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 June 30, 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
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 750-4440
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NONE
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(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
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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 43,572,858 July 31, 1996
- ---------------------------- ------------------ -----------------
Class Number of Shares Date
2
WASHINGTON GAS LIGHT COMPANY
INDEX
Page No.
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PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1996 and September 30, 1995. . . . . . . . . . . 2
Consolidated Statement of Income -
Three Months Ended June 30, 1996 and 1995 . . . . . . . . 3
Consolidated Statement of Income -
Nine Months Ended June 30, 1996 and 1995. . . . . . . . . 4
Consolidated Statement of Cash Flows -
Nine Months Ended June 30, 1996 and 1995. . . . . . . . . 5
Notes to Consolidated Financial Statements. . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 7-11
PART II. Other Information:
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)
June 30, Sept. 30,
1996 1995
------------ ------------
(Thousands)
ASSETS
PROPERTY, PLANT AND EQUIPMENT
At original cost . . . . . . . . . . . . . . . . $ 1,683,829 $ 1,608,518
Accumulated depreciation and amortization . . . . (582,222) (552,460)
------------ -----------
1,101,607 1,056,058
------------ -----------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . 12,074 13,911
Accounts receivable, less reserve . . . . . . . . 93,171 49,963
Inventories and storage gas purchased . . . . . . 57,082 67,657
Deferred income taxes . . . . . . . . . . . . . . 16,161 19,710
Other prepayments, principally taxes . . . . . . 6,109 7,799
------------ -----------
184,597 159,040
------------ -----------
DEFERRED CHARGES AND OTHER ASSETS . . . . . . . . . 116,256 145,040
------------ -----------
TOTAL . . . . . . . . . . . . . . . . . . . . . $ 1,402,460 $ 1,360,138
============ ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity . . . . . . . . . . . $ 586,480 $ 513,044
Preferred stock . . . . . . . . . . . . . . . . . 28,454 28,471
Long-term debt . . . . . . . . . . . . . . . . . 353,876 329,051
------------ -----------
968,810 870,566
------------ -----------
CURRENT LIABILITIES
Current maturities of long-term debt . . . . . . 8,006 52,505
Accounts and wages payable . . . . . . . . . . . 107,931 80,523
Customer deposits and advance payments . . . . . 6,244 15,408
Accrued taxes and interest . . . . . . . . . . . 39,849 11,830
Other current liabilities . . . . . . . . . . . . 23,039 62,090
------------ -----------
185,069 222,356
------------ -----------
DEFERRED CREDITS . . . . . . . . . . . . . . . . . 248,581 267,216
------------ -----------
TOTAL . . . . . . . . . . . . . . . . . . . . . $ 1,402,460 $ 1,360,138
============ ===========
See accompanying Notes to Consolidated Financial Statements.
2
4
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
----------------------------------
June 30, 1996 June 30, 1995
------------- -------------
(Thousands, Except Per Share Data)
OPERATING REVENUES . . . . . . . . . . . . . . . . $ 157,760 $ 131,916
Cost of Gas . . . . . . . . . . . . . . . . . . . . 76,008 57,717
----------- -----------
NET REVENUES . . . . . . . . . . . . . . . . . . . 81,752 74,199
----------- -----------
OTHER OPERATING EXPENSES
Operation . . . . . . . . . . . . . . . . . . . 47,451 40,168
Maintenance . . . . . . . . . . . . . . . . . . 8,571 7,912
Depreciation and amortization . . . . . . . . . 11,900 11,781
General taxes . . . . . . . . . . . . . . . . . 15,217 14,653
Income taxes . . . . . . . . . . . . . . . . . . (2,974) (2,546)
----------- -----------
80,165 71,968
----------- -----------
OPERATING INCOME . . . . . . . . . . . . . . . . . 1,587 2,231
Other Income - Net . . . . . . . . . . . . . . . . 210 200
----------- -----------
INCOME BEFORE INTEREST EXPENSE . . . . . . . . . . 1,797 2,431
Interest Expense . . . . . . . . . . . . . . . . . 7,218 7,872
----------- -----------
NET LOSS . . . . . . . . . . . . . . . . . . . . . (5,421) (5,441)
Dividends on Preferred Stock . . . . . . . . . . . 333 333
----------- -----------
NET LOSS APPLICABLE TO COMMON STOCK . . . . . . . . $ (5,754) $ (5,774)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . 43,472 42,679
LOSS PER AVERAGE SHARE OF COMMON STOCK
(See Exhibit 11 for computation of fully
diluted earnings per average share) . . . . . . $ (0.13) $ (0.14)
=========== ===========
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . $ .285 $ .28
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
3
5
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Nine Months Ended
----------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
(Thousands, Except Per Share Data)
OPERATING REVENUES . . . . . . . . . . . . . . . . $ 863,912 $ 728,481
Cost of Gas . . . . . . . . . . . . . . . . . . . . 424,660 347,710
----------- -----------
NET REVENUES . . . . . . . . . . . . . . . . . . . 439,252 380,771
----------- -----------
OTHER OPERATING EXPENSES
Operation . . . . . . . . . . . . . . . . . . . . 139,799 124,333
Maintenance . . . . . . . . . . . . . . . . . . . 23,675 23,281
Depreciation and amortization . . . . . . . . . . 35,737 34,656
General taxes . . . . . . . . . . . . . . . . . . 56,093 56,933
Income taxes . . . . . . . . . . . . . . . . . . 59,882 44,371
----------- -----------
315,186 283,574
----------- -----------
OPERATING INCOME . . . . . . . . . . . . . . . . . 124,066 97,197
Other Income (Loss) - Net . . . . . . . . . . . . . (1,355) 2,752
----------- -----------
INCOME BEFORE INTEREST EXPENSE . . . . . . . . . . 122,711 99,949
Interest Expense . . . . . . . . . . . . . . . . . 22,883 24,226
----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . 99,828 75,723
Dividends on Preferred Stock . . . . . . . . . . . 999 1,000
----------- -----------
NET INCOME APPLICABLE TO COMMON STOCK . . . . . . . $ 98,829 $ 74,723
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . 43,272 42,485
EARNINGS PER AVERAGE SHARE OF COMMON STOCK
(See Exhibit 11 for computation of fully
diluted earnings per average share) . . . . . . $ 2.28 $ 1.76
=========== ===========
DIVIDENDS DECLARED PER COMMON SHARE . . . . . . . . $ .85 $ .8375
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
4
6
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
(Thousands)
OPERATING ACTIVITIES
Net Income . . . . . . . . . . . . . . . . . . . . . $ 99,828 $ 75,723
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization (a) . . . . . . . . 40,778 39,025
Deferred income taxes--net . . . . . . . . . . . 8,595 (4,404)
Amortization of investment tax credits . . . . . (730) (745)
Allowance for funds used during construction . . (386) (380)
Other noncash charges and credits--net . . . . . 4,980 1,878
------------- -----------
153,065 111,097
Changes in assets and liabilities:
Accounts receivable and accrued utility
revenues . . . . . . . . . . . . . . . . . . . . (32,903) 4,052
Gas costs due from/to customers - net . . . . . . (39,142) 11,922
Materials and supplies . . . . . . . . . . . . . 1,222 857
Storage gas purchased . . . . . . . . . . . . . . 9,353 25,612
Other prepayments, principally taxes . . . . . . 1,690 1,266
Accounts and wages payable . . . . . . . . . . . 25,491 (9,657)
Customer deposits and advance payments . . . . . (9,164) (9,099)
Accrued taxes . . . . . . . . . . . . . . . . . . 22,156 23,053
Accrued interest . . . . . . . . . . . . . . . . 5,863 6,526
Pipeline refunds due customers . . . . . . . . . (1,300) (3,210)
Rate refund due customers . . . . . . . . . . . . (9,306) 9,246
Deferred purchased gas costs . . . . . . . . . . (1,978) 25,524
Other-net . . . . . . . . . . . . . . . . . . . . 3,641 (1,555)
------------- -----------
Net Cash Provided by Operating Activities . 128,688 195,634
------------- -----------
FINANCING ACTIVITIES
Common stock issued . . . . . . . . . . . . . . . . . 9,568 10,133
Long-term debt issued . . . . . . . . . . . . . . . . 50,000 40,000
Long-term debt retired . . . . . . . . . . . . . . . (69,830) (9,322)
Notes payable - net . . . . . . . . . . . . . . . . . - (52,912)
Dividends on common and preferred stock . . . . . . . (37,515) (36,419)
------------- -----------
Net Cash Used in Financing Activities . . . (47,777) (48,520)
------------- -----------
INVESTING ACTIVITIES
Proceeds from sale of non-utility subsidiary . . . . - 2,000
Capital Expenditures . . . . . . . . . . . . . . . . (82,748) (75,620)
------------- -----------
Net Cash Used in Investing Activities . . . (82,748) (73,620)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . (1,837) 73,494
Cash and Cash Equivalents at Beginning of Period . . 13,911 3,522
------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . $ 12,074 $ 77,016
============= ===========
(a) Includes amounts charged to other accounts.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid . . . . . . . . . . . . . . . . . $ 31,180 $27,980
Interest paid . . . . . . . . . . . . . . . . . . . $ 16,705 $16,997
See accompanying Notes to Consolidated Financial Statements.
5
7
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, except as described in Note D below) 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. 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.
C. 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, during a one month period 60 days
prior to the tenth anniversary date for the 7-7/8% Series and 30 days
prior to the tenth anniversary date for the 9-1/4% Series. 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. These MTNs carry the same terms and put and
call options as the 9-1/4% Series First Mortgage Bonds mentioned 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 June 30,
1996, the First Mortgage Bonds mentioned above have been 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 is being amortized over future
periods as an adjustment to interest expense in accordance with prior
regulatory practice.
D. On June 28, 1996, the Company announced a redesigned organizational
structure and the process under which the new organization will be
staffed. The new structure flattens the corporate hierarchy and results
in fewer supervisory positions. In the initial stage of the
reorganization, the Company offered certain eligible supervisory
employees a voluntary separation pay program which entitles these
employees to a year of salary upon reaching their separation date. In
the quarter ended June 30, 1996, the Company recorded a non-recurring
$6.0 million pre-tax charge, representing the estimated expenses
associated with this voluntary separation pay program.
In the staffing phase of the reorganization process, management positions
in the new organization will be filled through a competitive bidding and
selection process. Employees not selected to fill management positions in
the staffing phase may choose from among three post-staffing options: (i)
leave the Company's payroll and receive voluntary separation pay; (ii)
remain on the payroll for up to six months while receiving the assistance
of outplacement services or (iii) join a program that will allow
employees to perform short-term work assignments. The Company is not
currently able to estimate the costs of these three options and
accordingly, no costs are recorded in the accompanying financial
statements.
Implementation of the new organizational structure is currently expected
to be completed by December 31, 1996.
6
8
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended June 30, 1996 vs. June 30, 1995
For the three months ended June 30, 1996, a seasonal net loss applicable
to common stock of $5.8 million was recorded, which represented virtually no
change from the amount recorded for the same period in the prior year. The net
loss per average common share was $.13, as compared to a net loss per average
common share of $.14 for the quarter ended June 30, 1995. Average common
shares outstanding increased by 1.9% over the same period in the prior year.
The effect of colder weather and lower interest expense during the current
quarter offset the impact of higher other operating expenses, which included a
non-recurring after-tax charge of $3.8 million, or $.09 per average common
share, resulting from estimated expenses stemming from a voluntary separation
pay program being offered as part of the Company's reorganization. This charge
is discussed more fully in Note D to the Consolidated Financial Statements.
Net revenues for the period rose by $7.6 million (10.2%) from the same
period last year to $81.8 million. Therms delivered to firm customers, as
shown in the table below, rose by 22.2 million therms due primarily to the
19.8% colder weather and the effect of increased customer meters, which were
2.7% higher at the end of the most recent period as compared to last year.
Weather for the quarters ended June 30, 1996 and June 30, 1995 was 28.7% and
5.7% colder than normal, respectively.
Three Months Ended
------------------
June 30, June 30,
1996 1995
-------- --------
Gas Delivered (thousands of therms)
Firm...................................... 164,887 142,683
Interruptible............................. 44,944 46,592
Electric Generation-Interruptible......... 16,082 14,882
Transportation Service.................... 21,893 14,281
Gas Sold Off System (thousands of therms)... 509 -
-------- --------
Total................................... 248,315 218,438
======== ========
Number of Customer Meters (end of period)... 770,076 749,735
======== ========
Degree Days................................. 399 333
======== ========
Excluding deliveries for electric generation, therms delivered to
interruptible and transportation service customers increased by 6.0 million
therms (9.8%). 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 is
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 rose by 1.2 million therms (8.1%) from the same period in the prior
year. The increase was due, in part, to a conversion of certain steam
production units to natural gas from other fuels. 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
9
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONT'D)
Operation and maintenance expenses increased by $7.9 million (16.5%) from
the same period last year, due primarily to a non-recurring $6.0 million charge
recorded to cover the estimated expenses associated with a voluntary separation
pay program being offered to eligible supervisory employees in connection with
a reorganization of the Company.
General taxes increased by $564,000 (3.8%) due primarily to higher gross
receipts taxes resulting from the colder weather. Partially offsetting these
increases was the effect of a drop in the fuel tax rate for service to
customers in Montgomery County, Maryland. All such taxes are included in
revenues and therefore fluctuations in these amounts have no effect on net
income.
Interest expense decreased by $654,000 (8.3%). Interest on long-term
debt dropped by $399,000, due almost exclusively to a .4% decline in the
weighted average interest rate on long-term debt. The average amount of
long-term debt outstanding decreased slightly as compared to the comparable
period last year. Contributing to the drop in interest expense was a
$200,000 decline in interest due to customers resulting from amounts
overcollected in interim rate relief in fiscal year 1995.
Nine months ended June 30, 1996 vs. June 30, 1995
For the nine months ended June 30, 1996, net income applicable to common
stock amounted to $98.8 million, which represented an increase of $24.1 million
from the same period in the prior year. Earnings per average common share were
$2.28, or $.52 per average common share higher than the nine month period ended
June 30, 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 (i) the combined effect of significantly colder weather in the
current nine month period and increased customer meters; and (ii) lower
interest expense. Factors which partially offset these items were higher other
operating expenses and lower other income (loss) - net.
Net revenues for the period rose $58.5 million (15.4%) from the same
period last year to $439.3 million. Therms delivered to firm customers
increased by 204.7 million therms (22.3%) which resulted from weather that was
25.6% colder than the prior year and the impact of a 2.7% increase in the
number of customer meters. Weather for the nine months ended June 30, 1996 and
June 30, 1995 was 18.9% colder than normal and 5.5% warmer than normal,
respectively.
8
10
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONT'D)
Nine Months Ended
-----------------
June 30, June 30,
1996 1995
-------- --------
Gas Delivered (thousands of therms)
Firm...................................... 1,121,808 917,074
Interruptible............................. 153,161 208,064
Electric Generation-Interruptible......... 23,249 42,076
Transportation Service.................... 61,720 46,512
Gas Sold Off System (thousands of therms)... 36,565 -
-------- ---------
Total................................. 1,396,503 1,213,726
========= =========
Number of Customer Meters (end of period)... 770,076 749,735
========= =========
Degree Days................................. 4,561 3,630
========= =========
Excluding deliveries for electric generation, therms delivered to
interruptible and transportation service customers declined by 39.7 million
therms (15.6%). The decrease resulted primarily from significantly longer
interruptions in service to these customers during the first and second fiscal
quarters of the current year due to the sharply colder weather. Margins earned
on sales and deliveries to the interruptible class are being shared with firm
customers as described previously in this report.
Volumes delivered for electric generation declined by 18.8 million therms
(44.7%) from the same period last year. This drop was primarily attributable to
reduced deliveries during the quarter ended March 31, 1996 resulting primarily
from an unavailability of pipeline capacity during that period.
Operation and maintenance expenses increased by $15.9 million (10.7%)
from the same period last year due primarily to (i) the previously-described
charge related to a voluntary separation pay program; (ii) higher uncollectible
accounts expense resulting from the colder weather; (iii) higher labor
expenses; (iv) higher injuries and damages expenses and (v) a non-recurring
accrual for a contingency.
Depreciation and amortization increased by $1.1 million (3.1%) due
primarily to depreciation on the Company's rising investment in depreciable
plant.
General taxes declined by $840,000 (1.5%) due to a drop in the fuel tax
rate for service to customers in Montgomery County, Maryland. The decline in
this gross receipts tax was largely offset by higher other gross receipts taxes
due to the colder weather during the current nine month period, and higher
property taxes. As discussed previously, all gross receipts 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 primarily to a
$1.9 million gain on the sale of 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 $1.3 million (5.5%) in the current nine
month period. Reflected in this change is the effect of lower interest on
short-term debt reflecting significantly lower average borrowing levels
outstanding resulting from the temporary overcollection of purchased gas costs
and interim rate relief, and the level of refunds from pipeline companies that
will be returned to the Company's customers. This decline was partially offset
by increased interest expense on long-term debt reflecting higher average
balances outstanding during the current nine month period.
9
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 therms delivered (excluding deliveries 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 no short-term
debt outstanding at June 30, 1996 or at June 30, 1995.
Long-Term Cash Requirements and Related Financing
Capital expenditures for the first nine months of fiscal year 1996 were
$82.7 million. The Company currently expects to underrun the $130.3 million
budgeted for fiscal year 1996. The expected underrun is due primarily to a
reduction in single family housing starts within the Company's service
territory. 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 therms delivered. The level of therms delivered is almost exclusively
dependent upon the number of customer meters and the variability of the
weather.
Net cash provided by operating activities was $128.7 million during the
first nine months of fiscal year 1996 and compares to $195.6 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 the prior year's overcollection of gas costs and (iv) the
effect of a higher current year cost per therm to replace storage gas volumes
withdrawn during the winter heating season. These factors were partially
offset by: (i) increased accounts payable resulting from greater amounts owed
for gas purchases due to higher gas prices, and the charge related to the
voluntary separation pay program and (ii) the effect of higher net income.
10
12
WASHINGTON GAS LIGHT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONT'D)
In connection with the January 1996 in-substance defeasance discussed in
Note C to the Consolidated Financial Statements, the Company issued $50.0
million of unsecured MTNs at a coupon rate of 6.15%. These MTNs have 30-year
nominal lives and allow the holder to elect early maturity of the MTNs, at par,
during a one month period 30 days prior to the tenth anniversary date.
Additionally, the Company may redeem the MTNs 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. The $69.8 million of long-term debt retired included $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 nine months ended June 30, 1996, the Company sold with
recourse, $23.7 million of non-utility accounts receivable. This compares to
$36.9 million sold in the nine months ended June 30, 1995.
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PART II. OTHER INFORMATION
Item 5. Other Information
A. 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 of Virginia (SCC of VA) 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%. New rates were placed into effect, subject to refund, on
August 6, 1995.
On May 30, 1996, the SCC of VA issued a final order approving an
increase in annual revenues of $883,000, effective August 6, 1995. The
increase reflects an overall rate of return of 9.51% and an ROE of
11.00%. Amounts collected under interim rates in excess of the amount
granted by the SCC of VA will be returned, with interest, by September 1,
1996.
As reported on Form 10-Q for the quarter ended December 31, 1995,
on February 2, 1996, Shenandoah filed a request with the Public Service
Commission of West Virginia (PSC of WVA) for a rate increase of
approximately $604,000, or 7.4%. The request included an overall rate of
return of 10.33%, an ROE of 12.25% and a 57.11% common equity ratio.
On August 8, 1996, a settlement agreement was reached between
Shenandoah, the Staff of the PSC of WVA and the Consumer Advocate
Division of the PSC of WVA which would result in an increase in annual
revenues of $216,000. The agreement, which is subject to approval by the
PSC of WVA, does not specify an overall rate of return or a return on
equity. If approved by the PSC of WVA, the increase in rates will be
placed into effect in December 1996.
B. Effective June 1, 1996, the Company's Board of Directors elected
Richard L. Fisher as Vice President. Mr. Fisher will be responsible for
the Company's delivery services business unit. In this position, Mr.
Fisher will be responsible for ensuring safe, reliable and efficient
delivery of gas to customers. He most recently served as Executive
Director with responsibilities in the Company's distribution area. Prior
to his distribution experience, Mr. Fisher held the position of Director
of federal regulations and gas operations.
Also effective June 1, 1996, James B. White, Vice President,
becomes Vice President of the new customer business unit. Mr. White will
be responsible for increasing sales to new and existing customers,
developing new products and services and market planning and analysis.
Mr. White previously held the position of Vice President and General
Manager of the Company's Virginia Division and has prior experience in
the Company's marketing and investor relations areas.
C. On June 26, 1996, the Public Service Commission of Maryland approved
a tariff filing made by the Company establishing a pilot program for
approximately 6,000 residential customers. This program, as described in
the Form 10-Q for the quarter ended March 31, 1996, contains unbundled
service options which will provide participating customers with the
opportunity to acquire their gas supplies from a third party supplier.
The two year pilot program becomes effective November 1, 1996.
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Item 5. Other Information (CONT'D)
D. Effective July 22, 1996, Washington Resources Group, Inc., a
non-utility subsidiary, was renamed Washington Gas Energy Services, Inc.
This subsidiary is now engaged in the sale of natural gas in competition
with third-party suppliers, such as marketers or other gas companies.
The Company anticipates that opportunities for non-regulated sales will
increase as competition intensifies and as unbundling initiatives are
implemented.
E. The Company maintains a constructive policy of negotiating in good
faith for labor contracts with all of the unions that represent five
separate units of employees. The Company has signed contracts with four
out of the five, covering a total of 610 employees.
With respect to a production and maintenance unit of 950 persons
represented by the International Union of Gas Workers (IUGW), there is no
signed contract, but the employees have been working peacefully since
September 27, 1995, under the terms of the Company's last offer, as
amended, to the IUGW. No negotiations are currently taking place, but
the Company remains willing to negotiate when asked to do so.
In July 1996 the IUGW, previously an independent union, affiliated with
the International Brotherhood of Teamsters, AFL-CIO and is now known as
IBT Local 96.
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PART II. OTHER INFORMATION (CONT'D)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Filed Herewith:
Page in
Description 10-Q
----------- -------
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
Additional Exhibits -
27. Financial Data Schedule See Separate
Volume
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 June 30, 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 August 14, 1996 /s/ Frederic M. Kline
--------------------- --------------------------------
Vice President and Treasurer
(Principal Accounting Officer)
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