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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 October 30, 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 October 27, 1995, Washington Energy Company made the following press
release:
Operating margin up, but write-downs produce loss
SEATTLE -- Washington Energy Company (NYSE: WEG) posted a
$41.1 million loss available to common, or $1.72 per share, for
the fiscal year ended Sept. 30, 1995 including charges related
to early adoption of a new accounting standard and ongoing
restructuring activities. Excluding the charges, earnings
available to common totaled $8.1 million, or 34 cents per share,
which compares favorably with the prior year s results, said
company Chairman William P. Vititoe.
Last year the company posted a loss of $46.3 million avail-
able to common, or $1.97 per share, including major charges for
restructuring and other initiatives to refocus the business.
Excluding the charges, the company recorded a loss of $3.8
million, or 16 cents per share, for fiscal 1994.
UTILITY MARGIN UP 17%
Utility operating margin for the company s utility subsid-
iary, Washington Natural Gas Company, rose $27.2 million, or 17
percent, compared to the prior year, on a 5 percent increase in
gas volumes.
"Utility operating margin or utility revenue minus the
cost of the gas is a good gauge of our overall profitability,
Vititoe said. The fact that this year s margin shows signifi-
cant improvement, even without full benefit of our $17.7 million
general rate increase last May, indicates that we have an excel-
lent opportunity to produce a competitive return for shareowners
in 1996, when this most recent rate increase will be in effect
for the full year.
A 5 percent increase in the number of Washington Natural Gas
customers (an additional 21,000 customers served) had a positive
impact on gas sales volumes, adding approximately
$6 million to margin.
Weather, which was 12 percent warmer than normal, reduced
overall gas usage per customer negatively affecting margin by an
estimated $9 million. However, the warm weather was not a
significant factor in the year-to-year comparison because fiscal
1995 was only 2 percent warmer than the prior year.
ONGOING OPERATING AND MAINTENANCE EXPENSES DOWN 11%
The company reduced its ongoing operating and maintenance
expenses by $7.7 million in 1995 compared with 1994. These cost
reductions result from the initial restructuring and work- force
reduction implemented in the summer of 1994.
The calculation of ongoing operating and maintenance ex-
penses for 1995 excludes $4.1 million of consulting charges to
support the company s continuing organizational transformation
and $3.2 million of accrued severance expenses related to an
additional 4 percent work-force reduction at Washington Natural
Gas which occurred in October, subsequent to the end of the
fiscal year. The current work-force reduction affected only
salaried employees.
WRITE-DOWNS AND OTHER CHARGES
As previously announced, Washington Energy has recorded
charges in 1995 for the following: 1) early implementation of
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, which resulted in write-downs of
the company s coal and rail interests in Montana ($26.5 million
after tax); 2) a reduction in the value of its investment in
Cabot Oil & Gas Corporation, associated with Cabot s implementa-
tion of SFAS 121 as well as recognition of a permanent impairment
of the carrying value of Washington Energy s investment in Cabot
($16.1 million after tax); 3) employee severance ($2.0 million
after tax); 4) deferred taxes relating to tax contingencies ($1.3
million); and 5) increased losses projected in the future from
certain gas transportation and storage arrangements assumed from
Washington Energy s former oil and gas exploration subsidiary
($3.2 million after tax).
FOURTH-QUARTER RESULTS
The company posted a $59.9 million loss available to common,
or $2.49 per share, for the quarter ended Sept. 30, 1995, includ-
ing the charges discussed above. Excluding the charges, the loss
on common totaled $10.8 million, or 45 cents per share.
As a provider of heating fuel, Washington Energy normally
posts an operating loss in its summer (fourth) quarter, Vititoe
noted.
During the corresponding quarter one year ago, the company
reported a loss of $10.8 million on common, or 46 cents per
share, exclusive of special charges.
PROPOSED MERGER
A definitive agreement to merge Washington Energy Company
and Washington Natural Gas Company into Puget Sound Power and
Light (NYSE: PSD) was announced October 18. The strategic merger
of equals, unanimously approved by the boards of both companies,
would generate savings as a result of synergies totaling approxi-
mately $370 million over the next 10 years, according to a study
by Deloitte & Touche.
The resulting organization would be the largest combination
electric and gas utility company in the Northwest, serving
830,000 electric and 470,000 gas customers in western Washington
state. The combined market capitalization of Puget Power and
Washington Energy totals approximately $1.9 billion.
The agreement calls for each common share in Washington
Energy Company to be exchanged for .86 shares of Puget Power
stock. Each preferred share in Washington Natural Gas will be
exchanged for comparable Puget Power preferred shares. The new
name for the merged company is yet to be determined.
Subject to the approval of shareowners and the Washington
Utilities and Transportation Commission, the merger could be
concluded in the last half of calendar 1996.
After the merger, the then-current dividend policy of Puget
Power would be adopted. The current annual common dividend paid
by Puget Power is $1.84 per share and by Washington Energy is
$1.00 per share. During the merger approval process, each company
will continue its respective dividend policy.
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Washington Energy Company
Summary Income Statements And Other Financial Data
(Dollars in thousands, except per share amounts)
3 Months Ended 12 Months Ended
September 30 (1) September 30 (1)
1995 1994 1995 1994
--------- --------- --------- ---------
Washington Energy Company
Operating revenues
Regulated utility
sales $ 45,416 $ 50,161 $ 420,048 $ 396,407
Merchandise,
conservation
products, and other 5,565 4,626 23,563 35,618
Oil and natural gas --- --- (2) --- --- (2)
Total operating --------- --------- --------- ---------
revenues $ 50,981 $ 54,787 $ 443,611 $ 432,025
Operating income (loss)
after income taxes $ (2,204) $ (3,991) $ 51,303 $ 25,956
Net loss on merger of oil
and gas subsidiary $ --- $ (30,015)(2)$ --- $ (30,015)(2)
Preferred dividend
requirement - Washington
Natural Gas $ (1,755) $ (1,118) $ (7,126) $ (3,970)
Income (loss) from
continuing operations$ (59,921) $ (11,890) $ (41,062) $ (44,847)
Discontinued operations,
net of income taxes $ --- $ (596) $ --- $ (799)
Net income (loss) $ (59,921) $ (12,486) $ (41,062) $ (45,646)
Preferred dividends --- --- --- 9
Premium - preferred
redemption --- --- --- 673
Earnings (loss) on --------- --------- --------- ---------
common stock $ (59,921) $ (12,486) $ (41,062) $ (46,328)
Earnings (loss)
per common share (2.49) (.53) (1.72) (1.97)
Dividends
per common share .25 .25 1.00 1.00
Average common shares
outstanding
(in thousands) 24,026 23,637 23,893 23,486
Book value per share 8.17 10.83
Capitalization and
short-term debt
Common $ 196,686 $ 256,800
Preferred 90,000 90,000
Long-term debt 340,060 290,200
Current portion
long-term debt 140 60,140
Commercial paper
and notes payable 161,994 125,182
Total capitalization --------- ---------
and short-term debt $ 788,880 $ 822,322
========= =========
Net plant $ 797,207 $ 782,565
========= =========
Operating income (loss)
by business segment
before income taxes
Regulated utility
sales $ (8,906) $ (10,678) $ 58,286 $ 19,063
Merchandise,
conservation
products, and other (398) 73 (1,803) (106)
Oil and natural gas --- --- (2) --- --- (2)
Other 1,536 189 63 (890)
--------- --------- --------- ---------
Total $ (7,768) $ (10,416) $ 56,546 $ 18,067
========= ========= ========= =========
(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
September 30 (1) September 30 (1)
1995 1994 1995 1994
--------- --------- --------- ---------
Washington Natural Gas Company
Operating revenues
Firm gas sales $ 35,444 $ 36,335 $ 354,458 $ 327,179
Interruptible
gas sales 5,479 9,398 44,541 51,424
Transportation 1,913 2,088 10,732 8,399
Rentals and other 2,580 2,340 10,317 9,405
Total operating --------- --------- --------- ---------
revenues $ 45,416 $ 50,161 $ 420,048 $ 396,407
Gross utility margin
Gas sales less
gas purchases $ 21,840 $ 20,854 $ 179,977 $ 155,101
Transportation margin 1,913 2,088 10,732 8,399
--------- --------- --------- ---------
Total margin $ 23,753 $ 22,942 $ 190,709 $ 163,500
Net income (loss) $ (10,751) $ (9,653) $ 17,853 $ (8,243)
Gas volumes
(000's of therms)
Firm gas sales 59,037 59,380 633,373 608,838
Interruptible
gas sales 20,321 28,206 132,312 151,175
Transportation 37,662 25,556 156,945 119,590
--------- --------- --------- ---------
Total gas volumes 117,020 113,142 922,630 879,603
Customers served
(average)
Firm gas sales 468,130 448,670 464,327 443,578
Interruptible
gas sales 1,046 1,023 1,037 1,045
Transportation 70 36 55 36
--------- --------- --------- ---------
Total customers 469,246 449,729 465,419 444,659
Annual increase
in customers 20,760 21,450
Weather % colder (+)
or warmer (-) than
normal (in terms
of degree days) -36 % -69 % -12 % -10 %
Degree days 156 71 4,201 4,286
(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
October 30, 1995