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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2700
EL PASO NATURAL GAS COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction 74-0608280
of Incorporation or Organization) (I.R.S. Employer Identification No.)
ONE PAUL KAYSER CENTER,
100 NORTH STANTON STREET, EL PASO, TEXAS 79901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (915) 541-2600
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
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING
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Common Stock, par value $3.00 per share,
as of April 25, 1995 35,023,339 shares
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER COMMON SHARE AMOUNTS)
(UNAUDITED)
FIRST QUARTER
---------------------
1995 1994
-------- --------
Operating revenues...................................................... $204,131 $221,945
-------- --------
Operating charges
Operation and maintenance............................................. 77,366 69,840
Natural gas and liquids............................................... 43,225 62,960
Depreciation, depletion, and amortization............................. 16,805 16,229
Litigation special charge............................................. -- 15,062
Taxes, other than income taxes........................................ 10,522 10,057
-------- --------
147,918 174,148
-------- --------
Operating income........................................................ 56,213 47,797
-------- --------
Other (income) and income deductions
Interest and debt expense............................................. 21,066 19,715
Other -- net.......................................................... (1,378) (6,624)
-------- --------
19,688 13,091
-------- --------
Income before income taxes.............................................. 36,525 34,706
Income taxes............................................................ 14,555 13,591
-------- --------
Net income.............................................................. $ 21,970 $ 21,115
======== ========
Earnings per common share............................................... $ .62 $ .57
======== ========
Average common shares outstanding....................................... 35,156 36,892
======== ========
Dividends declared per common share..................................... $ .3300 $ .3025
======== ========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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EL PASO NATURAL GAS COMPANY
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
ASSETS
MARCH 31,
1995 DECEMBER 31,
(UNAUDITED) 1994
------------ ------------
Current assets
Cash and temporary investments................................... $ 37,634 $ 27,636
Accounts and notes receivable, net............................... 97,232 131,650
Materials and supplies inventory................................. 35,091 34,666
Take-or-pay buy-outs, buy-downs, and prepayments, net............ 34,103 33,356
Other regulatory assets.......................................... 12,000 12,000
Deferred income tax benefit...................................... 35,968 41,257
Other............................................................ 28,483 18,594
----------- -----------
Total current assets..................................... 280,511 299,159
----------- -----------
Property, plant, and equipment, net................................ 1,872,086 1,865,897
Take-or-pay buy-outs, buy-downs, and prepayments, net.............. 4,260 14,502
Other regulatory assets............................................ 57,020 59,021
Other.............................................................. 89,926 93,192
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2,023,292 2,032,612
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Total assets............................................. $2,303,803 $2,331,771
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable................................................. $ 162,550 $ 229,356
Commercial paper................................................. 167,900 106,800
Take-or-pay financing liability.................................. 26,900 36,700
Current maturities on long-term debt............................. 7,170 6,824
Other............................................................ 64,018 72,375
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Total current liabilities................................ 428,538 452,055
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Long-term debt, less current maturities............................ 775,462 779,097
Deferred income taxes, less current portion........................ 308,201 304,918
Deferred credits................................................... 39,190 40,325
Other.............................................................. 46,894 45,740
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1,169,747 1,170,080
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Commitments and contingent liabilities (See Notes 2, 3, 4, and 5)
Stockholders' equity
Common stock, par value $3 per share; authorized 100,000 shares;
issued 37,351 shares.......................................... 112,053 112,053
Additional paid-in capital....................................... 454,705 454,705
Retained earnings................................................ 212,894 202,558
Less: Treasury stock (at cost) 2,278 and 1,799 shares............ 74,134 59,680
----------- -----------
Total stockholders' equity............................... 705,518 709,636
----------- -----------
Total liabilities and stockholders' equity............... $2,303,803 $2,331,771
=========== ===========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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EL PASO NATURAL GAS COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FIRST QUARTER
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1995 1994
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Cash flows from operating activities
Net income....................................................... $ 21,970 $ 21,115
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation, depletion, and amortization..................... 16,805 16,229
Deferred income taxes......................................... 8,708 9,869
Net take-or-pay recoveries.................................... 9,495 7,216
Other working capital changes
Accounts and notes receivable............................... 34,418 10,843
Materials and supplies inventory............................ (425) 384
Other current assets........................................ (9,733) 4,721
Accounts payable............................................ (66,769) 7,383
Other current liabilities................................... (9,162) (6,456)
Other......................................................... 4,768 (4,199)
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Net cash provided by operating activities................ 10,075 67,105
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Cash flows from investing activities
Capital expenditures............................................. (23,259) (15,610)
Proceeds from disposal of property............................... 1,037 1,504
Other............................................................ (2,214) (2,271)
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Net cash used in investing activities.................... (24,436) (16,377)
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Cash flows from financing activities
Long-term debt retirements....................................... (3,667) (3,010)
Net commercial paper borrowings.................................. 61,100 5,500
Repayment of volumetric take-or-pay receivable................... (9,800) (12,408)
Acquisition of treasury stock.................................... (14,564) --
Dividends paid................................................... (10,850) (10,135)
Other............................................................ 2,140 558
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Net cash provided by (used in) financing activities...... 24,359 (19,495)
-------- --------
Increase in cash and temporary investments......................... 9,998 31,233
Cash and temporary investments
Beginning of period...................................... 27,636 --
-------- --------
End of period............................................ $ 37,634 $ 31,233
======== ========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The 1994 Annual Report on Form 10-K for El Paso Natural Gas Company and
subsidiaries includes a summary of significant accounting policies and should be
read in conjunction with this Form 10-Q. As used herein, "Company" refers to El
Paso Natural Gas Company and its subsidiaries and "EPG" refers to El Paso
Natural Gas Company, unless the context otherwise requires. The condensed
consolidated financial statements at March 31, 1995 and the quarter then ended
are unaudited, and the condensed balance sheet at December 31, 1994 is derived
from audited financial statements. These financial statements do not include all
disclosures required by generally accepted accounting principles. In the opinion
of management, all material adjustments necessary to present fairly the results
of operations for such periods have been included. All such adjustments are of a
normal recurring nature. Results of operations for any interim period are not
necessarily indicative of the results of operations for the entire year.
Financial statements for the previous periods include certain reclassifications
which were made to conform to current presentation. Such reclassifications have
no effect on reported net income or stockholders' equity.
2. RATES AND REGULATORY MATTERS
EPG has made buy-out and buy-down payments and recoupable prepayments to
resolve past and future take-or-pay exposure, to terminate and reform gas
purchase contracts, to amend pricing and take provisions of gas purchase
contracts, and to settle related litigation. EPG is collecting its buy-out and
buy-down costs under the Federal Energy Regulatory Commission ("FERC") cost
recovery procedures. The collection period for such costs extends through March
1996. EPG has established a reserve, based on throughput projections, for that
portion of the receivables balance which is unlikely to be collected over the
period through March 1996. The balances of this reserve were $8 million and $9
million at March 31, 1995, and December 31, 1994, respectively.
Under FERC procedures, take-or-pay cost recovery filings may be challenged
by pipeline customers on prudence and certain other grounds. In October 1992,
FERC issued an order resolving all but one of the outstanding issues regarding
EPG's take-or-pay proceedings. Certain of EPG's customers sought review of
certain aspects of that order in the United States Court of Appeals for the
District of Columbia Circuit ("Court of Appeals"). That appeal is currently
pending. The remaining issue unresolved by FERC involved the claim by several
customers that EPG sought to recover an excessive amount for the value of
certain production properties which were transferred to a producer as part of a
1989 take-or-pay settlement. Following a hearing on this issue, in June 1994,
FERC affirmed a decision of an Administrative Law Judge ("ALJ") which found that
the valuation proposed by EPG was excessive and required EPG to refund to its
customers the costs found to be ineligible for take-or-pay recovery. In
accordance with the FERC decision, EPG refunded $34 million, inclusive of
interest, to its customers in September 1994. In December 1994, EPG filed a
petition with the Court of Appeals for review of the FERC decision, which is
currently pending.
Mojave Pipeline Company ("MPC") filed a service and rate design
restructuring plan in November 1992 in compliance with the industry-wide
restructuring directives of FERC. In March 1993, FERC issued an order
essentially approving MPC's compliance filing, subject to changes, which were
made in an amended restructuring plan in March 1993.
Several of MPC's customers have filed petitions with the Court of Appeals
for review of certain FERC orders. These petitions are currently pending before
the Court of Appeals. The primary issues on appeal pertain to FERC's requirement
that MPC's rates for firm transportation service be based upon Straight Fixed
Variable ("SFV") rate design rather than Modified Fixed Variable ("MFV") rate
design. The application of SFV requires MPC's existing firm shippers to pay a
higher proportion of their total transportation rate in the reservation
component of the rate. Such shippers have contended that FERC's application of
SFV rate design
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to MPC unlawfully abrogates the rate provisions of MPC's service agreements and
constitutes an unlawful rate increase. Management believes the Court of Appeals
will uphold SFV rates as applied to MPC.
In February 1995, MPC made a filing with FERC seeking authorization to
maintain its existing rates. By order issued March 29, 1995, FERC accepted the
filing, established hearing procedures to determine the justness and
reasonableness of the rates proposed by MPC, and allowed those rates to become
effective as of March 31, 1995, subject to refund.
3. LEGAL PROCEEDINGS
In El Paso Natural Gas Company and Meridian Oil Gathering Inc. v. Amoco
Production Company, filed in Delaware Chancery Court ("the Court") on May 8,
1991, Amoco Production Company ("Amoco") alleged breaches by EPG and a then
affiliated company, Meridian Oil Gathering Inc. ("MOGI"), of certain gas
purchase, gathering, and transportation agreements pertaining to natural gas
produced by Amoco in the San Juan Basin. Amoco alleged breach of "favored
nations" contractual provisions regarding services to be performed by EPG,
including those relating to transportation capacity and rates. Amoco sought a
court order requiring specific performance by EPG and MOGI with respect to
future transportation services and an award of monetary damages of an
undetermined amount for alleged past breaches of contract. On March 4, 1992, the
Court issued a Memorandum Opinion which, among other things, denied Amoco's
motion for partial summary judgment and concluded that the Amoco contracts at
issue do not contain the broad "favored nations" rights claimed by Amoco. The
Court further concluded that MOGI's motion for summary judgment, seeking
dismissal of Amoco's counterclaim against MOGI, should be granted. Conoco Inc.
("Conoco") asserted claims similar to Amoco's original claims, involving lesser
quantities of gas, in a separate Delaware Chancery Court proceeding filed on
December 30, 1991, Conoco Inc. v. El Paso Natural Gas Company. In August 1992,
the Amoco and Conoco cases were consolidated, MOGI was dismissed as a party, and
Amoco and Conoco filed amended pleadings to restate their claims in light of the
court's March 4, 1992 ruling. EPG and Conoco concluded a settlement agreement
which resulted in dismissal of the Conoco claims. Trial of the Amoco claims
concluded on July 15, 1993, and post-trial briefing and oral arguments concluded
in early November 1993. On March 29, 1994, the Court rendered a decision in
favor of Amoco. After additional briefing, the Court issued its opinion
respecting certain contested damages issues on December 16, 1994, and entered a
final order on January 30, 1995. Both EPG and Amoco have filed appeals with the
Delaware Supreme Court. As a result of the Court's March 1994 decision, EPG
refunded to Amoco approximately $20 million in the first quarter of 1995.
TransAmerican Natural Gas Corporation ("TransAmerican") has filed a
complaint in a Texas state court against various parties, including EPG,
alleging fraud, tortious interference with contractual relationships, economic
duress, civil conspiracy and violation of state antitrust laws. The complaint,
as amended, seeks unspecified actual and exemplary damages. EPG is actively
defending the matter and has initiated collateral proceedings challenging both
the validity of TransAmerican's claims and the jurisdiction of the forum in
which they were filed. No discovery has been commenced pending resolution of
these threshold issues. Based on information available at this time, management
believes that the claims made by TransAmerican have no factual or legal basis
and that the ultimate resolution of this matter will not have a materially
adverse effect on the Company's financial condition.
The United States Department of Justice ("Justice Department") terminated
an investigation of EPG's natural gas meter sales and installation practices in
the San Juan Basin on January 6, 1995. EPG and the Justice Department agreed to
a consent decree which was filed in the United States District Court for the
District of Columbia ("District Court") on January 12, 1995. The consent decree
requires no material change to EPG's existing business practices and imposes no
fines or monetary penalties. The consent decree stipulates that EPG may not
require a well operator to purchase meter facilities or meter installation
equipment as a condition of access to its gathering system in the San Juan
Basin, and requires EPG to inform well operators
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that they have the legal right to provide their own meter installation services.
The consent decree further provides that any meter installation undertaken by
third parties must be done in accordance with environmental and safety standards
specified by EPG. Moreover, EPG has the right to inspect such installations to
ensure that they conform to standards that apply uniformly on EPG's gathering
system. Records of EPG's inspection activities will be maintained to document
compliance with EPG's standards and procedures. A required 60-day public comment
period concerning the consent decree expired on March 27, 1995. On April 24,
1995, the Justice Department filed with the District Court a motion for entry of
final judgment, which states that no comments were received with respect to the
proposed final judgment. Action by the District Court is pending.
The Company is a named defendant in numerous lawsuits and a named party in
numerous governmental proceedings arising in the ordinary course of business.
While the outcome of such lawsuits or other proceedings against the Company
cannot be predicted with certainty, management does not expect these matters to
have a materially adverse effect on the Company's financial condition.
4. ENVIRONMENTAL
As of March 31, 1995, EPG had a reserve of approximately $40 million for
the following environmental contingencies with income statement impact:
1 -- EPG has been conducting remediation of polychlorinated biphenyl
("PCB") contamination at certain of its facilities. The majority of the
required PCB remediation has been completed. Future costs are estimated to
range between $7 million and $11 million over the next 5 years.
2 -- EPG executed an Administrative Order on Consent with the United States
Environmental Protection Agency ("EPA") in June 1993 to conduct a Remedial
Investigation/Feasibility Study ("RI/FS") for a Burlington Industries, Inc.
("BI") site located in Statesville, North Carolina, that has been
identified for cleanup. BI and EPG have entered into an agreement to
jointly fund the RI/FS for the site. Total remediation costs are estimated
to be between $17 million and $29 million over a 30 year period. EPG and BI
are engaged in negotiations over the appropriate allocation of the
remediation costs.
3 -- In November 1993, in accordance with an EPA order, EPG and Atlantic
Richfield Company ("ARCO") submitted work plans for remediation of the
subsurface at the Prewitt Refinery in McKinley County, New Mexico. EPG and
ARCO have a cost sharing agreement to each pay one-half of any remediation
costs at this site. EPG's share of the remediation costs is estimated to be
between $10 million and $20 million over a 30 year period.
4 -- In December 1993, EPA issued EPG a Notice of Liability for the
Colorado School of Mines Research Institute ("CSMRI") site in Golden,
Colorado. EPA has determined that the volume of hazardous substances sent
to the site by EPG represent less than 2.5 percent of the total volumes
sent by all potentially responsible parties ("PRPs"). Based on this
percentage, EPG's share of the potential remediation costs is estimated to
be less than $500,000.
5 -- EPG and Texaco Exploration and Production Inc. ("Texaco") have been
notified about potential groundwater and soil contamination at various
sites in southeastern Utah. EPG and Texaco have been conducting
environmental assessments at certain of these sites and are engaged in
negotiations over the appropriate allocation of the remediation costs.
Based upon currently available information, EPG's share of the remediation
costs is estimated to be approximately $4 million. However, costs could be
higher once the environmental assessment has been completed.
6 -- In August 1992, EPG received a notice from the current owner of a site
in Etowah, Tennessee requesting compensation for remediation expenses
associated with the site. These costs are estimated to be approximately
$1.7 million. EPG and the other PRPs are engaged in negotiations over the
appropriate
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allocation of the alleged costs. Based upon currently available
information, EPG's share of the remediation costs is estimated to be less
than $1 million.
7 -- EPG and other PRPs entered into an agreement to conduct a RI/FS for a
site located in Fountain Inn, South Carolina. The RI/FS was completed in
October 1994, and EPA issued their proposed plan for the site in November
1994. The proposed remediation and EPA oversight costs are estimated to be
$800,000. The allocation of these costs between EPG and the other PRPs is
currently being negotiated. EPG's share of the costs is estimated to be
between $300,000 and $500,000 over a 5 year period.
Management believes the amount reserved as of March 31, 1995 is sufficient
to cover these and other small environmental assessments and remediation
activities.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for cleanup costs associated with a site in
Elizabethton, Tennessee. The State and EPA are in the preliminary stages of
investigating the nature and extent of contamination, as well as identifying
other PRPs. Since testing is in the initial stages, EPG is unable to estimate
its potential share of any remediation costs.
EPG also has potential expenditures, of a capital nature, for the following
environmental projects:
1 -- EPG has analyzed the Clean Air Act Amendments of 1990 ("CAAA") and
believes that these rules will impact the Company's operations primarily in
the following areas: (i) potential reductions in the emissions of nitrogen
oxides ("NOx") in non-attainment areas; (ii) the requirement for air
emissions permitting of existing facilities; and (iii) enhanced monitoring
of air emissions. EPG anticipates capitalizing the equipment costs
associated with complying with CAAA and estimates that approximately $30
million will be spent from 1995 through 2005. However, EPA's proposed
enhanced monitoring rules, when finalized, could potentially impose greater
costs to the Company.
2 -- EPG has been conducting remediation of mercury contamination at
certain facilities and is replacing mercury containing meters with other
measurement devices. The project is expected to be completed by the end of
1995 at a cost of approximately $8 million. EPG will close and retire about
1,500 earthen siphon/dehydration pits in the San Juan Basin as required by
certain environmental regulations. The project is expected to be completed
by the end of 1995 at a cost of approximately $6 million. The mercury
remediation and pit closure costs, which are associated with the retirement
of equipment, will be recorded as adjustments to accumulated depreciation,
as permitted by regulatory accounting.
It is possible that new information or future developments could require
the Company to reassess its potential exposure related to environmental matters.
As such information or developments occur, related accrual amounts will be
adjusted accordingly.
5. FINANCING TRANSACTIONS
In August 1994, EPG established with a group of banks a revolving credit
facility of $400 million that expires in five years. As of March 31, 1995, and
December 31, 1994, there were no borrowings outstanding under this facility. As
of March 31, 1995, and December 31, 1994, respectively, approximately $168
million and $107 million of commercial paper were outstanding.
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions. On March
10, 1995, the registration statement was declared effective by the Securities
and Exchange Commission ("SEC").
In February 1995, El Paso New Chaco Company ("EPNC"), a wholly owned
subsidiary of EPG, entered into a 7.75 year lease for a plant which is being
constructed in the San Juan Basin. The lease is an
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EL PASO NATURAL GAS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
unconditional "triple net" lease with the trustee of a special purpose trust.
The trust obtains financing for construction of the plant from a consortium of
financial institutions. The total amount financed via the operating lease will
not exceed $80 million, and the annual lease obligation will be a function of
the amount financed, a variable interest rate, and commitment and other fees.
EPNC has an option at the end of the lease term, and has an obligation upon the
occurrence of certain events, to purchase the plant for a price sufficient to
pay the entire amount financed, interest, and certain expenses. If EPNC does not
purchase the plant at the end of the lease term, it has an obligation to pay a
residual guaranty amount equal to approximately 87 percent of the amount
financed, plus interest. EPG unconditionally guarantees all obligations of EPNC
under the lease. Construction of the plant began in April 1995 and is expected
to be in service by early 1996.
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment at March 31, 1995, and December 31, 1994,
consisted of the following:
1995 1994
---------- ----------
(IN THOUSANDS)
Property, plant, and equipment, at cost..................... $2,982,881 $2,979,368
Less accumulated depreciation and depletion................. 1,208,448 1,212,477
---------- ----------
1,774,433 1,766,891
Additional acquisition cost assigned to utility plant,
net of accumulated amortization........................... 97,653 99,006
---------- ----------
Property, plant, and equipment, net............... $1,872,086 $1,865,897
========== ==========
7. SUPPLEMENTAL DISCLOSURE OF CASH FLOW ACTIVITIES
FIRST QUARTER
-------------------
1995 1994
------- -------
(IN THOUSANDS)
Cash Payments (Refunds)
Interest....................................................... $33,174 $30,431
Income taxes................................................... (2,436) (3,346)
8. RECENT PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. SFAS No. 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Certain long-lived assets and certain identifiable intangibles to
be disposed of must be reported at the lower of carrying amount or fair value
less cost to sell. SFAS No. 121 also requires that a rate-regulated enterprise
recognize an impairment for the amount of costs that a regulator excludes from
the enterprise's rate base. SFAS No. 121 is effective for the fiscal years
beginning after December 15, 1995. The Company is in the process of evaluating
the implication of SFAS No. 121.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
Net cash provided by operating activities was $10 million for the quarter
ended March 31, 1995, compared with $67 million for the same period of 1994. The
decrease from the previous year was primarily due to a payment resulting from
the Amoco decision, timing of insurance premium payments, higher interest
payments, and timing differences in other working capital disbursements,
partially offset by lower take-or-pay payments and timing differences in other
working capital receipts.
Financing Transactions
In August 1994, EPG established with a group of banks a revolving credit
facility of $400 million that expires in five years. As of March 31, 1995, and
December 31, 1994, there were no borrowings outstanding under this facility. As
of March 31, 1995, and December 31, 1994, respectively, approximately $168
million and $107 million of commercial paper was outstanding.
EPG filed a shelf registration statement in August 1994, pursuant to which
EPG may offer up to $400 million of unsecured debt securities, preferred stock,
and common stock from time to time as determined by market conditions. On March
10, 1995, the registration statement was declared effective by the SEC.
In February 1995, EPNC entered into a 7.75 year lease for a plant which is
being constructed in the San Juan Basin. The lease is an unconditional "triple
net" lease with the trustee of a special purpose trust. The trust obtains
financing for construction of the plant from a consortium of financial
institutions. The total amount financed via the operating lease will not exceed
$80 million, and the annual lease obligation will be a function of the amount
financed, a variable interest rate, and commitment and other fees. EPNC has an
option at the end of the lease term, and has an obligation upon the occurrence
of certain events, to purchase the plant for a price sufficient to pay the
entire amount financed, interest, and certain expenses. If EPNC does not
purchase the plant at the end of the lease term, it has an obligation to pay a
residual guaranty amount equal to approximately 87 percent of the amount
financed, plus interest. EPG unconditionally guarantees all obligations of EPNC
under the lease. Construction of the plant began in April 1995 and is expected
to be in service by early 1996.
Rates and Regulatory Matters
In January 1994, EPG filed an application with FERC seeking an order which
would terminate, effective January 1, 1996, certificates applicable to certain
gathering and processing facilities owned by EPG on the basis that such
facilities are not subject to FERC jurisdiction.
EPG intends, effective January 1, 1996, to transfer the facilities which
are subject to the January 1994 application together with its nonjurisdictional
gathering and processing facilities to El Paso Field Services Company, a wholly
owned subsidiary of EPG. Such facilities are used for gathering and other
nonjurisdictional functions and are an inherent part of EPG's current gathering
operations. The facilities to be transferred consist of approximately 6,700
miles of various sized pipelines, compressors with an aggregate installed
horsepower of 40,600, and various treating and processing plants.
Several producers and other shippers filed protests and requests for a
formal hearing of the January 1994 application. The primary issues raised in the
protests focus on the extent of competition in EPG's producing basins and the
proper functionalization of its facilities. In response to the producer and
shipper protests, EPG made a filing in March 1994 asserting that the protests
raised issues already settled under EPG's 1993 settlement agreement.
Beginning in May 1994, FERC issued a series of orders which clarified its
policy regarding the regulation of gathering facilities. Under the policy
announced in these orders, FERC will have no authority to regulate the rates,
terms, and conditions that apply to service through gathering facilities owned
by an affiliate of a pipeline, except where the gatherer acts in concert with
its pipeline affiliate to frustrate FERC's effective regulation over interstate
transportation services. FERC has stated it will evaluate applications to
deregulate
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gathering and processing facilities on a case by case basis, and management
believes EPG's January 1994 application will be approved.
As specified in the 1993 settlement agreement, EPG is obligated to file a
rate change to be effective no later than January 1, 1996. EPG expects to file a
rate change in the second quarter of 1995.
MPC filed a service and rate design restructuring plan in November 1992 in
compliance with FERC's industry-wide restructuring directives. In March 1993,
FERC issued an order essentially approving MPC's compliance filing, subject to
changes, which were made in an amended restructuring plan in March 1993.
Several of MPC's customers have filed petitions with the Court of Appeals
for review of certain FERC orders. These petitions are currently pending before
the Court of Appeals. The primary issues on appeal pertain to FERC's requirement
that MPC's rates for firm transportation service be based upon SFV rate design
rather than MFV rate design. The application of SFV requires MPC's existing firm
shippers to pay a higher proportion of their total transportation rate in the
reservation component of the rate. Such shippers have contended that FERC's
application of SFV rate design to MPC unlawfully abrogates the rate provisions
of MPC's service agreements and constitutes an unlawful rate increase.
Management believes the Court of Appeals will uphold SFV rates as applied to
MPC.
In February 1995, MPC made a filing with FERC seeking authorization to
maintain its existing rates. By order issued March 29, 1995, FERC accepted the
filing, established hearing procedures to determine the justness and
reasonableness of the rates proposed by MPC, and allowed those rates to become
effective as of March 31, 1995, subject to refund.
Under FERC procedures, take-or-pay cost recovery filings may be challenged
by pipeline customers on prudence and certain other grounds. In October 1992,
FERC issued an order resolving all but one of the outstanding issues regarding
EPG's take-or-pay proceedings. Certain of EPG's customers sought review of
certain aspects of that order in the Court of Appeals. That appeal is currently
pending. The remaining issue unresolved by FERC involved the claim by several
customers that EPG sought to recover an excessive amount for the value of
certain production properties which were transferred to a producer as part of a
1989 take-or-pay settlement. Following a hearing on this issue, in June 1994,
FERC affirmed a decision of an ALJ which found that the valuation proposed by
EPG was excessive and required EPG to refund to its customers the costs found to
be ineligible for take-or-pay recovery. In accordance with the FERC decision,
EPG refunded $34 million, inclusive of interest, to its customers in September
1994. In December 1994, EPG filed a petition with the Court of Appeals for
review of the FERC decision, which is currently pending.
Environmental
As of March 31, 1995, EPG had a reserve of approximately $40 million for
the following environmental contingencies with income statement impact:
1 -- EPG has been conducting remediation of PCB contamination at certain of
its facilities. The majority of the required PCB remediation has been
completed. Future costs are estimated to range between $7 million and $11
million over the next 5 years.
2 -- EPG executed an Administrative Order on Consent with EPA in June 1993
to conduct a RI/FS for a BI site located in Statesville, North Carolina,
that has been identified for cleanup. BI and EPG have entered into an
agreement to jointly fund the RI/FS for the site. Total remediation costs
are estimated to be between $17 million and $29 million over a 30 year
period. EPG and BI are engaged in negotiations over the appropriate
allocation of the remediation costs.
3 -- In November 1993, in accordance with an EPA order, EPG and ARCO
submitted work plans for remediation of the subsurface at the Prewitt
Refinery in McKinley County, New Mexico. EPG and ARCO have a cost sharing
agreement to each pay one-half of any remediation costs at this site. EPG's
share of the remediation costs is estimated to be between $10 million and
$20 million over a 30 year period.
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4 -- In December 1993, EPA issued EPG a Notice of Liability for the CSMRI
site in Golden, Colorado. EPA has determined that the volume of hazardous
substances sent to the site by EPG represent less than 2.5 percent of the
total volumes sent by all PRPs. Based on this percentage, EPG's share of
the potential remediation costs is estimated to be less than $500,000.
5 -- EPG and Texaco have been notified about potential groundwater and soil
contamination at various sites in southeastern Utah. EPG and Texaco have
been conducting environmental assessments at certain of these sites and are
engaged in negotiations over the appropriate allocation of the remediation
costs. Based upon currently available information, EPG's share of the
remediation costs is estimated to be approximately $4 million. However,
costs could be higher once the environmental assessment has been completed.
6 -- In August 1992, EPG received a notice from the current owner of a site
in Etowah, Tennessee requesting compensation for remediation expenses
associated with the site. These costs are estimated to be approximately
$1.7 million. EPG and the other PRPs are engaged in negotiations over the
appropriate allocation of the alleged costs. Based upon currently available
information, EPG's share of the remediation costs is estimated to be less
than $1 million.
7 -- EPG and other PRPs entered into an agreement to conduct a RI/FS for a
site located in Fountain Inn, South Carolina. The RI/FS was completed in
October 1994, and EPA issued their proposed plan for the site in November
1994. The proposed remediation and EPA oversight costs are estimated to be
$800,000. The allocation of these costs between EPG and the other PRPs is
currently being negotiated. EPG's share of the costs is estimated to be
between $300,000 and $500,000 over a five year period.
Management believes the amount reserved as of March 31, 1995, is sufficient
to cover these and other small environmental assessments and remediation
activities.
The State of Tennessee has asserted a claim that EPG is a liable party
under state environmental laws for cleanup costs associated with a site in
Elizabethton, Tennessee. The State and EPA are in the preliminary stages of
investigating the nature and extent of contamination, as well as identifying
other PRPs. Since testing is in the initial stages, EPG is unable to estimate
its potential share of any remediation costs.
EPG also has potential expenditures, of a capital nature, for the following
environmental projects:
1 -- EPG has analyzed the CAAA, and believes that these rules will impact
the Company's operations primarily in the following areas: (i) potential
reductions in the emissions of NOx in non-attainment areas; (ii) the
requirement for air emissions permitting of existing facilities; and (iii)
enhanced monitoring of air emissions. EPG anticipates capitalizing the
equipment costs associated with complying with CAAA and estimates that
approximately $30 million will be spent from 1995 through 2005. However,
EPA's proposed enhanced monitoring rules, when finalized, could potentially
impose greater costs to the Company.
2 -- EPG has been conducting remediation of mercury contamination at
certain facilities and is replacing mercury containing meters with other
measurement devices. The project is expected to be completed by the end of
1995 at a cost of approximately $8 million. EPG will close and retire about
1,500 earthen siphon/dehydration pits in the San Juan Basin as required by
certain environmental regulations. The project is expected to be completed
by the end of 1995 at a cost of approximately $6 million. The mercury
remediation and pit closure costs which are associated with the retirement
of equipment, will be recorded as adjustments to accumulated depreciation,
as permitted by regulatory accounting.
It is possible that new information or future developments could require
the Company to reassess its potential exposure related to environmental matters.
As such information or developments occur, related accrual amounts will be
adjusted accordingly.
Acquisitions
The Company is no longer in negotiations to effect a merger with Hadson
Corporation.
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Dividends
The following table reflects quarterly dividends declared and paid on EPG's
common stock:
DECLARATION DATE AMOUNT PER SHARE PAYMENT DATE TOTAL AMOUNT
- ----------------- ---------------- ---------------- ------------
(IN MILLIONS)
October 13, 1994 $ 0.3025 January 3, 1995 $ 11
January 13, 1995 $ 0.3300 April 3, 1995 $ 12
On April 13, 1995, the Board of Directors ("the Board") declared a
quarterly dividend of $.33 per share on EPG's common stock, payable on July 3,
1995, to shareholders of record on June 9, 1995.
In November 1994, the Board authorized the repurchase of up to 3.5 million
shares of EPG's outstanding common stock from time to time in the open market.
Shares repurchased are held in EPG's treasury and are expected to be used in
connection with EPG stock option compensation plans and for other corporate
purposes. This authorization is in addition to a two million share authorization
received in October 1992. Pursuant to the foregoing authorizations, the Company
has purchased 3,137,300 shares as of March 31, 1995.
CAPITAL EXPENDITURES
The Company's planned capital expenditures for 1995 of $225 million are
primarily for maintenance of business, system expansion, and system enhancement.
Capital expenditures for the three months ended March 31, 1995, were $23 million
compared to $16 million for the same period of 1994.
EPG is a member of a consortium that plans to build the proposed Samalayuca
II Power Plant near Ciudad Juarez, Chihuahua, Mexico. In December 1992, an award
for construction was granted to the consortium by the Comision Federal de
Electricidad ("CFE"). In August 1994, EPG increased its prospective ownership
interest in the Samalayuca II Power Plant from 10 percent to 20 percent. CFE and
the consortium signed a trust agreement in August 1994. Additional annexes to
the trust agreement are currently being negotiated with CFE. The trust
agreement, together with the annexes, will form the basis for seeking
international financing for the Samalayuca II Power Plant project.
In March 1993, EPG filed an application with FERC to expand its system in
order to provide natural gas service to the proposed Samalayuca II Power Plant
and to an existing power plant in the same location. The proposed expansion
would provide an additional 300 million cubic feet per day ("MMcf/d") of
capacity at a cost of approximately $57 million. In November 1993, FERC issued
an order that approved the proposed border crossing facility south of Clint,
Texas that would connect EPG's facilities with facilities in Mexico. FERC
deferred action on the remainder of the March 1993 filing and in November 1994
required EPG to provide the executed long-term contracts or binding agreements
for a substantial amount of the firm capacity of the proposed facilities by
January 1995. EPG advised FERC that although the contracts or agreements had not
been obtained, EPG believes the project remains viable and that the application
should therefore not be dismissed. In December 1993, Pacific Gas & Electric
Company ("PG&E"), the California Public Utilities Commission ("CPUC") and
Southern California Gas Company ("SoCal") jointly filed a motion with FERC
seeking clarification or rehearing of the November 1993 order on the Samalayuca
II Power Plant project discussed above.
In April 1994, EPG filed an application with FERC for a certificate of
public convenience and necessity to build a 98 mile pipeline to parallel and
loop its existing Havasu Crossover Line. The proposed pipeline would allow for
the transfer of 468 MMcf/d of San Juan Basin gas to EPG's south system and would
enhance EPG's overall system flexibility to meet market demands. The project is
expected to cost approximately $62 million. At the request of several of EPG's
customers, FERC held a technical conference in August 1994 with respect to the
April 1994 application.
In June 1994, EPG filed an application with FERC for a certificate of
public convenience and necessity to expand its existing mainline system in the
San Juan Basin by approximately 300 MMcf/d at a cost of about $26 million. The
proposed expansion would accommodate increased volumes and provide markets with
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enhanced access to San Juan Basin gas supplies. FERC held a technical conference
in August 1994 with respect to the June 1994 application.
In early 1995, FERC preliminarily approved nonenvironmental aspects of the
Havasu Crossover Line flexibility project and the San Juan Basin mainline
expansion project. FERC accepted EPG proposals requiring that the projects
benefit EPG's customers or meet such other standard as might be established by
FERC in order for the projects' costs to be included in EPG's rates. Final
approval of both projects is dependent on favorable environmental reviews. SoCal
has filed a request for rehearing of FERC's 1995 order on the San Juan Basin
mainline expansion project, which is expected to be completed in the third
quarter of 1995.
In March 1993, MPC filed an application, which was amended in November 1993
and April 1994, for a certificate of public convenience and necessity to build
and operate a 475 MMcf/d expansion of its existing system at an estimated cost
of approximately $500 million.
In December 1993, FERC held a public conference to examine the question
raised by CPUC and PG&E regarding MPC's proposed expansion. The primary issue
was whether FERC or CPUC should have jurisdiction over the expansion. In
February 1994, FERC issued an order determining that it has exclusive
jurisdiction over MPC and its proposed expansion. In March 1994, CPUC, PG&E and
other parties filed for rehearing or clarification of FERC's February 1994
order. The petitions for rehearing and/or clarification are currently pending
action by FERC. In November 1994, FERC unanimously issued an order which
addressed all nonenvironmental issues and, on that basis, granted MPC a
certificate of public convenience and necessity for the proposed expansion,
subject to certain conditions. This order is subject to possible later
modification as a result of FERC's consideration of environmental issues. In
addition, FERC requested certain further information from the parties to
determine whether PG&E, which is currently the principal gas supplier in the
region to be served by the expansion project, is entitled to any bypass
compensation from MPC and/or EPG as a result of MPC's proposed expansion. MPC
and EPG have provided FERC with the requested information and urged that any
compensation or other relief to PG&E would be inappropriate. (Similar
information was later requested by FERC and provided by MPC regarding the
potential for bypass compensation to SoCal). In December 1994, MPC and other
parties filed requests for rehearing of certain aspects of FERC's November 1994
order. In February and March 1995, FERC issued orders which granted in part and
denied in part rehearing and accordingly modified the November 1994 order. MPC,
PG&E and Meridian Oil Inc. have sought judicial review of FERC's November 1994
order, and MPC has sought reconsideration of certain aspects of FERC's March
1995 order. Whether MPC goes forward with the expansion will depend on, among
other things, the final actions taken by FERC and whether there is a
satisfactory market for the project.
The capital projects discussed above are expected to be financed through
internally generated funds and short-term and long-term borrowings.
RESULTS OF OPERATIONS
First Quarter 1995 Compared to First Quarter 1994
Operating revenues for the quarter ended March 31, 1995, were $18 million
lower than for the same period of 1994. Lower gas sales rates, gas sales
volumes, and transportation rates contributed $15 million, $8 million, and $3
million, respectively, to the decrease. An increase in return on take-or-pay
receivables, higher gathering rates, and amounts related to the Amoco decision
partially offset the decrease in operating revenues by $3 million, $2 million,
and $2 million, respectively.
Operating charges were $26 million lower for the quarter ended March 31,
1995, compared to the same period of 1994. Lower average cost of gas, lower gas
sales volumes, and a 1994 litigation special charge contributed $15 million, $8
million, and $15 million, respectively, to the decrease in operating charges.
Offsetting this decrease was an increase in operation and maintenance expense.
The increase in operation and maintenance expense was due primarily to higher
severance accruals, higher stock related benefits, and a 1994 adjustment for Gas
Research Institute fees.
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Other-net income was $5 million lower for the quarter ended March 31, 1995,
compared to the same period of 1994. The 1994 results contain income related to
the recovery of EPG's investment in its underground storage facility and
interest expense related to the special charge for litigation.
EPG's mainline throughput for the quarter ended March 31, 1995, was 316
billion cubic feet ("Bcf") compared to 313 Bcf for the same period of 1994. The
higher throughput was primarily due to an increase in off-system deliveries,
which was offset in part by lower deliveries to the California market.
Deliveries to California decreased due primarily to lower demand in northern
California, a result of an increase in the availability of hydroelectric power.
RECENT PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Certain long-lived assets
and certain identifiable intangibles to be disposed of must be reported at the
lower of carrying amount or fair value less cost to sell. SFAS No. 121 also
requires that a rate-regulated enterprise recognize an impairment for the amount
of costs that a regulator excludes from the enterprise's rate base. SFAS No. 121
is effective for the fiscal years beginning after December 15, 1995. The Company
is in the process of evaluating the implication of SFAS No. 121.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Notes 2, 3, and 4 of the Notes to Consolidated Financial Statements.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its annual meeting of stockholders on March 16,
1995. Proposals presented for a stockholder vote included (1) the
election of eight directors, (2) the ratification of the appointment of
the Company's independent certified public accountants for the fiscal
year 1995, (3) the approval of the Company's 1995 Omnibus Compensation
Plan, (4) the approval of the Company's 1995 Incentive Compensation
Plan, and (5) the approval of the Company's 1995 Compensation Plan for
Non-Employee Directors.
Each of the eight incumbent directors nominated by the Company were
elected with the following voting results:
FOR WITHHELD
---------- ---------
Byron Allumbaugh......................................... 31,047,303 215,153
Luino Dell'Osso, Jr. .................................... 31,027,414 235,042
Eugenio Garza Laguera.................................... 29,769,526 1,492,930
James F. Gibbons......................................... 31,052,145 210,311
Ben F. Love.............................................. 31,020,563 241,893
Kenneth L. Smalley....................................... 31,056,115 206,341
Malcolm Wallop........................................... 30,979,404 283,051
William A. Wise.......................................... 31,043,711 218,745
There were no broker non-votes for the election of directors.
The appointment of Coopers & Lybrand L.L.P. as the Company's
independent certified public accountants for the fiscal year 1995 and
each of the Company's three employee benefit plans were approved with
the following voting results:
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--------- -------- ------- --------
Ratification of Appointment of
Coopers & Lybrand L.L.P................... 30,306,842 832,023 123,591 --
Approval of Company's 1995 Omnibus
Compensation Plan......................... 22,112,824 5,654,684 392,993 3,101,955
Approval of Company's 1995 Incentive
Compensation Plan......................... 23,577,172 4,210,559 367,758 3,106,967
Approval of Company's 1995 Compensation Plan
for Non-Employee Directors................ 25,164,996 2,590,262 400,233 3,106,965
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ITEM 5. OTHER INFORMATION
Continuous Odd-Lot Stock Sales Program
EPG has made available a Continuous Odd-Lot Stock Sales Program
("Program") in which shareholders of EPG owning beneficially fewer than
100 shares of EPG's common stock ("Odd-lot Holders") are offered a
convenient method of disposing of all their shares without incurring the
customary brokerage costs associated with the sale of an odd-lot. Only
Odd-lot Holders are eligible to participate in the Program. The Program
is strictly voluntary, and no Odd-lot Holder is obligated to sell
pursuant to the Program. A brochure and related materials describing the
Program were sent to Odd-lot Holders in February 1994. The Program
currently does not have a termination date, but EPG may suspend the
Program at any time. Inquiries regarding the Program should be directed
to The First National Bank of Boston.
Dividend Reinvestment and Common Stock Purchase Plan
EPG has made available a Dividend Reinvestment and Common Stock
Purchase Plan ("Plan") which provides all shareholders of record a
convenient and economical means of increasing their holdings in EPG's
common stock. A shareholder who owns shares of common stock in street
name or broker name and who wishes to participate in the Plan will need
to have his or her broker or nominee transfer the shares into the
shareholder's name. The Plan is strictly voluntary, and no shareholder
of record is obligated to participate in the Plan. A brochure and
related materials describing the Plan were sent to shareholders of
record in November 1994. The Plan currently does not have a termination
date, but EPG may suspend the Plan at any time. Inquiries regarding the
Plan should be directed to The First National Bank of Boston.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.Y -- Participation and Credit Agreement, dated as of February 9, 1995,
among EPG, El Paso New Chaco Company, State Street Bank and Trust
Company, as Trustee, Chemical Bank, as Agent, the Note Holders
Signatories and the Certificate Holders Signatories (without exhibits
and schedules, except for the schedule of defined terms), and the
following documents related thereto: Lease Agreement, dated as of
February 9, 1995, between State Street Bank and Trust Company and El
Paso New Chaco Company; Support Agreement, dated as of February 9,
1995, between El Paso New Chaco Company and State Street Bank and
Trust Company; Guaranty Agreement by EPG in favor of Chemical Bank,
as Agent, and each of the Participants as of February 9, 1995;
Sponsor Agreement by EPG in favor of State Street Bank and Trust
Company as of February 9, 1995; Mortgage, Assignment, Security
Agreement and Financing Statement, executed February 7, 1995, between
State Street Bank and Trust Company (Mortgagor) and Chemical Bank
(Mortgagee); and Security Agreement among State Street Bank and Trust
Company and Chemical Bank, as Agent, dated February 9, 1995.
11 -- Computation of Earnings Per Common Share
27 -- Financial Data Schedule
B. Reports on Form 8-K
None
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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.
EL PASO NATURAL GAS COMPANY
(Registrant)
Date: April 26, 1995 /s/ H. BRENT AUSTIN
H. Brent Austin
Senior Vice President and
Chief Financial Officer
Date: April 26, 1995 /s/ THOMAS E. RICKS
Thomas E. Ricks
Vice President, Controller and
Chief Accounting Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
- ------------------ ------------------------------------------------------------------------
10.Y -- Participation and Credit Agreement, dated as of February 9, 1995,
among EPG, El Paso New Chaco Company, State Street Bank and Trust
Company, as Trustee, Chemical Bank, as Agent, the Note Holders
Signatories and the Certificate Holders Signatories (without exhibits
and schedules, except for the schedule of defined terms), and the
following documents related thereto; Lease Agreement, dated as of
February 9, 1995, between State Street Bank and Trust Company and El
Paso New Chaco Company; Support Agreement, dated as of February 9,
1995, between El Paso New Chaco Company and State Street Bank and
Trust Company; Guaranty Agreement by EPG in favor of Chemical Bank,
as Agent, and each of the Participants as of February 9, 1995;
Sponsor Agreement by EPG in favor of State Street Bank and Trust
Company as of February 9, 1995; Mortgage, Assignment, Security
Agreement and Financing Statement, executed February 7, 1995, between
State Street Bank and Trust Company (Mortgagor) and Chemical Bank
(Mortgagee); and Security Agreement among State Street Bank and Trust
Company and Chemical Bank, as Agent, dated February 9, 1995.
11 -- Computation of Earnings Per Common Share
27 -- Financial Data Schedule