-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UKSU8YlnaezuC1nlNxNycxBMBfiAfRkGtfmTEoIWnb391CSodddJ9A1x6pQGqLz/ h0YcDJfupQerG1xIOi+nbA== 0000950124-97-002716.txt : 19970509 0000950124-97-002716.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950124-97-002716 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHIGAN CONSOLIDATED GAS CO /MI/ CENTRAL INDEX KEY: 0000065632 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 380478040 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07310 FILM NUMBER: 97598131 BUSINESS ADDRESS: STREET 1: 500 GRISWOLD ST CITY: DETROIT STATE: MI ZIP: 48226 BUSINESS PHONE: 3139652430 10-Q 1 10-Q 1 ================================================================================ 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 1-7310 MICHIGAN CONSOLIDATED GAS COMPANY (Exact name of registrant as specified in its charter) MICHIGAN 38-0478040 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 500 GRISWOLD STREET, DETROIT, MICHIGAN 48226 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 313-965-2430 NO CHANGES (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 ----- ----- Number of shares outstanding of each of the registrant's classes of common stock, as of April 30, 1997: Common Stock, par value $.01 per share: 10,300,000 ================================================================================ 2 INDEX TO FORM 10-Q FOR QUARTER ENDED MARCH 31, 1997 PAGE NUMBER COVER ....................................................... i INDEX ....................................................... ii PART I - FINANCIAL INFORMATION Item 1. Financial Statements................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................. 1 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.................... 9 SIGNATURE ................................................... 10 ii 3 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Earnings declined by $7.8 million and $14.0 million for the 1997 quarter and twelve-month periods, respectively. The decreases reflect lower gross margins resulting from reduced gas sales and end user transportation deliveries due to warmer weather, as well as higher operating expenses. EARNINGS COMPONENTS (IN MILLIONS) COMPARING 1997 TO 1996
Quarter Twelve Months ------- ------------- $ Change % Change $ Change % Change -------- -------- -------- -------- Operating Revenues........................ $(3.9) (0.7) $ 64.4 5.4 Cost of Gas............................... 4.6 1.5 68.6 12.0 Gross Margin.............................. (8.5) (3.7) (4.2) (0.7) Operation and Maintenance................. 5.3 7.8 13.7 4.8 Depreciation and Depletion................ 1.1 4.5 7.9 8.6 Property and Other Taxes.................. (0.8) (4.4) 1.8 3.1 Other Income and Deductions............... (0.1) (0.8) 1.5 3.3 Income Tax Provision...................... (6.1) (15.9) (14.8) (29.5)
GROSS MARGIN Gross margin (operating revenues less cost of gas) decreased in the 1997 quarter and twelve-month periods reflecting lower gas deliveries resulting from warmer weather as previously discussed. The decline for the twelve-month period was partially offset by increased revenues as a result of the continued growth in intermediate transportation services. EFFECT OF WEATHER ON GAS MARKETS AND EARNINGS
Quarter Twelve Months ------------- -------------- 1997 1996 1997 1996 -------- --------- ----- ------ Percentage Colder (Warmer) than Normal......................................... (3.3)% 5.7% 1.0% 6.0% Increase (Decrease) from Normal In: Gas Markets(Bcf)....................... (3.1) 5.4 2.4 12.2 Net Income(Millions)........................... $(2.8) $4.9 $2.2 $11.1
1 4 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The decline in gas sales revenue for the 1997 twelve-month period attributable to reduced sales volumes was more than offset by higher revenue necessary to recover higher gas costs, as subsequently discussed. Gas sales and end user transportation volumes decreased in the 1997 quarter- and twelve-month periods as compared to the 1996 periods due primarily to warmer weather. The decrease in end user transportation revenue for the 1997 twelve-month period was partially offset by increased deliveries to a cogeneration facility under a long-term transportation contract.
Quarter Twelve Months ------- ------------- 1997 1996 1997 1996 ---- ---- ---- ---- GAS MARKETS (IN BCF) Gas Sales............................. 93.3 102.2 208.8 219.8 End User Transportation............... 44.3 47.4 143.6 149.2 Intermediate Transportation........... 140.6 148.6 519.4 384.3 ----- ----- ----- ----- 278.2 298.2 871.8 753.3 ===== ===== ===== =====
The decrease in intermediate transportation deliveries in the 1997 quarter is due primarily to lower volumes transported for two major fixed-fee customers. Although volumes associated with these fixed-fee customers may vary, the related revenues are not significantly affected. The increase in intermediate transportation deliveries in the 1997 twelve-month period was primarily the result of additional volumes transported in connection with the recently expanded northern Michigan gathering system along with higher volumes transported for fixed-fee customers. The expansion of the northern Michigan gathering system enabled MichCon to transport an additional 2.3 Bcf and 81.5 Bcf in the 1997 quarter and twelve-month periods, respectively. Other operating revenues decreased in the 1997 twelve-month period due to a decrease in conservation revenue resulting from the discontinuation of MichCon's conservation programs. As discussed in the "Operation and Maintenance" section that follows, this decrease is offset by a corresponding decrease in expenses related to the conservation programs. The decrease in operating revenues is partially offset by an increase in gas processing revenues from the Michigan pipeline operations which were transferred from MCN Energy Group Inc. (MCN) to MichCon at the beginning of 1996. COST OF GAS Cost of gas is affected by variations in sales volumes and cost of gas rates. Through the Gas Cost Recovery (GCR) mechanism, MichCon is allowed timely recovery of 100% of its prudently and reasonably incurred cost of gas sold. Therefore, fluctuations in total gas costs have little or no effect on gross margins and earnings. Cost of gas sold increased in the 1997 quarter- and twelve-month periods due to higher spot market prices paid for natural gas purchases. The increase in market prices paid for gas resulted in an increase in the cost of gas sold per thousand cubic feet of $.37 (13%) and $.46 (17%) in the 1997 quarter and twelve-month periods, respectively, from the comparable 1996 periods. 2 5 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) OPERATION AND MAINTENANCE Operation and maintenance expenses for the 1997 first quarter increased from the comparable 1996 period due primarily to increased uncollectibles expense. This increase was partially offset by a decrease in benefit costs, primarily pension and retiree health care costs. For the 1997 twelve-month period, operation and maintenance expenses increased from the comparable 1996 period due to increased uncollectibles expense and additional operating expenses related to the transfer of the Michigan pipeline operation from MCN to MichCon. These increases were offset by lower employee benefit costs, primarily pension and retiree health care costs and a decrease in expenses related to the conservation program, which was discontinued as noted above in Gross Margin. Management continues to evaluate company processes for potential operating cost reductions. DEPRECIATION AND DEPLETION The increase in depreciation and depletion for the 1997 quarter and twelve-month periods is due to higher plant balances reflecting capital expenditures of $448.4 million over the past two calendar years. Depreciation and depletion expenses are expected to increase in future years due to additional capital investments. MichCon filed an application with the MPSC to lower its depreciation rates which could partially offset the anticipated increase in depreciation expense in 1997 and future years. INCOME TAX PROVISION Income taxes decreased for the 1997 quarter and twelve-month periods primarily as a result of decreased earnings. Income taxes were also reduced by $2.7 million and $1.1 million during the 1997 and 1996 twelve-month periods, respectively, due to the favorable resolution of prior years' tax issues. CAPITAL RESOURCES AND LIQUIDITY OPERATING ACTIVITIES MichCon's cash flow from operating activities totaled $146.9 million for the first quarter of 1997, increasing $52.6 million from the comparable 1996 period. The increase was due primarily to lower working capital requirements, offset by lower net income after adjusting for depreciation and deferred taxes. Operating cash flows were sufficient for the payment of cash dividends on common stock and a portion of capital investments. FINANCING ACTIVITIES Cash and cash equivalents increased by $5.3 million during the first quarter 1997. Cash and cash equivalents normally increase and short-term debt is reduced in the first part of each year as gas inventories are depleted and funds are received from heating sales. During the latter part of the year, short-term debt is generally incurred to finance increases in gas inventories and customers accounts receivable. To meet its seasonal short-term borrowing needs, MichCon normally issues commercial paper 3 6 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED) which is backed by credit lines with several banks. MichCon has established credit lines to allow for borrowings of up to $150 million under a 364-day revolving credit facility and up to $150 million under a three-year revolving credit facility. During the first three months of 1997, MichCon repaid $79.2 million of commercial paper, leaving a balance of $159.1 million outstanding under this program at March 31, 1997. MichCon filed a shelf registration with the Securities and Exchange Commission in the fourth quarter of 1996, which allows the company to issue, in conjunction with its remaining existing shelf registration, up to $300 million of debt securities over the next several years. MichCon anticipates the issuance of $85 million of first mortgage bonds under its shelf registrations in the second quarter of 1997. The funds from this issuance will be used to repay short-term debt which was used to retire first mortgage bonds in May 1997, fund capital expenditures and for general corporate purposes. MichCon's capital requirements and general market conditions will affect the timing and amount of future issuances. During April 1997, subsidiaries of MichCon borrowed $40 million under a non-recourse credit agreement that matures in 2005. Proceeds were used to finance the expansion of its northern Michigan pipeline system. MichCon has available a Trust Demand Note program which allows it to borrow up to $25 million. As of March 31, 1997 there were no borrowings outstanding under this program. MichCon's capitalization objective is to maintain a ratio of approximately 50% debt and 50% equity. At March 31, 1997, the common equity ratio was 53.2% of total capitalization. INVESTING ACTIVITIES MichCon's capital expenditures totaled $23.7 million during the first quarter of 1997 and are anticipated to be approximately $175 million by the end of the year. These investments will be made to add new customers, develop new gas transportation markets, make improvements to existing storage and transmission systems and to improve its information systems. It is management's opinion that MichCon will have sufficient capital resources, both internal and external, to meet anticipated capital requirements. OUTLOOK MichCon's strategy is to grow revenues and reduce its costs in order to maintain strong returns and provide customers with quality service at competitive prices. Revenue growth will be achieved through the expansion of MichCon's 1.2 million residential, commercial and industrial customer base. In 1997, MichCon will concentrate on adding new customers in current service areas and increase penetration of previous expansion projects. MichCon will continue initiatives to increase productivity and improve customer services in order to strengthen its competitive position in the gas industry. Management is continually assessing ways to improve cost competitiveness. Among cost savings initiatives, MichCon and other Michigan utilities are exploring opportunities to share the cost of common, duplicative functions in order to obtain greater efficiencies and increase value to customers. 4 7 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (THOUSANDS OF DOLLARS)
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, ---------------------- ----------------------- 1997 1996 1997 1996 ---------- --------- ---------- --------- OPERATING REVENUES........................... $527,445 $531,392 $1,254,838 $1,190,393 -------- -------- ---------- ---------- OPERATING EXPENSES Cost of gas................................ 303,273 298,716 641,151 572,541 Operation and maintenance.................. 74,105 68,771 299,615 285,866 Depreciation and depletion................. 25,501 24,393 99,255 91,370 Property and other taxes................... 17,794 18,608 60,948 59,118 -------- -------- ---------- ---------- Total operating expenses................. 420,673 410,488 1,100,969 1,008,895 -------- -------- ---------- ---------- OPERATING INCOME............................. 106,772 120,904 153,869 181,498 -------- -------- ---------- ---------- EQUITY IN EARNINGS OF JOINT VENTURES......... 310 235 961 750 -------- -------- ---------- ---------- OTHER INCOME AND (DEDUCTIONS) Interest income............................ 1,209 585 4,524 3,630 Interest on long-term debt................. (10,740) (9,656) (41,787) (38,024) Other interest expense..................... (2,891) (2,835) (8,068) (6,916) Minority interest.......................... (338) (348) (978) (348) Other...................................... 201 (408) (1,147) (4,278) -------- -------- ---------- ---------- Total other income and (deductions)...... (12,559) (12,662) (47,456) (45,936) --------- -------- ---------- ---------- INCOME BEFORE INCOME TAXES................... 94,523 108,477 107,374 136,312 INCOME TAX PROVISION......................... 32,330 38,437 35,379 50,159 -------- -------- ---------- ---------- NET INCOME................................... 62,193 70,040 71,995 86,153 DIVIDENDS ON PREFERRED STOCK................. - 18 - 179 -------- -------- --------- ---------- NET INCOME AVAILABLE FOR COMMON STOCK........ $ 62,193 $ 70,022 $ 71,995 $ 85,974 ======== ======== ========= ==========
CONSOLIDATED STATEMENT OF RETAINED EARNINGS (UNAUDITED) (THOUSANDS OF DOLLARS)
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, --------------------- ---------------------- 1997 1996 1997 1996 -------- -------- ------- ------- Balance - Beginning of Period................ $336,305 $267,744 $330,766 $251,792 Add - Net income........................... 62,193 70,040 71,995 86,153 -------- -------- -------- -------- 398,498 337,784 402,761 337,945 Deduct - Cash dividends declared: Preferred stock.......................... - 18 - 179 Common stock............................. 15,000 7,000 19,263 7,000 -------- -------- -------- -------- Balance - End of Period...................... $383,498 $330,766 $383,498 $330,766 ======== ======== ======== ========
The notes to the consolidated financial statements are an integral part of these statements. 5 8 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED) (THOUSANDS OF DOLLARS)
MARCH 31, DECEMBER 31, ---------------------------- ------------- 1997 1996 1996 ------------- ------------ ------------- ASSETS CURRENT ASSETS Cash and cash equivalents, at cost (which approximates market value) ... $ 15,284 $ 9,554 $ 10,010 Accounts receivable, less allowance for doubtful accounts of $24,398, $17,064 and $17,707, respectively ............................ 256,692 263,670 169,436 Accrued unbilled revenues .............................................. 71,507 72,382 107,377 Gas in inventory (Note 1) .............................................. 21,419 13,665 67,910 Property taxes assessed applicable to future periods ................... 49,300 47,062 60,592 Accrued gas cost recovery revenues ..................................... 21,500 35,362 27,672 Other .................................................................. 29,292 36,601 23,025 ---------- --------- ---------- 464,994 478,296 466,022 ----------- --------- ---------- DEFERRED CHARGES AND OTHER ASSETS Investment in and advances to joint ventures ........................... 19,865 20,043 19,479 Deferred postretirement benefit costs 4,099 11,582 4,863 Deferred environmental costs 28,116 28,016 28,233 Prepaid benefit costs 60,228 48,896 64,307 Other 52,679 47,934 50,206 ----------- --------- ---------- 164,987 156,471 167,088 ----------- --------- ---------- PROPERTY, PLANT and EQUIPMENT, AT COST ................................... 2,685,456 2,500,764 2,668,294 Less - Accumulated depreciation and depletion .......................... 1,265,095 1,177,584 1,243,060 ----------- ----------- ----------- 1,420,361 1,323,180 1,425,234 ----------- ----------- ----------- $ 2,050,342 $ 1,957,947 $ 2,058,344 =========== =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable ....................................................... $ 95,299 $ 117,060 $ 130,725 Notes payable .......................................................... 160,958 144,919 265,126 Current portion of long-term debt, capital lease obligations and redeemable cumulative preferred stock ............................. 53,286 3,143 53,232 Gas inventory equalization (Note 1) .................................... 96,197 82,393 - Federal income, property and other taxes payable ....................... 89,578 82,048 84,788 Deferred income taxes - current ........................................ 6,166 17,353 13,342 Customer deposits ...................................................... 12,630 10,818 12,860 Other .................................................................. 45,728 58,012 49,967 ----------- ----------- ----------- 559,842 515,746 610,040 ----------- ----------- ----------- DEFERRED CREDITS AND OTHER LIABILITIES Accumulated deferred income taxes ...................................... 75,846 81,830 76,523 Unamortized investment tax credit ...................................... 34,127 35,975 34,588 Tax benefits amortizable to customers .................................. 115,897 113,968 116,313 Accrued environmental costs ............................................ 32,000 32,000 32,000 Minority interest ...................................................... 17,738 17,805 17,604 Other .................................................................. 41,695 56,438 43,954 ----------- ----------- ----------- 317,303 338,016 320,982 ----------- ----------- ----------- LONG-TERM DEBT, INCLUDING CAPITAL LEASE OBLIGATIONS (NOTE 2) ........... 549,000 532,720 550,318 ----------- ----------- ----------- COMMITMENTS AND CONTINGENCIES (NOTE 3) COMMON SHAREHOLDER'S EQUITY Common stock ........................................................... 10,300 10,300 10,300 Additional paid-in capital ............................................. 230,399 230,399 230,399 Retained earnings ...................................................... 383,498 330,766 336,305 ----------- ----------- ----------- 624,197 571,465 577,004 ----------- ----------- ----------- $ 2,050,342 $ 1,957,947 $ 2,058,344 =========== =========== ===========
The notes to the consolidated financial statements are an integral part of this statement. 6 9 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS)
THREE MONTHS ENDED MARCH 31, -------------------------- 1997 1996 ---------- ----------- CASH FLOW FROM OPERATING ACTIVITIES Net income $ 62,193 $ 70,040 Adjustments to reconcile net income to net cash flow provided from operating activities: Depreciation and depletion Per statement of income 25,501 24,393 Charged to other accounts 1,913 1,865 Deferred income taxes - current (7,176) 8,974 Deferred income taxes and investment tax credit - net (1,554) 11,348 Other (766) (629) Changes in assets and liabilities, exclusive of changes shown separately 66,748 21,695 --------- -------- Net cash provided from operating activities 146,859 94,296 --------- -------- CASH FLOW FROM FINANCING ACTIVITIES Notes payable - net (104,168) (51,716) Additional paid-in-capital - 1,614 Cash dividend paid: Common stock (15,000) (7,000) Preferred stock - (54) Retirement of long-term debt and preferred stock (1,297) (3,974) --------- -------- Net cash used for financing activities (120,465) (61,130) --------- -------- CASH FLOW FROM INVESTING ACTIVITIES Capital expenditures (23,702) (29,616) Other - net 2,582 (2,465) --------- -------- Net cash used for investing activities (21,120) (32,081) --------- -------- Net Increase in Cash and Cash Equivalents 5,274 1,085 Cash and Cash Equivalents, January 1 10,010 8,469 --------- -------- Cash and Cash Equivalents, March 31 $ 15,284 $ 9,554 ========= ======== CHANGES IN ASSETS AND LIABILITIES, EXCLUSIVE OF CHANGES SHOWN SEPARATELY Accounts receivable - net $ (88,130) $(82,006) Gas inventory equalization 96,197 82,393 Accrued/deferred gas cost recovery revenues 6,172 (35,940) Accrued unbilled revenues 35,870 18,752 Gas in inventory 46,491 26,526 Property taxes assessed applicable to future periods 11,292 11,097 Accounts payable (35,426) 7,846 Federal income, property and other taxes payable 4,790 (5,164) Other current assets and liabilities (10,736) (2,471) Deferred and prepaid benefit costs (4,843) (22,668) Deferred assets and liabilities (4,615) (20,060) --------- -------- $ 66,748 $(21,695) ========= ======== SUPPLEMENTAL DISCLOSURES Cash paid for: Interest, net of amounts capitalized $ 9,889 $ 7,004 ========= ======== Federal income taxes $ 11,303 $ 3,724 ========= ======== Noncash financing activities: Transfer of pipeline net assets from MCN $ - $ 17,008 ========= ========
The notes to the consolidated financial statements are an integral part of this statement. 7 10 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GAS IN INVENTORY Inventory gas is priced on a last-in, first-out (LIFO) basis. In anticipation that interim inventory reductions will be replaced prior to year end, the cost of gas for net withdrawals from inventory is recorded at the estimated average purchase rate for the calendar year. The excess of these charges over the LIFO cost is credited to the gas inventory equalization account. During interim periods when there are net injections to inventory, the equalization account is reversed. Approximately 23.6 billion cubic feet (Bcf) and 22.3 Bcf of gas was included in inventory at March 31, 1997 and 1996, respectively. 2. CAPITALIZATION During April 1997, MichCon subsidiaries borrowed $40,000,000 under a non-recourse credit agreement at an average interest rate of 6.45%. Under terms of the agreement, certain alternative variable interest rates are available at the borrowers option during the life of the agreement. Quarterly principal payments commence in June 1997 with final installment due November 2005. The loan is secured by a pledge of the stock of the borrowers and a security interest in certain of their assets. 3. COMMITMENTS AND CONTINGENCIES MichCon is involved in certain legal and administrative proceedings before various courts and governmental agencies concerning claims arising in the ordinary course of business. Management cannot predict the final disposition of such proceedings, but believes that adequate provision has been made for probable losses. It is management's belief, after discussion with legal counsel, that the ultimate resolution of those proceedings still pending will not have a material adverse effect on MichCon's financial statements. 4. GENERAL There have been no changes in MichCon's principal accounting policies from those set forth in MichCon's 1996 Annual Report on Form 10-K. Certain reclassifications have been made to the prior year's financial statements to conform with the 1997 presentation. The unaudited information furnished herein, in the opinion of management, reflects all adjustments (consisting of only recurring adjustments or accruals) necessary for a fair presentation of the results of operations during the periods. Because of seasonal and other factors, revenues, expenses and net income for the interim periods should not be construed as representative of revenues, expenses and net income for all or any part of the balance of the current year or succeeding periods. 8 11 OTHER INFORMATION EXHIBITS (a) Exhibits EXHIBIT NUMBER DESCRIPTION 12-1 Computation of Ratio of Earnings to Fixed Charges. 27-1 Financial Data Schedule. 99-1 MichCon Investment and Stock Ownership Plan, as amended (Exhibit 99-1 to MCN's March 31, 1997 Form 10-Q). 99-2 MCN Energy Group Savings and Stock Ownership Plan, as amended (Exhibit 99-2 to MCN's March 31, 1997 Form 10-Q). 9 12 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, thereunto duly authorized. MICHIGAN CONSOLIDATED GAS COMPANY Date: May 8, 1997 By: /s/ Howard L. Dow III -------------------------- Howard L. Dow III Vice President and Chief Financial Officer 10 13 SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION PAGE 12-1 Computation of Ratio of Earnings to Fixed Charges 27-1 Financial Data Schedule EX-12.1 2 EXHIBIT 12.1 1 EXHIBIT 12-1 MICHIGAN CONSOLIDATED GAS COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (THOUSANDS OF DOLLARS)
Twelve Months Ended Twelve Months Ended Twelve Months Ended ------------------- ------------------- ------------------- March 31, 1997 December 31, 1996 December 31, 1995 ------------------- ------------------- ------------------- EARNINGS AS DEFINED (1) Pre-tax income (2) ...................... $107,832 $122,239 $112 727 Fixed charges ........................... 55,011 53,831 45,637 -------- -------- -------- Earnings as defined $162,843 $176,070 $158,364 ======== ======== ======== FIXED CHARGES AS DEFINED (1) Interest on long-term debt .............. $ 44,364 $ 43,163 $ 35,820 Interest on other borrowed funds ........ 8,068 8,012 7,053 Amortization of debt discounts, premium and expense ............................ 1,087 1,081 996 Interest implicit in rentals (3) ........ 1,492 1,575 1,768 -------- -------- -------- Fixed charges as defined ............... $ 55,011 $ 53,831 $ 45,637 ======== ======== ======== Ratio of Earnings to Fixed Charges ...... 2.96 3.27 3.47 ======== ======== ========
Notes: (1) Earnings and fixed charges are defined and computed in accordance with Item 503 of Regulation S-K. (2) This amount represents the aggregate of (a) the pre-tax income of MichCon, (b) MichCon's share of pre-tax income of its 50% owned companies and (c) any income actually received from less than 50% owned companies. (3) This amount is estimated to be a reasonable approximation of the interest portion of rentals. MichCon is a guarantor of certain other debt. Fixed charges related to such debt are deemed to be immaterial and therefore have been excluded from the above ratios. EX-27.1 3 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME AND THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 15,284 0 281,090 24,398 21,419 464,994 2,685,456 1,265,095 2,050,342 559,842 549,000 0 0 10,300 613,897 2,050,342 0 527,445 0 420,673 137 10,890 13,631 94,523 32,330 62,193 0 0 0 62,193 0 0
-----END PRIVACY-ENHANCED MESSAGE-----