<PAGE>
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 December 31, 1997
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------- ---------------------
Commission file number 1-1483
---------------------------------------------------
WASHINGTON GAS LIGHT COMPANY
(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)
(703) 750-4440
- -------------------------------------------------------------------------------
Registrant's telephone number, including area code
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 43,636,118 January 30, 1998
- ---------------------------- ------------------ -------------------
Class Number of Shares Date
<PAGE>
WASHINGTON GAS LIGHT COMPANY
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> .............................................................. <C>
PART I. Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 1997 and September 30, 1997 .............. 2-3
Consolidated Statements of Income -
Three Months Ended December 31, 1997 and 1996 .......... 4
Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1997 and 1996 ......... 5
Notes to Consolidated Financial Statements ................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations .. 8-12
PART II. Other Information:
Item 5. Other Information .............................. 13
Item 6. Exhibits and Reports on Form 8-K ............... 14
Signature ............................................... 14
</TABLE>
1
<PAGE>
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1997 1997
----------- -----------
(Unaudited)
(Thousands)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
At original cost ................................. $ 1,879,198 $ 1,846,471
Accumulated depreciation and amortization ........ (641,310) (629,334)
----------- -----------
1,237,888 1,217,137
----------- -----------
Current Assets
Cash and cash equivalents ........................ 16,977 9,708
Accounts receivable .............................. 164,799 65,232
Gas costs due from customers ..................... 9,073 9,445
Allowance for doubtful accounts .................. (11,391) (11,043)
Accrued utility revenues ......................... 81,148 21,020
Materials and supplies--principally at average cost 14,702 15,186
Storage gas--at cost (first-in, first-out) ....... 72,605 81,072
Deferred income taxes ............................ 18,084 17,447
Other prepayments--principally taxes ............. 15,168 11,907
----------- -----------
381,165 219,974
----------- -----------
Deferred Charges and Other Assets
Regulatory assets--deferred purchased gas costs .. -- 4,447
Regulatory assets--other ......................... 96,799 97,509
Other ............................................ 12,995 12,965
----------- -----------
109,794 114,921
----------- -----------
Total .......................................... $ 1,728,847 $ 1,552,032
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1997 1997
----------- ----------
(Unaudited)
(Thousands)
<S> .....................................................<C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity ......................... $ 611,676 $ 589,035
Preferred stock ..................................... 28,427 28,430
Long-term debt ...................................... 418,567 431,575
---------- ----------
1,058,670 1,049,040
---------- ----------
Current Liabilities
Current maturities of long-term debt ................ 25,163 20,862
Notes payable ....................................... 130,404 67,900
Accounts payable .................................... 149,593 99,578
Wages payable ....................................... 12,010 13,590
Dividends declared .................................. 13,224 13,224
Customer deposits and advance payments .............. 12,835 16,662
Accrued taxes and interest .......................... 50,646 10,934
Pipeline refunds due to customers ................... 4,356 6,054
Gas costs due to customers .......................... 4,761 2,418
---------- ----------
402,992 251,222
---------- ----------
Deferred Credits
Unamortized investment tax credits .................. 21,190 21,427
Deferred income taxes ............................... 130,111 136,682
Regulatory liabilities--deferred purchased gas costs .. 19,388 --
Other regulatory liabilities and other deferred credits 96,496 93,661
---------- ----------
267,185 251,770
---------- ----------
Total ............................................. $1,728,847 $1,552,032
========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
Dec. 31, Dec. 31,
1997 1996
-------- --------
(Thousands, Except Per Share Data)
<S> ................................................ <C> <C>
Operating Revenues ................................. $367,547 $344,958
Cost of Gas ........................................ 212,046 191,275
-------- --------
Net Revenues ....................................... 155,501 153,683
-------- --------
Other Operating Expenses
Operation ........................................ 43,101 45,746
Maintenance ...................................... 9,237 8,866
Depreciation and amortization .................... 13,430 12,579
General taxes .................................... 19,769 18,946
Income taxes ..................................... 22,262 21,490
-------- --------
107,799 107,627
-------- --------
Operating Income ................................... 47,702 46,056
Other Income - Net ................................. 112 551
-------- --------
Income Before Interest Expense ..................... 47,814 46,607
Interest Expense
Interest on long-term debt ....................... 7,992 7,453
Other ............................................ 1,699 1,730
-------- --------
9,691 9,183
-------- --------
Net Income ......................................... 38,123 37,424
Dividends on Preferred Stock ....................... 332 333
-------- --------
Net Income Applicable to Common Stock .............. $ 37,791 $ 37,091
======== ========
Average Common Shares Outstanding .................. 43,651 43,711
======== ========
Earnings per Average Common Share - Basic & Diluted $ 0.87 $ 0.85
======== ========
Dividends Declared per Common Share ................ $ 0.295 $ 0.285
======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
WASHINGTON GAS LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------
Dec. 31, Dec. 31,
1997 1996
---------- ----------
(Thousands)
<S> .................................................... <C> <C>
Operating Activities
Net income ............................................. $ 38,123 $ 37,424
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization a/ ..................... 14,781 14,275
Deferred income taxes - net .......................... (7,179) (618)
Amortization of investment tax credits ............... (237) (242)
Allowance for funds used during construction ......... (218) (80)
Other noncash charges - net .......................... 1,436 1,111
---------- ----------
46,706 51,870
Changes in assets and liabilities:
Accounts receivable and accrued utility revenues ..... (159,347) (166,141)
Gas costs due from/to customers - net ................ 2,715 3,359
Storage gas .......................................... 8,467 7,878
Other prepayments - principally taxes ................ (3,261) (2,610)
Accounts payable ..................................... 49,495 68,596
Wages payable ........................................ (1,580) 1,142
Customer deposits and advance payments ............... (3,827) (4,745)
Accrued taxes and interest ........................... 39,712 32,507
Pipeline refunds due to customers .................... (1,698) (3,718)
Deferred purchased gas costs ......................... 23,835 4,850
Other - net .......................................... 2,283 (1,385)
---------- ----------
Net Cash Provided by (Used in) Operating Activities 3,500 (8,397)
---------- ----------
Financing Activities
Common stock issued .................................... -- 313
Long-term debt issued .................................. -- 53,000
Long-term debt retired ................................. (8,720) (6)
Common stock repurchased ............................... (2,340) --
Notes payable - net .................................... 62,504 2,603
Dividends on common and preferred stock ................ (13,224) (12,737)
---------- ----------
Net Cash Provided by Financing Activities .......... 38,220 43,173
---------- ----------
Investing Activities
Capital expenditures ................................... (34,451) (29,885)
---------- ----------
Net Cash (Used in) Investing Activities ............ (34,451) (29,885)
---------- ----------
Increase in Cash and Cash Equivalents .................. 7,269 4,891
Cash and Cash Equivalents at Beginning of Period ....... 9,708 4,589
---------- ----------
Cash and Cash Equivalents at End of Period ............. $ 16,977 $ 9,480
========== ==========
Supplemental Disclosures of Cash Flow Information
Income taxes paid .................................... $ 19 $ 5
Interest paid ........................................ $ 1,660 $ 1,532
</TABLE>
a/ Includes amounts charged to other accounts.
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
WASHINGTON GAS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. In the opinion of Washington Gas Light Company (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. Refer to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1997.
B. Due to the seasonal nature of the Company's business, the results of
operations shown do not indicate the expected results for the fiscal year
ended September 30, 1998.
C. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
D. Certain amounts in financial statements of prior years have been
reclassified to conform to the presentation of the current year.
E. On January 12, 1998, the Company issued a total of $10 million in
Medium-Term Notes (MTNs) with a January 12, 2028 maturity date. The notes
have a 30-year nominal life and a coupon rate of 6.57% per annum.
In February 1998, the Company issued $12 million in MTNs and used part
of the proceeds to redeem $11 million of the 8-3/4% Series First Mortgage
Bonds. The Company paid a premium of $493,100 on the redemption. The $12
million in MTNs have a 30-year nominal life, maturing on February 15, 2028,
and have a coupon rate of 6.72% per annum. The Company has an option to
redeem the MTNs at any time, as a whole or in part, at the greater of: (1)
par value; or (2) the price implied in the yield to maturity, plus 20 basis
points, of a comparable-maturity Treasury security.
F. The Company plans to issue $30 million of 30-year MTNs in March 1998 for
general corporate purposes. The Company's interest costs associated with
issuing MTNs reflect comparable Treasury yields plus additional costs for
issuing corporate debt.
In order to lock in interest costs for the anticipated MTN issuance in
March 1998, the Company, on December 4, 1997, entered into an agreement
that reflects the forward sale of $27.5 million of 30-year Treasury bonds
at a fixed price to be paid on March 16, 1998. The Company accounts for
this transaction as a hedge of an anticipated transaction in accordance
with Statement of Financial Accounting Standards No. 80, "Accounting for
Futures Contracts." Any gain or loss associated with this hedge will be
recognized as a MTN debt issuance cost when the Company issues such debt.
If the agreement is terminated without completing the anticipated MTN
issuance, any gain or loss will be immediately recognized in earnings.
G. The Company adopted Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings Per Share" (SFAS No.128) in the quarter ended December 31,
1997. Basic earnings per share (EPS) were computed by dividing net income
applicable to common stock by the weighted average number of shares
outstanding during the quarter. Diluted EPS assumes conversion of
convertible preferred stock at the beginning of the applicable period.
There was no change to previously reported EPS for the quarter ended
December 31, 1996 as a result of adopting SFAS No. 128. A reconciliation of
the numerators and denominators of the basic and diluted EPS computations
is shown below:
6
<PAGE>
WASHINGTON GAS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(continued)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1997
----------------------------------
Per-Share
Income Shares Amount
------- ------ ---------
(Thousands, Except Per Share Data)
<S> <C> <C> <C>
Basic EPS:
Net Income Applicable to Common Stock ...... $37,791 43,651 $ 0.87
Effect of Dilutive Securities:
$4.60 and $4.36 Convertible Preferred Stock,
Assuming Conversion on October 1, 1997 ... 2 27
------- ------
Diluted EPS:
Net Income Applicable to Common Stock
Plus Assumed Conversions ................. $37,793 43,678 $ 0.87
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1996
------------------------------
Per-Share
Income Shares Amount
------- ------ ---------
(Thousands, Except Per Share Data)
<S> <C> <C> <C>
Basic EPS:
Net Income Applicable to Common Stock ...... $37,091 43,711 $ 0.85
Effect of Dilutive Securities:
$4.60 and $4.36 Convertible Preferred Stock,
Assuming Conversion on October 1, 1996 ... 3 28
------- ------
Diluted EPS:
Net Income Applicable to Common Stock
Plus Assumed Conversions ................. $37,094 43,739 $ 0.85
======= ====== ======
</TABLE>
7
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
This report may contain statements that are not based on historical facts
and thereby constitute forward-looking statements. Certain words, such as, but
not limited to, "estimates," "expects," "anticipates," "intends," "believes,"
and variations of these words, identify forward-looking statements that involve
uncertainties and risks. Although the Company believes such forward-looking
statements are based on reasonable assumptions, it cannot give assurance that
such results will be reached. The Company makes such statements in reliance on
the safe harbor protections provided under the Private Securities Litigation
Reform Act of 1995.
As required by such Act, the Company hereby identifies the following
important factors that could cause actual results to differ materially from any
results projected, forecasted, estimated or budgeted by the Company in
forward-looking statements: (1) risks and uncertainties impacting the Company as
a whole primarily related to changes in general economic conditions in the
United States; (2) changes in laws and regulations to which the Company is
subject, including tax, environmental and employment laws and regulations; (3)
the cost and effects of legal and administrative claims and proceedings against
the Company or which may be brought against the Company; (4) conditions of the
capital markets utilized by the Company to access capital to finance operations;
(5) the effect of fluctuations in weather from normal levels; (6) variations in
prices of natural gas and competing energy sources; (7) improvements in products
or services offered by competitors; and (8) the Company's ability to develop
expanded markets and product offerings as well as to maintain existing markets
and the expenditures required to develop and provide such products and services.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED DECEMBER 31, 1997 vs. DECEMBER 31, 1996
- ----------------------------------------------------------
Earnings
- --------
For the three months ended December 31, 1997, net income applicable to
common stock totaled $37.8 million, or $0.7 million higher than the same period
last year. Basic and diluted earnings per average common share were $0.87, or
$0.02 per average common share higher than one year ago. Average common shares
outstanding declined by less than 1% from the prior year, primarily due to the
effect of the Company's repurchase of 88,700 common shares during the current
quarter. The increase in net income applicable to common stock was primarily
attributable to higher net revenues resulting from colder weather in the current
quarter, and lower operation expenses. Partially offsetting these increases to
earnings are higher depreciation and amortization, general and income taxes and
interest expense.
Net Revenues
- ------------
Net revenues for the period increased by $1.8 million (1.2%) from the same
period last year to $155.5 million, primarily resulting from colder weather in
the current quarter and the effect of increased customer meters. The table on
the following page compares certain operating statistics for the quarters ended
December 31, 1997 and 1996.
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
-------------------
Dec. 31, Dec. 31,
1997 1996
-------- --------
<S> <C> <C>
Gas Sales and Deliveries (thousands of therms)
Gas Sold and Delivered
Firm .............................................. 355,410 369,145
Interruptible ..................................... 28,712 54,397
Electric Generation ............................... -- 51
------- -------
384,122 423,593
------- -------
Gas Delivered for Others
Firm .............................................. 24,326 3,322
Interruptible ..................................... 75,653 43,928
Electric Generation ............................... 16,532 10,637
------- -------
116,511 57,887
------- -------
Total Deliveries ............................... 500,633 481,480
======= =======
Degree Days
Actual ............................................ 1,526 1,476
Normal ............................................ 1,376 1,376
Customer Meters (end of period) ....................... 813,898 789,897
</TABLE>
Gas Delivered to Firm Customers
The level of gas delivered to firm customers is highly sensitive to the
variability of weather since a large portion of the Company's deliveries of
natural gas is used for space heating. The Company's rates are based on normal
weather. Weather for the three months ended December 31, 1997 was 10.9% colder
than normal while weather for the same period last year was 7.3% colder than
normal. The Company has no weather normalization tariff provision in any of its
jurisdictions. However, the Company has declining block rates in two of its
three major jurisdictions that reduce the impact on net revenues of deviations
in weather from normal.
Therm deliveries to firm customers include the amounts reflected in gas
sold and delivered and gas delivered for others. Customers that do not acquire
their gas supply from the Company do not affect net revenues since margins
generated from delivering customer-owned gas are equivalent to those earned on
bundled gas service. Firm therm deliveries increased by 7.3 million therms
(2.0%) in the current quarter, primarily due to weather that was 3.4% colder
than the same quarter last year and the effect of a 3.0% increase in the number
of customer meters.
Gas Delivered to Interruptible Customers
Therms delivered to interruptible customers, including gas sold and
delivered and gas delivered for others, increased by 6.0 million therms (6.1%)
in the current quarter. The increase in volumes delivered resulted primarily
from the colder weather as compared to the same period last year. The effect on
net income of changes in delivered volumes and prices to the interruptible class
is minimized by margin-sharing arrangements that are part of the design of the
Company's rates. Under these arrangements, the Company returns a majority of the
margins earned on interruptible gas sales and deliveries to firm customers after
it reaches a gross margin threshold or in exchange for the shifting of a portion
of the fixed costs of providing service from the interruptible to the firm
class.
9
<PAGE>
Gas Delivered for Electric Generation
The Company sells and/or transports gas to two customers with facilities in
Maryland who use the supplies to generate electricity. Volumes delivered for
electric generation in the current quarter increased by 5.8 million therms over
the same period last year, primarily due to increased usage by these customers.
The Company shares a significant majority of the margins earned on deliveries of
gas to these customers with firm customers and, therefore, changes in volumes
delivered between periods have an immaterial effect on net revenues and net
income.
Other Operating Expenses
- ------------------------
Operation and maintenance expenses declined by $2.3 million (4.2%) from the
same period last year. This decrease is primarily attributable to lower labor
costs due to a decline in employee levels, and the absence in the current
quarter of miscellaneous operating provisions recorded in the same period last
year.
Depreciation and amortization increased by $851,000 (6.8%) primarily due to
the Company's increased investment in new plant and equipment.
General taxes rose by $823,000 (4.3%) primarily due to an increase in gross
receipts taxes, reflecting higher revenues. Gross receipts taxes collected from
customers are reflected in both revenues and general tax expense, and,
therefore, there is no effect on net income. Higher property taxes resulting
from increased investments in property also contributed to the increase.
Income taxes, including amounts reflected in other income, increased by
$499,000 (2.3%), due primarily to higher pre-tax income generated this quarter.
Other Income - Net
- ------------------
Other income - net decreased by $439,000, primarily resulting from slightly
lower earnings generated from non-utility activities.
Interest Expense
- ----------------
Total interest expense increased by $508,000 (5.5%) from the same period
last year, reflecting the following changes:
Composition of the Changes in Interest Expense:
Increase/(Decrease)
-------------------
(Thousands)
Long-term debt $539
Short-term notes payable 163
Other (194)
-----
Total $508
=====
Long-Term - The increase in interest on long-term debt of $539,000 was primarily
due to a $41.0 million rise in the average amount of long-term debt outstanding,
partially offset by a decline of 0.19 percentage points in the weighted-average
cost of such debt.
Short-Term Notes Payable - The increase in interest on short-term debt of
$163,000 was due to a $7.3 million increase in the average amount of short-term
debt outstanding and an increase of 0.22 percentage points in the
weighted-average cost of such debt.
10
<PAGE>
Other - Other interest expense decreased by $194,000, primarily reflecting a
higher accrual in the current quarter for Allowance for Funds Used During
Construction.
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) occur in the first and second fiscal quarters. This weather
sensitivity causes short-term cash requirements to vary significantly during the
year. Cash requirements peak in the fall and winter months when accounts
receivable, accrued utility revenues and storage gas 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 requirements. Alternative sources include
unsecured lines of credit, some of which are seasonal, and $160 million in a
revolving credit agreement maintained with a group of banks. The Company
activates these financing options to support or replace the Company's commercial
paper.
At December 31, 1997, the Company had notes payable outstanding of $130.4
million ($56.3 million of bank loans and $74.1 million of commercial paper), as
compared with $117.9 million ($37.9 million of bank loans and $80.0 million of
commercial paper) at December 31, 1996. The increase in notes payable during the
three months ended December 31, 1997 as compared to the same period last year
was primarily due to the Company's increased use of short-term financing and the
absence of long-term debt issuances in the current quarter. Total short-term
debt outstanding increased by $62.5 million from the balance outstanding at
September 30, 1997, reflecting the seasonality of borrowing and the effect of
the Company's issuance of long-term debt in the latter part of fiscal year 1997,
which resulted in a lower relative notes payable balance at September 30, 1997.
Long-Term Cash Requirements and Related Financing
- -------------------------------------------------
Capital expenditures for the first three months of fiscal year 1998 were
$34.5 million with a budget of $168.8 million for the fiscal 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 deliveries. The
Company's last significant base rate increase became effective in December 1994.
The number of customer meters and the variability of the weather almost
exclusively affect the level of therms delivered.
Operating activities provided net cash of $3.5 million during the first
three months of fiscal year 1998 compared to $8.4 million of net cash used in
operating activities for the same period in fiscal year 1997. The improvement
was primarily derived from: (1) the effect of a shift from an undercollection of
then current gas costs from customers in the prior year to an overcollection of
current gas costs this year; (2) an increase in accrued taxes primarily due to
higher taxable income in the current quarter, reflecting lower deductions for
purchased gas costs; and (3) lower funds supporting accounts receivable and
accrued utility revenues primarily due to a lower increase in gas costs in the
current quarter. Partially offsetting these sources of cash were the following:
(1) a decreased source of cash reflected in accounts payable primarily due to a
lower liability for gas purchases resulting from decreased gas prices near the
end of the first quarter of fiscal year 1998; and (2) a decrease in net income
before non-cash charges.
11
<PAGE>
During the first three months of fiscal year 1998, the Company retired $8.7
million of MTNs with coupon rates ranging from 6.43% to 7.53%. There were no
issuances of long-term debt in the current quarter.
During the quarter ended December 31, 1997, the Company paid $2.3 million
to repurchase 88,700 shares of common stock.
During the three months ended December 31, 1997, the Company sold, with
recourse, $8.3 million of non-utility accounts receivable. This compares to $8.6
million sold in the three months ended December 31, 1996.
OTHER FACTORS AFFECTING THE COMPANY
- -----------------------------------
Year 2000
- ---------
Like all companies having business-application software programs written
over many years and a computing infrastructure that includes computerized
devices, the Company is also affected by the so-called "Year 2000" issue. These
programs, which include, but are not limited to, the Company's customer service
operations and financial systems, were written using two-year digits to define
the applicable year, rather than four. Any of the Company's programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in the computer shutting down or
performing incorrect computations. The computing infrastructure, including
computerized devices, could contain date-sensitive software or electronics
embedded in the equipment that could cause the devices to fail to operate or to
operate inconsistently.
The Company is completing the process of identifying the programs and
infrastructure that could be affected by the Year 2000 issue and has developed
an implementation plan to resolve the issue. The Company's plan includes
individual strategies targeted at the specific nature of the year 2000 issues in
each of the following areas: (1) business applications, including mainframe,
telecommunications, networks, personal computers, electronic communications and
user-developed and supported applications; (2) embedded systems, including
equipment that operates such items as the Company's storage and distribution
system, metering, fleet and buildings; and (3) vendor and supplier
relationships.
The plan includes the replacement of certain equipment and replacement or
modification of certain software to recognize the turn of the century. The
Company expects its review of embedded systems could require replacement or
modification of some equipment or the electronics that control them. The
Company's review of vendors and suppliers could result in establishing new
business relationships with alternate providers of products and services. The
plan is currently expected to result in expenses of approximately $8 million to
$10 million that will be incurred by the turn of the century.
The plan also includes replacing certain existing systems with new systems
that will be Year 2000 operational and will provide additional business
management information. The costs to replace these systems, of approximately $15
million to $20 million, will be capitalized.
The Company believes, with appropriate replacement or modifications, it
will be able to operate its time-sensitive business-application software
programs and infrastructure through the turn of the century.
12
<PAGE>
PART II. OTHER INFORMATION
----------------------------
Item 5.
- -------
Other Information
- -----------------
A. Many in the energy industry, including the Company, believe that the
increasingly deregulated and more competitive energy industry will continue
to lead to industry consolidation, combination, disaggregation and other
strategic alliances and restructuring as energy companies seek to offer a
broader range of energy services to compete more effectively in attracting
and retaining customers. For example, affiliations with other operating
utilities could potentially result in economies and synergies, and
combinations could provide a means to offer customers a more complete range
of energy services. Others are discontinuing operations in certain portions
of the energy industry or divesting portions of their business and
facilities. The Company, from time to time, performs studies, and in some
cases holds discussions regarding utility and energy-related investments
and transactions. The ultimate impact on the Company of any such
investments and transactions that may occur can not be determined at this
time.
B. On January 20, 1998, the Public Service Commission of the District of
Columbia (PSC of DC) approved the Company's request to offer firm delivery
service to large commercial customers. Under the PSC of DC's order,
customers who use at least 60,000 therms of natural gas annually are
eligible to purchase gas from third-party suppliers, including the
Company's gas-marketing subsidiary. The Company continues to charge for
delivering the natural gas under existing tariffs. The new rate schedule is
expected to be effective April 1, 1998.
13
<PAGE>
PART II. OTHER INFORMATION (continued)
-----------------
Item 6.
- -------
Exhibits and Reports on Form 8-K
- --------------------------------
(a) Exhibits Filed Herewith:
Description Page in 10-Q
- -------------------------------------------------------- -------------------
27 Financial Data Schedule See separate
volume
99.0 Computation of Ratio of Earnings to Fixed Charges "
99.1 Computation of Ratio of Earnings to Fixed Charges "
and Preferred Stock Dividends
(b) Reports on Form 8-K
On December 9, 1997, the Company filed a Form 8-K reporting the election of
James H. DeGraffenreidt, Jr. as President and Chief Executive Officer and
Joseph M. Schepis as Executive Vice President and Chief Operating Officer,
effective January 1, 1998, under Item 5. Patrick J. Maher continues to
serve as Chairman of the Board.
SIGNATURE
---------
Pursuant to the requirements of the Securities and 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 February 17, 1998 /s/ Robert E. Tuoriniemi
---------------------------------- --------------------------------
Controller
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
INTERIM CONSOLIDATED INCOME STATEMENTS, BALANCE SHEETS AND STATEMENTS OF
CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,234,764
<OTHER-PROPERTY-AND-INVEST> 3,124
<TOTAL-CURRENT-ASSETS> 381,165
<TOTAL-DEFERRED-CHARGES> 109,794
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,728,847
<COMMON> 43,743
<CAPITAL-SURPLUS-PAID-IN> 299,858
<RETAINED-EARNINGS> 268,075
<TOTAL-COMMON-STOCKHOLDERS-EQ> 611,676
0
28,427
<LONG-TERM-DEBT-NET> 418,567<F1>
<SHORT-TERM-NOTES> 56,300<F2>
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 74,104<F2>
<LONG-TERM-DEBT-CURRENT-PORT> 25,163
0
<CAPITAL-LEASE-OBLIGATIONS> 1,171
<LEASES-CURRENT> 500
<OTHER-ITEMS-CAPITAL-AND-LIAB> 513,439
<TOT-CAPITALIZATION-AND-LIAB> 1,728,847
<GROSS-OPERATING-REVENUE> 367,547
<INCOME-TAX-EXPENSE> 22,262
<OTHER-OPERATING-EXPENSES> 297,583
<TOTAL-OPERATING-EXPENSES> 319,845
<OPERATING-INCOME-LOSS> 47,702
<OTHER-INCOME-NET> 112
<INCOME-BEFORE-INTEREST-EXPEN> 47,814
<TOTAL-INTEREST-EXPENSE> 9,691
<NET-INCOME> 38,123
332
<EARNINGS-AVAILABLE-FOR-COMM> 37,791
<COMMON-STOCK-DIVIDENDS> 12,890
<TOTAL-INTEREST-ON-BONDS> 9,691<F3>
<CASH-FLOW-OPERATIONS> 3,500
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
<FN>
<F1> REPRESENTS TOTAL LONG-TERM DEBT INCLUDING $54,000 IN FIRST
MORTGAGE BONDS, $364,400 IN UNSECURED MEDIUM-TERM NOTES, $869 IN OTHER
LONG-TERM DEBT AND ($702) IN UNAMORTIZED PREMIUM AND DISCOUNT-NET.
<F2> TOTAL OF SHORT-TERM NOTES PAYABLE AND COMMERCIAL PAPER TIES TO
BALANCE SHEET CAPTION ENTITLED NOTES PAYABLE.
<F3> REPRESENTS TOTAL INTEREST EXPENSE, PER STATEMENTS OF INCOME.
</FN>
</TABLE>
<PAGE>
EXHIBIT 99.0
WASHINGTON GAS LIGHT COMPANY AND SUBSIDIARIES
---------------------------------------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Twelve Months Ended December 31, 1997
-------------------------------------
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
FIXED CHARGES:
<S> <C>
Interest Expense ......................................... $ 34,235
Amortization of Debt Premium, Discount and Expense ....... 298
Interest Component of Rentals ............................ 13
--------
Total Fixed Charges ............................. $ 34,546
========
EARNINGS:
Net Income ............................................... $ 82,719
Add:
Income Taxes Applicable to Operating Income ..... 48,636
Income Taxes Applicable to Other Income - Net ... 305
Total Fixed Charges ............................. 34,546
--------
Total Earnings ....................................... $166,206
========
Ratio of Earnings to Fixed Charges ................... 4.8
========
</TABLE>
<PAGE>
EXHIBIT 99.1
WASHINGTON GAS LIGHT COMPANY AND SUBSIDIARIES
---------------------------------------------
Computation of Ratio of Earnings to Fixed Charges and
-----------------------------------------------------
Preferred Stock Dividends
-------------------------
Twelve Months Ended December 31, 1997
-------------------------------------
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C>
PRE-TAX PREFERRED STOCK DIVIDENDS:
Preferred Dividends .......................................... $ 1,332
Effective Income Tax Rate .................................... 0.3717
Complement of Effective Income Tax Rate (1 - Tax Rate) ....... 0.6283
Pre-Tax Preferred Dividends .................................. $ 2,120
========
FIXED CHARGES:
Interest Expense ............................................. $ 34,235
Amortization of Debt Premium, Discount and Expense ........... 298
Interest Component of Rentals ................................ 13
--------
Total Fixed Charges .................................... 34,546
Pre-tax Preferred Dividends .................................. 2,120
Total .................................................. $ 36,666
========
EARNINGS:
Net Income ..................................................... $ 82,719
Add:
Income Taxes Applicable to Operating Income ................ 48,636
Income Taxes Applicable to Other Income - Net .............. 305
Total Fixed Charges ........................................ 34,546
--------
Total Earnings ................................................. $166,206
========
Ratio of Earnings to Fixed Charges and Preferred Stock Dividends 4.5
========
</TABLE>
