1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-1483
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WASHINGTON GAS LIGHT COMPANY
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(Exact name of registrant as specified in its charter)
District of Columbia and Virginia 53-0162882
- ------------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 H Street, N. W., Washington, D. C. 20080
- --------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 750-4440
----------------------------
NONE
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $1.00 par value 43,412,096 April 30, 1996
- ---------------------------- -------------------- ------------------
Class Number of Shares Date
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WASHINGTON GAS LIGHT COMPANY
INDEX
Page No.
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PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1996 and September 30, 1995.................... 2
Consolidated Statement of Income -
Three Months Ended March 31, 1996 and 1995............... 3
Consolidated Statement of Income -
Six Months Ended March 31, 1996 and 1995................. 4
Consolidated Statement of Cash Flows -
Six Months Ended March 31, 1996 and 1995................. 5
Notes to Consolidated Financial Statements................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 7-10
PART II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information................................... 12-13
Item 6. Exhibits and Reports on Form 8-K.................... 14
Signature.................................................... 14
1
3
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
(Unaudited)
Mar. 31, Sept. 30,
1996 1995
------------ ------------
(Thousands)
ASSETS
PROPERTY, PLANT AND EQUIPMENT
At original cost.............................. $ 1,651,964 $ 1,608,518
Accumulated depreciation and amortization..... (572,682) (552,460)
----------- ------------
1,079,282 1,056,058
----------- -----------
CURRENT ASSETS
Cash and cash equivalents..................... 6,534 13,911
Accounts receivable, less reserve............. 227,904 49,963
Inventories and storage gas purchased......... 18,634 67,657
Deferred income taxes......................... 17,207 19,710
Other prepayments, principally taxes.......... 7,308 7,799
----------- -----------
277,587 159,040
----------- ------------
DEFERRED CHARGES AND OTHER ASSETS............... 118,616 145,040
----------- -----------
TOTAL....................................... $ 1,475,485 $ 1,360,138
=========== ============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity................... $ 601,266 $ 513,044
Preferred stock............................... 28,467 28,471
Long-term debt................................ 353,860 329,051
----------- ------------
983,593 870,566
----------- ------------
CURRENT LIABILITIES
Current maturities of long-term debt.......... 8,006 52,505
Notes payable................................. 23,794 -
Accounts and wages payable.................... 127,145 80,523
Customer deposits and advance payments........ 6,435 15,408
Accrued taxes and interest.................... 47,498 11,830
Other current liabilities..................... 29,320 62,090
----------- ------------
242,198 222,356
----------- ------------
DEFERRED CREDITS................................ 249,694 267,216
----------- ------------
TOTAL....................................... $ 1,475,485 $ 1,360,138
=========== ============
See accompanying Notes to Consolidated Financial Statements.
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4
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
-------------------------------
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
(Thousands, Except Per Share Data)
OPERATING REVENUES............................. $ 431,826 $ 353,650
Cost of Gas.................................... 225,748 173,875
----------- ------------
NET REVENUES................................... 206,078 179,775
----------- ------------
OTHER OPERATING EXPENSES
Operation.................................... 47,402 42,556
Maintenance.................................. 7,287 7,520
Depreciation and amortization................ 11,964 11,469
General taxes................................ 24,403 25,134
Income taxes................................. 39,564 31,519
----------- ------------
130,620 118,198
----------- -----------
OPERATING INCOME............................... 75,458 61,577
Other Income (Loss) - Net...................... (714) 91
----------- ------------
INCOME BEFORE INTEREST EXPENSE................. 74,744 61,668
Interest Expense............................... 7,835 8,230
----------- ------------
NET INCOME..................................... 66,909 53,438
Dividends on Preferred Stock................... 333 334
----------- ------------
NET INCOME APPLICABLE TO COMMON STOCK.......... $ 66,576 $ 53,104
=========== ============
AVERAGE COMMON SHARES OUTSTANDING
(See Note B to the Consolidated Financial
Statements)................................ 43,317 42,495
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
(See Exhibit 11 for computation of fully
diluted earnings per average share and Note
B to the Consolidated Financial Statements).. $ 1.54 $ 1.25
=========== ============
DIVIDENDS DECLARED PER COMMON SHARE
(See Note B to the Consolidated Financial
Statements)................................ $ .285 $ .28
=========== ============
See accompanying Notes to Consolidated Financial Statements.
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5
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Six Months Ended
---------------------------------
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
(Thousands, Except Per Share Data)
OPERATING REVENUES............................. $ 706,152 $ 596,565
Cost of Gas.................................... 348,652 289,993
----------- ------------
NET REVENUES................................... 357,500 306,572
----------- ------------
OTHER OPERATING EXPENSES
Operation.................................... 92,348 84,165
Maintenance.................................. 15,104 15,369
Depreciation and amortization................ 23,837 22,875
General taxes................................ 40,876 42,280
Income taxes................................. 62,856 46,917
----------- ------------
235,021 211,606
----------- ------------
OPERATING INCOME............................... 122,479 94,966
Other Income (Loss) - Net...................... (1,565) 2,552
----------- ------------
INCOME BEFORE INTEREST EXPENSE................. 120,914 97,518
Interest Expense............................... 15,665 16,354
----------- ------------
NET INCOME..................................... 105,249 81,164
Dividends on Preferred Stock................... 666 667
----------- ------------
NET INCOME APPLICABLE TO COMMON STOCK.......... $ 104,583 $ 80,497
=========== ============
AVERAGE COMMON SHARES OUTSTANDING
(See Note B to the Consolidated Financial
Statements)................................ 43,175 42,390
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
(See Exhibit 11 for computation of fully
diluted earnings per average share and Note
B to the Consolidated Financial Statements).. $ 2.42 $ 1.90
=========== ============
DIVIDENDS DECLARED PER COMMON SHARE
(See Note B to the Consolidated Financial
Statements)................................ $ .565 $ .5575
=========== ============
See accompanying Notes to Consolidated Financial Statements.
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WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
--------------------------------
Mar. 31, 1996 Mar. 31, 1995
------------- -------------
(Thousands)
OPERATING ACTIVITIES
Net Income........................................ $ 105,249 $ 81,164
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (a)............. 27,152 25,708
Deferred income taxes--net.................... 5,422 (9,693)
Amortization of investment tax credits........ (488) (499)
Allowance for funds used during construction.. (293) (329)
Other noncash charges and credits--net........ 5,190 1,303
----------- ------------
142,232 97,654
Changes in assets and liabilities:
Accounts receivable and accrued utility
revenues.................................. (173,801) (91,240)
Gas costs due from/to customers - net......... (29,638) 8,961
Storage gas purchased......................... 48,100 49,026
Other prepayments, principally taxes.......... 491 580
Accounts and wages payable.................... 45,445 315
Customer deposits and advance payments........ (8,973) (8,996)
Accrued taxes................................. 36,495 46,012
Pipeline refunds due customers................ 1,687 (3,638)
Rate refund due customers..................... (9,306) 7,833
Deferred purchased gas costs.................. (29) 33,960
Other-net..................................... 2,477 4,813
---------- -----------
Net Cash Provided by Operating Activities. 55,180 145,280
----------- -----------
FINANCING ACTIVITIES
Common stock issued............................... 6,295 6,962
Long-term debt issued............................. 50,000 20,000
Long-term debt retired............................ (69,830) (9,322)
Notes payable - net............................... 23,794 (52,912)
Dividends on common and preferred stock........... (24,811) (24,152)
----------- -----------
Net Cash Used in Financing Activities..... (14,552) (59,424)
----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of non-utility subsidiary...... - 2,000
Capital Expenditures.............................. (48,005) (54,495)
----------- -----------
Net Cash Used in Investing Activities..... (48,005) (52,495)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.. (7,377) 33,361
Cash and Cash Equivalents at Beginning of Period.. 13,911 3,522
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 6,534 $ 36,883
=========== ===========
(a) Includes amounts charged to other accounts.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid............................... $ 28,111 $ 19,270
Interest paid................................... $ 16,326 $ 15,792
See accompanying Notes to Consolidated Financial Statements.
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WASHINGTON GAS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results for such periods.
Reference is hereby made to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1995.
B. On May 1, 1995, additional shares of common stock were distributed to
shareholders of record on April 20, 1995, in connection with a two-for-one
stock split. All share disclosures and per share calculations included in
this report are on a post-split basis.
C. Due to the seasonal nature of the Company's business, the results of
operations shown are not indicative of the results to be expected for the
fiscal year ended September 30, 1996.
D. At December 31, 1995, the Company had outstanding $50 million of 7-7/8%
Series First Mortgage Bonds due September 1, 2016 and $17.325 million of
9-1/4% Series First Mortgage Bonds due April 15, 2018. Each of these
series has a 30-year nominal life, and each allows the holder to elect
early maturity of the bonds, at par, on the tenth anniversary of the
issuance date. Additionally, the Company may redeem the bonds at par at
any time on or after the tenth anniversary date of their issuance up until
the end of the 30-year nominal life.
On January 25, 1996, the Company issued $50 million of unsecured
Medium-Term Notes (MTNs) at a coupon rate of 6.15% and $21.6 million of
short-term commercial paper. The new MTNs carry the same terms as the
First Mortgage Bonds discussed in the prior paragraph. The proceeds of
these issuances were used to purchase approximately $71.6 million of U.S.
Treasury Securities. These securities were deposited in an irrevocable
trust and the principal and interest on these securities will be used to
pay the interest and principal payments on the outstanding 7-7/8% and
9-1/4% Series First Mortgage Bonds up to and including their first call
dates on September 1, 1996 and April 15, 1998, respectively. The First
Mortgage Bonds will be legally retired on their first call dates with the
proceeds from the treasury securities included in the trust. This
transaction was recorded as an in-substance defeasance in January 1996;
therefore, as of March 31, 1996, the First Mortgage Bonds mentioned above
were extinguished for financial reporting purposes. A premium of
approximately $2.3 million was recorded as a regulatory asset in connection
with acquiring the treasury securities and this amount will be amortized
over future periods in accordance with prior regulatory practice.
6
8
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1996 vs. March 31, 1995
For the three months ended March 31, 1996, net income applicable
to common stock amounted to $66.6 million, which represented an increase of
$13.5 million from the same period in the prior year. Earnings per average
common share were $1.54, or $.29 per average common share higher than the
quarter ended March 31, 1995. Average common shares outstanding increased by
1.9% over the prior year. The increase in net income applicable to common
stock was primarily due to significantly colder weather during the current
quarter. This factor was partially offset by higher other operating expenses
and lower other income (loss)-net.
Net revenues for the period rose $26.3 million (14.6%) from the
same period last year to $206.1 million. Therm sales to firm customers, as
shown in the table below, rose by 95.2 million therms (19.8%), due to weather
that was 16.3% colder than the prior year and the effect of increased customer
meters, which were 3.0% higher at the end of the most recent period as compared
to last year. Weather for the quarters ended March 31, 1996 and March 31, 1995
was 14.4% colder than normal and 1.4% warmer than normal, respectively.
Three Months Ended
------------------
March 31, March 31,
1996 1995
-------- --------
Gas Delivered (thousands of therms)
Firm...................................... 575,951 480,718
Interruptible............................. 49,712 87,991
Electric Generation-Interruptible......... 593 17,531
Transportation Service.................... 17,921 15,896
Gas Sold Off System (thousands of therms)... 36,056 -
-------- --------
Total................................... 680,233 602,136
======== ========
Number of Customer Meters (end of period)... 774,266 751,543
======== ========
Degree Days................................. 2,466 2,120
======== ========
Excluding deliveries for electric generation, therms delivered to
interruptible and transportation service customers declined by 36.3 million
therms (34.9%) resulting in a drop in net revenues. This reflects the effect
of significantly longer interruptions in service to these customers in the
current quarter due to the colder weather. Margin sharing arrangements in each
of the Company's major jurisdictions minimize the effect on net income of
increases or decreases in sales and deliveries to the interruptible class.
Under these arrangements, a majority of the margins earned on sales and
deliveries to these classes are returned to firm customers after a certain
gross margin threshold is reached or in exchange for the shift of a portion of
the fixed costs from the interruptible to the firm class.
Volumes delivered to Potomac Electric Power Company (Pepco) for
electric generation declined by 16.9 million therms from the same period in the
prior year. The decline was primarily due to the unavailability of pipeline
capacity in the current quarter. A significant majority of margins earned on
deliveries to Pepco are shared with firm customers and changes in volumes
delivered between periods therefore had an immaterial effect on net income.
7
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WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONT'D)
During the quarter ended March 31, 1996, the Company recorded
off-system sales of 36.1 million therms. Off-system sales represent sales made
outside of the Company's service territory. The majority of the margins earned
on these sales are being shared with firm customers in the Company's three
major jurisdictions and therefore there is an immaterial effect on net income.
Operation and maintenance expenses rose by $4.6 million (9.2%) from
the same period last year due primarily to higher labor expenses, a provision
recorded to cover potential injuries and damages, and higher uncollectible
accounts expense due to the colder weather.
Depreciation and amortization increased by $495,000 (4.3%) due
primarily to depreciation on the Company's rising investment in depreciable
plant.
General taxes declined by $731,000 (2.9%) due to a drop in the fuel
tax rate for service to customers in Montgomery County, Maryland that was
partially offset by higher other gross receipts taxes due to the colder
weather. All such taxes are included in revenues and therefore fluctuations in
these amounts have no effect on net income.
Other income (loss) - net declined by $805,000 due primarily to the
effect of valuation reserves recorded in the current period related to various
non-utility activities.
Interest expense decreased by $395,000 (4.8%). Reflected in this
change is the effect of lower interest on short-term debt reflecting lower
levels outstanding and the effects of lower interest rates resulting from the
in-substance defeasance recorded in January 1996. Partially offsetting these
factors is the effect of a higher level of long-term debt outstanding.
Six months ended March 31, 1996 vs. March 31, 1995
For the six months ended March 31, 1996, net income applicable to
common stock amounted to $104.6 million, which represented an increase of $24.1
million from the same period in the prior year. Earnings per average common
share were $2.42, or $.52 per average common share higher than the six month
period ended March 31, 1995. Average common shares outstanding increased by
1.9% over the prior year. The increase in net income applicable to common
stock was primarily due to the effect of significantly colder weather in the
current period and increased customer meters. Factors which partially offset
the impact of the weather were higher other operating expenses and lower other
income (loss) - net.
Net revenues for the period rose $50.9 million (16.6%) from the same
period last year to $357.5 million. Therm sales to firm customers, as shown in
the following table, increased by 182.5 million therms (23.6%) which resulted
from weather that was 26.2% colder than the prior year and the impact of a 3.0%
increase in the number of customer meters. Weather for the six months ended
March 31, 1996 and March 31, 1995 was 18.0% colder than normal and 6.5% warmer
than normal, respectively.
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10
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONT'D)
Six Months Ended
----------------
March 31, March 31,
1996 1995
-------- --------
Gas Delivered (thousands of therms)
Firm...................................... 956,921 774,391
Interruptible............................. 108,217 161,472
Electric Generation-Interruptible......... 7,167 27,194
Transportation Service.................... 39,827 32,231
Gas Sold Off System (thousands of therms)... 36,056 -
--------- --------
Total................................... 1,148,188 995,288
========= ========
Number of Customer Meters (end of period)... 774,266 751,543
========= ========
Degree Days................................. 4,162 3,297
========= ========
Excluding deliveries for electric generation, therms delivered to
interruptible and transportation service customers declined by 45.7 million
therms (23.6%). The decrease resulted primarily from significantly longer
interruptions in service to these customers during the most recent six month
period because of the colder weather. Margins earned on such sales and
deliveries are being shared with firm customers as described previously in this
report.
Volumes delivered for electric generation declined by 20.0 million
therms from the same period last year due primarily to reduced deliveries
during the quarter ended March 31, 1996 as explained previously.
Operation and maintenance expenses increased by $7.9 million (8.0%)
from the same period last year due primarily to higher labor expenses, a
provision recorded to cover injuries and damages, higher uncollectible accounts
expense resulting from the colder weather and a non-recurring accrual for a
contingency.
Depreciation and amortization increased by $962,000 (4.2%) due
primarily to depreciation on the Company's rising investment in depreciable
plant.
General taxes declined by $1.4 million (3.3%) due to a drop in the
fuel tax rate for service to customers in Montgomery County, Maryland that was
partially offset by higher other gross receipts taxes due to the colder
weather. As discussed previously, all such taxes are included in revenues and
therefore fluctuations in these amounts have no effect on net income.
Other income (loss) - net declined by $4.1 million due to a $1.9
million gain on the sale of American Environmental Products, Inc., a
non-utility subsidiary, recorded in the same period in the prior year and the
effect of valuation reserves recorded related to various non-utility activities
in the current period.
Interest expense decreased by $689,000 (4.2%). Reflected in this
change is the effect of lower interest on short-term debt reflecting lower
levels outstanding and the effects of lower interest rates resulting from the
in-substance defeasance recorded in January 1996. Partially offsetting these
factors is the effect of a higher level of long-term debt outstanding.
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11
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Short-Term Cash Requirements and Related Financing
The Company's business is highly weather sensitive and seasonal.
Approximately 75% of the Company's therm sales (excluding sales made for
electric generation) are normally generated in the first and second fiscal
quarters. This seasonality causes short-term cash requirements to vary
significantly during the year. Cash requirements peak in the winter months
when accounts receivable, accrued utility revenues and storage gas costs are at
or near their highest levels. After the winter heating season, these assets
are converted into cash and are used to liquidate short-term debt and acquire
storage gas for the subsequent heating season.
The Company uses short-term debt in the form of commercial paper and
short-term bank loans to fund seasonal cash requirements. Alternative seasonal
sources include unsecured lines of credit, some of which are seasonal, and $130
million in a revolving credit agreement maintained with a group of banks.
These financing options may be activated to support or replace the Company's
commercial paper. Excluding current maturities, the Company had $23.8 million
of short-term debt outstanding at March 31, 1996. These borrowings were
composed of $15.0 million and $8.8 million of bank loans and commercial paper,
respectively, and represent an increase of $23.8 million from the balance at
September 30, 1995. Excluding current maturities, the Company had no
short-term debt outstanding at March 31, 1995.
Long-Term Cash Requirements and Related Financing
Capital expenditures for the first six months of fiscal year 1996 were
$48.0 million and are budgeted to be $130.3 million for the year. To fund
construction expenditures and other capital requirements, the Company draws
upon both internal and external sources of cash. The Company's ability to
generate adequate cash internally depends upon a number of factors, including
the timing and amount of rate increases received and the level of therm sales.
The level of therm sales is almost exclusively dependent upon the number of
customer meters and the variability of the weather.
Net cash provided by operating activities was $55.2 million during the
first six months of fiscal year 1996 and compares to $145.3 million for the
same period in fiscal year 1995. The decrease in net cash provided by
operating activities is primarily attributable to: (i) higher funds used to
support accounts receivable and accrued utility revenues resulting from higher
sales and increased cost of gas; (ii) the effect of a shift from an
overcollection of current gas costs from customers in the prior year to an
undercollection of current gas costs in the current year; (iii) refunds made to
customers for amounts overcollected from the implementation of interim rates
and the return of prior year's overcollection of gas costs; and (iv) increased
income tax payments in 1996 resulting from increased taxable income primarily
due to colder weather and lower current deductions for gas costs. These
factors were partially offset by: (i) an increased accounts payable balance
resulting from greater amounts owed for gas purchases as a result of colder
weather and higher gas prices and (ii) the effect of additional net income.
In connection with the January 1996 in-substance defeasance discussed
in Note D to the consolidated financial statements, the Company issued $50.0
million of unsecured MTNs at a coupon rate of 6.15% having 30-year terms with
10 year put and call options and $21.6 million of short-term debt. The $69.8
million of long-term debt retired represents $67.3 million of First Mortgage
Bonds extinguished for financial reporting purposes that were the subject of
the in-substance defeasance and a $2.5 million MTN retirement.
During the six months ended March 31, 1996, the Company sold with
recourse, $17.3 million of non-utility accounts receivable. This compares to
$29.0 million sold in the six months ended March 31, 1995.
10
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders was held on February 21, 1996.
(c) Matters voted upon at the meeting:
The following individuals were elected to the Board of Directors at the
annual meeting on February 21, 1996:
Director Votes in Favor Votes Withheld
-------- --------------- --------------
Michael D. Barnes 36,682,838 803,022
Fred J. Brinkman 36,719,536 729,626
Daniel J. Callahan, III 36,858,711 451,456
Orlando W. Darden 36,716,084 739,344
James H. DeGraffenreidt, Jr. 36,706,103 756,458
Melvyn J. Estrin 36,861,742 445,152
Patrick J. Maher 36,766,066 636,584
Karen Hastie Williams 36,599,846 968,944
Stephen G. Yeonas 36,806,286 556,064
Sheldon W. Fantle retired from the Board of Directors effective
February 21, 1996.
The following other matters were introduced and voted upon at the
annual meeting:
The Board of Directors recommended that the stockholders ratify the
appointment of Arthur Andersen LLP, independent public accountants, to
audit the books, records and accounts of the Company for fiscal year
1996. This proposal was approved by a vote of 36,619,654 in favor of the
proposal and 304,633 against. There were 327,425 abstentions.
The Board of Directors proposed that the shareholders approve a Directors'
Stock Compensation Plan. This is a new plan that provides that
non-employee directors receive part of their retainer fees in the form of
common stock rather than in cash. This proposal was approved by a combined
vote of the common and preferred classes of 34,288,888 in favor of the
proposal and 2,072,780 against. There were 893,874 abstentions.
A stockholder proposed that the Board of Directors take steps to provide
for cumulative voting in the election of Directors. This proposal was
defeated by a vote of 4,708,992 in favor of the proposal and 22,638,491
against. There were 1,802,228 abstentions and 8,112,032 broker non-votes.
11
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Item 5. Other Information
A. As previously reported on Form 10-Q for the quarter ended December 31,
1995, the Regional Office of the National Labor Relations Board (NLRB) on
February 6, 1996, dismissed a second round of unfair labor practice charges
filed by the International Union of Gas Workers (IUGW) in October 1995.
The IUGW alleged that the Company's installation of new employment terms
was illegal because there had been insufficient bargaining and no true
impasse. The IUGW further alleged that the Company's various offers and
communications with its employees amounted to bypassing the union's
authority as bargaining agent. The Regional Office found no merit to the
IUGW's charges, upholding the Company's conduct entirely.
The IUGW subsequently appealed the Regional Office's decision to the
Office of Appeals of the NLRB. On April 29, 1996, the Office of Appeals
dismissed the IUGW's appeal, without any further right of appeal.
The Company continues its willingness to meet with the IUGW in order
to achieve a ratified contract. Meanwhile, the bargaining unit is working
successfully under the terms and conditions of the Company's last offer, as
amended.
B. As previously reported on Form 10-K for the year ended September 30,
1995, on July 7, 1995, the Company's distribution subsidiary, Shenandoah
Gas Company (Shenandoah) filed an application with the State Corporation
Commission (SCC) of Virginia under expedited rate case rules for an
increase in annual revenues of approximately $1.2 million. The request
included an overall rate of return of 9.88% and a return on equity (ROE) of
11.5%. The SCC's Staff recommended an increase of approximately $762,000
in annual revenues. In addition, the SCC's Staff recommended an ROE
between 10% and 11% with the return set at the midpoint of 10.5%.
Shenandoah's 11.5% ROE request was consistent with the ROE granted the
parent company in its last Virginia rate case. Shenandoah filed rebuttal
testimony and a hearing was held in January 1996.
On May 3, 1996, a Hearing Examiner issued a report recommending an
increase of approximately $883,000 in annual revenues. In addition, the
Hearing Examiner recommended an ROE between 10.5% and 11.5% with the return
set at the midpoint of 11.0%. A final order from the SCC of Virginia is
currently expected in the fourth fiscal quarter of 1996.
New rates based on the full revenue request of $1.2 million were put
in place in August 1995, subject to refund.
C. On March 27, 1996, the Board of Directors declared a dividend on common
stock of $.285 per share. This compares to a $.28 dividend declared in the
quarter ended March 31, 1995 on a post-split basis. The higher dividend
rate, if declared for the next three quarters, would represent an annual
increase of $.02 per share on a post-split basis.
D. As an initial step toward unbundling services in Virginia, the Company
filed a proposed tariff on January 23, 1996 with the SCC of Virginia to
provide balancing service options to interruptible customers who elect to
purchase gas from third parties. Under the proposed Comprehensive Balancing
Service option, the Company would provide daily balancing of customer usage
with the deliveries of customer-owned gas at a fixed charge for every therm
delivered during the month. Under the proposed Self-Balancing Service
option, the Company would require a delivery service customer to maintain a
daily balance between deliveries and usage. A charge per therm would be
assessed on imbalance amounts over 3% on a daily basis, with the charge
increasing as the magnitude of the imbalance increased.
The SCC's Staff issued a report on April 22, 1996, which agreed with
the Company's proposed tariff concepts. On May 10, 1996, the SCC of
Virginia issued its Final Order approving the Staff's report.
Implementation of the proposed tariff will begin for service rendered on
and after May 16, 1996.
E. As part of an ongoing series of steps toward unbundling services in the
District of Columbia, the Company filed two proposed tariffs on April 1,
1996 with
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Other Information (CONT'D)
the Public Service Commission of the District of Columbia. Under the first
proposal, a pilot program would be offered to approximately 3,000
residential customers featuring a transportation option which gives
customers the opportunity to acquire their gas supplies from a third party
supplier. Under the pilot program, residential customers will be
aggregated by each participating supplier in groups of at least 300
customers, and each aggregated group will have the option to be assigned
1,000 dekatherms per day of the Company's firm interstate pipeline
capacity, at cost, to transport the supplies.
In the second proposal, the Company would offer, at the customer's
election, a new Service on Customer's Premises charge for non-safety or
non-diagnostic work. The Company is also requesting that charges be tiered
for pilot lighting, pilot turn-off, and service reconnection based on when
the service is performed.
F. The Company plans to file by July 1, 1996, a proposed tariff in
Maryland providing unbundled service options to residential customers.
Under the proposed tariff, a pilot program will be offered to
approximately 6,000 residential customers featuring a transportation option
which gives customers the opportunity to acquire their gas supplies from a
third party supplier. Under the pilot program, residential customers will
be aggregated by each participating supplier in groups of at least 300
customers, and each aggregated group will have the option to be assigned
2,000 dekatherms per day of the Company's firm interstate pipeline
capacity, at cost, to transport the supplies.
Implementation of the pilot program to residential customers is expected
to begin November 1, 1996.
G. On April 24, 1996, the Federal Energy Regulatory Commission (FERC)
issued two orders that are intended to increase competition within the
electric utility industry and result in lower costs of electricity for
consumers.
FERC Order No. 888 addresses open access and stranded cost issues. It
opens wholesale electric power sales to competition by requiring public
utilities that own, control or operate transmission lines to file
non-discriminatory tariffs that offer others the same transmission services
they provide themselves, under comparable terms and conditions. These
utilities must also use these tariffs for their own wholesale energy sales
and purchases. The order also provides that stranded costs are eligible
for recovery, under certain terms and conditions, from customers who use
open access to move to another electricity supplier.
The second order, FERC Order No. 889, requires that utilities establish
electronic systems to share information related to available transmission
capacity. The intent of the order is to ensure that transmission owners
have no unfair competitive advantage in using transmission systems to sell
power. The order also requires that utilities separate their wholesale
power marketing and transmission functions.
As mentioned above, the implementation of these orders is expected to
result in reduced electricity costs for consumers which should bring about
increased competition between providers of electric power and natural gas
distributors, such as the Company.
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15
PART II. OTHER INFORMATION (CONT'D)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Filed Herewith:
Page in
Description 10-Q
----------- -------
3. Articles of Incorporation and Bylaws - See
Bylaws of the Company as amended effective separate
February 21, 1996 volume
11. Computation of Earnings per Average Share of Common 15
Stock Assuming Full Dilution from Conversion of the
$4.60 and $4.36 Convertible Preferred Series
27. Financial Data Schedule See
separate
volume
Additional Exhibits -
99.0 Computation of Ratio of Earnings to Fixed Charges 16
99.1 Computation of Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends 17
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three months ended March 31, 1996.
SIGNATURE
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 thereunto duly authorized.
WASHINGTON GAS LIGHT COMPANY
--------------------------------
(Registrant)
Date May 15, 1996 /s/ Frederic M. Kline
------------------- --------------------------------
Vice President and Treasurer
(Principal Accounting Officer)
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