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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: April 30, 1996
I.R.S. Employer
Commission State of Identification
File Number Registrant Incorporation Number
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001-11227 Washington Energy Company Washington 91-1005304
001-11271 Washington Natural Gas Company Washington 91-1005303
815 Mercer Street, Seattle, Washington 98109
(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 April 24, 1996, Washington Energy Company, parent company of Washington
Natural Gas Company, issued the following press release:
Quarterly net income up 61%
SEATTLE -- Washington Energy Company's net income for the second fiscal
quarter rose 61 percent compared to the same period one year ago, Chairman, CEO
and President William P. Vititoe announced today. The improvement shows the
impact of the May 1995 general rate increase granted to the company's utility
subsidiary, Washington Natural Gas, as well as the effect of increased utility
gas sales due to more normal weather conditions and continuing utility customer
growth, Vititoe said.
Net income was $18.0 million, or 75 cents per share, for the quarter ended
March 31, 1996, up from $11.2 million, or 47 cents per share, for the same
period last year.
"These results clearly show the impact of the turnaround strategies we've
implemented over the past two years," Vititoe said. "The benefits of last May's
$17.7 million general rate increase is reaching the bottom line in the form of
improved profitability. In addition, our work-process redesigns have helped to
control costs and significantly improved customer service."
DETAIL OF QUARTERLY RESULTS
The 61 percent increase in quarterly net income resulted primarily from
increases in utility operating margin attributable to: 1) a general rate
increase of $17.7 million (on an annual basis), effective May 1995. The increase
added approximately $6 million to quarterly utility operating margin (revenues
minus the cost of gas sold). 2) more normal weather conditions. Temperatures
averaged 1 percent colder than normal in the current quarter, compared to 17
percent warmer than normal in the same period one year ago. 3) continuing growth
in utility customers. The average number of customers served during the quarter
rose 4 percent compared to the same period last year, adding approximately $2
million to margin.
DETAIL OF 12-MONTH RESULTS
The company posted a net loss of $37.4 million, or $1.55 per share, for
the 12 months ending March 31, 1996, compared to a prior-year net loss of $36.9
million, or $1.56 per share. The results for both periods include significant
special charges, which are detailed in the company's 1995 annual report to
shareholders. Excluding these special charges, the company produced 12-month net
income (after tax) of $11.7 million, an increase of $6.1 million, or 108
percent, over the same period one year prior.
The improvement resulted from the general rate increase effective May
1995, 4 percent growth in utility customers, and ongoing utility operating cost
savings.
Twelve-month utility operations and maintenance expense decreased by $4.4
million for the period, compared to the prior year (after excluding consulting
and other non-recurring charges). The savings stem primarily from work force
reductions and the implementation of more efficient work processes. The company
has 22 percent fewer employees now than it did when reductions began in fiscal
1994, including a 27 percent reduction in the management group.
The results of both periods, however, were severely affected by the
negative impact of weather on utility gas sales. Weather in the 12 months ending
March 31, 1996, was 10 percent warmer than normal, compared to 13 percent warmer
than normal during the same period one year earlier.
MERGER WITH PUGET SOUND POWER & LIGHT COMPANY
A definitive agreement to merge Washington Energy Company (NYSE: WEG) and
its major operating subsidiary, Washington Natural Gas Company, with Puget Sound
Power & Light Company (NYSE: PSD) was announced October 18, 1995. The agreement
was approved by shareholders of all three companies on March 20, 1996.
The strategic merger of equals would create a combination utility company
to be called Puget Sound Energy, serving more than 830,000 electric and 484,000
gas customers in western Washington state (with approximately 250,000 customers
purchasing both forms of energy from the merged company).
The merger could be concluded in the second half of calendar 1996, subject
to, among other conditions, the approval of the Washington Utilities and
Transportation Commission.
WASHINGTON ENERGY COMPANY
SUMMARY INCOME STATEMENTS AND OTHER FINANCIAL DATA
(Dollars in thousands, except per share amounts)
3 Months Ended 12 Months Ended
March 31 (1) March 31
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1996 1995 1996 1995
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Washington Energy Company
Operating revenues
Regulated utility sales $ 148,673 $ 149,763 $ 389,736 $ 422,126
Merchandise, conservation products, and other 6,616 7,756 22,895 26,050
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Total operating revenues $ 155,289 $ 157,519 $ 412,631 $ 448,176
Operating income after income taxes $ 29,482 $ 22,782 $ 56,308 $ 40,309
Net loss on merger of oil and gas subsidiary $ -- $ -- $ -- $ (30,015)
Non-utility charges after income taxes $ -- $ -- $ (47,078) $ --
Preferred dividend requirement - Washington Natural Gas $ (1,755) $ (1,755) $ (7,020) $ (5,851)
Income (loss) from continuing operations $ 18,023 $ 11,228 $ (37,387) $ (36,168)
Discontinued operations, net of income taxes -- -- -- (751)
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Net income (loss) $ 18,023 $ 11,228 $ (37,387) $ (36,919)
Earnings (loss) per common share $ .75 $ .47 $ (1.55) $ (1.56)
Dividends per common share $ .25 $ .25 $ 1.00 $ 1.00
Average common shares outstanding (in thousands) 24,139 23,859 24,049 23,690
Book value per share $ 8.88 $ 11.37
Capitalization and short-term debt
Common $ 214,704 $ 272,129
Preferred 90,000 90,000
Long-term debt 344,920 290,060
Current portion long-term debt 140 40,140
Commercial paper and notes payable 125,918 98,250
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Total capitalization and short-term debt $ 775,682 $ 790,579
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Net plant $ 818,497 $ 801,300
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Operating income (loss) by business segment
before income taxes
Regulated utility sales $ 39,936 $ 30,465 $ 64,329 $ 42,080
Merchandise, conservation products, and other 227 (565) (741) (1,106)
Other (350) (737) 587 (1,102)
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Total $ 39,813 $ 29,163 $ 64,175 $ 39,872
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(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.
WASHINGTON ENERGY COMPANY
SUMMARY INCOME STATEMENTS AND OTHER FINANCIAL DATA (Continued)
(Dollars in thousands)
3 Months Ended 12 Months Ended
March 31 (1) March 31
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1996 1995 1996 1995
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Washington Natural Gas Company
Operating revenues
Firm gas sales $ 134,444 $ 129,166 $ 337,254 $ 351,598
Interruptible gas sales 8,177 14,792 31,056 50,188
Transportation 3,254 3,221 10,692 10,477
Rentals and other 2,798 2,584 10,734 9,863
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Total operating revenues $ 148,673 $ 149,763 $ 389,736 $ 422,126
Gross utility margin
Gas sales less gas purchases $ 73,156 $ 62,080 $ 187,748 $ 172,394
Transportation margin 3,254 3,221 10,692 10,477
Rentals and other 2,798 2,584 10,734 9,863
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Total margin $ 79,208 $ 67,885 $ 209,174 $ 192,734
Utility operations & maintenance expense $ 16,701 (2) $ 15,294 (2) $ 71,018 (3) $ 77,236 (3)
Net income $ 20,964 $ 14,362 $ 22,187 $ 3,883
Gas volumes (000's of therms)
Firm gas sales 258,889 234,401 626,339 631,158
Interruptible gas sales 25,407 41,497 101,433 144,968
Transportation 68,281 42,543 197,633 137,874
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Total gas volumes 352,577 318,441 925,405 914,000
Customers served (average)
Firm gas sales 482,629 464,605 472,862 454,346
Interruptible gas sales 1,001 1,037 1,028 1,039
Transportation 101 50 80 43
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Total customers 483,731 465,692 473,970 455,428
Annual increase in customers 18,542 21,309
Weather % colder (+) or warmer (-) than normal (in terms
of degree days) 1 % -17 % -10 % -13 %
Degree days 1,952 1,624 4,317 4,162
(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) Utility operations and maintenance expense for the 3 months ended March
31, 1996 and March 31, 1995 include consulting and certain non-recurring
charges of $528,000 and non-recurring credits of $1,148,000,
respectively.
(3) Utility operations and maintenance expense for the 12 months ended March
31, 1996 and March 31, 1995 include consulting and certain non-recurring
charges of $8,848,000 and $10,622,000, respectively.
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
James P. Torgerson
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer; the
Principal Financial Officer
WASHINGTON NATURAL GAS COMPANY
by /s/ James P. Torgerson
James P. Torgerson
Executive Vice President,
Chief Administrative Officer and
Chief Financial Officer; the
Principal Financial Officer
April 30, 1996