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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report August 11, 1995
I.R.S.
Commission Employer
File State of Identification
Number Registrant Incorporation Number
001-11227 Washington Energy Company Washington 91-1005304
001-11271 Washington Natural Gas Company Washington 91-1005303
815 Mercer Street, Seattle, Washington 98111
(Address of Registrant's principal executive offices)
Registrant's telephone number, including area code: (206) 622-6767
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Item 5. Other Events
a) On July 27, 1995, Washington Energy Company made the following press
release:
RATE ACTIONS IMPROVE UTILITY MARGIN 24%
SEATTLE -- Washington Energy Company's utility margin
(revenue less cost of purchased gas) rose 24 percent in the third
fiscal quarter as a result of two rate increases in the past year
and a 5 percent increase in utility customers, Chairman William
P. Vititoe reported today.
"The two rate increases are key to this quarter's results,
even though the full benefit of the most recent increase won't
hit the bottom line until next heating season," Vititoe said.
"These increases, in combination with several other positive rate
actions this year, have produced a marked improvement in the
company's earnings capability. The elements are in place for a
far more productive future," he said.
Utility margin increased by $7 million, to $36.3 million,
compared to the same quarter last year. The impact of the rate
increases on margin was dampened by lower gas sales due to
weather that was 25 percent warmer than normal during the
quarter.
The company posted a quarterly loss of $5.6 million from
continuing operations, or 23 cents per share. That compares with
a 34 cent per share loss in the same quarter one year ago, after
eliminating the impact of one-time charges in the prior period.
(Net earnings in the June 1994 quarter included $1.74 per share
in one-time charges resulting primarily from management
strategies to focus on the core utility business.)
Because natural gas is used mainly for heating, the company's
first two quarters provide the majority of its earnings, with the
third quarter normally showing either a profit or a loss,
depending upon weather.
Analysis of quarterly results
Third-quarter results included the benefits of several
factors:
1) two utility rate increases: the first, of $19 million,
was implemented in June 1994; the second, of $17.7 million, went
into effect May 15, 1995.
2) 5 percent growth in utility customers (on an annual
basis), which contributed to a 3 percent increase in gas sales
volumes. The company served 20,500 more utility customers during
the current period, compared to one year ago.
3) a reduction of $300,000 in ongoing operating and
maintenance expenses, reflecting organizational changes
implemented primarily in the summer of 1994.
12-month results
Utility margin for the 12 months ended June 30, 1995, rose by
$22.5 million, a 13 percent increase over the same period one
year ago. The improvement reflects a full year of operation with
the $19 million rate increase implemented June 4, 1994, and 1-1/2
months of operation under the $17.7 million rate increase that
went into effect May 15, 1995.
The positive earnings impact of the rate increases, however,
was restrained by three factors: 1) warmer-than-normal weather;
2) one-time charges totalling $1.6 million, taken in the
September quarter of fiscal 1994; and 3) various consulting
costs of $2.6 million to support the company's organizational
transformation. The transformation includes restructuring around
customer-oriented processes, re-engineering, and focused training
for all employees to embrace an efficient and customer-responsive
corporate culture.
"We expect re-engineering to reduce utility operating and
maintenance costs by $3-to-$5 million in fiscal 1996," Vititoe
said, "and our improved cost-effectiveness will help to restrain
the overall growth of operating expenses as we continue to add
new customers. Long-term, we also expect re-engineering to
reduce substantially the costs of adding new customers --
although over the next two-to-three years we will significantly
increase our capital outlays for information technologies to
support more efficient operations.
"We estimate consulting expenses in fiscal 1995 will be
approximately $4.5 million, but to be minimal in fiscal 1996 as
the company implements the redesigned processes," Vititoe added.
Twelve-month income from continuing operations totaled $8.0
million, an increase of $7.6 million compared to the prior year,
after excluding one-time charges taken in the third and fourth
quarters of fiscal 1994. The improvement reflects the 12-month
impact of the same factors that affected quarterly results: two
general rate increases, reductions of $3.1 million in ongoing
utility operating and maintenance costs for the period, and
continuing 5 percent utility customer growth.
Outlook
"Neither the quarterly results nor our 12-month performance
reflects the full impact of the transformation of our
organization this year and the positive direction in which our
company now is headed," Vititoe said. "A series of constructive
rate actions, culminating this quarter in a $17.7 million rate
increase and a redesign of our rate structure, have improved our
regulatory foundation, our opportunity for profitability, and our
ability to be successful in a future of increased competition.
"These rate changes will be complemented by the
transformation of our organization into a more productive and
creative company," Vititoe added. "Our goal is to provide the
best service and be the most cost-efficient gas utility in the
nation."
Washington Energy Company common stock trades on the New York
Stock Exchange under the symbol, "WEG."
Washington Energy Company
Summary Income Statements And Other Financial Data
(Dollars in thousands, except per share amounts)
3 Months Ended 12 Months Ended
June 30 (1) June 30 (1)
1995 1994 1995 1994
--------- --------- --------- ---------
Washington Energy Company
Operating revenues
Regulated utility
sales $ 75,124 $ 72,455 $ 424,795 $ 400,485
Merchandise,
conservation
products, and other 3,744 7,171 22,624 49,231
Oil and natural gas --- --- (2) --- 9,767 (2)
Total operating --------- --------- --------- ---------
revenues $ 78,868 $ 79,626 $ 447,419 $ 459,483
Operating income (loss)
after income taxes $ 6,594 $ (4,245) $ 49,517 $ 32,811
Net loss on merger of oil
and gas subsidiary $ --- $ (28,968)(2)$ (1,047) $ (28,968)(2)
Preferred dividend
requirement - Washington
Natural Gas $ (1,755) $ (1,117) $ (6,489) $ (3,504)
Income (loss) from
continuing operations$ (5,624) $ (48,760) $ 6,969 $ (38,366)
Discontinued operations,
net of income taxes $ --- $ (156) $ (596) $ (12,591)
Net income (loss) $ (5,624) $ (48,916) $ 6,373 $ (50,957)
Preferred dividends --- --- --- 34
Premium - preferred
redemption --- --- --- 673
Earnings (loss) on --------- --------- --------- ---------
common stock $ (5,624) $ (48,916) $ 6,373 $ (51,664)
Earnings (loss)
per common share (.23) (2.08) .27 (2.21)
Dividends
per common share .25 .25 1.00 1.10
Average common shares
outstanding
(in thousands) 23,950 23,529 23,795 23,383
Book value per share 10.90 11.64
Capitalization and
short-term debt
Common $ 261,696 $ 274,804
Preferred 90,000 60,000
Long-term debt 290,060 330,200
Current portion
long-term debt 40,140 20,140
Commercial paper
and notes payable 125,480 98,413
Total capitalization --------- ---------
and short-term debt $ 807,376 $ 783,557
========= =========
Net plant $ 809,491 $ 770,828
========= =========
Operating income (loss)
by business segment
before income taxes
Regulated utility
sales $ 5,126 $ (12,032) $ 56,515 $ 27,901
Merchandise,
conservation
products, and other (737) (511) (1,332) 1,798
Oil and natural gas --- --- (2) --- 1,923 (2)
Other (368) (187) (1,285) (2,770)
--------- --------- --------- ---------
Total $ 4,021 $ (12,730) $ 53,898 $ 28,852
========= ========= ========= =========
(1) Results for the quarter are not indicative of what can be expected
for a full year of operations because operating revenues and
earnings are greatly affected by variations in weather conditions.
(2) Subsequent to September 30, 1993, operating revenues and expenses
have been reclassified to other income (expense) due to the merger
of the exploration and production subsidiary with Cabot Oil & Gas
Corp. in May, 1994, consistent with the presentation of earnings
from ownership of Cabot stock.
Washington Energy Company
Summary Income Statements And Other Financial Data (Continued)
(Dollars in thousands)
3 Months Ended 12 Months Ended
June 30 (1) June 30 (1)
1995 1994 1995 1994
--------- --------- --------- ---------
Washington Natural Gas Company
Operating revenues
Firm gas sales $ 60,934 $ 57,183 $ 355,348 $ 332,348
Interruptible
gas sales 9,255 11,014 48,457 49,136
Transportation 2,368 1,905 10,913 9,998
Rentals and other 2,567 2,353 10,077 9,003
Total operating --------- --------- --------- ---------
revenues $ 75,124 $ 72,455 $ 424,795 $ 400,485
Gross utility margin
Gas sales less
gas purchases $ 33,952 $ 27,386 $ 178,987 $ 157,371
Transportation margin 2,368 1,905 10,913 9,998
--------- --------- --------- ---------
Total margin $ 36,320 $ 29,291 $ 189,900 $ 167,369
Net income (loss) $ (1,900) $ (16,968) $ 18,951 $ (4,301)
Gas volumes
(000's of therms)
Firm gas sales 105,837 103,278 633,715 613,541
Interruptible
gas sales 28,651 33,420 140,198 134,806
Transportation 34,653 27,690 144,840 143,466
--------- --------- --------- ---------
Total gas volumes 169,141 164,388 918,753 891,813
Customers served
(average)
Firm gas sales 467,085 446,570 459,460 438,360
Interruptible
gas sales 1,038 1,005 1,036 1,050
Transportation 50 36 47 40
--------- --------- --------- ---------
Total customers 468,173 447,611 460,543 439,450
Annual increase
in customers 21,093 21,963
Weather % colder (+)
or warmer (-) than
normal (in terms
of degree days) -25 % -18 % -14 % -5 %
Degree days 668 714 4,117 4,496
(1) Results for the quarter are not indicative of what can be expected
for a full year of operations because operating revenues and
earnings are greatly affected by variations in weather conditions.
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 hereunto duly authorized.
WASHINGTON ENERGY COMPANY
by /s/ James P. Torgerson
Senior Vice President - Finance,
Planning and Development and
Chief Financial Officer
WASHINGTON NATURAL GAS COMPANY
by /s/ James P. Torgerson
Senior Vice President - Finance,
Planning and Development and
Chief Financial Officer
August 11, 1995