- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 8-K
-------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: November 6, 1996
I.R.S. Employer
Commission State of Identification
File 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 98109
(Address of Registrant's principal executive offices)
Registrant's telephone number, including area code: (206) 622-6767
- -------------------------------------------------------------------------------
ITEM 5. OTHER EVENTS
a) On November 1, 1996, Washington Energy Company,
parent company of Washington Natural Gas Company, issued the following
press release:
Fiscal-year earnings rise sharply
SEATTLE -- Washington Energy Company earned $25.0 million from
continuing operations in its 1996 fiscal year, up from a loss of $14.5
million in the prior year, Chairman, CEO and President William P. Vititoe
announced today.
Earnings per share from continuing operations were $1.03 for the year,
which ended Sept. 30, compared to a per-share loss of 61 cents in the
previous year.
"Importantly for our future, " Vititoe said, "a significant portion of
the earnings growth results directly from our turnaround strategies -- such
as our 1995 regulatory actions and our ongoing programs to control costs and
improve efficiency. The company's fundamental profitability rose markedly
this year, thanks to these achievements."
Ongoing utility operations and maintenance expense (excluding special
charges, consulting fees and other non-recurring items) declined to $128 per
customer in fiscal 1996, down 4 percent compared to the prior year and 18
percent lower than in fiscal 1994, when the company launched ongoing,
systematic programs to achieve cost savings and improve efficiency.
Fiscal 1996 net income including discontinued operations totaled $23.1
million, or 96 cents per share, compared to a net loss of $41.1 million, or
$1.72 per share, in the prior year.
Discontinued operations consist of undeveloped coal reserves in
southeastern Montana and a related railroad in the permitting stage, which
the company has decided not to pursue.
DETAIL OF FISCAL-YEAR RESULTS
The increase in fiscal 1996 earnings resulted in large part from
increased utility gas sales due to more-normal weather, the addition of
18,700 new customers (a 4 percent annual growth rate), and the May 1995
general utility rate increase. Together, these factors added $21 million to
utility margin.
Weather for fiscal 1996 was 9 percent colder than in the prior year.
However, 1996 weather remained 3 percent warmer than normal. Normal weather
would have increased 1996 earnings by approximately 22 cents per share.
Income from continuing operations also benefited from a $2.1 million
after-tax reduction in previously established reserves related to
environmental remediation activities. Fiscal 1995 income from continuing
operations included special charges totaling $22.7 million (after tax), as
detailed in the company's 1995 annual report.
The $1.8 million loss from discontinued operations in 1996 includes a
$446,000 after-tax charge for expected carrying costs related to the coal and
rail investments prior to disposition in fiscal 1997. The 1995 loss from
discontinued operations consists primarily of $26.5 million in write-downs of
these investments, associated with adoption of the FAS 121 accounting
standard.
FOURTH-QUARTER RESULTS
The company showed a loss of $4.3 million from continuing operations, or
18 cents per share, during the quarter ended September 30, 1996. The results
represent an improvement over a loss of $33.4 million from continuing
operations, or $1.39 per share, in the same period one year prior. Excluding
the environmental reserve adjustment noted above and the special charges
recorded in 1995, the quarterly loss from continuing operations was $6.4
million in 1996 and $10.7 million in 1995.
The improvement in quarterly results was due to the same general factors
that affected fiscal-year earnings.
As Washington Energy's primary business is distribution of natural gas
for heating purposes, the majority of the company's profits are realized in
the fall and winter quarters, while the summer quarter generally shows a loss.
Including discontinued operations, the company posted a net loss of $5.1
million, or 21 cents per share, in the September 1996 quarter, compared to a
net loss of $59.9 million in the same period one year prior.
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 the 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 852,000 electric
and 490,000 gas customers in western Washington state (with approximately
250,000 customers using both forms of energy).
The merger could be concluded late in calendar 1996 or early in
calendar 1997, subject to 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
September 30 (1) September 30
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
Washington Energy Company
Operating revenues
Regulated utility sales $ 52,215 $ 45,416 $ 400,108 $ 420,048
Merchandise, conservation products, and other 6,201 5,565 25,603 23,563
------------- ------------- ------------- -------------
Total operating revenues $ 58,416 $ 50,981 $ 425,711 $ 443,611
Operating income (loss) after income taxes $ 7,868 $ (2,205) $ 71,986 $ 51,841
Non-utility charges after income taxes $ --- $ (20,622) $ --- $ (20,622)
Preferred dividend requirement - Washington Natural Gas $ (1,755) $ (1,755) $ (7,020) $ (7,126)
Income (loss) from continuing operations $ (4,294) $ (33,430) $ 24,960 $ (14,465)
Discontinued operations, net of income taxes $ (820) $ (26,491) $ (1,832) $ (26,597)
------------- ------------- ------------- -------------
Net income (loss) $ (5,114) $ (59,921) $ 23,128 $ (41,062)
EPS from continuing operations (0.18) (1.39) 1.03 (0.61)
EPS from discontiued operations (0.03) (1.10) (0.07) (1.11)
----------- ----------- ------------ ------------
Earnings (loss) per common share $ (0.21) $ (2.49) $ 0.96 $ (1.72)
Dividends per common share $ 0.25 $ 0.25 $ 1.00 $ 1.00
Average common shares outstanding (in thousands) 24,235 24,026 24,159 23,893
Book value per share $ 8.21 $ 8.17
Capitalization and short-term debt
Common $ 199,351 $ 196,686
Preferred 90,000 90,000
Long-term debt 344,920 310,060
Current portion long-term debt 140 30,140
Commercial paper and notes payable 177,709 161,994
============= =============
Total capitalization and short-term debt $ 812,120 $ 788,880
============= =============
(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
September 30 (1) September 30
------------------------------ ------------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
Washington Natural Gas Company
Operating revenues
Firm gas sales $ 42,906 $ 35,444 $ 352,835 $ 354,458
Interruptible gas sales 3,142 5,463 23,376 44,511
Transportation 3,439 1,929 12,812 10,762
Rentals and other 2,728 2,580 11,085 10,317
------------- ------------- ------------- -------------
Total operating revenues $ 52,215 $ 45,416 $ 400,108 $ 420,048
Gross utility margin
Gas sales less gas purchases $ 26,966 $ 21,823 $ 198,492 $ 179,947
Transportation margin 3,439 1,929 12,812 10,762
Rentals and other 2,728 2,580 11,085 10,317
------------- ------------- ------------- -------------
Total margin $ 33,133 $ 26,332 $ 222,389 $ 201,026
Utility operations & maintenance expense $ 11,810 (2) $ 21,569 (2) $ 59,875 (3) $ 68,125 (3)
Net income (loss) $ (1,153) $ (10,750) $ 37,224 $ 17,854
Gas volumes (000's of therms)
Firm gas sales 69,669 59,036 656,688 633,373
Interruptible gas sales 9,149 20,323 72,229 132,316
Transportation 57,854 37,661 242,299 156,941
------------- ------------- ------------- -------------
Total gas volumes 136,672 117,020 971,216 922,630
Customers served (average)
Firm gas sales 489,054 468,130 482,999 464,327
Interruptible gas sales 983 1,046 1,000 1,037
Transportation 116 70 106 55
------------- ------------- ------------- -------------
Total customers 490,153 469,246 484,105 465,419
Annual increase in customers 18,686 20,760
Weather % colder (+) or warmer (-) than normal
(in terms of degree days) 3 % -36 % -3 % -12 %
Degree days 241 156 4,630 4,201
(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 September 30, 1996 and 1995 include
consulting and certain non-recurring charges (benefits) of ($3,266) and $4,689, respectively.
(3) Utility operations and maintenance expense for the 12 months ended September 30, 1996 and 1995 include
consulting and certain non-recurring charges (benefits) of ($2,270) and $6,147, 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
November 6, 1996