanying condensed consolidated financial statements of Southern
and its subsidiaries have been prepared in accordance with the instructions to
Form 10-Q and include the information and footnotes required by such
instructions. In the opinion of management, all adjustments including those of a
normal recurring nature have been made that are necessary for a fair
presentation of the results for the interim periods presented herein.
Certain amounts in the 1996 condensed consolidated financial statements
have been reclassified to conform with the 1997 presentation.
2. Changes in Operations
On January 1, 1997, Southern made a non-cash transfer of its investment
of $23,612,000 in Sonat Intrastate-Alabama Inc. to Sonat. For the three months
ended March 31, 1996, Sonat Intrastate-Alabama had revenues of $7,024,000 and a
net loss of $332,000.
3. Unconsolidated Affiliates
A subsidiary of Southern owns 50 percent of Bear Creek Storage Company,
an underground gas storage company. The following is summarized income statement
information for Bear Creek. No provision for income taxes has been included
since its income taxes are paid directly by the joint-venture participants.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Thousands)
<S> <C> <C>
Revenues $9,346 $9,241
Expenses:
Operating expenses 1,241 1,166
Depreciation 1,356 1,353
Other expenses, net 1,333 1,486
------ ------
Income Reported $5,416 $5,236
====== ======
</TABLE>
4. Debt and Notes To and From Affiliates
Unsecured Notes - As part of Sonat's cash management program, Southern
can either loan funds to or borrow funds from Sonat. Notes receivable and
payable are in the form of demand notes with rates reflecting Sonat's return on
funds loaned to its subsidiaries, average short-term investment rates and
<PAGE>
4. Debt and Notes To and From Affiliates (Cont'd)
cost of borrowed funds. In certain circumstances, these notes are subordinated
in right of payment to amounts payable by Sonat under certain long-term credit
agreements. In September 1996 Southern began borrowing from its subsidiaries and
repaid its loan from Sonat.
Southern has available short-term lines of credit of $50 million through
May 27, 1997. Borrowings are available for a period of not more than 364 days
and are in the form of unsecured promissory notes that bear interest at rates
based on the banks' prevailing prime, international or money-market lending
rates. At March 31, 1997, no amount was outstanding under Southern's agreement.
5. Commitments and Contingencies
Rate Matters - Periodically, Southern and its subsidiaries make general
rate filings with the Federal Energy Regulatory Commission (FERC) to provide for
the recovery of cost of service and a return on equity. The FERC normally allows
the filed rates to become effective, subject to refund, until it rules on the
approved level of rates. Southern and its subsidiaries provide reserves relating
to such amounts collected subject to refund, as appropriate, and make refunds
upon establishment of the final rates. At March 31, 1997, Southern's rates are
established by a settlement with all of its customers (except one representing
approximately 2 percent of Southern's firm transportation volumes) that was
approved by a FERC order issued in 1995 and are not subject to refund. (See Rate
Matters in Item 2 of this report.)
Sea Robin - In January 1995, Sea Robin Pipeline Company, a subsidiary of
Southern, filed with the FERC a petition for a declaratory ruling that the Sea
Robin pipeline system is engaged in the gathering of natural gas and is,
therefore, exempt from FERC regulation under the Natural Gas Act. In June 1995,
the FERC denied Sea Robin's petition on the basis that the primary function of
the Sea Robin system is the interstate transportation of gas. Sea Robin's
request for rehearing of that ruling was denied by the FERC on June 26, 1996.
Sea Robin filed on August 15, 1996, for judicial review of the orders denying
its petition.
Following the filing of Sea Robin's petition for a gathering exemption,
several of the shippers on the Sea Robin system filed with the FERC in February
1995 a complaint against Sea Robin under Section 5 of the Natural Gas Act
claiming that Sea Robin's rates are unjust and unreasonable. In its answer, Sea
Robin asked the FERC to dismiss the complaint or to find that its rates continue
to be just and reasonable based on the data it presented. On August 2, 1996, the
FERC issued an order on the complaint, instituting an investigation and hearing
under Section 5 of the Natural Gas Act and requiring that an initial decision be
issued by May 2, 1997. On December 31, 1996, Sea Robin filed a proposed
settlement of the complaint proceeding pursuant to which it would voluntarily
reduce its transportation rates by $.0042 per
<PAGE>
5. Commitments and Contingencies (Cont'd)
decatherm (Dth), calculated on a 100 percent load factor basis, effective
January 1, 1997. The settlement was supported by the staff of the FERC and one
of two groups of active intervenors, but was opposed by the complainant
shippers, which was the other group of active intervenors. By order dated April
16, 1997, the FERC approved the settlement with modifications, making a merits
determination as to just and reasonable rate levels to become effective for
contesting and non-contesting parties as of May 1, 1997. Under the FERC Order,
Sea Robin's transportation rates were reduced an additional $.006 per Dth,
calculated on a 100 percent load factor basis, below the proposed settlement
rate level. Sea Robin intends to seek rehearing of the settlement order on the
grounds that it improperly modified the settlement terms as to non-contesting
parties, and that it failed to properly consider the filed case in making its
merits determinations as to contesting parties.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SOUTHERN NATURAL GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The principal business of Southern Natural Gas Company (Southern) and
its subsidiaries is the interstate transmission of natural gas in the
southeastern United States, which is regulated by the Federal Energy Regulatory
Commission (FERC).
Southern is aggressively seeking to expand its pipeline system in its
traditional market area and to connect new gas supplies.
In April 1997, an amended application and tariff for the Destin Pipeline
was filed with the Federal Energy Regulatory Commission (FERC) to reflect the
fact that units of Shell Oil Company and Amoco Corporation have joined in the
ownership of this 1 Bcf per day, $300 million pipeline designed to transport
natural gas from the growing eastern Gulf of Mexico production area. Southern
has a one-third interest in this pipeline. Shell and Amoco have made substantial
firm transportation commitments to this pipeline, and discussions are underway
with other prospective shippers. The pipeline, which is still subject to FERC
approval, is expected to be completed in mid-1998.
Also in April 1997, the FERC issued an order that permits Southern to
begin construction on a $36 million project that will add 46 million cubic feet
per day of firm capacity for customers in Georgia and Tennessee. Construction is
planned to begin in mid-May, and this project is expected to be in service in
late 1997. Southern is also moving forward on expansions to eastern Tennessee
and northern Alabama that have a total estimated capital cost of $107 million.
The North Alabama expansion, which is pending before the FERC, is now
anticipated to go in service in the summer of 1998. The East Tennessee expansion
is anticipated to go in service in November 1998, subject to FERC approval of an
application that is expected to be filed in May.
<PAGE>
Operations
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Millions)
Revenues:
<S> <C> <C>
Gas sales $ 51.0 $ 60.2
Market transportation and storage 83.2 84.4
Supply transportation 10.5 11.2
Other 7.8 1.5
------ ------
Total Revenues 152.5 157.3
------ ------
Costs and Expenses:
Natural gas cost 51.1 57.6
Transition cost recovery 2.3 (5.4)
Operating and maintenance 17.6 19.9
General and administrative 18.0 19.5
Depreciation and amortization 11.7 12.4
Taxes, other than income 5.2 5.1
------ ------
105.9 109.1
------ ------
Operating Income $ 46.6 $ 48.2
====== ======
Equity in Earnings of
Unconsolidated Affiliates $ 2.7 $ 2.6
====== ======
(Billion Cubic Feet)
Volumes:
Intrastate gas sales - 2
Market transportation 170 208
--- ---
Total Market Throughput 170 210
Supply transportation 80 85
--- ---
Total Volumes 250 295
=== ===
Transition gas sales 18 17
=== ===
</TABLE>
First Quarter 1997 to First Quarter 1996 Analysis
Operating results for the first quarter of 1997 were down slightly
compared with the prior year primarily due to lower throughput, partially offset
by lower expenses.
Gas sales revenue and natural gas cost decreased in the 1997 period due
to lower volumes resulting from the transfer to Sonat of its ownership of a
small intrastate pipeline, which was immaterial to operating results, and sales
of storage gas in 1996. Market transportation revenues decreased due to lower
volumes resulting primarily from warmer weather. The decrease in supply
transportation revenues reflects lower transportation volumes at Sea Robin
Pipeline Company, a wholly owned subsidiary of Southern. Other revenues and
transition cost recovery in the 1997 period were higher due to a $16 million gas
supply realignment (GSR) cost refund made pursuant to Southern's approved
settlement. Since the impact of this refund was offsetting in nature, operating
income was not affected. Absent the GSR refund, other revenues and transition
cost recovery were lower in 1997 due to a higher GSR recovery rate in the 1996
period. Operating and maintenance expenses decreased in 1997 as a result of cost
cutting measures, and general and administrative expenses decreased primarily
due to lower allocations of corporate charges.
<PAGE>
Natural Gas Sales and Supply
Sales by Southern of natural gas are anticipated to continue only until
Southern's remaining supply contracts expire, are terminated, or are assigned.
As a result of FERC Order No. 636, Southern has terminated or renegotiated to
market pricing substantially all of its gas supply contracts through which it
had historically obtained its long-term gas supply. Southern currently is
incurring no take-or-pay liabilities under any of these contracts. Two
market-priced contracts entered into with Exxon Corporation in 1995 as part of a
settlement of certain other gas purchase contracts account for 85 percent of the
purchase commitments in 1997 described below. Based on Southern's current
expectations with respect to natural gas prices in the years following 1997,
only a small amount of gas volumes are expected to be at prices above market.
Pending the termination of these remaining supply contracts, Southern is selling
a portion of its remaining gas supply to a number of its firm transportation
customers under contracts that have been extended through November 30, 1997. The
remainder of Southern's gas supply will continue to be sold on a month-to-month
basis.
Southern's purchase commitments under its remaining gas supply contracts
for the last nine months of 1997 and years 1998 through 2001 are estimated as
follows:
Estimated
Purchase
Commitments
(In Millions)
1997 $136
1998 19
1999 17
2000 15
2001 10
These estimates are subject to significant uncertainty due both to the
number of assumptions inherent in these estimates and to the wide range of
possible outcomes for each assumption. None of the three major factors that
determine purchase commitments (underlying reserves, future deliverability and
future price) is known today with certainty.
<PAGE>
Rate Matters
A settlement approved by the FERC in 1995 resolved all of Southern's
previously pending rate proceedings and proceedings to recover GSR and other
transition costs associated with the implementation of FERC Order No. 636,
except for one contesting party that represents approximately 2 percent of
Southern's firm transportation volumes. That party has appealed the FERC's
approval of the settlement and orders in the proceedings to the United States
Circuit Court of Appeals. The settlement provides that, except in certain
limited circumstances, Southern will not file a general rate case to be
effective prior to March 1, 1998, but requires Southern to file a new rate case
no later than September 1, 1999.
---------------------
Other Income Statement Items
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Millions)
<S> <C> <C>
Other Income, Net $ 6.7 $ 2.8
</TABLE>
The increase in Other Income in the 1997 period compared to the 1996
period is primarily due to a gain on the termination of an interest rate swap in
1997. There was also a higher level of allowance for funds capitalized at
Southern in the current period.
<TABLE>
<S> <C> <C>
Interest Expense, Net $ 6.7 $ 9.1
</TABLE>
Net interest expense decreased in 1997 compared to 1996 due to lower
interest expense, slightly offset by lower interest income. Interest expense
decreased due to much lower average regulatory reserve balances and lower
average debt balances. Interest income decreased due to lower GSR related
interest income and lower average balances of loans to affiliates.
<TABLE>
<S> <C> <C>
Income Tax Expense $18.0 $16.1
</TABLE>
Income tax expense increased in the 1997 period due to higher pretax
income.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1996
(In Millions)
<S> <C> <C>
Operating Activities $49.2 $ 5.1
</TABLE>
Cash flow from operations increased $44.1 million compared to the 1996
period. The increase was attributable to several items. The change in net gas
supply realignment costs represents net recoveries in the current period
compared to net payments in the prior period. The change in accounts receivable
and accounts payable is primarily attributable to lower gas sales in the current
period. The change in inventory resulted from Southern's purchase of materials
for various expansion projects in 1996. The increase in interest and taxes is
attributable to higher taxable earnings in the 1997 period. The increase in
Other is primarily due to higher purchases of gas stored underground by Southern
in 1996.
<TABLE>
<S> <C> <C>
Investing Activities $(44.2) $(13.4)
</TABLE>
Net cash used in investing activities was $30.8 million higher in 1997
compared to 1996. The increase was primarily attributable to increased loans by
Southern to its parent and to capital expenditures, which were higher in the
current period due to system expansions at Southern.
<TABLE>
<S> <C> <C>
Financing Activities $ (6.5) $ 8.3
</TABLE>
Financing activities used $6.5 million in 1997 compared to providing
$8.3 million in 1996. The change was primarily due to borrowings from Sonat and
dividends paid during the 1996 period.
Capital Resources
At March 31, 1997, Southern had lines of credit with a capacity of $50
million. Southern also has a shelf registration with the Securities and Exchange
Commission for up to $200 million in debt securities, of which $100 million has
been issued.
Southern expects to continue to use cash from operations and borrowings
in the public or private markets or loans from affiliates to finance its capital
and other corporate expenditures.
<PAGE>
FORWARD LOOKING STATEMENTS
From time to time Southern may make or publish forward-looking
statements relating to such matters as anticipated financial performance,
business plans and prospects, objectives, future projects, and similar matters.
This report contains such forward-looking statements. These forward-looking
statements are based on assumptions that Southern believes are reasonable. A
variety of factors, however, could cause Southern's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in Southern's forward-looking statements.
Important factors that could cause actual results to differ include the
timing and extent of changes in oil and gas prices and underlying demand, which
would affect profitability and might cause Southern to alter its plans, the pace
of deregulation of retail natural gas and electricity markets in the United
States, and the success of management's cost reduction activities. Realization
of Southern's objectives and expected performance can also be adversely affected
by the actions of customers and competitors, changes in governmental regulation
of Southern's businesses, and changes in general economic conditions and the
state of domestic capital markets.
The success of Southern's expansion projects in its natural gas
transmission segment is dependent on obtaining both the necessary number of
customer commitments for a project and regulatory approval of the project, which
may encounter opposition by the staff of the FERC, environmental groups, local
landowners, and customers of Southern or its local distribution customers.
Southern's regulated natural gas transmission subsidiaries recover substantially
all of their fixed costs, a return on equity, and income taxes in the capacity
reservation component of their firm transportation rates. There can be no
assurance, however, that the existing customers of Southern's natural gas
transmission subsidiaries will extend their firm service agreements at the same
levels when their current service agreements expire.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In Jack J. Grynberg, ex rel. v. Alaska Pipeline Company, et al., which
is described in Part I, Item 3, of the Company's report on Form 10-K for the
year ended December 31, 1996, the court on March 27, 1997, granted the motion to
dismiss filed by the Combined Defendants Group, which included Southern and Sea
Robin. The dismissal, which was without prejudice against refiling, was based on
two grounds: (1) the defendants were improperly joined in a single action, and
(2) the complaint failed to plead fraud with sufficient particularity to state a
claim.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits(1)
Exhibit
Number Exhibits
12* Computation of Ratio of Earnings to Fixed Charges
27* Financial Data Schedules for the period ended March 31, 1997
- -------------
* Filed herewith
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the quarter ended
March 31, 1997.
(1) The Company will furnish to requesting security holders the exhibits on
this list upon the payment of a fee of $.10 per page up to a maximum of
$5.00 per exhibit. Requests must be in writing and should be addressed to
R. David Hendrickson, Secretary, Southern Natural Gas Company, P. O. Box
2563, Birmingham, Alabama 35202-2563.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
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.
Southern Natural Gas Company
Date: May 9, 1997 By: /s/ Thomas W. Barker, Jr.
-------------------------- --------------------------
Thomas W. Barker, Jr.
Treasurer
Date: May 9, 1997 By: /s/ Norman G. Holmes
-------------------------- ---------------------
Norman G. Holmes
Vice President & Controller
EXHIBIT 12
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
Computation of Ratios of Earnings
from Continuing Operations to Fixed Charges
Total Enterprise (a)
<TABLE>
<CAPTION>
Three Months Ended March 31, Years Ended December 31,
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(In Thousands)
Earnings from Continuing Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $46,638 $41,897 $150,219 $134,124 $ 76,098 $127,617 $126,691
Fixed charges (see computation below) 8,375 12,401 43,028 48,779 47,575 58,249 47,995
------- ------- -------- -------- -------- -------- --------
Total Earnings Available for Fixed Charges $55,013 $54,298 $193,247 $182,903 $123,673 $185,866 $174,686
======= ======= ======== ======== ======== ======== ========
Fixed Charges:
Interest expense before deducting
interest capitalized $ 8,019 $11,920 $ 41,147 $ 46,859 $ 45,900 $ 56,599 $ 46,298
Rentals(b) 356 481 1,881 1,920 1,675 1,650 1,697
------- ------- -------- -------- -------- -------- --------
$ 8,375 $12,401 $ 43,028 $ 48,779 $ 47,575 $ 58,249 $ 47,995
======= ======= ======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 6.6 4.4 4.5 3.7 2.6 3.2 3.6
======= ======= ======== ======== ======== ======== ========
</TABLE>
- ----------------
(a) Amounts include the Company's portion of the captions as they relate to
persons accounted for by the equity method.
(b) These amounts represent 1/3 of rentals which approximate the interest
factor applicable to such rentals of the Company and its subsidiaries and
continuing unconsolidated affiliates.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 727
<SECURITIES> 0
<RECEIVABLES> 79,023
<ALLOWANCES> 0
<INVENTORY> 23,846
<CURRENT-ASSETS> 141,197
<PP&E> 2,363,446
<DEPRECIATION> 1,488,098
<TOTAL-ASSETS> 1,205,337
<CURRENT-LIABILITIES> 101,546
<BONDS> 305,216
0
0
<COMMON> 4
<OTHER-SE> 572,231
<TOTAL-LIABILITY-AND-EQUITY> 1,205,337
<SALES> 51,040
<TOTAL-REVENUES> 152,545
<CGS> 51,114
<TOTAL-COSTS> 71,010
<OTHER-EXPENSES> 11,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,803
<INCOME-PRETAX> 46,638
<INCOME-TAX> 17,972
<INCOME-CONTINUING> 28,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,666
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
