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 June 30, 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 JULY 31, 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>
(Unaudited)--June 30, 1997 and December 31, 1996 1
Condensed Consolidated Statements of Income
(Unaudited)--Three Months and Six Months Ended
June 30, 1997 and 1996 2
Condensed Consolidated Statements of Cash Flows
(Unaudited)--Six Months Ended June 30, 1997 and 1996 3
Notes to Condensed Consolidated Financial
Statements (Unaudited) 4 - 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7 - 12
PART II. Other Information
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>
June 30, December 31,
1997 1996
(In Thousands)
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 1,667 $ 2,316
Notes receivable, primarily from affiliates 19,014 -
Accounts receivable 84,107 103,736
Inventories 29,002 24,197
Gas imbalance receivables 12,572 20,161
Other 3,995 6,112
---------- ----------
Total Current Assets 150,357 156,522
---------- ----------
Investments in Unconsolidated Affiliates and Other 54,766 50,367
---------- ----------
Plant, Property and Equipment 2,380,251 2,422,845
Less accumulated depreciation and amortization 1,494,067 1,539,984
---------- ----------
886,184 882,861
---------- ----------
Deferred Charges and Other:
Gas supply realignment costs 6,176 11,144
Other 120,228 130,251
---------- ----------
126,404 141,395
---------- ----------
$1,217,711 $1,231,145
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Long-term debt due within one year $ 6,324 $ 6,964
Notes payable to affiliates - 1,189
Accounts payable 39,033 62,516
Accrued income taxes 1,997 184
Other accrued taxes 9,988 8,031
Accrued interest 17,525 17,015
Gas imbalance payables 10,131 17,162
Other 7,305 8,217
---------- ----------
Total Current Liabilities 92,303 121,278
---------- ----------
Long-Term Debt 305,536 310,536
---------- ----------
Deferred Credits and Other:
Deferred income taxes 124,071 119,850
Reserves for regulatory matters 4,641 14,644
Other 92,903 97,656
---------- ----------
221,615 232,150
---------- ----------
Commitments and Contingencies
Stockholder's Equity:
Common stock and other capital 76,619 100,674
Retained earnings 521,638 466,507
---------- ----------
Total Stockholder's Equity 598,257 567,181
---------- ----------
$1,217,711 $1,231,145
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
(In Thousands)
Revenues:
<S> <C> <C> <C> <C>
Transportation and storage $ 86,950 $ 88,274 $180,714 $183,835
Other 16,431 7,707 21,833 17,247
-------- -------- -------- --------
103,381 95,981 202,547 201,082
-------- -------- -------- --------
Costs and Expenses:
Operating and maintenance 22,170 22,410 39,801 42,270
General and administrative 19,049 20,524 37,092 40,033
Depreciation and amortization 11,960 12,393 23,613 24,794
Taxes, other than income 4,773 4,175 9,970 9,313
-------- -------- -------- --------
57,952 59,502 110,476 116,410
-------- -------- -------- --------
Operating Income 45,429 36,479 92,071 84,672
Other Income, Net:
Equity in earnings of
unconsolidated affiliates 2,701 2,340 5,397 4,895
Other 968 613 4,925 889
-------- -------- -------- --------
3,669 2,953 10,322 5,784
-------- -------- -------- --------
Interest:
Interest income, primarily
from affiliates 43 1,331 189 3,255
Interest expense (7,063) (11,159) (14,374) (22,295)
Interest capitalized 348 211 856 296
-------- -------- -------- --------
(6,672) (9,617) (13,329) (18,744)
-------- -------- -------- --------
Income before Income Taxes 42,426 29,815 89,064 71,712
Income Taxes 16,404 11,551 34,376 27,627
-------- -------- -------- --------
Net Income $ 26,022 $ 18,264 $ 54,688 $ 44,085
======== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE>
SOUTHERN NATURAL GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1997 1996
(In Thousands)
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 54,688 $ 44,085
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 23,613 24,794
Deferred income taxes 9,534 38,690
Equity in earnings of unconsolidated
affiliates, less distributions (897) 255
Gain on disposal of assets (262) -
Reserves for regulatory matters (10,003) (167,339)
Gas supply realignment costs 4,968 174,947
Change in:
Accounts receivable 16,294 19,815
Inventories (5,045) (4,109)
Accounts payable (20,636) (9,211)
Accrued interest and income taxes, net 2,978 (21,563)
Other current assets and liabilities 3,360 (1,350)
Other 5,319 (57,368)
-------- ---------
Net cash provided by operating
activities 83,911 41,646
-------- ---------
Cash Flows from Investing Activities:
Plant, property and equipment additions (59,037) (51,930)
Notes receivable, primarily from affiliates (16,455) 4,430
Proceeds from disposal of assets and other (2,239) 758
-------- ---------
Net cash used in investing activities (77,731) (46,742)
-------- ---------
Cash Flows from Financing Activities:
Payments of long-term debt (5,640) (5,888)
Changes in short-term borrowings (1,189) 36,601
-------- ---------
Net changes in debt (6,829) 30,713
Dividends paid - (24,800)
-------- ---------
Net cash provided by (used in)
financing activities (6,829) 5,913
-------- ---------
Net Increase (Decrease) in Cash (649) 817
Cash at Beginning of Period 2,316 711
-------- ---------
Cash at End of Period $ 1,667 $ 1,528
======== =========
Supplemental Disclosures of Cash Flow Information
Cash Paid for:
Interest (net of amount capitalized) $ 12,438 $ 13,513
Income taxes, net 23,249 11,049
</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.
The 1996 periods have been restated to reflect the reclassification of
natural gas sales, natural gas cost and transition cost recovery to other
revenues in the Condensed Consolidated Statements of Income. Certain other
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
and six months ended June 30, 1996, Sonat Intrastate-Alabama had revenues of
$5,482,000 and $12,506,000 and a net loss of $210,000 and $542,000,
respectively.
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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
(In Thousands)
<S> <C> <C> <C> <C>
Revenues $8,973 $8,952 $18,319 $18,193
Expenses:
Operating expenses 1,120 1,370 2,361 2,535
Depreciation 1,358 1,353 2,714 2,707
Other expenses, net 1,248 1,408 2,581 2,894
------ ------ ------- -------
Income Reported $5,247 $4,821 $10,663 $10,057
====== ====== ======= =======
</TABLE>
<PAGE>
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 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 26, 1998. 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 June 30, 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 June 30, 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 and had oral argument in its pending appeal before the Eleventh
Circuit on July 10, 1997.
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
<PAGE>
5. Commitments and Contingencies (Cont'd)
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 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, the other group
of active intervenors. By order dated April 22, 1997, the FERC approved the
settlement with modifications, making a merits determination as to the just and
reasonable rates 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 sought rehearing of
the settlement order on May 22, 1997, arguing that the FERC improperly modified
the settlement terms as to non-contesting parties, and that it failed to
properly consider Sea Robin's 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 March 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. In June 1997 the FERC issued a Preliminary
Determination, subject to completion of its environmental review, that approved
the construction and operation of the Destin Pipeline. In July 1997 the FERC
issued its Draft Environmental Impact Statement. The pipeline, which is still
subject to final FERC approval, is expected to be completed in mid-1998.
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 began
in late June, 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 received FERC approval in May 1997, is now anticipated
to go in service in the fourth quarter of 1998. The East Tennessee expansion is
anticipated to go in service in November 1998, subject to FERC approval of an
application that Southern filed in May 1997.
<PAGE>
Operations
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- -----------------
1997 1996 1997 1996
---- ---- ---- ----
(In Millions)
Revenues (Note):
Market transportation and
<S> <C> <C> <C> <C>
storage $ 74.6 $ 76.1 $157.8 $160.5
Supply transportation 12.4 12.1 22.9 23.3
Other 16.5 7.8 21.9 17.3
------ ------ ------ ------
Total Revenues 103.5 96.0 202.6 201.1
------ ------ ------ ------
Costs and Expenses (Note):
Operating and maintenance 22.2 22.4 39.8 42.3
General and administrative 19.1 20.5 37.1 40.0
Depreciation and amortization 11.9 12.4 23.6 24.8
Taxes, other than income 4.8 4.2 10.0 9.3
------ ------ ------ ------
58.0 59.5 110.5 116.4
------ ------ ------ ------
Operating Income $ 45.5 $ 36.5 $ 92.1 $ 84.7
====== ====== ====== ======
Equity in Earnings of
Unconsolidated Affiliates $ 2.7 $ 2.3 $ 5.4 $ 4.9
====== ====== ====== ======
(Billion Cubic Feet)
Volumes:
Market transportation 136 144 306 354
Supply transportation 100 80 180 165
---- ---- ----- -----
Total Volumes 236 224 486 519
==== ==== ===== =====
Transition gas sales 17 18 35 35
==== ==== ===== =====
</TABLE>
Note: The 1996 periods have been restated to reflect the reclassification of
natural gas sales, natural gas cost and transition cost recovery to
other revenues.
Second Quarter 1997 to Second Quarter 1996 Analysis
Operating income for Southern was $45.5 million compared with $36.5
million in the second quarter of 1996. The improvement is primarily due to the
impact of recent expansions, improved results at Sea Robin Pipeline Company, a
wholly owned subsidiary of Southern, and lower expenses. In addition, operating
income includes the adjustment of a reserve due to a favorable ruling on a
royalty issue. The reserve adjustment, net of other out-of-period items
including depreciation and property tax adjustments and interest related to GSR
collection in 1996, increased operating income by $2.4 million.
Market transportation revenues decreased due primarily to a reduction
in interruptible volumes, partially offset by increased revenue from expansions.
Supply transportation revenues increased due to an expansion in firm service at
Southern and increased volumes at Sea Robin. Excluding the out-of-period items
mentioned above, operating and maintenance expense decreased due to cost cutting
measures. General and administrative expenses decreased primarily due to lower
stock-based compensation expense.
Six Months 1997 to Six Months 1996 Analysis
Operating income for Southern was $92.1 million compared with $84.7
million for the six months ended June 30, 1996. The improvement was primarily
due to the same factors discussed above.
Market transportation revenues decreased due to lower volumes resulting
primarily from warmer weather, partially offset by increased revenue from
expansions. Supply transportation revenues decreased somewhat due to lower
transportation rates at Sea Robin, partially offset by higher revenue from
recent expansions at Southern. Operating and maintenance expense decreased in
the 1997 period due to cost cutting measures. General and administrative
expenses decreased primarily due to lower stock-based compensation and employee
benefit expenses.
Natural Gas Sales and Supply
As a result of FERC Order No. 636, Southern terminated or renegotiated
to market pricing substantially all of its gas supply contracts through which it
had historically obtained its long-term gas supply. Pending the termination of
the remaining supply contracts, Southern is selling a portion of its gas supply
to a number of its firm transportation customers under contracts that have been
extended through November 30, 1997. The remainder is sold on a month-to-month
basis. Gas sales revenue and natural gas cost are included in other revenue.
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 Southern's remaining estimated purchase commitments in 1997,
which total $68 million. Annual purchase commitments total less than $20 million
for subsequent years. 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.
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. As a contesting party under the settlement, that party
has also challenged at FERC the collection by Southern of approximately $6.3
million in GSR costs allocable to it under Order No. 636. 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 Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
(In Millions)
<S> <C> <C> <C> <C>
Other Income-Other $ 1.0 $ 0.6 $ 4.9 $ 0.9
</TABLE>
Other income-other increased for the six-month period of 1997 due to
the recognition of a gain on the termination of an interest rate swap. In
addition, both the three-month and six-month periods of 1997 reflect higher
levels of equity interest capitalized at Southern Natural.
<TABLE>
<S> <C> <C> <C> <C>
Interest Expense, Net $ 6.7 $ 9.6 $13.3 $18.7
</TABLE>
Net interest expense decreased in the three-month and six-month periods
of 1997 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 primarily due to
lower average balances of loans to affiliates and lower GSR related interest
income.
<TABLE>
<S> <C> <C> <C> <C>
Income Tax Expense $16.4 $11.6 $34.4 $27.6
</TABLE>
Income tax expense increased in the 1997 periods due to higher pretax
income.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1997 1996
(In Millions)
<S> <C> <C>
Operating Activities $83.9 $41.6
</TABLE>
Cash flow from operations increased $42.3 million compared to the 1996
period. The primary reasons for the increase was $35.0 million of cash refunds
to customers in the prior period and improved operations.
Other than the refunds discussed above, the change in gas supply
realignment costs was attributable to the recording of the Customer Settlement
in the second quarter of 1996. In addition, the change in reserves for
regulatory matters, deferred income taxes, accrued interest and income taxes,
and other is due to the settlement accounting, which was essentially offsetting
among these captions. The change in accounts payable is primarily due to the
accrual of cost for a contract termination in the 1996 period.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
1997 1996
(In Millions)
<S> <C> <C>
Investing Activities $(77.7) $(46.7)
</TABLE>
Net cash used in investing activities was $31.0 million higher in 1997
compared to 1996. The increased 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 Natural.
<TABLE>
<S> <C> <C>
Financing Activities $ (6.8) $ 5.9
</TABLE>
Financing activities used $6.8 million in 1997 compared to providing
$5.9 million in 1996. The change was primarily due to loan repayments of $36.6
million from Southern's parent, offset by $24.8 million in dividend payments in
the 1996 period.
Capital Resources
At June 30, 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.
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.
The success of Southern's expansion projects 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. There can be no assurance that Southern's pipeline
projects will receive timely regulatory approvals and be constructed and placed
into service on schedule.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits1
Exhibit
Number Exhibits
12* Computation of Ratio of Earnings to Fixed Charges
27.1* Financial Data Schedules for the period ended June 30, 1997
27.2* Restated Financial Data Schedules for the periods ended
March 31, 1997; March 31, 1996; June 30, 1996;
September 30, 1996; and December 31, 1996
27.3* Restated Financial Data Schedules for the periods ended
March 31, 1995; June 30, 1995; September 30, 1995;
December 31, 1995; and December 31, 1994
- ------------
* Filed herewith
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the quarter
ended June 30, 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: August 11, 1997 By: /s/ Thomas W. Barker, Jr.
--------------------------- --------------------------
Thomas W. Barker, Jr.
Vice President-Finance
Date: August 11, 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>
Six Months Ended June 30, 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 $ 89,064 $71,712 $150,219 $134,124 $ 76,098 $127,617 $126,691
Fixed charges (see computation below) 16,569 24,946 43,028 48,779 47,575 58,249 47,995
-------- ------- -------- -------- -------- -------- --------
Total Earnings Available for Fixed
Charges $105,633 $96,658 $193,247 $182,903 $123,673 $185,866 $174,686
======== ======= ======== ======== ======== ======== ========
Fixed Charges:
Interest expense before deducting
interest capitalized $ 15,792 $23,863 $ 41,147 $ 46,859 $ 45,900 $ 56,599 $ 46,298
Rentals(b) 777 1,083 1,881 1,920 1,675 1,650 1,697
-------- ------- -------- -------- -------- -------- --------
$ 16,569 $24,946 $ 43,028 $ 48,779 $ 47,575 $ 58,249 $ 47,995
======== ======= ======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 6.4 3.9 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,667
<SECURITIES> 0
<RECEIVABLES> 84,107
<ALLOWANCES> 0
<INVENTORY> 29,002
<CURRENT-ASSETS> 150,357
<PP&E> 2,380,251
<DEPRECIATION> 1,494,067
<TOTAL-ASSETS> 1,217,711
<CURRENT-LIABILITIES> 92,303
<BONDS> 305,536
0
0
<COMMON> 4
<OTHER-SE> 598,253
<TOTAL-LIABILITY-AND-EQUITY> 1,217,711
<SALES> 0
<TOTAL-REVENUES> 202,547
<CGS> 0
<TOTAL-COSTS> 39,801
<OTHER-EXPENSES> 23,613
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,518
<INCOME-PRETAX> 89,064
<INCOME-TAX> 34,376
<INCOME-CONTINUING> 54,688
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 54,688
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS 9-MOS
YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1996 DEC-31-1996
DEC-31-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996 JUN-30-1996 SEP-30-1996
DEC-31-1996
<CASH> 727 763 1,528 1,800
2,316
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 79,023 109,459 98,593 93,949
103,736
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 23,846 29,211 25,734 27,416
24,197
<CURRENT-ASSETS> 141,197 285,732 299,497 219,718
156,522
<PP&E> 2,363,446 2,341,863 2,359,836 2,398,402
2,422,845
<DEPRECIATION> 1,488,098 1,516,726 1,526,910 1,532,312
1,539,984
<TOTAL-ASSETS> 1,205,337 1,450,204 1,283,693 1,239,072
1,231,145
<CURRENT-LIABILITIES> 101,546 137,067 153,024 102,734
121,278
<BONDS> 305,216 312,307 311,739 310,856
310,536
0 0 0 0
0
0 0 0 0
0
<COMMON> 4 4 4 4
4
<OTHER-SE> 572,231 587,515 593,379 603,915
567,177
<TOTAL-LIABILITY-AND-EQUITY> 1,205,337 1,450,204 1,283,693 1,239,072
1,231,145
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 99,166 105,101 201,082 296,809
398,828
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 17,631 19,860 42,270 66,916
83,955
<OTHER-EXPENSES> 11,653 12,401 24,794 36,110
48,292
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 6,803 11,051 21,999 30,097
37,076
<INCOME-PRETAX> 46,638 41,897 71,712 108,319
150,219
<INCOME-TAX> 17,972 16,076 27,627 41,356
57,594
<INCOME-CONTINUING> 28,666 25,821 44,085 66,963
92,625
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 28,666 25,821 44,085 66,963
92,625
<EPS-PRIMARY> 0 0 0 0
0
<EPS-DILUTED> 0 0 0 0
0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1995 DEC-31-1995
DEC-31-1994
<PERIOD-END> MAR-31-1995 JUN-30-1995 SEP-30-1995 DEC-31-1995
DEC-31-1994
<CASH> 1,605 874 4,204 711
975
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 138,038 85,499 102,174 96,798
122,514
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 21,184 24,516 22,572 21,625
20,930
<CURRENT-ASSETS> 304,595 280,537 315,140 262,957
361,043
<PP&E> 2,292,453 2,300,976 2,298,596 2,315,003
2,241,972
<DEPRECIATION> 1,491,091 1,503,918 1,504,977 1,504,087
1,460,649
<TOTAL-ASSETS> 1,385,256 1,396,345 1,410,620 1,437,709
1,375,210
<CURRENT-LIABILITIES> 114,694 104,040 108,011 130,446
138,100
<BONDS> 318,587 318,267 317,947 317,627
323,907
0 0 0 0
0
0 0 0 0
0
<COMMON> 4 4 4 4
4
<OTHER-SE> 557,720 565,502 571,906 574,094
519,220
<TOTAL-LIABILITY-AND-EQUITY> 1,385,256 1,396,345 1,410,620 1,437,709
1,375,210
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 113,147 209,349 306,875 412,326
381,883
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 19,273 40,300 63,538 96,097
151,732
<OTHER-EXPENSES> 14,858 27,524 39,781 52,274
46,576
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 10,284 20,860 31,459 43,218
41,452
<INCOME-PRETAX> 47,032 79,817 110,352 134,124
76,098
<INCOME-TAX> 18,113 30,717 42,447 51,631
28,274
<INCOME-CONTINUING> 28,919 49,100 67,905 82,493
47,824
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> 28,919 49,100 67,905 82,493
47,824
<EPS-PRIMARY> 0 0 0 0
0
<EPS-DILUTED> 0 0 0 0
0
</TABLE>
