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, 1998
-----------------------------------------------
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 Identification No.)
incorporation or organization)
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 46,245,496 January 29, 1999
- ---------------------------- ---------------- ----------------
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, 1998 and September 30, 1998.......... 2-3
Consolidated Statements of Income -
Three Months Ended December 31, 1998 and 1997..... 4
Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1998 and 1997..... 5
Notes to Consolidated Financial Statements.............. 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 9-19
Item 3. Quantitative and Qualitative Disclosures About
Market Risks of the Company 20
PART II. Other Information:
Item 5. Other Information................................. 20
Item 6. Exhibits and Reports on Form 8-K.................. 21
Signature.................................................. 22
</TABLE>
1
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1998 1998
--------- ----------
(Unaudited)
(Thousands)
<S> <C> <C>
ASSETS
Property, Plant and Equipment
At original cost .................................. $ 2,022,641 $ 1,992,770
Accumulated depreciation and amortization.......... (684,946) (673,269)
----------- -----------
1,337,695 1,319,501
----------- -----------
Current Assets
Cash and cash equivalents .......................... 19,480 17,876
Accounts receivable ................................ 118,998 92,178
Gas costs due from customers ....................... 9,279 9,921
Allowance for doubtful accounts .................... (8,544) (9,078)
Accrued utility revenues ........................... 82,807 16,304
Materials and supplies - principally at average cost 15,161 15,607
Storage gas - at cost (first-in, first-out)......... 71,875 76,338
Deferred income taxes............................... 16,384 16,337
Other prepayments - principally taxes............... 15,439 13,864
Other .............................................. 1,109 849
----------- -----------
341,988 250,196
----------- -----------
Deferred Charges and Other Assets
Regulatory assets - deferred purchased gas costs .. - 3,550
Regulatory assets - other ......................... 91,125 91,802
Other ............................................. 20,109 17,384
----------- -----------
111,234 112,736
----------- -----------
Total ........................................... $ 1,790,917 $ 1,682,433
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1998 1998
---------- ----------
(Unaudited)
(Thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity ....................... $ 677,104 $ 607,755
Preferred stock ................................... 28,423 28,424
Long-term debt .................................... 452,292 428,641
---------- ----------
1,157,819 1,064,820
---------- ----------
Current Liabilities
Current maturities of long-term debt .............. 55,193 64,106
Notes payable ..................................... 93,036 124,943
Accounts payable .................................. 125,008 103,243
Wages payable ..................................... 11,869 13,527
Dividends declared ................................ 14,203 13,485
Customer deposits and advance payments ............ 21,651 19,454
Accrued taxes and interest ........................ 34,363 9,200
Pipeline refunds due to customers ................. 1,741 1,437
Gas costs due to customers ........................ 5,563 5,671
Other ............................................. 605 1,146
---------- ----------
363,232 356,212
---------- ----------
Deferred Credits
Unamortized investment tax credits ................ 20,262 20,493
Deferred income taxes ............................. 141,142 145,519
Regulatory liabilities - deferred purchased
gas costs ...................................... 13,071 -
Other regulatory liabilities and other deferred
credits ........................................ 95,391 95,389
---------- ----------
269,866 261,401
---------- ----------
Total ........................................... $1,790,917 $1,682,433
========== ==========
</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,
1998 1997
---------- ----------
(Thousands, Except Per Share Data)
<S> <C> <C>
Operating Revenues .............................. $ 297,349 $ 367,547
Cost of Gas ..................................... 158,919 212,046
---------- ----------
Net Revenues .................................... 138,430 155,501
---------- ----------
Other Operating Expenses
Operation ..................................... 47,624 43,101
Maintenance ................................... 9,268 9,237
Depreciation and amortization ................. 14,305 13,430
General taxes ................................. 16,606 19,769
Income taxes .................................. 15,123 22,262
---------- ----------
102,926 107,799
---------- ----------
Operating Income ................................ 35,504 47,702
Other Income (Loss) - Net ....................... (608) 112
---------- ----------
Income Before Interest Expense .................. 34,896 47,814
---------- ----------
Interest Expense
Interest on long-term debt .................... 8,761 7,992
Other ......................................... 1,220 1,699
---------- ----------
9,981 9,691
---------- ----------
Net Income ...................................... 24,915 38,123
Dividends on Preferred Stock .................... 333 332
---------- ----------
Net Income Applicable to Common Stock ........... $ 24,582 $ 37,791
========== ==========
Average Common Shares Outstanding ............... 45,038 43,651
========== ==========
Earnings per Average Common Share - Basic ....... $ 0.55 $ 0.87
========== ==========
Earnings per Average Common Share - Diluted ..... $ 0.55 $ 0.87
========== ==========
Dividends Declared per Common Share ............. $ 0.300 $ 0.295
========== ==========
</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,
1998 1997
--------- --------
(Thousands)
<S> <C> <C>
Operating Activities
Net income ............................................. $ 24,915 $ 38,123
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization a/ ..................... 15,733 14,781
Deferred income taxes - net .......................... (3,687) (7,179)
Amortization of investment tax credits ............... (231) (237)
Allowance for funds used during construction ......... (406) (218)
Loss from agreement to sell West Virginia assets
(Note 10) ......................................... 3,300 -
Other noncash charges - net .......................... 3,626 1,436
-------- ---------
43,250 46,706
Changes in assets and liabilities:
Accounts receivable and accrued utility revenues ..... (93,857) (159,347)
Gas costs due from/to customers - net ................ 534 2,715
Storage gas .......................................... 4,463 8,467
Other prepayments - principally taxes ................ (1,575) (3,261)
Accounts and wages payable ........................... 20,270 47,915
Customer deposits and advance payments ............... 2,197 (3,827)
Accrued taxes and interest ........................... 25,163 39,712
Pipeline refunds due to customers .................... 304 (1,698)
Deferred purchased gas costs - net ................... 16,621 23,835
Other - net .......................................... (5,596) 2,283
-------- ---------
Net Cash Provided by Operating Activities .......... 11,774 3,500
-------- ---------
Financing Activities
Common stock issued .................................... 58,577 -
Common stock repurchased ............................... - (2,340)
Long-term debt issued .................................. 26,099 -
Long-term debt retired ................................. (11,375) (8,720)
Debt issuance costs (Note 5) ........................... (2,248) -
Notes payable - net .................................... (31,907) 62,504
Dividends on common and preferred stock ................ (13,452) (13,224)
-------- ---------
Net Cash Provided by Financing Activities .......... 25,694 38,220
-------- ---------
Investing Activities
Capital expenditures ................................... (35,864) (34,451)
-------- ---------
Net Cash Used in Investing Activities .................. (35,864) (34,451)
-------- ---------
Increase in Cash and Cash Equivalents .................. 1,604 7,269
Cash and Cash Equivalents at Beginning of Period ....... 17,876 9,708
-------- ---------
Cash and Cash Equivalents at End of Period ............. $ 19,480 $ 16,977
======== =========
Supplemental Disclosures of Cash Flow Information
Income taxes paid .................................... $ 16 $ 19
Interest paid ........................................ $ 1,834 $ 1,660
</TABLE>
a/ Includes amounts charged to other accounts.
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(Unaudited)
1. 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, 1998.
2. 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, 1999.
3. 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.
4. Certain amounts in financial statements of prior years have been
reclassified to conform to the presentation of the current year.
5. Interest Rate Hedge
The Company has $39 million of 8-3/4% First Mortgage Bonds (FMBs) that can
be called by the Company, or put to the Company on July 1, 1999. On
September 2, 1998, in order to lock in the Treasury yield for an
anticipated $39 million Medium-Term Note (MTN) issuance, which will be used
to refund the FMBs, the Company entered into an agreement that reflects the
forward sale of $40 million of 10-year U.S. Treasury notes at a fixed price
to be paid on July 1, 1999. 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"
(SFAS No. 80). The Company will record any gain or loss associated with
this hedge as MTN debt issuance costs when the Company issues such debt and
will amortize the costs over the life of the MTNs. If the agreement is
terminated without completing the anticipated MTN issuance, any gain or
loss will be immediately recognized in earnings.
Debt Issuance
During October 1998, the Company issued $25 million of 10-year MTNs with a
coupon rate of 5.49%. In order to lock in the Treasury yield for this
issuance, in June 1998, the Company entered into an agreement that
reflected a forward sale of $24.9 million of 10-year U.S. Treasury notes at
a fixed price. The Company unwound its hedge position concurrent with the
issuance of the above mentioned $25 million of MTNs, recording debt
issuance costs of $2.1 million to be amortized over the life of the MTNs.
This accounting treatment was in accordance with SFAS No. 80. The effective
cost of the debt was 6.74%.
6. In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). This statement is
effective for fiscal years beginning after June 15, 1999, and the Company
must adopt it no later than fiscal year 2000. SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the
derivative's fair value be recognized currently in earnings
6
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
(Unaudited)
(continued)
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting. The Company is reviewing SFAS
No. 133 and does not currently expect it to materially impact its financial
condition or results of operations.
7. In November 1998, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board reached a consensus related to EITF Issue No.
98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." This consensus requires that energy trading
contracts, as these are defined in the consensus, are presented at fair
value with periodic gains and losses included in earnings. The Company is
reviewing EITF Issue No. 98-10, which would be applicable to the Company in
its fiscal year 2000, and does not currently expect it to materially impact
the Company's financial condition or results of operations.
8. Basic and diluted earnings per share ("EPS") computations for the three
months ended December 31, 1998 and 1997 are shown below. Basic EPS is
computed by dividing net income applicable to common stock by the weighted
average number of common shares outstanding during the quarter. Diluted EPS
assumes conversion of convertible preferred stock at the beginning of the
applicable period.
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1998
-----------------------------
Per Share
Income Shares Amount
------ ------ ---------
(Thousands, Except Per Share Data)
<S> <C> <C> <C>
Basic EPS:
Net Income Applicable to Common Stock $24,582 45,038 $ 0.55
Effect of Dilutive Securities:
$4.60 and $4.36 Convertible Preferred Stock,
Assuming Conversion on October 1, 1998 3 26
------- ------
Diluted EPS:
Net Income Applicable to Common Stock
Plus Assumed Conversions $24,585 45,064 $ 0.55
======= ====== ======
</TABLE>
7
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
NOTES TO THE 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>
9. On November 12, 1998, the Company publicly offered 2 million shares of
common stock at $25.0625 per share. On November 18, 1998, the underwriters
involved in the offering exercised their option to purchase an additional
300,000 shares from the Company at the same price per share. Net proceeds
from the sale amounted to $55.7 million, and are being used for general
corporate purposes, including capital expenditures and working capital
requirements.
10. On November 2, 1998, Shenandoah Gas Company (Shenandoah Gas), a wholly
owned subsidiary of the Company entered into an agreement to sell its
natural gas utility assets located in West Virginia. According to this
agreement, Shenandoah Gas will provide natural gas transportation service
through its pipeline system in Virginia to the purchaser to assure
continued natural gas service in the Eastern Panhandle of West Virginia.
Shenandoah Gas has approximately 3,600 customers in Martinsburg and
surrounding areas in Berkeley County, West Virginia. Shenandoah Gas will
continue to provide natural gas utility service to its approximately 10,000
customers in the northern Shenandoah Valley of Virginia.
In fiscal year 1998, Shenandoah Gas' natural gas therm deliveries in West
Virginia represented less than two percent of the Company's consolidated
natural gas therm deliveries and less than one percent of associated
consolidated revenues. Shenandoah Gas' West Virginia operations contributed
approximately $200,000 (0.3%) to the Company's fiscal year 1998 net income
applicable to common stock. This represents less than one-half of one cent
of basic and diluted earnings per average common share for fiscal year
1998. During the quarter ended December 31, 1998, the Company recorded a
non-recurring $3.3 million pre-tax loss ($2.1 million after-tax or $0.05
per average common share) related to this agreement to reflect the
anticipated loss at settlement.
The proposed transaction is subject to approval by the Public Service
Commission of West Virginia. The transportation service to be provided by
Shenandoah Gas to the purchaser is subject to approval by the Federal
Energy Regulatory Commission.
8
<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
every objective 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, which are not intended to cover all events, 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 effect of fluctuations in weather from
normal levels; (4) variations in prices of natural gas and competing energy
sources; (5) the Company's ability to develop new markets and product and
service offerings as well as to maintain existing markets and the expenditures
required to develop and provide such products and services; (6) conditions of
the capital markets utilized by the Company to access capital to finance
operations and capital expenditures; (7) improvements in products or services
offered by competitors; (8) the cost and effects of legal and administrative
claims and proceedings against the Company or which may be brought against the
Company; and (9) estimates of future costs or the effect on future operations as
a result of events that could result from the Year 2000 issue described further
herein.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED DECEMBER 31, 1998 vs. DECEMBER 31, 1997
- ----------------------------------------------------------
Earnings
- --------
For the quarter ended December 31, 1998, net income applicable to common
stock was $24.6 million or $13.2 million lower than the results for the same
period last year. Basic and diluted earnings per average common share were $0.55
compared to $0.87 per average common share last year. Average common shares
outstanding increased by approximately 3% from the prior year, primarily due to
the public offering of 2.3 million shares of common stock in November 1998 (See
Note 9 to the Consolidated Financial Statements) and common shares issued under
the Dividend Reinvestment and Common Stock Purchase Plan and the Employee
Savings Plans. The decline of earnings in the current quarter primarily resulted
from 19.8 percent warmer weather in the current quarter, which caused lower firm
therm deliveries and associated net revenues. Weather for the three months ended
December 31, 1998, was 11.0% warmer than normal while weather for the same
period last year was 10.9% colder than normal. Also contributing to the decrease
in earnings was a non-recurring $2.1 million after-tax loss recorded during the
quarter ended December 31, 1998 ($0.05 per average common share) related to an
agreement to sell the Shenandoah Gas natural gas utility assets located in West
Virginia (See Note 10 to the Consolidated Financial Statements).
9
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Net Revenues
- ------------
Net revenues for the period declined by $17.1 million (11.0%) from the same
period last year to $138.4 million. The following table compares certain
operating statistics for the quarters ended December 31, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Ended
---------------------
Dec. 31, Dec. 31,
1998 1997
-------- --------
<S> <C> <C>
Gas Sales and Deliveries (thousands of therms)
Firm
Gas Sold and Delivered ...................... 292,096 355,410
Gas Delivered for Others ..................... 32,334 27,169
------- -------
324,430 382,579
------- -------
Interruptible
Gas Sold and Delivered ....................... 15,158 28,712
Gas Delivered for Others ..................... 75,070 72,810
------- -------
90,228 101,522
------- -------
Electric Generation
Gas Delivered for Others ..................... 13,453 16,532
------- -------
Total Deliveries ......................... 428,111 500,633
======= =======
Degree Days
Actual ....................................... 1,224 1,526
Normal ....................................... 1,376 1,376
Customer Meters (end of period) .................... 837,974 813,898
</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. 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.
Firm therm deliveries decreased by 58.1 million therms (15.2%) in the
current quarter, primarily due to weather that was 19.8% warmer than the same
quarter last year, partially offset by the effect of a 3.0% increase in the
number of customer meters. Net revenues generated from delivering gas for others
are equivalent on a per unit basis to those earned on bundled gas service.
Therefore, the Company does not experience any loss of margins from customers
that choose to purchase their gas from a third-party supplier.
10
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Gas Delivered to Interruptible Customers
Therms delivered to interruptible customers declined by 11.3 million therms
(11.1%) in the current quarter. The decrease in volumes delivered resulted
primarily from the warmer weather experienced during the current quarter. 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.
Gas Delivered for Electric Generation
The Company has two customers with facilities in Maryland to which it sells
and/or delivers gas that is used to generate electricity. Volumes delivered for
electric generation in the current quarter decreased by 3.1 million therms
(18.6%) over the same period last year, primarily due to lower prices for
competing fuels. 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 increased by $4.6 million (8.7%) from
the same period last year. This increase is primarily attributable to the
previously-mentioned non-recurring loss ($3.3 million pre-tax) related to an
agreement to sell the Shenandoah Gas natural gas utility assets located in West
Virginia and costs associated with technology initiatives ($2.1 million).
Partially offsetting these increases are decreased uncollectible accounts
expenses reflecting lower revenues due to the warmer weather and lower labor
costs.
Depreciation and amortization increased by $875,000 (6.5%) primarily due to
the Company's increased investment in plant and equipment to meet customer
growth and to replace existing capacity.
General taxes declined by $3.2 million (16.0%) primarily due to a decrease
in gross receipts taxes, reflecting lower revenues caused by the warmer weather
in the current quarter. The Company records the amounts collected from customers
in revenue and general tax expense, and, therefore there is generally no effect
on net income.
Income taxes, including amounts reflected in Other Income (Loss)-Net,
decreased by $7.5 million, primarily due to lower pre-tax income generated this
quarter.
11
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Other Income (Loss) - Net
- -------------------------
Other Income (Loss) - Net decreased by $720,000, primarily due to higher
miscellaneous general expenses and lower earnings generated from energy-related
activities.
Energy-related activities engaged in by the Company and its subsidiaries
include energy marketing, commercial energy services, consumer financing and
merchandising. The following table compares the financial results for each of
these activities for the quarters ended December 31, 1998 and 1997.
Net Income (Loss) Applicable to Energy-Related Activities
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
Dec. 31, Dec. 31,
1998 1997
-------- --------
(Thousands)
<S> <C> <C>
Energy Marketing ......................... $ (363) $ (24)
Commercial Energy Services ............... 184 (19)
Consumer Financing ....................... 284 202
Merchandising ............................ 41 19
-------- --------
Total ............................. $ 146 $ 178
======== ========
</TABLE>
Energy Marketing
The Company's gas marketing subsidiary, Washington Gas Energy Services
(WGES), sells natural gas in competition with unregulated marketers and
unregulated subsidiaries of other utility companies. WGES continues to gain
market share both inside and outside the Company's traditional service
territory. The increased loss this year primarily results from significant
customer acquisition costs incurred by WGES in the current quarter. Although
WGES incurred a seasonal loss in the first fiscal quarter of 1999, the quarterly
results of WGES are not indicative of the anticipated fiscal year results due to
the revenue from annual fixed rate sales contracts matched with gas costs that
may vary seasonally. The quantity and pricing structure of WGES' purchase
contracts are designed to match its sales commitments to effectively lock in a
margin on gas sales over the terms of existing sales contracts.
Commercial Energy Services
The Company's commercial energy services include the design and renovation
of mechanical heating, ventilating and air conditioning systems. Positive
financial results generated from two subsidiaries purchased by the Company in
March 1998 were the primary reason for increased profits this quarter.
Consumer Financing
Consumer financing, which includes the financing of gas appliances and
certain other equipment for residential and small commercial customers,
continues to show positive results.
12
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Merchandising
The Company's merchandising activities include the sale of carbon monoxide
detectors and electronic billing services. In addition, the Company has a
marketing alliance through which it earns fees for selling pagers and paging
services.
Interest Expense
- ----------------
Total interest expense increased by $290,000 (3.0%) from the same period
last year, reflecting the following changes:
Composition of the Changes in Interest Expense:
<TABLE>
<CAPTION>
Increase/(Decrease)
-------------------
(Thousands)
<S> <C>
Long-Term Debt ..................................... $ 769
Short-Term Debt .................................... (280)
Other .............................................. (199)
------
Total ........................................... $ 290
======
</TABLE>
Long-Term Debt - The increase in interest on long-term debt of $769,000 was
primarily due to a $53.7 million rise in the average amount of long-term debt
outstanding, partially offset by a decline of 0.11 percentage points in the
weighted-average cost of such debt. The embedded cost of long-term debt at
December 31, 1998 was 6.8%.
Short-Term Debt - The decrease in interest on short-term debt of $280,000
was due to a $13.8 million decline in the average amount of short-term debt
outstanding and a decrease of 0.33 percentage points in the weighted-average
cost of such debt.
Other - Other interest expense decreased by $199,000 in the current quarter
primarily reflecting an increase in the accrual 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.
13
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
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, 1998, the Company had notes payable outstanding, which
consists of bank loans and commercial paper, of $93.0 million as compared to
$124.9 million at September 30, 1998. The decrease in notes payable from
September 1998 was primarily due to the cash inflow resulting from the Company's
common stock issuance in November 1998. See Note 9 in the Consolidated Financial
Statements for more details regarding the stock issuance.
Long-Term Cash Requirements and Related Financing
- -------------------------------------------------
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 significantly affect the level of therms delivered.
Cash Flow from
Operating Activities
- --------------------
Net cash provided by operating activities was $11.8 million during the
first three months of fiscal year 1999 or an improvement of $8.3 million from
the same period last year. Warmer weather and lower gas costs in the current
quarter were the primary reasons for decreases in: (1) funds used to support
accounts receivable and accrued utility revenues; (2) sources of funds reflected
in accounts payable and taxes accrued; (3) collections of gas costs from
customers; and (4) net income, adjusted for non-cash items.
Cash Flow from
Financing Activities
- --------------------
As more fully described in Note 9 to the Consolidated Financial Statements,
the Company in November 1998 raised $55.7 million through the sale of 2.3
million shares of common stock. Additionally, during the quarter ended December
31, 1998, the Company raised $2.9 million from shares issued through the
Dividend Reinvestment and Common Stock Purchase Plan and the Employee Savings
Plans.
Through the quarter ended December 31, 1998, the Company issued $26.1
million of long-term debt including $25 million of Medium-Term Notes (MTNs) with
a coupon rate of 5.49%. Construction funding debt of approximately $800,000 was
also issued during the quarter. The Company retired $11 million of MTNs with a
coupon rate of 7.97%.
14
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Cash Flow from
Investing Activities
- --------------------
Capital expenditures for the first three months of fiscal year 1999 were
$35.9 million on a budget of $141.9 million for fiscal year 1999. Capital
expenditures in the first three months of fiscal year 1998 were $34.5 million.
Sales of Accounts Receivable
- ----------------------------
During the three months ended December 31, 1998, the Company sold, with
recourse, $7.7 million of non-utility accounts receivable, compared to $8.3
million in the three months ended December 31, 1997.
OTHER FACTORS AFFECTING THE COMPANY
- -----------------------------------
YEAR 2000
- ---------
The millennial change to the Year 2000 could affect the Company's software
programs and computing infrastructure that use two-digit years to define the
applicable year, rather than four-digit years. As such they may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in the
computer or device shutting down, performing incorrect computations or
performing inconsistently.
In 1996, the Company began a structured program to address Year 2000
issues. It has been implementing individual strategies targeted at the specific
nature of Year 2000 issues in each of the following areas: (1)
business-application systems including, but not limited to, the Company's
customer service, operations and financial systems and end-user applications;
(2) embedded systems, including equipment that operates such items as the
Company's storage and distribution system, meters, telecommunications, fleet and
buildings; (3) vendor and supplier relationships; (4) communications with
customers; (5) business continuity management planning; and (6) independent
verification and validation.
To implement this comprehensive Year 2000 program, the Company established
a Year 2000 Project Office, chaired by the Vice President and Chief Information
Officer who reports directly to the Chairman and Chief Executive Officer. The
multi-disciplinary project office includes executive management and employees
with expertise from various disciplines including, but not limited to,
information technology, engineering, finance, communications, internal audit,
facilities management, procurement, operations, law and human resources. In
addition, the Company has utilized the expertise of outside consultants to
assist in the implementation of the Year 2000 program in such areas as
business-application system remediation, business-application system
replacement, embedded systems inventory and analysis, business continuity
management planning, and independent verification and validation.
Business-Application Systems
In March 1997, the Company completed its assessment of all its
business-application systems. It is resolving Year 2000 issues through
remediation of 19 systems to recognize the turn of the century and the
15
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
replacement of 20 systems with new systems that provide additional business
management information and recognize four-digit years. By February 1999, the
Company had completed modifications to 17 business applications for remediation,
representing approximately 89 percent of those systems targeted for remediation.
The remaining two systems represent approximately 11 percent of the systems to
be remediated. The Company expects them to be remediated by the end of the
second quarter of fiscal year 1999.
The Company is using in-house staff to test all remediated applications and
is using a testing procedure commonly known as trace-based testing to test
modified business applications for Year 2000 functionality. This method first
captures current processing steps and relevant data, which are run prior to
remediation (baseline test) and again after remediation (regression test). This
process is intended to identify any business rules that may have changed during
the remediation effort and to confirm that only date processes have been
changed. Once the regression test is successfully completed, the Company uses
automated test software tools to perform additional applicable future date tests
for each system.
The Company is also installing an enterprise-wide software system that will
replace 18 business application systems, including its financial, human
resources and supply chain systems. Two other systems will be replaced with
systems not included in the enterprise-wide software initiative. These 20
business applications represent approximately one-half of the business
application software code requiring remediation or replacement. The Company
currently expects to complete the replacement in July 1999.
During the fourth quarter of fiscal year 1998, the Company completed a
comprehensive, prioritized inventory of end-user applications (i.e., PC-based
databases) and is implementing project plans to replace or remediate these
applications, as necessary. It expects to complete replacement or remediation,
including testing, by the end of September 1999.
Embedded Systems
The Company has performed a comprehensive inventory of its embedded systems
at the component level. This inventory identified several hundred components
that were potentially date sensitive. The Company has contacted all
manufacturers of those components that it has identified as critical or
important to its operations. At this time, approximately three percent of the
date-sensitive components that the Company has identified are non-compliant
based on information provided by the manufacturers. The Company implemented
remediation or replacement plans as necessary and expects critical embedded
systems to be completed by the end of the second quarter of fiscal year 1999.
The quality of the responses received from manufacturers, the estimated impact
of the individual systems on the Company, and the ability of the Company to
perform meaningful tests will influence its decision to conduct independent
testing of embedded systems through the end of fiscal year 1999.
16
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Vendor and Supplier Relationships
The Company is contacting in writing or through face-to-face discussions
all vendors and suppliers of products and services that it considers critical or
important to its operation. These contacts include providers of interstate
transportation capacity and storage, natural gas suppliers, financial
institutions and electric, telephone and water companies. The Company has
evaluated responses and continues the process of following up with the vendors
and suppliers either through meetings or by letter. The Company will consider
new business relationships with alternate providers of products and services as
necessary and to the extent alternatives are available. However, the Company
recognizes there are no practical alternatives for external infrastructure such
as electric and telephone service, suppliers of natural gas and providers of
interstate transportation capacity and storage to deliver natural gas to the
Company's distribution system.
Customer Communications
One part of the Company's effort to communicate the potential impact of the
Year 2000 on its customers is its outreach to its major interruptible customers
to inform them about the potential vulnerability of embedded boiler and plant
control systems. The Company informed them that they should assess the need to
include potential remediation and/or replacement of these systems as part of
their Year 2000 programs to ensure their ability to switch to an alternate fuel
source, as required by applicable tariffs and contracts and if called on to do
so.
In addition, the Company is communicating its Year 2000 efforts to
customers through community and association presentations, and individual
presentations made at customers' requests, through responses to written
inquiries, and through its website.
Year 2000 Risks and Business Continuity Planning
With respect to its internal operations, over which the Company has direct
control, the Company believes the most significant potential risks are: (1) its
ability to use electronic devices to control and operate its distribution
system; (2) its ability to render timely bills to its customers; (3) its ability
to enforce tariffs and contracts applicable to interruptible customers; and (4)
its ability to maintain continuous operation of its computer systems including
enterprise wide software systems the Company is currently developing. The
Company's Year 2000 program addresses each of these risks, and the remediation
or replacement of these systems is well under way. In the event that any Year
2000-related problems may occur, the Company's continuity plan will outline
alternatives to mitigate the impact of such failures, to the extent possible.
17
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
The Company relies on the suppliers of natural gas and interstate
transportation and storage capacity to deliver natural gas to the Company's
distribution system. External infrastructure, such as electric, telephone and
water service, is necessary for the Company's basic operation as well as the
operations of many of its customers. Should any of these critical vendors fail,
the impact of any such failure could become a significant challenge to the
Company's ability to meet the demands of its customers, to operate its
distribution system and to communicate with its customers. It could also have a
material adverse financial impact including, but not limited to, lost revenues,
increased operating costs and claims from customers related to business
interruptions. The Company has no way of ensuring that those vendors or
suppliers mentioned above for which there are no viable options will be timely
Year 2000 compliant.
As part of its normal business practice, the Company maintains plans to
follow during emergency circumstances. These plans are being used as a basis to
build the Company's continuity plan for potential Year 2000-related problems.
The Company maintains and operates a command center that is activated during
emergency circumstances. The Company will manage specific Year 2000 continuity
operations from the command center during the millennium change as well as at
other points in time on an as needed basis.
Because of the interconnected nature of potential Year 2000-related
problems, the Company recognizes that effective continuity planning must focus
on both internal and external operations and is working with local organizations
and other utilities as it completes its planning effort.
The Company believes that its work will serve to reduce the risk that its
internal systems will fail for Year 2000 reasons. However, the continuity plan
cannot offset interrupted delivery to the Company's distribution system of
natural gas by the producers of natural gas and providers of interstate
transportation capacity or the impact on operations of failures of electric,
telephone and water services.
Independent Verification and Validation
The Company is currently working with external consultants to verify and
validate the Company's Year 2000 remediation and replacement strategies and
results for both business applications and embedded systems.
To verify and validate the Company's remediation efforts on its business
applications the consultants reviewed all remediated business applications to
determine that the code was remediated correctly. The consultants have reviewed
the compliance statements received from the manufacturers of the critical and
important embedded system components and where possible have developed
strategies and testing procedures to verify the compliance statements.
18
<PAGE>
WASHINGTON GAS LIGHT COMPANY
----------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(continued)
Financial Implications
To implement its Year 2000 strategies, the Company currently expects to
have generated non-recurring expenses of approximately $10 million over the
three fiscal-year periods ending September 30, 1999 for (1) business-application
systems remediation; (2) embedded systems replacement; (3) end-user applications
remediation and replacement; (4) independent verification and validation; and
(5) certain costs associated with the replacement of certain existing business
systems. The Company will capitalize costs of approximately $40 million incurred
to replace certain existing business-application software systems with new
systems that will be Year 2000 operational and provide additional business
management information.
The following tables reflect the amounts charged to expense and capitalized
for the fiscal years ending September 30, 1997 and 1998 and fiscal year 1999
through December 31, 1998:
Business-application systems remediation, embedded systems
replacement, end-user applications remediation and replacement,
and independent verification and validation
---------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(millions) 1999 1998 1997 Total
Expense $ 1 $ 1 $ 1 $ 3
Capital $ - $ 1 $ - $ 1
</TABLE>
Business-application software systems replacement
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(millions) 1999 1998 1997 Total
Expense $ 1 $ 4 $ - $ 5
Capital $ 7 $19 $ - $26
</TABLE>
Until the Company has completed further analysis of the impact of the Year
2000 issue on its embedded systems, vendor and supplier relationships and
continuity planning, it is unable to estimate the additional costs, if any, it
may incur as a result of its efforts.
Each of the components of the Company's Year 2000 program is progressing,
and the Company believes it is taking reasonable steps necessary to be able to
operate successfully through and beyond the turn of the century.
19
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS OF THE
COMPANY
The Company has interest rate risk exposure related to long-term debt.
Additionally, the Company's subsidiary, Washington Gas Energy Services (WGES)
has price risk exposure related to gas-marketing activities. For information
regarding the Company's exposure related to these risks see Item 7A in the
Company's most recently filed Form 10-K. The Company's risk associated with
interest rates has not materially changed from September 30, 1998. At December
31, 1998, WGES' open position was not material to the Company's financial
position or results of operations.
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.
20
<PAGE>
PART II. OTHER INFORMATION
--------------------------
(continued)
Item 6.
- -------
Exhibits and Reports on Form 8-K
- --------------------------------
(a) Exhibits Filed Herewith:
<TABLE>
<CAPTION>
Description Page in 10-Q
- ------------------------------------------- ----------------------------
<S> <C>
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
</TABLE>
(b) Reports on Form 8-K:
<TABLE>
<CAPTION>
Date Filed Description of Event Reported
- --------------------- -------------------------------------------------
<S> <C>
October 13, 1998 Announcement of the future retirement date of
Chairman of the Board, Patrick J. Maher and
other succession plans.
October 30, 1998 Announcement of the unaudited results of
operations for the fiscal year 1998 and the
three months ended September 30, 1998.
November 4, 1998 Announcement that Shenandoah Gas Company
entered into an agreement to sell its utility
assets located in West Virginia.
November 25, 1998 A copy of the Underwriting Agreement and
Price Determination Agreement related to the
public issuance of up to 2.3 million shares of
the Company's common stock. Announcement of
the Underwriters exercising their option to
purchase an additional 300,000 shares from the
Company.
</TABLE>
21
<PAGE>
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 February 16, 1999 /s/ Robert E. Tuoriniemi
-------------------------- -----------------------------
Controller
(Principal Accounting Officer)
22
<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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,334,845
<OTHER-PROPERTY-AND-INVEST> 2,850
<TOTAL-CURRENT-ASSETS> 341,988
<TOTAL-DEFERRED-CHARGES> 111,234
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,790,917
<COMMON> 46,359
<CAPITAL-SURPLUS-PAID-IN> 361,720
<RETAINED-EARNINGS> 269,025
<TOTAL-COMMON-STOCKHOLDERS-EQ> 677,104
0
28,423
<LONG-TERM-DEBT-NET> 452,292 <F1>
<SHORT-TERM-NOTES> 56,840 <F2>
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 36,196 <F2>
<LONG-TERM-DEBT-CURRENT-PORT> 55,193
0
<CAPITAL-LEASE-OBLIGATIONS> 512
<LEASES-CURRENT> 356
<OTHER-ITEMS-CAPITAL-AND-LIAB> 484,357
<TOT-CAPITALIZATION-AND-LIAB> 1,790,917
<GROSS-OPERATING-REVENUE> 297,349
<INCOME-TAX-EXPENSE> 15,123
<OTHER-OPERATING-EXPENSES> 246,722
<TOTAL-OPERATING-EXPENSES> 261,845
<OPERATING-INCOME-LOSS> 35,504
<OTHER-INCOME-NET> (608)
<INCOME-BEFORE-INTEREST-EXPEN> 34,896
<TOTAL-INTEREST-EXPENSE> 9,981
<NET-INCOME> 24,915
333
<EARNINGS-AVAILABLE-FOR-COMM> 24,582
<COMMON-STOCK-DIVIDENDS> 13,871
<TOTAL-INTEREST-ON-BONDS> 9,981 <F3>
<CASH-FLOW-OPERATIONS> 11,774
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0.55
<FN>
<F1> REPRESENTS TOTAL LONG-TERM DEBT INCLUDING $450,700 IN UNSECURED
MEDIUM-TERM NOTES, $2,317 IN OTHER LONG-TERM DEBT AND ($725) 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>
EXHIBIT 99.0
WASHINGTON GAS LIGHT COMPANY AND SUBSIDIARIES
---------------------------------------------
Computation of Ratio of Earnings to Fixed Charges
-------------------------------------------------
Twelve Months Ended December 31, 1998
-------------------------------------
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
FIXED CHARGES:
<S> <C>
Interest Expense ....................................... $ 37,904
Amortization of Debt Premium, Discount and Expense ..... 431
Interest Component of Rentals .......................... 12
---------
Total Fixed Charges ................................. $ 38,347
=========
EARNINGS:
Net Income ............................................. $ 55,420
Add:
Income Taxes Applicable to Operating Income ...... 30,868
Income Taxes Applicable to Other Income - Net .... 1,476
Total Fixed Charges .............................. 38,347
---------
Total Earnings ........................................... $ 126,111
=========
Ratio of Earnings to Fixed Charges ....................... 3.3
=========
</TABLE>
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, 1998
-------------------------------------
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
PRE-TAX PREFERRED STOCK DIVIDENDS:
<S> <C>
Preferred Dividends ....................................... $ 1,331
Effective Income Tax Rate ................................. 0.3685
Complement of Effective Income Tax Rate (1 - Tax Rate) .... 0.6315
Pre-Tax Preferred Dividends ............................... $ 2,108
========
FIXED CHARGES:
Interest Expense .......................................... $ 37,904
Amortization of Debt Premium, Discount and Expense ........ 431
Interest Component of Rentals ............................. 12
--------
Total Fixed Charges .................................... 38,347
Pre-tax Preferred Dividends ............................... 2,108
--------
Total ............................................... $ 40,455
========
EARNINGS:
Net Income .................................................. $ 55,420
Add:
Income Taxes Applicable to Operating Income ............ 30,868
Income Taxes Applicable to Other Income - Net .......... 1,476
Total Fixed Charges .................................... 38,347
--------
Total Earnings .............................................. $126,111
========
Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends .............................................. 3.1
========
</TABLE>
