8-K 1 h42348e8vk.htm FORM 8-K e8vk
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 21, 2006
(Date of Earliest Event Reported)
ANR PIPELINE COMPANY
(Exact name of Registrant as specified in its charter)
         
Delaware
(State or other jurisdiction of
incorporation or organization) 		  1-7320
(Commission File Number) 		  38-1281775
(I.R.S. Employer
Identification No.)
El Paso Building
1001 Louisiana Street
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (713) 420-2600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

Item 1.01 Entry into a Material Definitive Agreement.
     See Item 2.01 below, which is incorporated by reference into this item.
Item 2.01 Completion of Acquisition or Disposition of Assets.
     On December 21, 2006, our wholly owned subsidiary, ANR Capital Corporation, entered into a definitive purchase and sale agreement and sold all of its interest in El Paso Great Lakes Company, L.L.C. (“El Paso Great Lakes”) to Seafarer US Pipeline System, Inc. (“Seafarer”), a wholly owned subsidiary of El Paso Corporation, for $815 million. El Paso Great Lakes owns our 50 percent ownership interest in Great Lakes Gas Transmission (“Great Lakes”), which operates a 2,115 mile interstate natural gas pipeline system that transports natural gas to customers in the midwestern and northeastern U.S. and eastern Canada. This sale was an interim step in the announced sale of Great Lakes by El Paso to affiliates and subsidiaries of TransCanada Corporation. The purchase and sale agreement between ANR Capital Corporation and Seafarer is attached to this Form 8-K as Exhibit 10.A.
     This Current Report on Form 8-K is being filed to report the sale and present the pro forma impact of the sale on our historical financial statements.
Item 8.01 Other Events.
     On December 22, 2006, El Paso Corporation, our parent company, announced it was selling us, Great Lakes and its Michigan storage assets to affiliates and subsidiaries of TransCanada Corporation for approximately $3.3 billion in cash, plus the assumption of debt. A copy of El Paso’s press release is attached as Exhibit 99.A.
Item 9.01 Financial Statements and Exhibits.
     (b) Pro forma financial information.
     The accompanying pro forma financial statements are based on our historical consolidated financial statements as of and for the nine months ended September 30, 2006 and our historical consolidated financial statements for the year ended December 31, 2005, adjusted for the effects of the sale of El Paso Great Lakes, as described above. These statements are unaudited. The pro forma balance sheet as of September 30, 2006, assumes the disposition occurred on the balance sheet date. The pro forma statements of income for the nine months ended September 30, 2006 and year ended December 31, 2005, assume the disposition occurred on January 1, 2005. The pro forma financial statements should be read in conjunction with the historical financial statements included in our Annual Report on Form 10-K for 2005 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and should not be construed to be indicative of future results or results that actually would have occurred had the transaction occurred at the dates presented. In addition, these pro forma financial statements were prepared in accordance with Article 11 of Regulation S-X. Accordingly, we have not assumed any cost savings that might occur related to the transaction, nor have we assumed any interest income on the proceeds received as consideration in the historical pro forma periods presented.

 

 

ANR Pipeline Company
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2006
(In millions)
                         
    ANR     Pro Forma     As  
    Historical     Adjustments     Adjusted  
Current Assets
                        
Cash and cash equivalents
   $ —     $ —     $ —  
Accounts and notes receivable, net
     39       282 (a)     321  
Materials and supplies
     21               21  
Deferred income taxes
     13       13 (c)      
Other
     6               6  
 
                  
Total current assets
     79       269       348  
 
                  
 
                        
Property, plant and equipment, net
     1,774               1,774  
 
                        
Other assets
                        
Notes receivable from affiliates
     610       533 (a)     1,143  
Investment in unconsolidated affiliate
     295       (295 )(b)     —  
Other
     21               21  
 
                  
Total Assets
   $ 2,779     $ 507     $ 3,286  
 
                  
 
                        
Current liabilities
                        
Accounts payable
   $ 73     $       $ 73  
Taxes payable
     121       9 (c)     130  
Accrued interest
     15               15  
Other
     34       273 (c)     307  
 
                  
Total current liabilities
     243       282       525  
 
                  
 
                        
 
                  
Long-term debt
     741               741  
 
                  
 
                        
Other Liabilities
                        
Deferred income taxes
     390       (108 )(c)     282  
Affiliate payable
     167               167  
Other
     68               68  
 
                  
 
     625       (108 )     517  
 
                  
 
                        
Commitments and contingencies
                        
 
                        
Stockholder’s equity
                        
Common stock
     —       —       —  
Additional paid-in capital
     597       333 (a)     930  
Retained earnings
     573               573  
 
                  
Total stockholder’s equity
     1,170       333       1,503  
 
                  
Total liabilities and stockholder’s equity
   $ 2,779     $ 507     $ 3,286  
 
                  
See accompanying notes.

 

 

ANR Pipeline Company
Unaudited Pro Forma Condensed Consolidated Income Statement
Nine Months Ended September 30, 2006
(In millions)
                         
    ANR     Pro Forma     As  
    Historical     Adjustments     Adjusted  
 
                        
Operating revenues
   $ 405     $       $ 405  
 
                  
Operating expenses
                        
Operations and maintenance
     183               183  
Depreciation, depletion and amortization
     28               28  
Taxes, other than income
     20               20  
 
                  
 
     231               231  
 
                  
Operating income
     174               174  
 
                        
Earnings from unconsolidated affiliate
     44       (44 )(b)     —  
Other income, net
     1               1  
 
                        
Interest and debt expense
     (49 )             (49 )
Affiliated interest income, net
     25               25  
 
                  
Income before income taxes
     195       (44 )     151  
 
                        
Income taxes
     72       (16 )(d)     56  
 
                  
Net income
   $ 123     $ (28 )   $ 95  
 
                  
See accompanying notes.

 

 

ANR Pipeline Company
Unaudited Pro Forma Condensed Consolidated Income Statement
Year Ended December 31, 2005
(In millions)
                         
    ANR     Pro Forma     As  
    Historical     Adjustments     Adjusted  
 
                        
Operating revenues
   $ 548     $       $ 548  
 
                  
Operating expenses
                        
Operations and maintenance
     267               267  
Depreciation, depletion and amortization
     40               40  
Taxes, other than income
     24               24  
 
                  
 
     331               331  
 
                  
Operating income
     217               217  
 
                        
Earnings from unconsolidated affiliate
     59       (59 )(b)     —  
Other income, net
     2               2  
 
                        
Interest and debt expense
     (67 )             (67 )
Affiliated interest income, net
     21               21  
 
                  
Income before income taxes
     232       (59 )     173  
 
                        
Income taxes
     84       (21 )(d)     63  
 
                  
Income from continuing operations before cumulative effect of accounting change
   $ 148     $ (38 )   $ 110  
 
                  
See accompanying notes.

 

 

ANR Pipeline Company
Notes to the Pro Forma Financial Statements
ANR Historical
     These amounts represent our historical balance sheet amounts as of September 30, 2006 and historical income statement amounts for the nine months ended September 30, 2006 and for the year ended December 31, 2005. The amounts as of and for the nine months ended September 30, 2006 were derived from our Quarterly Report on Form 10-Q for the period ended September 30, 2006. The amounts for the year ended December 31, 2005 were derived from our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
Pro Forma Adjustments
     The pro forma adjustments represent:
  (a)   the proceeds from the sale of our interests in El Paso Great Lakes. The proceeds were advanced to El Paso through our cash management program and we have reflected these advances as notes receivable in the pro forma financial statements. These cash management receivables will earn interest. As of September 30, 2006, the interest rate on our cash management receivables was 5.2%. However, for pro forma income statement purposes, we have not assumed any additional affiliated interest income. In addition, we have classified a portion of these advances as current based upon the classification of taxes that resulted from the transactions that are discussed below.
 
As a result of El Paso’s announced sale of ANR Pipeline, it is anticipated that ANR Pipeline’s affiliated receivables, with the exception of cash needed in the interim period leading up to the sale, will be settled through equity transactions (e.g. contributions or distributions). As a result, all of ANR Pipeline’s affiliated balances that are expected to be settled in this manner will be classified as a reduction or increase to stockholder’s equity. The accompanying pro forma financial statements do not reflect any adjustments associated with the ultimate settlement of the affiliated balances in connection with El Paso’s sale of ANR Pipeline.

Finally, because this sale transaction occurred between entities that are both owned by El Paso Corporation, the difference between the proceeds and the historical balances of El Paso Great Lakes, net of the related taxes discussed below, have been reflected in the balance sheet in additional paid-in capital as a contribution.
 
  (b)   the historical balances of El Paso Great Lakes sold to Seafarer.
 
  (c)   deferred income taxes reclassified as current upon the sale of El Paso Great Lakes and deferred taxes recorded on the difference between the proceeds and the underlying net book value of El Paso Great Lakes. For tax purposes, the sale of El Paso Great Lakes to Seafarer created a taxable gain, the majority of which is deferred and recognized at the time ANR Pipeline or Great Lakes is sold outside of the El Paso group. The deferred taxes were recorded at a tax rate of 36%, which represents ANR Capital Corporation’s statutory combined federal and state tax rates, and these deferred taxes have been reflected as current since they are expected to be settled in the next twelve months.
 
  (d)   income taxes on the income of our Great Lakes investment at a statutory rate of 36%.

 

 

     (d) Exhibits.
     
Exhibit    
Number   Description
 
    
10.A
  Purchase and Sale Agreement dated December 21, 2006, by and between ANR Capital Corporation and Seafarer U.S. Pipeline System, Inc.
 
    
99.A
  Press Release of El Paso Corporation dated December 22, 2006

 

 

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.
         
  ANR PIPELINE COMPANY
 		  
  By:   /s/ John R. Sult    
    John R. Sult   
    Senior Vice President, Chief Financial Officer and Controller (Principal Accounting and Financial Officer)   
 
Dated: December 28, 2006

 

 

EXHIBIT INDEX
     
Exhibit    
Number   Description
 
    
10.A
  Purchase and Sale Agreement dated December 21, 2006, by and between ANR Capital Corporation and Seafarer U.S. Pipeline System, Inc.
 
    
99.A
  Press Release of El Paso Corporation dated December 22, 2006