UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter 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
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Commission file number 1-1483
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WASHINGTON GAS LIGHT COMPANY
(Exact name of registrant as specified in its charter)
District of Columbia and Virginia 53-0162882
-------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 H Street, N. W., Washington, D. C. 20080
- ------------------------------------------ -------------------
(Address of principal executive offices) (Zip Code)
(703) 750-4440
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Registrant's telephone number, including area code
NONE
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(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $1.00 par value 43,705,279 April 30, 1997
- ---------------------------- -------------------- ----------------
Class Number of Shares Date
1
WASHINGTON GAS LIGHT COMPANY
INDEX
Page No.
--------
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1997 and September 30, 1996.................... 2
Consolidated Statement of Income -
Three Months Ended March 31, 1997 and 1996............... 3
Consolidated Statement of Income -
Six Months Ended March 31, 1997 and 1996................. 4
Consolidated Statement of Cash Flows -
Six Months Ended March 31, 1997 and 1996................. 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................7-13
PART II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders ... 14
Item 5. Other Information...................................... 15
Item 6. Exhibits and Reports on Form 8-K....................... 16
Signature....................................................... 16
2
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
Mar. 31, Sept. 30,
1997 1996
----------- -----------
(Unaudited)
(Thousands)
ASSETS
Property, Plant and Equipment
At original cost ............................. $ 1,777,518 $ 1,721,956
Accumulated depreciation and amortization .... (612,727) (591,382)
----------- -----------
1,164,791 1,130,574
----------- -----------
Current Assets
Cash and cash equivalents .................... 10,692 4,589
Accounts receivable, less reserve ............ 215,260 84,967
Inventories and storage gas purchased ........ 34,929 98,254
Deferred income taxes ........................ 21,550 17,888
Other prepayments, principally taxes ......... 8,076 10,047
----------- -----------
290,507 215,745
----------- -----------
Deferred Charges and Other Assets .............. 112,266 118,282
----------- -----------
Total ........................................ $ 1,567,564 $ 1,464,601
=========== ===========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity .................. $ 629,702 $ 558,809
Preferred stock .............................. 28,434 28,440
Long-term debt ............................... 402,506 353,893
----------- -----------
1,060,642 941,142
----------- -----------
Current Liabilities
Current maturities of long-term debt ......... 7,707 8,006
Notes payable ................................ 50,563 115,278
Accounts and wages payable ................... 117,682 104,832
Customer deposits and advance payments ....... 6,444 12,997
Accrued taxes and interest ................... 59,333 10,504
Other current liabilities .................... 13,218 22,537
----------- -----------
254,947 274,154
----------- -----------
Deferred Credits ............................... 251,975 249,305
----------- -----------
Total ........................................ $ 1,567,564 $ 1,464,601
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
3
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
-----------------------
Mar. 31, Mar. 31,
1997 1996
--------- ---------
(Thousands, Except Per
Share Data)
Operating Revenues ................................ $ 431,465 $ 431,826
Cost of Gas ....................................... 242,888 225,748
--------- ---------
Net Revenues ...................................... 188,577 206,078
--------- ---------
Other Operating Expenses
Operation ....................................... 42,160 47,402
Maintenance ..................................... 8,113 7,287
Depreciation and amortization ................... 12,819 11,964
General taxes ................................... 24,854 24,403
Income taxes .................................... 33,670 39,564
--------- ---------
121,616 130,620
--------- ---------
Operating Income .................................. 66,961 75,458
Other Income (Loss) - Net ......................... 1,106 (714)
--------- ---------
Income Before Interest Expense .................... 68,067 74,744
Interest Expense .................................. 8,923 7,835
--------- ---------
Net Income ........................................ 59,144 66,909
Dividends on Preferred Stock ...................... 333 333
--------- ---------
Net Income Applicable to Common Stock ............. $ 58,811 $ 66,576
========= =========
Average Common Shares Outstanding ................. 43,706 43,317
Earnings per Average Share of Common Stock
(See Exhibit 11 for computation of fully
diluted earnings per average share) ............ $ 1.35 $ 1.54
========= =========
Dividends Declared per Common Share ............... $ 0.295 $ 0.285
========= =========
See accompanying Notes to Consolidated Financial Statements.
4
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Six Months Ended
-----------------------
Mar. 31, Mar. 31,
1997 1996
--------- ---------
(Thousands, Except Per
Share Data)
Operating Revenues ................................ $ 776,423 $ 706,152
Cost of Gas ....................................... 434,162 348,652
--------- ---------
Net Revenues ...................................... 342,261 357,500
--------- ---------
Other Operating Expenses
Operation ....................................... 87,906 92,348
Maintenance ..................................... 16,980 15,104
Depreciation and amortization ................... 25,398 23,837
General taxes ................................... 43,800 40,876
Income taxes .................................... 55,160 62,856
--------- ---------
229,244 235,021
--------- ---------
Operating Income .................................. 113,017 122,479
Other Income (Loss) - Net ......................... 1,657 (1,565)
--------- ---------
Income Before Interest Expense .................... 114,674 120,914
Interest Expense .................................. 18,106 15,665
--------- ---------
Net Income ........................................ 96,568 105,249
Dividends on Preferred Stock ...................... 666 666
--------- ---------
Net Income Applicable to Common Stock ............. $ 95,902 $ 104,583
========= =========
Average Common Shares Outstanding ................. 43,710 43,175
Earnings per Average Share of Common Stock
(See Exhibit 11 for computation of fully
diluted earnings per average share) ............ $ 2.19 $ 2.42
========= =========
Dividends Declared per Common Share ............... $ 0.580 $ 0.565
========= =========
See accompanying Notes to Consolidated Financial Statements.
5
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
-----------------------
Mar. 31, Mar. 31,
1997 1996
--------- ---------
(Thousands)
Operating Activities
Net Income ........................................... $ 96,568 $ 105,249
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization a/ ................... 29,007 27,152
Deferred income taxes-net .......................... (3,440) 5,422
Amortization of investment tax credits ............. (479) (488)
Allowance for funds used during construction ....... (179) (293)
Other noncash charges and credits-net .............. (1,520) 5,190
--------- ---------
119,957 142,232
Changes in assets and liabilities:
Accounts receivable and accrued utility revenues ... (145,813) (173,801)
Gas costs due from/to customers - net .............. 15,236 (29,638)
Storage gas costs .................................. 62,052 48,100
Other prepayments, principally taxes ............... 1,971 491
Accounts and wages payable ......................... 12,085 45,445
Customer deposits and advance payments ............. (6,553) (8,973)
Accrued taxes ...................................... 48,761 36,495
Pipeline refunds due customers ..................... (9,466) 1,687
Rate refund due customers .......................... - (9,306)
Deferred purchased gas costs ....................... 13,367 (29)
Other-net .......................................... (1,768) 4,740
--------- ---------
Net Cash Provided by Operating Activities ........ 109,829 57,443
--------- ---------
Financing Activities
Common stock issued .................................. 312 6,295
Long-term debt issued ................................ 83,788 50,000
Long-term debt retired ............................... (35,506) (69,830)
Premium on long-term debt retired .................... (1,422) (2,263)
Notes payable - net .................................. (64,715) 23,794
Dividends on common and preferred stock .............. (25,583) (24,811)
--------- ---------
Net Cash Used in Financing Activities ............ (43,126) (16,815)
--------- ---------
Investing Activities
Capital expenditures ................................. (60,600) (48,005)
--------- ---------
Net Cash Used in Investing Activities ............ (60,600) (48,005)
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents ..... 6,103 (7,377)
Cash and Cash Equivalents at Beginning of Period ..... 4,589 13,911
--------- ---------
Cash and Cash Equivalents at End of Period ........... $ 10,692 $ 6,534
========= =========
Supplemental Disclosures of Cash Flow Information
Income taxes paid .................................. $ 14,462 $ 28,111
Interest paid ...................................... $ 15,922 $ 16,326
a/ Includes amounts charged to other accounts.
See accompanying Notes to Consolidated Financial Statements.
6
WASHINGTON GAS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. In the opinion of the Company, the accompanying Consolidated Financial
Statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results for such periods.
Refer to the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996.
B. Due to the seasonal nature of the Company's business, the results of
operations shown do not indicate the expected results for the fiscal year
ended September 30, 1997.
C. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
D. During the six months ended March 31, 1997, the Company issued a total of
$83 million in Medium Term Notes (MTNs). The notes have a 30-year nominal
life and coupon rates ranging from 6.57% to 6.82%. Holders of $28 million
of these MTNs have a one-time option to have the Company redeem the notes
at their face value in seven years. The holders of the remaining $55
million of MTNs have a one-time option to have the Company redeem the notes
at their face value in ten years.
E. In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share"
(SFAS No.128) and SFAS No. 129, "Disclosure of Information about Capital
Structure" (SFAS No. 129). The Company will adopt both of these statements
in the first quarter of fiscal year 1998; however, there is not expected to
be any effect on the Company's Consolidated Financial Statements.
SFAS No. 128 establishes standards for computing and presenting earnings
per share (EPS) which simplifies calculations currently found in Accounting
Principles Board Opinion No. 15, "Earnings per Share," as amended and
interpreted, and thus, makes them comparable to international EPS
standards. SFAS No. 128 replaces primary EPS with a presentation of basic
EPS. Basic EPS excludes dilution for any potentially dilutive securities
and is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. SFAS
No. 128 also requires dual presentation of basic and fully diluted EPS (now
called diluted EPS) on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the basic
EPS calculation to the diluted EPS computation.
SFAS No. 129 continues the existing requirements to disclose the pertinent
rights and privileges of all security holders other than ordinary common
stockholders but expands the number of companies subject to portions of its
requirements.
F. As of March 31, 1997, the Company had permanent bank lines of credit
available of $20 million, all of which were unused. In support of the
permanent lines, the Company pays commitment or non-usage fees of .07% per
annum of the unused lines. Of these lines, $15 million will expire on June
30, 1997, with the remaining $5 million expiring on June 30, 1998.
G. Certain amounts in financial statements of prior years have been
reclassified to conform to the presentation of the current year.
7
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this report that are not based on historical facts
are forward-looking statements as defined in the Private Securities Litigation
Reform Act of 1995. Actual results could differ from the expectations discussed
herein.
Factors that could cause actual results to differ from management's beliefs
described in this report include, among other matters: (1) the effect of
fluctuations in weather from normal levels; (2) regulatory and legislative
changes; (3) variations in prices of natural gas and competing energy sources;
(4) improvements in products or services offered by competitors; and (5)
changing economic conditions.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 vs. MARCH 31, 1996
Earnings
For the three months ended March 31, 1997, net income applicable to common
stock amounted to $58.8 million, or $7.8 million lower than for the same quarter
last year. Earnings per average common share were $1.35, or $.19 per average
common share lower than last year. Average common shares outstanding increased
by less than 1% over the prior year. Effective November 1, 1996 shares issued
under the Dividend Reinvestment and Common Stock Purchase Plan and Employee
Savings Plans are being purchased on the open market instead of being issued as
new shares. The decrease in net income applicable to common stock was directly
attributable to significantly warmer weather in the current quarter, resulting
in a decrease in firm therms delivered and thus, net revenues. Mitigating some
of the effect of the warmer weather were a 2.9% increase in the number of
customer meters and a decrease in other operating expenses.
Net Revenues
The variability of weather affects the level of gas delivered to customers,
since a large portion of the Company's deliveries of natural gas is used for
heating. The Company establishes its rates on the basis of normal weather. The
Company has no weather normalization tariff provision in any of its
jurisdictions. However, the Company has declining block rates in two of its
three major jurisdictions that reduce the impact on net revenues of deviations
in weather from normal. Weather for the quarters ended March 31, 1997 and March
31, 1996 was 10.6% warmer than normal and 14.4% colder than normal,
respectively.
Net revenues for the period decreased by $17.5 million (8.5%) from the same
period last year to $188.6 million. The table on the following page compares
certain operating statistics for the quarters ended March 31, 1997 and 1996.
8
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Three Months Ended
----------------------
Mar. 31, Mar. 31,
1997 1996
-------- -------
Gas Sales and Deliveries (thousands of therms)
Gas Sold and Delivered
Firm ........................................ 484,255 575,951
Interruptible ............................... 53,278 49,712
Electric Generation ......................... - 253
------- -------
537,533 625,916
------- -------
Gas Delivered for Others
Firm ........................................ 10,620 1,522
Interruptible ............................... 54,879 16,399
Electric Generation ......................... 9,587 340
------- -------
75,086 18,261
------- -------
Total Deliveries ......................... 612,619 644,177
======= =======
Gas Sold Off System (thousands of therms) ......... 56,665 36,056
Degree Days
Actual ...................................... 1,924 2,466
Normal ...................................... 2,152 2,156
Customer Meters (end of period) ................... 796,653 774,266
Gas Delivered to Firm Customers
Therm deliveries to firm customers, including gas sold and delivered and
gas delivered for others, decreased by 82.6 million therms (14.3%) due to
weather that was 22% warmer than the same quarter last year. This caused the
majority of the decline in net revenues and was partially offset by the effect
of a 2.9% increase in the number of customer meters.
Gas Delivered to Interruptible Customers
Therms delivered to interruptible customers, including gas sold and
delivered and gas delivered for others, increased by 42.0 million therms (63.6%)
in the current quarter resulting in a slight increase in net revenues when
compared to the same quarter last year. The increase in volumes delivered
resulted primarily from significant interruptions in service to these customers
in the quarter last year due to the colder weather. Margin sharing arrangements
in each of the Company's major jurisdictions minimized the effect on net income
of increases in sales and deliveries to the interruptible class. Under these
arrangements, the Company returns a majority of the margins earned on sales and
deliveries to the interruptible class to firm customers after it reaches a
certain gross margin threshold or in exchange for the shift of a portion of the
fixed costs from the interruptible class to the firm class.
9
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Gas Delivered for Electric Generation
The Company sells and/or transports gas to two customers with facilities in
Maryland where the customers use the supplies to generate electricity. Volumes
delivered for electric generation in the current quarter increased by 9.0
million therms due primarily to the addition of the second customer in August
1996. The Company shares a significant majority of the margins earned on
deliveries to these customers with firm customers and, therefore, the change in
volumes delivered between periods had an immaterial effect on net income.
Gas Sold Off System
During the quarter ended March 31, 1997, the Company sold 56.7 million
therms to customers outside its service territory, an increase of 20.6 million
therms over the same period last year. The effect of these sales on net income
was not material.
Other Operating Expenses
Operation and maintenance expenses declined by $4.4 million (8.1%) from the
same period last year. This decrease primarily reflects: (1) lower labor costs
in the current year resulting from fewer employees; (2) increased compensation
to employees last year reflecting a lump-sum cash payout; and (3) higher
amortization of environmental expenses recorded last year.
Depreciation and amortization increased by $855,000 (7.1%) primarily due to
the effect of the Company's rising investment in plant and equipment.
General taxes rose by $451,000 (1.8%) primarily due to higher property
taxes resulting from increased investments in property.
Income taxes, including amounts reflected in other income, decreased by
$4.9 million, due primarily to lower pre-tax income. The effective tax rate for
the current quarter was 36.6% and was 36.9% in the prior year's quarter.
Other Income (Loss) - Net
Other income (loss) - net increased by $1.8 million due to the difference
in valuation reserves for certain non-utility activities recorded in the two
periods.
Interest Expense
Interest expense increased by $1.1 million (13.9%) primarily due to greater
interest expense on both long- and short-term debt. Interest on long-term debt
increased by $800,000 due almost exclusively to a $55.8 million rise in the
average amount of long-term debt outstanding. Partially offsetting this increase
was a decline of .25 percentage points in the weighted average cost of long-term
debt. Interest on short-term debt increased by $600,000 primarily due to a $44.7
million increase in the average amount of short-term debt outstanding. A decline
of .13 percentage points in the average cost of short-term debt partially offset
this increase.
10
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
SIX MONTHS ENDED MARCH 31, 1997 vs. MARCH 31, 1996
Earnings
For the six months ended March 31, 1997, net income applicable to common
stock amounted to $95.9 million, or $8.7 million lower than for the same period
last year. Earnings per average common share were $2.19, or $.23 per average
common share lower than last year. Average common shares outstanding increased
by 1.2% over the prior year. The decrease in net income applicable to common
stock was directly attributable to the warmer weather in the current period.
This decrease was partially offset by a 2.9% increase in customer meters, a
decrease in other operating expenses and an increase in other income (loss)-net.
Net Revenues
Net revenues for the six months ended March 31, 1997 decreased by $15.2
million (4.3%) from the same period last year to $342.3 million. This primarily
resulted from the significantly colder weather last year, partially offset by an
increase in customer meters in the current year. Weather for the six months
ended March 31, 1997 and March 31, 1996 was 3.6% warmer than normal and 18.0%
colder than normal, respectively. The table below compares certain operating
statistics for the six months ended March 31, 1997 and 1996.
Six Months Ended
-----------------------
Mar. 31, Mar. 31,
1997 1996
--------- ---------
Gas Sales and Deliveries (thousands of therms)
Gas Sold and Delivered
Firm ........................................ 853,400 956,921
Interruptible ............................... 107,675 108,217
Electric Generation ......................... 51 375
--------- ---------
961,126 1,065,513
--------- ---------
Gas Delivered for Others
Firm ........................................ 13,942 1,585
Interruptible ............................... 98,807 38,242
Electric Generation ......................... 20,224 6,792
--------- ---------
132,973 46,619
--------- ---------
Total Deliveries .......................... 1,094,099 1,112,132
========= =========
Gas Sold Off System (thousands of therms) ......... 85,803 36,056
Degree Days
Actual ...................................... 3,400 4,162
Normal ...................................... 3,528 3,526
Customer Meters (end of period) ................... 796,653 774,266
11
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Gas Delivered to Firm Customers
Therm deliveries to firm customers decreased by 91.2 million therms (9.5%)
resulting in a decline in net revenues. This net reduction was caused by weather
that was 18.3% warmer than for the same period last year, partially offset by a
2.9% increase in customer meters.
Gas Delivered to Interruptible Customers
Therms delivered to interruptible customers in the current period increased
by 60.0 million therms (41.0%) due to significant interruptions in service to
these customers in the same period last year due to the colder weather. As a
result of the previously mentioned margin sharing arrangements in each of the
Company's jurisdictions, the effect on net income of increased deliveries to
interruptible customers was minimal.
Gas Delivered for Electric Generation
Volumes delivered for electric generation in the current six months
increased by 13.1 million therms from the same period last year due primarily to
a second customer added in August 1996. Margins earned on such deliveries are
being shared with firm customers as described previously in this report.
Gas Sold Off System
During the six months ended March 31, 1997, the Company sold 85.8 million
therms to customers outside its service territory, a 49.7 million therm increase
over the same period last year. The effect of these sales on net income was not
material.
Other Operating Expenses
Operation and maintenance expenses fell by $2.6 million (2.4%) from the
same period last year. This decrease primarily reflects increased compensation
to employees last year from a lump-sum cash payout and lower labor costs this
year because of reduced employee levels.
Depreciation and amortization increased by $1.6 million (6.5%) primarily
due to additional depreciation on the Company's rising investment in plant and
equipment.
General taxes increased by $2.9 million (7.2%) due primarily to increased
property taxes resulting from increased investments in property and higher gross
receipts taxes on higher revenues. The higher revenues reflect an increased cost
of gas per therm in 1997 compared to 1996. Gross receipts taxes are included in
revenues and, therefore, fluctuations in these amounts have no effect on net
income.
Income taxes, including amounts reflected in other income, decreased by
$6.2 million, due primarily to lower pre-tax income. The effective tax rate for
the current year was 36.7% and was 37.1% in the prior year.
12
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Other Income (Loss) - Net
Other income (loss) - net increased by $3.2 million due to the difference
in valuation reserves for certain non-utility activities recorded in the two
periods.
Interest Expense
Interest expense increased by $2.4 million (15.6%) primarily due to higher
interest expense on both long- and short-term debt. Interest on long-term debt
increased by $900,000 primarily due to a $45.8 million rise in the average
amount of long-term debt outstanding. Partially offsetting this increase was a
decline of .40 percentage points in the weighted average cost of long-term debt.
Interest on short-term debt increased by $1.8 million primarily due to a $65.3
million increase in the average amount of short-term debt outstanding reflecting
the effect of financing increased gas costs and an increased emphasis on using
short-term debt to finance current assets. A decline of .21 percentage points in
the average cost of short-term debt partially offset this increase.
LIQUIDITY AND CAPITAL RESOURCES
Short-Term Cash Requirements and Related Financing
The Company's business is highly weather sensitive and seasonal.
Approximately 75% of the Company's therms delivered (excluding deliveries for
electric generation) occur in the first and second fiscal quarters. This weather
sensitivity causes short-term cash requirements to vary significantly during the
year. Cash requirements peak in the fall and winter months when accounts
receivable, accrued utility revenues and storage gas are at or near their
highest levels. When these assets are converted into cash after the winter
heating season, the Company liquidates short-term debt and acquires storage gas
for the subsequent heating season.
The Company uses short-term debt in the form of commercial paper and
short-term bank loans to fund seasonal cash requirements. Alternative seasonal
sources include unsecured lines of credit, some of which are seasonal, and $130
million in a revolving-credit agreement maintained with a group of banks. The
Company activates these financing options to support or replace the Company's
commercial paper. Excluding current maturities, the Company had $50.6 million
and $23.8 million of short-term debt outstanding as of March 31, 1997 and March
31, 1996, respectively. At March 31, 1997, the Company had $8.0 million of bank
loans and $42.6 million of commercial paper outstanding. This represented a
decline of $64.7 million from the balance outstanding at September 30, 1996.
Long-Term Cash Requirements and Related Financing
Capital expenditures for the first six months of fiscal year 1997 were
$60.6 million with a budget of $153.2 million for the year. To fund construction
expenditures and other capital requirements, the Company draws upon both
internal and external sources of cash. The Company's ability to generate
adequate cash internally depends upon a number of factors, including the timing
and amount of rate increases received and the level of therm sales. The
Company's last significant base rate increase became effective in December 1994.
The number of customer meters and the variability of the weather almost
exclusively affect the level of therm sales.
13
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Net cash provided by operating activities was $109.8 million during the
first six months of fiscal year 1997 and compares to $57.4 million for the same
period in fiscal year 1996. This improvement came from: (1) increased
collections from customers of gas costs; (2) lower funds supporting accounts
receivable due to warmer weather and decreased gas costs in March 1997; (3)
decreased income tax payments in 1997 even though taxable income between years
did not vary significantly due to the timing of current deductions for gas
costs; and (4) increased levels of storage gas injections in the prior period
due to the colder weather experienced last year. The combined effect of: (1)
decreased sources of cash reflected in accounts and wages payable due to
decreased gas prices in March 1997 compared to March 1996 and the payment of
amounts associated with the redesign of the Company's organization; (2) lower
refunds received from pipelines; and (3) lower net income, partially offset
these sources.
The total long-term debt issued in the current six month period ($83.8
million) represents issuances of Medium-Term Notes (MTNs) in October 1996 and
February 1997 and other long-term debt ($.8 million) issued by a subsidiary of
the Company. The $30.0 million issuance of MTNs in February 1997 was used for
the retirement on March 27, 1997 of $27.5 million of the 8-5/8% Series of First
Mortgage Bonds that were callable on or after March 1, 1997. The $30.0 million
of MTNs have a 30-year nominal life and a coupon rate of 6.57%. Holders of the
notes have a one-time option to have the Company redeem the notes at their face
value on February 22, 2007. Other retirements of long-term debt ($8.0 million)
occurred in January 1997 related to the maturity of MTNs with coupon rates of
6.50% to 6.58%.
The discontinuation of new shares being issued through the Dividend
Reinvestment and Common Stock Purchase Plan and Employee Savings Plans caused
the $6.0 million decrease in cash provided by common stock issued. Effective
November 1, 1996, the plans purchase shares in the open market.
During the six months ended March 31, 1997, the Company sold with recourse,
$19.2 million of non-utility accounts receivable. This compares to $17.3 million
sold in the six months ended March 31, 1996.
14
PART II. OTHER INFORMATION
Item 4.
Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders was held on February 21, 1997.
(c) Matters voted upon at the meeting:
The following individuals were elected to the Board of Directors at
the annual meeting on February 21, 1997:
Director Votes in Favor Votes Withheld
---------------------------- -------------- --------------
Michael D. Barnes 35,927,869 717,743
Fred J. Brinkman 36,005,498 763,045
Daniel J. Callahan, III 36,047,620 597,992
Orlando W. Darden 35,924,471 721,141
James H. DeGraffenreidt, Jr. 36,030,021 615,591
Melvyn J. Estrin 35,943,554 702,058
Patrick J. Maher 36,077,089 568,523
Karen Hastie Williams 35,795,294 850,318
Stephen G. Yeonas 35,998,261 647,351
The following other matters were introduced and voted upon at the
annual meeting:
The Board of Directors recommended that the stockholders ratify the
appointment of Arthur Andersen LLP, independent public accountants, to
audit the books, records and accounts of the Company for fiscal year 1997.
This proposal was approved by a vote of 35,945,030 in favor of the proposal
and 341,759 against. There were 367,858 abstentions.
A stockholder proposed that the Board of Directors take steps to
provide for cumulative voting in the election of Directors. This proposal
was defeated by a vote of 6,182,823 in favor of the proposal and 20,013,930
against. There were 10,090,036 broker non-votes.
A stockholder proposed that the Board of Directors stop giving pension
or other retirement benefits to outside Directors unless the shareholders
vote on the pension package; and that current non-employee Directors
voluntarily give up their pension benefits. This proposal was defeated by a
vote of 8,821,524 in favor of the proposal and 17,249,516 against. There
were 10,215,749 broker non-votes.
15
PART II. OTHER INFORMATION (continued)
Item 5.
Other Information
A. Many in the energy industry, including the Company, believe that the
increasingly deregulated and more competitive energy industry will continue
to lead to industry consolidation, combination, disaggregation and other
strategic alliances and restructuring as energy companies seek to offer a
broader range of energy services to compete more effectively in attracting
and retaining customers. For example, affiliations with other operating
utilities could potentially result in economies and synergies, and
combinations could provide a means to offer customers a more complete range
of energy services. Others are discontinuing operations in certain portions
of the energy industry or divesting portions of their business and
facilities. The Company, from time to time, performs studies, and in some
cases holds discussions regarding utility and energy-related investments
and transactions. The ultimate impact on the Company of any such
investments and transactions that may occur can not be determined at this
time.
B. On March 26, 1997, the Board of Directors declared a dividend on common
stock of $.295 per share. This compares to a $.285 dividend declared in the
quarter ended March 31, 1996. The higher dividend rate, if declared for the
next three quarters, would represent an annual increase of $.04 per share
and an annualized dividend of $1.18 per share.
C. As previously reported on Form 10-K for the year ended September 30, 1996,
during 1995, the Company conducted contract negotiations with the
International Union of Gas Workers (IUGW). The IUGW unit did not ratify the
Company's contract offer. Beginning June 10, 1995, a 16-week lockout of the
unit followed dozens of bargaining sessions, intercession by a federal
mediator, a strike authorization vote and the IUGW's statement that it
would strike when appropriate. In September 1995, after further efforts to
bargain, negotiations reached an impasse and the Company invited workers to
return to work under the terms and conditions of its final contract offer.
All IUGW-eligible employees returned to work. In June 1996, the IUGW voted
to affiliate with the International Brotherhood of Teamsters (IBT).
IBT Local 96-eligible employees have been working under the terms and
conditions of the Company's final contract offer, as amended, since
September 1995. The National Labor Relations Board (NLRB) has ruled in
favor of the Company three separate times on charges of unfair labor
practices brought by IUGW, including a decision on April 29, 1996 by the
Office of Appeals of the NLRB to dismiss IUGW's appeal of those rulings,
with no further right of appeal.
In October 1996, the Company invited IBT Local 96 to resume negotiations.
IBT Local 96 accepted the invitation and the parties have returned to the
bargaining table. Since the Company has not yet reached an agreement with
IBT Local 96, the no strike/no lockout provision, usually included in its
collective bargaining agreements, is not in effect and no assurance can be
given that work stoppages will not occur. In the event a work stoppage
occurs, the Company is prepared to maintain operations.
16
PART II. OTHER INFORMATION (continued)
Item 6.
Exhibits and Reports on Form 8-K
(a) Exhibits Filed Herewith:
Description Page in 10-Q
- --------------------------------------------------- -------------------
11 Computation of Earnings per Average Share of See separate
Common Stock Assuming Full Dilution from volume
Conversions of the $4.60 and $4.36 Convertible
Preferred Series
27 Financial Data Schedule "
99.0 Computation of Ratio of Earnings to Fixed Charges "
99.1 Computation of Ratio of Earnings to Fixed Charges "
and Preferred Stock Dividends
(b) Reports on Form 8-K
On February 6, 1997 the Company reported that on January 24, 1997, it
executed a Distribution Agreement with Salomon Brothers Inc; M.R. Beal &
Company; Merrill Lynch & Co. and PaineWebber Incorporated for issuance of
up to $250 million of Medium-Term Notes.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASHINGTON GAS LIGHT COMPANY
----------------------------
(Registrant)
Date May 15, 1997 /s/ Robert E. Tuoriniemi
------------------ -------------------------------
Controller
(Principal Accounting Officer)