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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: July 25, 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 July 24, 1996, Washington Energy Company, parent company of Washington
Natural Gas Company, issued the following press release:
Quarterly earnings up from prior year
SEATTLE -- Washington Energy Company (NYSE: WEG) reported net income of
$84,000 for the period ending June 30, Chairman, CEO and President William
P. Vititoe announced today. The results represent an increase of $5.7
million in net income compared to the same period last year.
As the company's primary business is distribution of natural gas for
heating purposes, the majority of its profits are realized in the fall and
winter quarters.
"These results underscore the improved earnings capability produced by
the general rate increase granted to our utility subsidiary in May 1995, as
well as our ongoing efficiency programs," Vititoe said. "However, we are not
yet where we need to be. We are continuing to focus on improving
profitability, primarily through continued efforts to improve operating
efficiency," he added.
DETAIL OF QUARTERLY RESULTS
The increase in quarterly net income resulted primarily from:
1) more normal weather conditions, which increased utility sales of gas for
heating purposes. Temperatures averaged 2 percent colder than normal in
the current quarter, compared to 25 percent warmer than normal in the
same period one year ago. Firm gas sales volumes were up 19 percent
compared to a year ago.
2) a general rate increase of $17.7 million (on an annual basis), effective
May 1995. The increase added approximately $2 million to quarterly
utility operating margin (revenues minus the cost of gas sold).
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.
Quarterly earnings also benefited from the utility's ongoing program to
control costs and improve operating efficiency. These efforts produced
savings sufficient to offset normal wage increases and the costs associated
with growth. Utility operating and maintenance expense (after excluding
consulting and other non-recurring expenses) was maintained at the prior-year
level.
12-MONTH RESULTS
Twelve-month results for the period ending June 30, 1996, showed a net
loss of $31.7 million, or $1.31 per share, compared to net income of $6.4
million in the same period one year prior. 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's net income for the 1996 period was $17.4 million ($.72 per share),
an increase of 142 percent compared to the prior 12-months' earnings of $7.2
million ($.30 per share).
The improvement in 12-month earnings, after exclusion of special
charges, resulted from many of the same factors that contributed to improved
quarterly results:
1) the general utility rate increase effective May 1995;
2) more normal weather, which contributed to higher utility gas
sales. Weather for the period was 5 percent warmer than normal;
however, that represents a significant improvement over the prior 12
months, when weather averaged 14 percent warmer than normal;
3) 4 percent growth in the number of utility customers served.
As with the quarterly results, 12-month net income also benefited from
the utility's ongoing program to control costs and improve operating
efficiency, which offset normal wage increases and the costs associated with
growth.
MERGER WITH PUGET SOUND POWER & LIGHT COMPANY
A definitive agreement to merge Washington Energy Company 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 848,000 electric
and 488,000 gas customers in western Washington state (with approximately
250,000 customers using both forms of energy).
The merger could be concluded by the end of calendar 1996, subject to,
among other conditions, the approval of the Washington Utilities and
Transportation Commission.
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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
June 30 (1) June 30
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1996 1995 1996 1995
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Washington Energy Company
Operating revenues
Regulated utility sales $ 78,695 $ 75,122 $ 393,309 $ 424,793
Merchandise, conservation products, and other 5,816 3,744 24,967 22,624
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Total operating revenues $ 84,511 $ 78,866 $ 418,276 $ 447,417
Operating income after income taxes $ 12,318 $ 6,758 $ 61,868 $ 52,233
Non-utility charges after income taxes $ --- $ --- $ 47,078 $ ---
Preferred dividend requirement - Washington Natural Gas $ (1,755) $ (1,755) $ (7,020) $ (6,489)
Income (loss) from continuing operations $ 84 $ (5,624) $ (31,679) $ 6,969
Discontinued operations, net of income taxes --- --- --- (596)
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Net income (loss) $ 84 $ (5,624) $ (31,679) $ 6,373
Earnings (loss) per common share $ --- $ (.23) $ (1.31) $ .27
Dividends per common share $ .25 $ .25 $ 1.00 $ 1.00
Average common shares outstanding (in thousands) 24,183 23,950 24,107 23,795
Book value per share $ 8.66 $ 10.90
Capitalization and short-term debt
Common $ 209,721 $ 261,696
Preferred 90,000 90,000
Long-term debt 344,920 265,060
Current portion long-term debt 140 65,140
Commercial paper and notes payable 132,325 125,480
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Total capitalization and short-term debt $ 777,106 $ 807,376
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Net plant $ 832,875 $ 809,490
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Operating income (loss) by business segment
before income taxes
Regulated utility sales $ 13,483 $ 5,403 $ 72,409 $ 59,159
Merchandise, conservation products, and other 109 (735) 103 (1,331)
Other (266) (370) 691 170
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Total $ 13,326 $ 4,298 $ 73,203 $ 57,998
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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
June 30 (1) June 30
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1996 1995 1996 1995
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Washington Natural Gas Company
Operating revenues
Firm gas sales $ 69,051 $ 60,935 $ 345,376 $ 355,349
Interruptible gas sales 3,892 9,253 25,697 48,443
Transportation 2,980 2,367 11,299 10,924
Rentals and other 2,772 2,567 10,937 10,077
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Total operating revenues $ 78,695 $ 75,122 $ 393,309 $ 424,793
Gross utility margin
Gas sales less gas purchases $ 39,548 $ 33,951 $ 193,353 $ 178,974
Transportation margin 2,980 2,367 11,299 10,924
Rentals and other 2,772 2,567 10,937 10,077
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Total margin $ 45,300 $ 38,885 $ 215,589 $ 199,975
Utility operations & maintenance expense $ 14,863 (2) $ 16,249 (2) $ 69,632 (3) $ 66,696
Net income (loss) $ 3,540 $ (1,900) $ 27,627 $ 18,951
Gas volumes (000's of therms)
Firm gas sales 125,547 105,835 646,055 633,716
Interruptible gas sales 10,625 28,653 83,403 140,200
Transportation 59,127 34,652 222,106 144,836
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Total gas volumes 195,299 169,140 951,564 918,752
Customers served (average)
Firm gas sales 486,714 467,085 477,769 459,460
Interruptible gas sales 989 1,038 1,016 1,036
Transportation 109 50 94 47
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Total customers 487,812 468,173 478,879 460,543
Annual increase in customers 18,336 21,093
Weather % colder (+) or warmer (-) than normal (in terms
of degree days) 2 % -25 % -5 % -14 %
Degree days 896 668 4,545 4,116
(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 June 30, 1995 include consulting
and certain non-recurring charges of $1,655,000.
(3) Utility operations and maintenance expense for the 12 months ended June 30, 1996 and June 30, 1995 include consulting
and certain non-recurring charges of $5,685,000 and $3,983,000, 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
July 25, 1996