SEC Filings
10-Q
SOUTHERN UNION CO filed this Form 10-Q on 11/10/1997
Entire Document
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                SOUTHERN UNION COMPANY AND SUBSIDIARIES

                 MANAGEMENT'S DISCUSSION AND ANALYSIS
          OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Missouri Gas Energy service territories experienced weather which
was 104% of a 30-year measure for both the twelve-month periods
ended September 30, 1997 and 1996.  Weather for Southern Union
Gas service territories for the twelve-month period ended
September 30, 1997 was 100% of a 30-year measure compared with
95% in 1996.

Net operating margin increased 3% for the twelve-month period
ended September 30, 1997 compared with the same period in 1996.
The increase in net operating margin resulted primarily from the
annual increase in revenues granted to Missouri Gas Energy and
increased revenues under the gas supply incentive plan, both
previously discussed.

Operating expenses were $157,013,000 for the twelve-month period
ended September 30, 1997, an increase of 2%, compared with
operating expenses of $153,907,000 in 1996.  The increase in
operating expenses resulted primarily from $4,278,000 in addi-
tional bad debt expense associated with increases in delinquent
customer accounts, primarily at Missouri Gas Energy as a result
of significant increases in natural gas prices during the 1996/
1997 winter heating season; increased media advertising, travel
and call center labor costs as a result of and in response to the
significant price spikes in natural gas during the 1996/1997
winter heating season; increased field and call center labor and
other costs to improve customer service at Missouri Gas Energy;
and increases in depreciation and amortization as a result of
including certain costs into rate base that were previously
deferred.  Partially offsetting these factors was a decrease in
medical, dental, pension and injury and damage claims.

Interest expense was $33,628,000 for the twelve-month period
ended September 30, 1997, a decrease of 4%, compared to
$34,981,000 in 1996.  The decrease in interest expense is due to
the repurchase of Senior Notes from June 1995 through June 1996
which was partially offset by an increase in interest expense
from increased borrowings under the various financing facilities.
See also "Debt" in the Notes to the Consolidated Financial State-
ments for the period ended September 30, 1997 included herein.

Other income for the twelve-month period ended September 30, 1997
was $2,915,000 compared to $11,641,000 in 1996.  Other income for
the twelve-month period ended September 30, 1997 included:
realized gains on the sale of investment securities of
$3,633,000; deferral of interest and other expenses associated
with the Missouri Gas Energy Safety Program of $2,423,000; and
net rental income from Lavaca Realty of $1,242,000.  This was
partially offset by $2,125,000 for the settlement of certain
billing errors at Missouri Gas Energy and the write-off of
$1,750,000 acquisition-related costs from the termination of
various acquisition activities. Other income for the twelve-month
period ended September 30, 1996 included:  $6,202,000 related to
the deferral of interest and other expenses associated with the
Missouri Gas Energy Safety Program; net rental income from Lavaca
Realty of $1,400,000; a pre-tax gain of $2,300,000 on the sale of
Western Gas Interstate Company (WGI) and other operations; and a
$1,488,000 gain on the repurchase of Senior Notes.

For the twelve-month period ended September 30, 1997, federal and
state income taxes decreased $2,094,000 over the same period in
1996 due to a reduction in pre-tax earnings as discussed above.
The Company's consolidated federal and state effective income tax
rate was 39% for the twelve-month period ended September 30, 1997
compared to 41% in 1996.


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