<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
/X/ OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 1996
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 1-1098
THE COLUMBIA GAS SYSTEM, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 13-1594808
-----------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
20 Montchanin Road, Wilmington, Delaware 19807
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (302) 429-5000
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, $10
Par Value: 55,065,869 shares outstanding at June 30, 1996.
<PAGE> 2
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
FORM 10-Q QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1 Financial Statements
Statements of Consolidated Income 1
Condensed Consolidated Balance Sheets 2
Consolidated Statements of Cash Flows 3
Consolidated Statements of Common Stock Equity 4
Notes 5
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II OTHER INFORMATION
- ------- -----------------
Item 1 Legal Proceedings 28
Item 2 Changes in Securities 30
Item 3 Defaults Upon Senior Securities 30
Item 4 Submission of Matters to a Vote of Security Holders 30
Item 5 Other Information 30
Item 6 Exhibits and Reports on Form 8-K 30
Signature 31
</TABLE>
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The Columbia Gas System, Inc. and Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME (unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Gas sales $ 432.0 $ 301.9 $1,434.3 $1,140.1
Transportation 113.3 108.8 255.9 235.5
Other 37.1 43.9 95.2 109.7
------- ------- -------- --------
Total Operating Revenues 582.4 454.6 1,785.4 1,485.3
------- ------- -------- --------
OPERATING EXPENSES
Products purchased 205.9 88.8 757.7 529.9
Operation 214.6 201.9 421.4 410.0
Maintenance 27.4 30.8 51.3 53.4
Depreciation and depletion 50.9 59.9 119.0 143.6
Other taxes 47.6 46.3 121.8 121.6
------- ------- -------- --------
Total Operating Expenses 546.4 427.7 1,471.2 1,258.5
------- ------- -------- --------
OPERATING INCOME 36.0 26.9 314.2 226.8
------- ------- -------- --------
OTHER INCOME (DEDUCTIONS)
Interest income and other, net 13.7 2.8 16.8 8.8
Interest expense and related charges* (39.2) (6.7) (82.9) (12.2)
Reorganization items, net - 21.8 - 32.5
------- ------- -------- --------
Total Other Income (Deductions) (25.5) 17.9 (66.1) 29.1
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 10.5 44.8 248.1 255.9
Income Taxes 2.3 13.9 88.6 96.2
------- ------- -------- --------
NET INCOME $ 8.2 $ 30.9 $ 159.5 $ 159.7
======= ======= ======== ========
EARNINGS PER SHARE OF COMMON STOCK $ 0.15 $ 0.61 $ 3.04 $ 3.16
======= ======= ======== ========
DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 0.15 - $ 0.30 -
AVERAGE COMMON SHARES OUTSTANDING (thousands) 55,044 50,568 52,544 50,566
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
*Due to the bankruptcy filings, interest expense of approximately $67 million
was not recorded for the three months ended June 30, 1995, and approximately
$132 million was not recorded for the six months ended June 30, 1995.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the 1991 to 1995 Chapter 11 bankruptcy
proceedings involving The Columbia Gas System, Inc. and Columbia Gas
Transmission Corporation (a wholly-owned subsidiary).
1
<PAGE> 4
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
The Columbia Gas System, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of
-------------------------------------
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
(million)
ASSETS
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Gas utility and other plant, at original cost $6,834.2 $6,903.2
Accumulated depreciation and depletion (3,292.5) (3,322.0)
-------- --------
Net Gas Utility and Other Plant 3,541.7 3,581.2
-------- --------
Oil and gas producing properties, full cost method 517.2 516.3
Accumulated depletion (151.8) (141.1)
-------- --------
Net Oil and Gas Producing Properties 365.4 375.2
-------- --------
Net Property, Plant and Equipment 3,907.1 3,956.4
-------- --------
INVESTMENTS AND OTHER ASSETS 160.9 354.6
-------- --------
CURRENT ASSETS
Cash and temporary cash investments 75.4 8.0
Accounts receivable, net 358.4 511.0
Income tax refund - 271.5
Gas inventory 149.1 172.3
Other inventories - at average cost 45.9 41.5
Prepayments 61.4 56.9
Regulatory assets 66.7 76.5
Other 251.4 138.2
-------- --------
Total Current Assets 1,008.3 1,275.9
-------- --------
REGULATORY ASSETS 422.3 422.0
DEFERRED CHARGES 51.4 48.1
-------- --------
TOTAL ASSETS $5,550.0 $6,057.0
======== ========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity $1,499.7 $1,114.0
Preferred stock - 399.9
Long-term debt 2,004.1 2,004.5
-------- --------
Total Capitalization 3,503.8 3,518.4
-------- --------
CURRENT LIABILITIES
Short-term debt - 338.9
Accounts and drafts payable 184.8 215.7
Accrued taxes 267.7 271.3
Accrued interest 23.6 94.3
Estimated rate refunds 94.9 96.1
Estimated supplier obligations 129.2 178.3
Transportation and exchange gas payable 43.0 46.7
Other 321.1 337.3
-------- --------
Total Current Liabilities 1,064.3 1,578.6
-------- --------
OTHER LIABILITIES AND DEFERRED CREDITS
Income taxes, noncurrent 530.1 468.6
Postretirement benefits other than pensions 180.5 208.2
Regulatory liabilities 44.6 44.9
Other 226.7 238.3
-------- --------
Total Other Liabilities and Deferred Credits 981.9 960.0
-------- --------
CAPITAL CAPITALIZATION AND LIABILITIES $5,550.0 $6,057.0
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
2
<PAGE> 5
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
The Columbia Gas System, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
----------------------
1996 1995
---- ----
(millions)
<S> <C> <C>
OPERATIONS ACTIVITIES
Net Income $ 159.5 $ 159.7
Adjustments for items not requiring (providing) cash:
Depreciation and depletion 119.0 143.6
Deferred income taxes 33.1 31.4
Other - net* (19.5) (5.5)
Change in components of working capital
Accounts receivable 172.9 171.5
Income tax refunds 271.5 -
Gas inventory 23.2 49.7
Prepayments (4.5) 42.6
Accounts payable 16.1 2.0
Accrued taxes (26.4) (30.0)
Accrued interest (71.1) (0.4)
Estimated rate refunds (1.3) (42.9)
Estimated supplier obligations (49.1) (2.2)
Under/Overrecovered gas costs (83.9) 91.6
Exchange gas payable (5.5) (6.7)
Other working capital 20.2 (11.7)
-------- --------
Net Cash From Operations 554.2 592.7
-------- --------
INVESTMENT ACTIVITIES
Capital expenditures (112.9) (155.2)
Proceeds received on the sale of Columbia Development 188.9 -
Other investments - net 14.7 12.6
-------- --------
Net Investment Activities 90.7 (142.6)
FINANCING ACTIVITIES
Retirement of preferred stock (400.0) -
Retirement of long-term debt (0.5) (0.4)
Dividends paid (15.6) -
Issuance of common stock 242.5 -
Net decrease in revolving credit facility (338.9) -
Other financing activities (65.0) (24.8)
-------- --------
Net Financing Activities (577.5) (25.2)
-------- --------
Increase in Cash and Temporary Cash Investments 67.4 424.9
Cash and temporary cash investments at beginning of year 8.0 1,481.8
-------- --------
Cash and temporary cash investments at June 30** $ 75.4 $1,906.7
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest 79.1 0.5
Cash paid for income taxes (net of refunds) (175.7) 39.5
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
* 1995 includes changes in Liabilities Subject to Chapter 11 Proceedings of
$2.8 million.
**The Corporation considers all highly liquid debt instruments to be cash
equivalents.
Reference is made to the accompanying Notes and Management's Discussion and
Analysis for information related to the 1991 to 1995 Chapter 11 bankruptcy
proceedings involving The Columbia Gas System, Inc. and Columbia Gas
Transmission Corporation (a wholly-owned subsidiary).
3
<PAGE> 6
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
The Columbia Gas System, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
<TABLE>
<CAPTION>
As of
-------------------------------
June 30, December 31,
1996 1995
-------------- ------------
(unaudited)
(millions)
<S> <C> <C>
COMMON STOCK EQUITY
Common stock, $10 par value, authorized
100,000,000 shares, outstanding 55,065,869 shares
and 49,204,025 shares respectively $ 550.7 $ 506.2
Additional paid in capital 736.8 595.8
Retained earnings 213.7 69.8
Unearned employee compensation (1.5) -
Cost of treasury stock (1,416,155 shares
outstanding as of December 31, 1995) - (57.8)
-------- --------
TOTAL COMMON STOCK EQUITY $1,499.7 $1,114.0
======== =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
4
<PAGE> 7
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (CONTINUED)
The Columbia Gas System, Inc. and Subsidiaries
NOTES
1. Basis of Accounting Presentation
The accompanying unaudited condensed consolidated financial statements for
The Columbia Gas System, Inc. (Columbia) reflect all normal recurring
adjustments which are necessary, in the opinion of management, to present
fairly the results of operations in accordance with generally accepted
accounting principles.
The accompanying financial statements should be read in conjunction with
the financial statements and notes thereto included in Columbia's 1995
Annual Report on Form 10-K and 1996 First Quarter Form 10-Q. Income for
interim periods may not be indicative of results for the calendar year due
to weather variations and other factors. Certain reclassifications have
been made to the 1995 financial statements to conform to the 1996
presentation.
2. Bankruptcy Matters
On November 28, 1995, Columbia and its wholly-owned subsidiary, Columbia
Gas Transmission Corporation (Columbia Transmission), emerged from Chapter
11 protection of the Federal Bankruptcy Code under the jurisdiction of the
United States Bankruptcy Court for the District of Delaware (Bankruptcy
Court). Both Columbia and Columbia Transmission had operated under Chapter
11 protection since July 31, 1991. Certain residual unresolved
bankruptcy-related matters are still within the jurisdiction of the
Bankruptcy Court.
Unsettled Producer Claims
Columbia Transmission's approved plan of reorganization (Plan) provided
that producers who rejected settlement offers contained in Columbia
Transmission's Plan may continue to litigate their claims under the
Bankruptcy Court-approved claims estimation procedures, described below,
and receive the same percentage payout on their allowed claims, when and if
ultimately allowed, as received by the settling producers. Columbia
Transmission's Plan further provided that the actual distribution
percentage for all producer claims, which would not be less than 68.875% or
greater than 72.5%, could not be determined until the total amount of
contested producer claims is established, and that until such time, 5% of
the maximum amount (based on a 72.5% payout) to be distributed to producer
claimants for allowed claims and to Columbia for unsecured debt will be
withheld. Additional distributions, if any, will be made when the total
amount of allowed producer claims has been determined.
Producer Claims Estimation Process
In 1992, the Bankruptcy Court approved the appointment of a claims mediator
and the implementation of a claims estimation procedure for the
quantification of claims arising from the rejection of above-market gas
purchase contracts and other claims by producers related to gas purchase
contracts with Columbia Transmission. In late 1994 and early 1995, the
Claims Mediator issued an Initial Report and Recommendations of the Claims
Mediator on Generic Issues for Natural Gas Contract Claims and a Supplement
to Initial Report and Recommendations of the Claims Mediator (Report) and
directed producer claimants to submit
5
<PAGE> 8
PART 1 - Financial Information
Item 1 - Financial Statements (continued)
recalculated claims prepared pursuant to the instructions contained in the
Report. The recommendations and instructions set out in the Report have
not been considered by the Bankruptcy Court. In mid-1995, most producers
with which Columbia Transmission had not yet negotiated settlements
liquidating their claims submitted recalculated claims to the claims
mediator. As submitted, those recalculated claims initially amounted to
over $2 billion. Since mid-1995, numerous additional producers have
settled their claims and those settlements became final with the
confirmation of Columbia Transmission's Plan. In addition, several
recalculated claims have been amended by producer claimants.
The claims estimation procedures remain in place for use in the
post-confirmation liquidation of producer claims. The claims estimation
process is now proceeding with various discovery, motions for dismissal or
summary judgement and evidentiary hearings before the claims mediator with
respect to individual producer claims, including claim-specific issues not
addressed by the Report. Motions are being filed by Columbia Transmission
with the Bankruptcy Court based on the recommendations of the claims
mediator to determine the amounts at which particular claims will be
allowed. All parties have rights of appellate review with respect to the
resulting orders of the Bankruptcy Court. When claims are allowed by the
Bankruptcy Court and the allowances become final, Columbia Transmission
will make distributions with respect to those claims pursuant to the Plan.
The timing of this litigation process is impossible to predict.
The 5% holdback from settling producers and a matching contribution by
reorganized Columbia Transmission will be used, to the extent necessary, to
fund any distributions on producer claims ultimately liquidated in an
aggregate amount in excess of those proposed by Columbia Transmission's
Plan. If the holdback and matching contributions are exhausted, any
further distribution would be funded entirely by Columbia Transmission.
Columbia has guaranteed the payment of the remaining distributions to
producers, either in cash or in Columbia's common stock. Based on the
information received and evaluated to date, Columbia Transmission believes
adequate reserves have been established for resolution of the remaining
producer claims and the payment of any amounts ultimately due to producers
with respect to the 5% holdback.
3. Sale of Southwest Oil and Gas Subsidiary
On April 30, 1996, Columbia sold Columbia Gas Development Corporation
(Columbia Development), effective December 31, 1995, to a privately- held
exploration and production concern for approximately $200 million.
Columbia Development had approximately 196 billion cubic feet equivalent of
proved oil and natural gas reserves located in the Gulf of Mexico and
on-shore continental United States. An estimated loss of $54.8 million
after-tax was recorded in the fourth quarter of 1995 to reflect the sale of
this subsidiary. In the second quarter of 1996, an adjustment was
recorded that reduced the loss to $49.2 million.
6
<PAGE> 9
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING INCOME (LOSS) BY SEGMENT
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C>
Transmission $ 38.8 $ 35.9 $ 124.4 $ 112.5
Distribution (3.0) (7.9) 165.0 108.3
Oil and Gas 6.4 (0.2) 17.2 (0.3)
Other Energy (3.1) 1.7 13.6 9.6
Corporate (3.1) (2.6) (6.0) (3.3)
------ ------ ------- -------
TOTAL $ 36.0 $ 26.9 $ 314.2 $ 226.8
====== ====== ======= =======
</TABLE>
DEGREE DAYS (DISTRIBUTION SERVICE TERRITORY)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Actual 705 624 3,807 3,382
Normal 580 580 3,559 3,527
% Colder (warmer) than normal 22 8 7 (4)
% Colder (warmer) than prior period 13 2 13 (10)
</TABLE>
7
<PAGE> 10
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS
Three Month Results
Net Income
Columbia's net income for the three months ended June 30, 1996, was $8.2
million, or $0.15 per share. In the same period last year, while Columbia was
in Chapter 11, net income of $30.9 million, or $0.61 per share was reported.
After adjusting the current period for unusual items and the prior period for
bankruptcy-related issues including interest costs not recorded, adjusted
second quarter 1996 net income was $21.2 million, an increase of $25.5 million
over adjusted net income for the same period last year. This increase was
attributed to improved results for all segments of the business that resulted
from higher rates in effect for the regulated subsidiaries, colder weather and
higher wellhead prices received for natural gas production.
Unusual items for the current quarter included a decrease to net income of
$18.6 million, after-tax, to reflect severance and benefit costs associated
with ongoing reengineering activities to improve operating efficiencies and
customer services and a $5.6 million after-tax improvement for an adjustment to
the loss on the sale of Columbia Development that was finalized in April 1996.
The table below reflects the unusual items and last year's bankruptcy-related
issues for both the three and six month periods.
Bankruptcy Related and Unusual Items
After-tax effect on Net Income
(millions)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Reported net income $ 8.2 $ 30.9 $159.5 $159.7
Less (plus):
Estimated interest costs not recorded - 43.0 - 83.4
Bankruptcy-related professional fees and related expenses - (7.8) - (14.6)
Reengineering costs (18.6) - (18.6) -
Adjustment to the sale of Columbia Development 5.6 - 5.6 -
----- ------ ------ ------
Total adjustments (13.0) 35.2 (13.0) 68.8
----- ------ ------ ------
Net income after adjusting for unusual and bankruptcy items $21.2 $(4.3) $172.5 $ 90.9
===== ====== ====== ======
</TABLE>
Revenues
Operating revenues for the second quarter of 1996 were $582.4 million, a $127.8
million improvement over the same period last year, due mainly to higher gas
prices, increased gas marketing activity and increased sales for the
distribution subsidiaries, resulting in part from 13% colder weather. Also,
increasing revenues was the beneficial effect of new rates in place for
Columbia Transmission and four of the five distribution subsidiaries.
Partially offsetting these improvements was a decrease in oil and gas
production revenues resulting from the sale of Columbia Development effective
year end 1995.
8
<PAGE> 11
PART 1-FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
Expenses
For the three months ended June 30, 1996, operating expenses of $546.4 million
were $118.7 million higher than the prior period, reflecting increased natural
gas purchases necessary to meet higher sales requirements and the impact of
higher prices for gas purchased. Also increasing current period expense was
$28.6 million of current and future expenditures representing severance and
benefit costs associated with Columbia's ongoing reengineering program
mentioned above. Included in expense last year were costs related to Columbia
Development's operations. Depreciation and depletion expense decreased $9
million. This reflects $13.6 million lower depletion expense attributable to
reduced depletable plant as a result of the sale of Columbia Development and a
lower depletion rate reflecting higher gas prices, tempered by a $4.6 million
increase in depreciation expense primarily due to higher depreciation rates in
effect for Columbia Transmission and additional plant in service for Columbia
Transmission and the other regulated subsidiaries.
Other Income (Deductions)
Other Income (Deductions) reduced income $25.5 million in the current quarter
primarily reflecting $35.1 million of interest expense on long- term debt
obligations partially offset by an $8.6 million pre-tax favorable adjustment
for the sale of Columbia Development. In the same period last year, while
Columbia was in Chapter 11, interest expense was not recorded. The 1995 income
improvement of $17.9 million for Other Income (Deductions) was due principally
to bankruptcy-related issues, which included the effect of $31.2 million of
interest earned on cash accumulated while in Chapter 11 partially offset by
expense of $9.4 million for professional fees and related costs.
Six Month Results
Net Income
Net income for the first six months of 1996 of $159.5 million was essentially
unchanged from the $159.7 million reported for the same period last year.
Included in the current period's results are the previously mentioned unusual
items recorded in the second quarter. Net income for the first half of 1995
benefitted from not recording $83.4 million in after-tax interest expense on
prepetition debt obligations due to the Chapter 11 proceedings. After
adjusting for unusual items and 1995 bankruptcy-related issues, adjusted net
income in 1996 was $172.5 million, an increase of $81.6 million over last
year's adjusted net income.
Revenues
For the first half of 1996, operating revenues were $1,785.4 million, an
increase of $300.1 million over the previous year. The increase was
principally due to the favorable effect of colder weather that increased sales
and transportation services, higher gas prices and higher rates in effect for
the regulated subsidiaries. Tempering the increase were lower revenues
associated with oil and gas production due to the sale of Columbia Development.
Expenses
Total operating expenses of $1,471.2 million for the first six months of 1996
were up $212.7 million. This was primarily the result of $227.8 million in
higher product purchase expense
9
<PAGE> 12
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
reflecting additional sales requirements and increased prices charged by
suppliers. The $24.6 million decrease in depreciation and depletion expense
was attributable to reduced depletable plant due to the sale of Columbia
Development and a lower depletion rate resulting from higher gas prices,
partially offset by higher depreciation rates and additional plant in service.
Operation and maintenance expense increased $9.3 million over last year. After
adjusting for the effect of the reengineering expense recorded in the second
quarter of 1996 and the elimination of Columbia Development's 1995 operating
expense, operation and maintenance expense was essentially unchanged from last
year.
Other Income (Deductions)
Other Income (Deductions) reduced income $66.1 million in the first six months
of 1996, whereas income was increased $29.1 million in the same period last
year. The effect in 1996 of $70.3 million of interest expense on long-term
debt obligations was mitigated by an $8.6 million favorable adjustment for the
sale of Columbia Development. In the same period last year, no interest
expense was recorded. In 1995, income increased for bankruptcy-related issues
reflecting $50.1 million of interest earned on cash accumulated while in
Chapter 11, partially offset by $17.6 million of expense for professional fees
and related costs.
Liquidity and Capital Resources
Cash from operations for the first half of 1996 was $554.2 million, a decrease
of $38.5 million from last year that was due largely to a lag in the recovery
by the distribution subsidiaries of gas costs in the current period together
with increased payments for estimated supplier obligations, increased
prepayments and payment of accrued interest. The recovery lag resulted from
the sharp rise in gas prices during 1996 that exceeded the distribution
subsidiaries' current recovery levels. These higher costs will be recovered
through future adjustments to the commodity portion of rates as provided for
under the regulatory process. Conversely, in the prior period when gas prices
were decreasing, the rates in place for the distribution subsidiaries led to an
overrecovered position. Cash from operations was improved by approximately
$213 million for the net effect of Internal Revenue Service (IRS) refunds.
Columbia's 1995 Federal Income Tax return included a net operating loss
carryback claim to recover income taxes and was the principal reason for a
$271.5 million improvement in working capital for income tax refunds. This
claim, net of other adjustments and liabilities to the IRS, resulted in a cash
refund in April 1996 of approximately $213 million. Cash also improved for the
favorable effect of colder weather that increased sales for the distribution
subsidiaries, as well as higher base rates in effect for the regulated
subsidiaries.
Columbia maintains an unsecured bank revolving credit facility (Credit
Facility) which permits borrowings of up to $1 billion. Scheduled quarterly
reductions of $25 million of the committed amount begin December 31, 1997,
and will reduce the Credit Facility to $700 million by September 30, 2000. The
Credit Facility provides for the issuance of up to $100 million of letters of
credit. Borrowings under the Credit Facility were used in February 1996, to
redeem the 5.22% Series B-Preferred Stock and 7.89% Series A-Preferred Stock
issued pursuant to Columbia's approved Plan of Reorganization. As of June 30,
1996, Columbia had $73.2 million of letters of credit outstanding under the
Credit Facility and no borrowings.
10
<PAGE> 13
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CONSOLIDATED RESULTS (CONTINUED)
Columbia has an effective shelf registration statement on file with the U.S.
Securities and Exchange Commission (SEC) for the issuance of up to $1 billion
in aggregate amount of debentures, common stock or preferred stock in one or
more series. In March 1996, Columbia issued 5,750,000 shares of common stock
consisting of 4,333,845 newly issued shares and 1,416,155 shares previously
held as treasury stock. Proceeds of $239.2 million from the issuance were used
to reduce borrowings incurred under the Credit Facility.
On April 30, 1996, Columbia sold Columbia Development for approximately $200
million. The funds generated from this sale were used to reduce borrowings
under the Credit Facility.
Columbia believes that future cash requirements for normal ongoing operations
and capital expenditures will be met with internally generated funds and
amounts available under the Credit Facility. No further issuances under the
shelf registration are contemplated at this time.
Restructuring Activities
In the second quarter of this year, $28.6 million (pre-tax) of expense was
recorded to reflect current and future severance and benefit expenditures
associated with Phase I of a study, called Project Phoenix, that began in 1995
to streamline operations and make them more efficient and cost-competitive.
Staffing throughout Columbia has been reduced nearly five percent as a result
of implementing this initial phase. Phase II of Project Phoenix is scheduled
to be completed and substantially implemented by year end. The second phase of
the project will result in additional expense being recorded later in 1996 that
is anticipated to be approximately half of the amount recorded for Phase I.
11
<PAGE> 14
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TRANSMISSION OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ----------------
1996 1995 1996 1995
----- ---- ---- ----
(millions)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation revenues $ 137.6 $ 135.3 $ 320.6 $ 294.6
Storage revenues 40.5 34.5 79.2 64.0
Other revenues 3.6 1.1 7.8 15.5
------- ------- ------- -------
Total Operating Revenues 181.7 170.9 407.6 374.1
------- ------- ------- -------
OPERATING EXPENSES
Operation and maintenance 100.3 95.6 198.1 182.5
Depreciation 28.2 26.0 55.2 51.7
Other taxes 14.4 13.4 29.9 27.4
------- ------- ------- -------
Total Operating Expenses 142.9 135.0 283.2 261.6
------- ------- ------- -------
OPERATING INCOME $ 38.8 $ 35.9 $ 124.4 $ 112.5
======= ======= ======= =======
Throughput (Bcf)
Transportation
Columbia Transmission
Market area 197.6 194.7 627.1 595.9
Columbia Gulf
Main-line 159.1 151.8 329.3 306.7
Short-haul 64.1 53.7 133.4 104.4
Intrasegment eliminations (158.2) (150.7) (324.7) (302.0)
------- ------- -------- --------
Total Throughput 262.6 249.5 765.1 705.0
======= ======= ======== =======
</TABLE>
12
<PAGE> 15
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TRANSMISSION OPERATIONS (CONTINUED)
Marketing Initiatives
In February 1996, Columbia Transmission filed with the Federal Energy
Regulatory Commission (FERC) for authorization to expand its pipeline and
storage systems to serve the increasing needs of customers. As previously
reported, Columbia Transmission has signed 15-year agreements with 23 customers
for approximately 500,000 Mcf per day (Mcf/d) of additional firm service to be
phased in over a three-year period commencing November 1, 1997. In the filing,
Columbia Transmission sought to roll the cost of the project into existing
rates rather than charge an incremental rate to the market expansion customers.
Several protests were subsequently filed with respect to the rolled-in rate
treatment. On April 12, 1996, Columbia Transmission filed a response to the
protests that reasserted points made in its initial FERC application that the
market expansion project meets the FERC's requirements for the rolled-in
pricing treatment and provides system operational benefits to its customers,
including those not receiving increased levels of service. The cost is
projected to increase overall rates by less than five percent which, under FERC
policy guidelines, qualifies for rolled-in rate treatment.
On June 7, 1996, Columbia Transmission filed an amendment to its market
expansion proposal that will reduce capital expenditures necessary for the
project by about $80 million, to approximately $270 million, while still
maintaining the same level of service to customers. The amendment reflects an
agreement between Columbia Transmission and Texas Eastern Transmission
Corporation (Texas Eastern) under which Texas Eastern will increase capacity on
its Pennsylvania pipeline system and lease the new capacity to Columbia
Transmission. In June 1996, Texas Eastern also filed with the FERC its
certificate application seeking approval of the arrangement. Interventions and
protests filed in response to the amendment generally question the propriety of
rolled-in rate treatment, the recovery mechanism for the lease costs and
whether a lease is appropriate as opposed to contracting for throughput
service. Responses to these protests have been filed by Columbia Transmission
and Texas Eastern. The responses noted, among other things, that Columbia
Transmission's leasing of the Texas Eastern capacity is fully consistent with
recently announced FERC policy that encourages creative arrangements among
pipelines to economically develop pipeline capacity to meet the needs of
growing markets.
Regulatory Matters
Columbia Transmission's Rate Filing
In August 1995, Columbia Transmission filed with the FERC its first general rate
case since 1991, requesting an increase in annual revenues of approximately $147
million. Columbia Transmission also proposed to recover its net investment in
gathering and certain gas processing facilities over a period of five years.
The FERC authorized new rates to be implemented on February 1, 1996, subject to
refund. Columbia Transmission agreed to collect only 75% of the requested rate
increase for at least three months in an effort to reach a timely resolution of
the issues. Since settlement discussions with active parties are on-going,
Columbia Transmission has agreed to continue the reduction in its collection
rates past May 1, 1996.
13
<PAGE> 16
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TRANSMISSION OPERATIONS (CONTINUED)
On June 20, 1996, an Administrative Law Judge order extended the hearing date
for the rate proceedings until February 25, 1997. A hearing date for issues
related to environmental matters was set for May 5, 1997.
Gathering Facilities
Under the FERC's Order No. 636, natural gas pipelines were required to unbundle
their gathering costs and services from all other transportation services.
Columbia Transmission has determined that gathering services are not essential
to its ongoing transportation activities and, as a result, intends to dispose
of the related assets. On April 29, 1996, Columbia Transmission filed an
application with FERC to abandon, by sale to Columbia Natural Resources, Inc.
(CNR), certain gathering and transmission facilities at their net book value of
approximately $28 million. Pending FERC approval, the transfer is expected to
be completed around year end. In response to Columbia Transmission's April
1996 filing, certain parties filed protests and motions for a technical
conference, a hearing, and consolidation with Columbia Transmission's ongoing
rate case. Columbia Transmission filed a response on June 4, 1996 in
opposition to the motions. Columbia Transmission is actively pursuing
discussions with various parties concerning the sale of its remaining gathering
assets.
Recovery of Columbia Gulf's Pre-November 1994 Transportation Costs
On March 1, 1995, Columbia Transmission filed with the FERC to recover $69
million of annual transportation costs. Included in this amount were $39
million of unrecovered transportation costs that were billed to Columbia
Transmission by Columbia Gulf Transmission Company (Columbia Gulf). Several
parties filed protests with the FERC regarding the Columbia Gulf charges.
In an April 2, 1996 order, the FERC ruled that Columbia Gulf was entitled to
bill its prudently incurred costs, under its cost-of-service tariff, to
Columbia Transmission, and that Columbia Transmission was entitled to flow such
amounts through to its customers. The FERC ruled that approximately $19
million of the Columbia Gulf charges, which were attributable to operation and
maintenance costs, were recoverable, subject to a general FERC audit which is
presently under way. With respect to the remaining $20 million of costs, that
are associated with environmental issues, the FERC has established hearing
procedures to determine if some portion of these costs are not recoverable
because they were not prudently incurred by Columbia Gulf. This hearing is
scheduled for March 1997. FERC has denied requests for rehearing of the April
1996 order and affirmed the limited scope of the hearing.
Environmental
A U.S. EPA Administrative Order by Consent establishes requirements for the
replacement of, maintenance to, or sale of, covered Columbia Transmission
facilities. In light of additional information about remediation activities
associated with certain facilities and presently known normal replacement and
maintenance activities, a reserve addition of $2.5 million was recorded in the
second quarter of 1996.
14
<PAGE> 17
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TRANSMISSION OPERATIONS (CONTINUED)
Restructuring Activities
The transmission segment has a reengineering project underway to assess the way
the companies do business. These efforts are expected to streamline the
business functions, improve the organizational structure and reduce overall
employee headcount. The project is focusing on all processes within the
companies. Implementation has begun and will continue into late 1996. In the
second quarter of 1996, Columbia Transmission recorded expense of $6.1 million
in anticipated severance costs associated with reengineering and restructuring
efforts currently underway. Additional expense will likely be recorded later
in 1996 as further reengineering and restructuring activities are identified.
Appeals of Order No. 636
On July 16, 1996, the U.S. Court of Appeals for the D.C. Circuit issued its
long-awaited decision regarding the appeals of FERC Order No. 636 (Order 636).
The court generally upheld the FERC's actions; however, it remanded to the FERC
certain aspects of Order 636. While analysis of the impact of the decision is
ongoing, Columbia Transmission does not believe that the order will have a
significant impact on its operations. A settlement approved by the FERC in
1995 provides that any relief granted as a result of the decision will be
implemented prospectively on Columbia Transmission's system, and that Columbia
Transmission will have no refund obligation or other financial liability as a
result of the decision.
Volumes
Throughput for the second quarter of 1996 increased 13.1 Bcf, to 262.6 Bcf,
primarily reflecting additional short-haul deliveries by Columbia Gulf in the
Gulf of Mexico that were due to increased offshore production. Higher
main-line and market-area transportation services were largely due to customers
injecting gas into storage and increased deliveries early in the second quarter
due to colder weather.
For the first six months of 1996, throughput was 765.1 Bcf, an increase of 60.1
Bcf over the same period last year, due in large part to 13% colder weather
that increased customer demand for transportation services. Short-haul
deliveries were 29 Bcf higher than last year reflecting increased offshore
supply at Vermillion and Eugene Island and increased marketing activity by
Columbia Gulf.
Operating Revenues
Operating revenues for the second quarter and first half of 1996 of $181.7
million and $407.6 million were up $10.8 million and $33.5 million,
respectively. These increases were principally due to the implementation of
higher rates for Columbia Transmission that were effective in February 1996,
subject to refund, and increased throughput for Columbia Gulf resulting from
colder weather. In the first quarter of 1995, Columbia Gulf recorded one-time
revenue of $5.4 million for its portion of exit fees that were paid to the
Ozark partnership. Columbia Gulf sold its interests in this partnership in
1995.
Operating Income
Second quarter operating income of $38.8 million, $2.9 million above last year,
reflected higher operating revenues partially offset by $7.9 million of higher
operating expenses. Included in the
15
<PAGE> 18
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TRANSMISSION OPERATIONS (CONTINUED)
current period was $6.1 million of reengineering-related severance and benefits
expense to improve operating efficiencies and customer service. Also
increasing operating expenses were higher depreciation rates and property
taxes. These higher expenses were tempered by cost-conservation measures
recently implemented.
Operating income for the six months ended June 30, 1996, of $124.4 million was
$11.9 million above the same period in 1995. The beneficial effect of $33.5
million higher operating revenues was mitigated by an increase of $21.6 million
in operating expenses primarily attributable to the reengineering costs
recorded in the second quarter and increases in depreciation rates, property
taxes and operation and maintenance expenses.
16
<PAGE> 19
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DISTRIBUTION OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------ -------------------
1996 1995 1996 1995
------ ------ ------ ------
(millions)
<S> <C> <C> <C> <C>
NET REVENUES
Sales revenues $ 299.9 $ 234.4 $ 1,156.6 $ 1,001.5
Less: Cost of gas sold 168.8 117.4 687.5 592.8
-------- -------- --------- ----------
Net Sales Revenues 131.1 117.0 469.1 408.7
-------- -------- --------- ----------
Transportation revenues 30.5 23.8 66.4 57.4
Less: Associated gas costs 4.2 2.1 7.4 5.2
-------- -------- --------- ----------
Net Transportation Revenues 26.3 21.7 59.0 52.2
-------- -------- --------- ----------
Net Revenues 157.4 138.7 528.1 460.9
-------- -------- --------- ----------
OPERATING EXPENSES
Operation and maintenance 118.6 107.1 235.1 225.4
Depreciation 12.2 10.6 43.8 41.5
Other taxes 29.6 28.9 84.2 85.7
-------- -------- --------- ----------
Total Operating Expenses 160.4 146.6 363.1 352.6
-------- -------- --------- ----------
OPERATING INCOME (LOSS) $ (3.0) $ (7.9) $ 165.0 $ 108.3
======== ======== ========= ==========
THROUGHPUT (BCF)
Sales
Residential 30.0 25.5 132.7 115.9
Commercial 11.7 10.1 54.0 46.7
Industrial and other 1.6 1.1 5.1 4.1
-------- -------- --------- ----------
Total Sales 43.3 36.7 191.8 166.7
Transportation 60.0 58.7 131.7 135.5
-------- -------- --------- ----------
Total Throughput 103.3 95.4 323.5 302.2
-------- -------- --------- ----------
Off-System Sales 0.9 0.8 5.3 3.9
-------- -------- --------- ----------
Total Sold or Transported 104.2 96.2 328.8 306.1
======== ======== ========= ==========
SOURCES OF GAS FOR THROUGHPUT (BCF)
Sources of Gas Sold
Spot market* 88.2 66.0 167.2 112.6
Producers 9.4 12.8 25.6 32.6
Storage withdrawals (injections) (60.6) (42.6) 7.9 26.4
Other 7.2 1.3 (3.6) (1.0)
-------- -------- --------- ---------
Total Sources of Gas Sold 44.2 37.5 197.1 170.6
Transportation received for delivery to customers 60.0 58.7 131.7 135.5
-------- -------- --------- ---------
Total Sources 104.2 96.2 328.8 306.1
======== ======== ========= =========
</TABLE>
* Purchase contracts of less than one year.
17
<PAGE> 20
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DISTRIBUTION OPERATIONS (CONTINUED)
Market Conditions
Weather in the distribution subsidiaries' (Distribution) operating territories
through the first half of 1996 was 13 percent colder than 1995 and 7 percent
colder than normal. The second quarter weather was also 13 percent colder than
last year. The extended cold weather reduced industry-wide storage inventories
to levels lower than any in recent history thereby causing gas wellhead prices
to rise. The higher wellhead prices may continue through summer, as gas
utilities replenish depleted storage volumes, and will continue to affect
customer bills throughout the 1996-1997 winter as storage gas is withdrawn to
meet heating requirements.
Regulatory Matters
Columbia Gas of Ohio, Inc.'s (Columbia of Ohio) 1994 rate case settlement
provided for a review of the company's revenue requirements by a collaborative
group composed of diverse interested parties (Collaborative). The review
process has been completed and discussions are continuing with the
Collaborative to determine how the identified revenue requirement can be
accommodated. The Collaborative is also developing a "Customer Choice"
transportation program and will be addressing alternative regulatory rules in
the near future.
Legislation has been enacted in Ohio that revises state laws governing natural
gas to allow for more competition among suppliers and more choices for
customers. The Public Utilities Commission of Ohio is required to have new
guidelines established by the first quarter of 1997.
Distribution continues to develop pilot transportation programs that, if
approved, would provide small customers, including residential, the opportunity
to arrange their own gas supplies from marketers while continuing to use
Distribution's facilities for transportation. Both Columbia Gas of
Pennsylvania, Inc. (Columbia of Pennsylvania) and Columbia Gas of Maryland,
Inc. (Columbia of Maryland) filed for regulatory authority to implement pilot
programs, discussed below, in the second quarter. Under these programs, both
companies will assign a portion of their upstream pipeline capacity to the
transportation customers' third party suppliers thereby avoiding stranded
upstream pipeline capacity costs and the shifting of such costs to sales
customers.
In June, Columbia of Pennsylvania filed with the Pennsylvania Public Utility
Commission two distinct, but interrelated, changes in its tariff provisions.
The first would provide a permanent, statewide residential transportation rate
schedule. The second proposes a two-year transportation pilot program for more
than 20,000 residential and human needs customers in Washington County
beginning in November, making it one of the largest pilot programs initiated
anywhere in the United States.
A new Columbia of Maryland program for smaller commercial and industrial
customers went into effect in June on a pilot basis. Additionally, Columbia of
Maryland has received approval from the Maryland Public Service Commission for
a residential transportation service pilot program involving 10,000 customers.
The pilot is for two years and is planned to begin in November.
18
<PAGE> 21
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DISTRIBUTION OPERATIONS (CONTINUED)
In other Columbia of Maryland rate matters, recent studies determined that a
new rate filing is not needed. Consequently, the company canceled its
previously announced plans to file for an increase in base rates in November
1996.
The Virginia State Corporation Commission has approved Commonwealth Gas
Services, Inc.'s (Commonwealth Services) rate case settlement that was reached
in early 1996. In addition to new rates, the settlement provided for a
separate proceeding to consider gas supply and other incentive proposals. A
hearing on these issues is set for September 1996.
Sales Incentives
Storage represents approximately 50% of Distribution's winter season firm
supply and two-thirds of its winter peak day supply. Distribution's supply
portfolio, particularly the storage component, enables it to accommodate the
day-to-day variations in customer demand caused by weather and other factors.
Off-system sales are sales outside of Distribution's traditional market areas.
In the first half of 1996, Distribution had off-system sales and exchange
volumes of approximately 3.3 Bcf resulting in pre-tax income of $2.2 million,
an increase of 2.3 Bcf and $2 million, respectively, from the same period in
1995. Columbia of Ohio has deferred approximately $22.9 million of pre-tax
income from off-system sales and exchange transactions pending a final
incentive-based sharing agreement with its customers.
Proceeds from releasing unused capacity totaled $7.8 million in the first half
of 1996, down $1.2 million from the prior year's first half total. This year's
colder weather increased the need for capacity to meet customer requirements
and reduced opportunities to release any unused capacity. Except for a small
amount retained by Columbia of Maryland, Distribution recorded these proceeds
as a reduction to gas costs. Columbia of Pennsylvania has an approved
incentive program that allows a portion of the proceeds to be retained once a
benchmark has been reached.
Distribution continues to pursue gas supply incentives in states that do not
have approved programs in place. Columbia Gas of Kentucky, Inc. (Columbia of
Kentucky) filed a tariff application in March 1996, in a renewed attempt to
obtain gas cost incentives. A hearing was held in June and a decision from the
Kentucky Public Service Commission is expected in the third quarter.
Restructuring Activities
As previously reported, Distribution has initiated a restructuring of its
headquarter's operations as part of its ongoing efforts to provide enhanced
customer service and to achieve greater operating efficiencies. The
restructuring will result in a reduction of 285 management, professional and
administrative/technical employees by the end of 1996. As a result of this
restructuring and related personnel reductions, Distribution recorded current
and future expenditures of $15.1 million representing severance and related
benefit costs. The separation of employees and related severance payments are
expected to begin in the third quarter of 1996.
19
<PAGE> 22
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DISTRIBUTION OPERATIONS (CONTINUED)
"Project Customer" initiatives discussed in the 1995 Form 10-K are continuing.
A charge of $1.9 million was recorded in the second quarter primarily
associated with the liability for salary and related benefit costs for 84
Columbia of Pennsylvania and Columbia of Maryland employees whose positions
will be eliminated.
Additional studies are underway in all of Distribution's service territories
that may affect the field organizations in functions other than customer
service and may result in additional positions being eliminated.
Volumes
Throughput for the quarter ended June 30, 1996, was 104.2 Bcf, an increase of 8
Bcf over last year. The increase in tariff sales was primarily due to colder
weather and customer growth while transportation service reflected a small
increase of 1.3 Bcf.
For the first half of 1996, throughput of 328.8 Bcf increased 22.7 Bcf over the
same period last year. Sales increased 25.1 Bcf due largely to higher
residential and commercial tariff sales attributable to colder weather and
customer growth. Transportation volumes were down 3.8 Bcf reflecting reduced
transportation service for power generation due to higher prices and
transportation capacity constraints. This reduction was partially offset by
increased usage within the manufacturing sector.
Net Revenues
For the three months ended June 30, 1996, net revenues were $157.4 million, an
increase of $18.7 million over 1995. This increase primarily reflects $7
million from additional throughput and $4.3 million from higher rates in effect
in four of the five states that Distribution serves. The remaining increase
was essentially due to higher revenue surcharges that are offset in expense and
have no effect on income.
For the first half of 1996, net revenues were $528.1 million, an increase of
$67.2 million over 1995. Additional throughput contributed $40.7 million of
the increase while higher rates produced another $15.2 million. Higher revenue
surcharges that are offset in expense accounted for most of the remaining
increase.
Operating Income (Loss)
Distribution experienced an operating loss for the second quarter of $3
million, a $4.9 million improvement over the same period last year. The higher
net revenues were mostly offset by $13.8 million of higher operating expenses.
The $11.5 million increase in operation and maintenance expense reflects $15.1
million for costs associated with reengineering activities and $1.9 million for
Project Customer initiatives partially offset by decreased costs due to
efficiencies and modernization efforts recently implemented. Depreciation was
up $1.6 million primarily reflecting increased plant additions. Higher gross
receipts taxes due to higher taxable revenues mainly contributed to a $0.7
million increase in other taxes.
20
<PAGE> 23
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
DISTRIBUTION OPERATIONS (CONTINUED)
Operating income for the first six months of 1996 was up $56.7 million from
1995. Higher net revenues were partially offset by a $10.5 million increase in
operating expenses. Included in the $9.7 million higher operation and
maintenance expenses were the restructuring costs recorded in the second
quarter. Increases in plant additions contributed to the $2.3 million rise in
depreciation. Lower gross receipts and sales taxes caused the $1.5 million
decline in taxes other than income.
21
<PAGE> 24
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OIL AND GAS OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
(millions)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Gas $ 23.5 $ 31.1 $ 51.2 $ 67.8
Oil and liquids 1.6 11.9 2.8 23.8
------ ------ ------ ------
Total Operating Revenues 25.1 43.0 54.0 91.6
------ ------ ------ ------
OPERATING EXPENSES
Operation and maintenance 9.1 19.4 18.0 40.4
Depreciation and depletion 7.4 21.1 14.3 46.0
Other taxes 2.2 2.7 4.5 5.5
------ ------ ------ ------
Total Operating Expenses 18.7 43.2 36.8 91.9
------ ------ ------ ------
OPERATING INCOME (LOSS) $ 6.4 $ (0.2) $ 17.2 $ (0.3)
====== ====== ====== ======
GAS PRODUCTION STATISTICS
Production (Bcf)
Appalachian 8.1 8.1 16.6 17.2
Southwest - 8.1 - 16.7
====== ====== ====== ======
Total 8.1 16.2 16.6 33.9
Average Price ($/Mcf)
Appalachian 2.81 2.11 2.98 2.20
Southwest - 1.62 - 1.69
System 2.81 1.86 2.98 1.95
OIL AND LIQUIDS PRODUCTION STATISTICS
Production (000Bbls)
Appalachian 83 80 153 158
Southwest - 616 - 1,280
------ ------ ------ ------
Total 83 696 153 1,438
====== ====== ====== ======
Average Price ($/Bbl)
Appalachian 19.10 16.87 18.00 16.43
Southwest - 16.99 - 16.53
System 19.10 16.98 18.00 16.52
</TABLE>
22
<PAGE> 25
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OIL AND GAS OPERATIONS (CONTINUED)
Gathering Facilities
On April 29, 1996, Columbia Transmission filed a request with the FERC for
abandonment and transfer of selected gathering facilities to CNR. CNR
requested an order from the FERC disclaiming jurisdiction over the selected
facilities. Interventions and protests were subsequently filed by producers
and other energy groups. CNR is negotiating with producers, shippers and
distribution companies regarding future gathering and supply arrangements.
Sale of Columbia Development
On April 30, 1996, (effective December 31, 1995) Columbia sold Columbia
Development to a privately-held exploration and production concern for
approximately $200 million. Columbia Development had approximately 196 billion
cubic feet equivalent of proved oil and natural gas reserves located in the
Gulf of Mexico and on-shore continental United States. An estimated loss of
$54.8 million after-tax was recorded in the fourth quarter of 1995 to reflect
the sale of this subsidiary. In the second quarter of 1996, an adjustment was
recorded that reduced the loss to $49.2 million.
Drilling Activity
Drilling activity lagged behind the pace established in the first half of 1995
due to inclement weather and CNR's reengineering activities. For the first
half of 1996, CNR participated in 18 wells in Ohio, Virginia, and West Virginia
of which 14 were successful, adding net reserves of 3.6 Bcf.
Volumes
For the three months and six months ended June 30, 1996, gas production was 8.1
Bcf and 16.6 Bcf. This represents decreases of 8.1 Bcf and 17.3 Bcf,
respectively, from last year. After adjusting for the sale of Columbia
Development, gas volumes were essentially unchanged.
CNR's oil and liquids production during the three and six months ended June 30,
1996 was essentially unchanged from last year.
Revenues
Gas revenues for the second quarter and first half of 1996 of $23.5 million and
$51.2 million, decreased $7.6 million and $16.6 million, respectively,
primarily due to the sale of Columbia Development. After adjusting for the
sale of Columbia Development, gas revenues increased $5.5 million and $11.7
million for the three and six month periods, reflecting higher prices.
Revenues from oil and liquids production for the three and six months ended
June 30, 1996, were $1.6 million and $2.8 million, down $10.3 million and $21
million, respectively. After adjusting for the sale of Columbia Development,
oil and liquids production revenues were relatively unchanged in both the
second quarter and year-to-date periods.
23
<PAGE> 26
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OIL AND GAS OPERATIONS (CONTINUED)
Operating Income (Loss)
For the current quarter, operating income was $6.4 million compared to an
operating loss of $0.2 million in the same quarter last year. The 1995 loss
included results from Columbia Development. Lower depletion expense of $13.7
million was due to reduced depletable plant resulting from the sale of Columbia
Development and a lower depletion rate in effect, reflecting higher gas prices.
The decreased operation and maintenance expense also reflected reduced labor
costs attributable to CNR's workforce reduction.
For the six months ended June 30, 1996, operating income was $17.2 million,
compared to an operating loss of $0.3 million last year. The improvement
reflected lower depletion expense of $31.7 million due to reduced depletable
revenues and a higher average gas price for CNR, along with CNR's lower
operating costs attributable to reduced staffing levels and improved
efficiency.
24
<PAGE> 27
Part 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER ENERGY OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- ------------------
1996 1995 1996 1995
------- ------- ------ -------
(millions)
<S> <C> <C> <C> <C>
NET REVENUES
Gas marketing revenues $ 152.3 $ 55.4 $ 310.4 $ 114.1
Less: Products purchased 149.5 54.0 299.4 110.9
------- ------- ------- -------
Net Gas Marketing Revenues 2.8 1.4 11.0 3.2
------- ------- ------- -------
Propane revenues 10.9 8.7 43.2 34.2
Less: Products purchased 6.3 4.8 24.2 18.9
------- ------- ------- -------
Net Propane Revenues 4.6 3.9 19.0 15.3
------- ------- ------- -------
Other Revenues 24.7 21.7 45.2 41.5
------- ------- ------- -------
Net Revenues 32.1 27.0 75.2 60.0
------- ------- ------- -------
OPERATING EXPENSES
Operation and maintenance 31.5 22.0 53.9 43.4
Depreciation and depletion 2.2 2.0 4.5 4.1
Other taxes 1.5 1.3 3.2 2.9
------- ------- ------- -------
Total Operating Expenses 35.2 25.3 61.6 50.4
------- ------- ------- -------
OPERATING INCOME (LOSS) $ (3.1) $ 1.7 $ 13.6 $ 9.6
======= ======= ======= =======
PROPANE SALES (MILLIONS OF GALLONS)
Retail 8.3 6.8 33.1 27.1
Wholesale and Other 2.5 1.3 8.9 10.3
------- ------- ------- -------
Total Propane Sales 10.8 8.1 42.0 37.4
======= ======= ======= =======
</TABLE>
25
<PAGE> 28
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER ENERGY OPERATIONS (CONTINUED)
Restructuring Activities
During the third quarter of 1996, Columbia Gas System Service Corporation,
Columbia LNG Corporation and TriStar Ventures Corporation are moving their
corporate headquarters from Wilmington, Delaware, to a temporary location in
Reston, Virginia. A new headquarters, that will be constructed in northern
Virginia, is expected to be completed by late-1997. As a result of the move to
Reston, Virginia, approximately $7.4 million of expense was recorded in the
second quarter to reflect current and future severance and benefit expenditures
for those employees who will not be transferring.
Energy Related Services
Columbia Energy Services Corporation has formed a wholly-owned subsidiary,
Columbia Service Partners, Inc. (CSP), to provide a variety of new
non-regulated services to both homeowners and businesses. The new company's
initial focus is on the nongas needs of Distribution's customers. In the
second quarter of 1996, CSP introduced a new appliance repair service called
Appliance Partner to Distribution's residential customers throughout
southeastern Ohio. In early July 1996, the service was extended to
Distribution's customers in northern Ohio. For a small monthly premium,
Appliance Partner customers are eligible for prompt appliance repair from
qualified independent contractors. CSP has also initiated a billing insurance
program, "Payment Partner," for Distribution customers in Ohio and Kentucky.
Later CSP expects to complement these services with warranty and energy
management services to commercial and industrial customers. These new programs
are part of Columbia's ongoing effort to become a full service provider of
energy and energy-related services.
In July 1996, Columbia Energy Services Corporation began providing energy
management services to 14 libraries in the Columbus, Ohio, area. This new
service agreement will provide more flexible and cost-effective pricing
arrangements for the 12.5 million cubic feet of natural gas that the libraries
use annually.
Net Revenues
Net revenues for the three months ended June 30, 1996, of $32.1 million
increased by $5.1 million from the same period last year. The increase is
primarily due to an increase of $3 million in revenues for services provided to
affiliated companies by Columbia Gas System Service Corporation and an increase
of $1.4 million in net revenues for increased gas marketing activities and $0.7
million for higher propane sales and margins.
For the six months ended June 30, 1996, net revenues improved by $15.2 million
to $75.2 million due to the impact of colder weather this year. Net revenues
for the gas marketing subsidiary increased $7.8 million as a result of
increased margins and volumes sold. Net revenues from propane operations
increased $3.7 million, reflecting increased weather-generated sales. Higher
other revenues for services provided to affiliates caused the remaining
increase.
26
<PAGE> 29
PART 1 - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OTHER ENERGY OPERATIONS (CONTINUED)
Operating Income (Loss)
An operating loss for the second quarter of 1996 of $3.1 million was primarily
the result of $7.4 million in reengineering-related costs. Absent these costs,
operating income improved due to higher propane margins and the increased gas
marketing activity.
Operating income for the first six months of 1996 was $13.6 million, up $4
million from the same period last year, as the favorable impact of colder
weather was only partially offset by the reengineering expenses recorded in the
second quarter.
27
<PAGE> 30
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
No new reportable matters have arisen and there have been no material
developments in any legal proceedings reported in Columbia's Annual Report on
Form 10-K for the year ended December 31, 1995, or reported on Form 10-Q for
the First Quarter 1996, except as follows:
I. Regulatory Matters
Columbia Gas Transmission Corp., FERC Docket No. RP95-196 (March 1, 1995)
On March 1, 1995, Columbia Transmission filed its semi-annual Transportation
Cost Recovery Adjustment to recover Account No. 858 (upstream pipeline) costs,
including $39 million of costs paid to Columbia Gulf.
On April 2, 1996, the FERC ruled generally that Columbia Gulf could bill the
costs to Columbia Transmission and that Columbia Transmission could recover the
costs from its customers. FERC did, however, (a) make recovery of operation
and maintenance costs (approximately $19 million) subject to the outcome of the
FERC's next audit of Columbia Gulf, and (b) establish hearing procedures
concerning whether some portion of Columbia Gulf's environmental costs billed
to Columbia Transmission (approximately $20 million) were imprudently incurred.
A hearing date has been set for March 26, 1997. On June 14, 1996, FERC denied
the requests for rehearing of the April 2, 1996 order and upheld the
Administrative Law Judge's rulings regarding the limited scope of the prudence
issues to be examined at hearing.
Tennessee Gas Pipeline Co., FERC Docket No. RP96-61 ( November 30, 1995)
On November 30, 1995, Tennessee made a filing to direct bill Columbia
Transmission for $115,303 of new take-or-pay costs which, if accepted, could
have resulted in estimated total costs being billed to Columbia Transmission of
$5 million. Columbia Transmission opposed Tennessee's filing.
On July 22, 1996, the FERC issued an order which holds that Tennessee may not
bill new take-or-pay costs to Columbia Transmission.
Columbia Gas Transmission Corp., FERC Docket No. RP96-149 (February 26, 1996)
On February 26, 1996, Columbia Transmission sought approval from the FERC to
sell, at market prices, certain base storage gas in connection with the
deactivation of the Majorsville-Heard Storage Complex, and proposed to retain
the profits. The FERC approved the sale, but reserved ruling on the issue of
whether Columbia Transmission is entitled to keep the profit from the sale.
Numerous parties protested arguing primarily that Columbia Transmission should
not be permitted to retain the profits. The base gas was sold at a profit of
approximately $19 million.
28
<PAGE> 31
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
II. Bankruptcy Matters
Daniel Garshman v. Columbia Gas Transmission Corporation, No. ATL-L-000172-99,
(Sup. Ct. of N.J., 1993)
The parties have proposed a resolution of the dispute, subject to Bankruptcy
Court approval, as set forth under the terms of the claims estimation
proceedings. The resolution of this issue will not have a material effect on
the financial results of Columbia.
New Bremen Corp. v. Columbia Gas Transmission Corp. and Columbia Gulf
Transmission Co. (November 16, 1988)
This action, filed in Texas State court, was removed to the U.S. District Court
for the Southern District of Texas, Houston District, on January 10, 1989 (Civ.
Action No. H-89-0072). The action concerns the interpretation of a producer
contract subject to the estimation proceedings in the Bankruptcy Court. On
March 12, 1996, the District Court entered final judgment on an order granting
Columbia Transmission's motion for partial summary judgment.
New Bremen Corp. appealed the District Court's ruling and on July 8, 1996 filed
its brief. Columbia Transmission's brief is due 30 days from the filing of New
Bremen's brief. Any claim of New Bremen will be subject to the claims
estimation proceedings.
III. Other
In re Marcor Environmental, Inc. v. Columbia Gas Transmission Corp. (U.S. EPA
Reg. III, No. CAA-III-055) (September 30, 1994)
On September 30, 1994, EPA Region III issued a complaint and notice of
opportunity for hearing against Marcor Environmental, Inc. (Marcor) and Columbia
Transmission for alleged violations of the Clean Air Act Amendments of 1990
arising from Marcor's removal of asbestos at Lanham Compressor Station at
Lanham, West Virginia in 1993. The complaint which seeks a penalty of $162,500
alleges failure by Marcor and Columbia Transmission, as owner of the facility,
to adequately wet the asbestos material and to ensure it remained wet pending
disposal.
Settlement was reached between EPA Region III and the parties for a civil
penalty of $40,000. The settlement was filed with the Chief Administrative Law
Judge on May 21, 1996. Marcor has agreed to indemnify Columbia Transmission for
all liabilities arising from the complaint and to pay the penalty in full.
29
<PAGE> 32
PART II - OTHER INFORMATION
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
------
<S> <C>
11 Statement re Computation of Per Share Earnings,
a copy of which is attached hereto as PART II,
EXHIBIT 11, pursuant to Regulation 229.601(b)(11).
12 Statements of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends, a copy of which is
attached hereto as PART II, EXHIBIT 12, pursuant
to Regulation 229.601(b)(12).
27 Financial Data Schedule.
</TABLE>
b. Reports on Form 8-K
The following reports on Form 8-K were not
previously reported.
<TABLE>
<CAPTION>
Financial
Item Statements
Reported Included Date Filed
-------- ---------- -------------
<S> <C> <C>
5 No June 10, 1996
5 No July 12, 1996
</TABLE>
30
<PAGE> 33
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.
The Columbia Gas System, Inc.
-----------------------------
(Registrant)
Date: August 1, 1996 By: /s/ J. W. Grossman
---------------------------------
J. W. Grossman
Vice President and Controller
(Chief Accounting Officer and
duly authorized officer)
31
<PAGE> 1
Exhibit 11
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
Statements Re Computation of Per Share Earnings
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------- ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Computation for Statements of Consolidated
- ------------------------------------------
Income ($ in millions)
- ----------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 30.9 159.5 159.7
- -----------------------------------------------------------------------------------------------------------------------------
Earnings per share of common stock
(based on average shares outstanding) ($)
Earnings on common stock . . . . . . . . . . . . . . . . . . . . . . . 0.15 0.61 3.04 3.16
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Additional computation of average common
shares outstanding (thousands) (NOTE)
- -----------------------------------------------------------------------------------------------------------------------------
Average shares of common stock outstanding . . . . . . . . . . . . . . 55,044 50,568 52,544 50,566
Incremental common shares applicable to
common stock based on the common stock
daily average market price:
Applicable to contingent stock awards . . . . . . . . . . . . . . . . 10 10 10 5
Applicable to contingent stock options . . . . . . . . . . . . . . . 66 - 58 -
- -----------------------------------------------------------------------------------------------------------------------------
Average common shares as adjusted . . . . . . . . . . . . . . . . . . . 55,120 50,578 52,612 50,571
- -----------------------------------------------------------------------------------------------------------------------------
Average shares of common stock outstanding . . . . . . . . . . . . . . 55,044 50,568 52,544 50,566
Incremental common shares applicable to
common stock based on the more dilutive
of the common stock ending or daily average
market price during the year:
Applicable to contingent stock awards . . . . . . . . . . . . . . . . 10 10 10 5
Applicable to contingent stock options . . . . . . . . . . . . . . . 114 - 114 -
- -----------------------------------------------------------------------------------------------------------------------------
Average common shares assuming full dilution . . . . . . . . . . . . . 55,168 50,578 52,668 50,571
- -----------------------------------------------------------------------------------------------------------------------------
Earnings on common stock
as adjusted ($) . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.15 0.61 3.03 3.16
- -----------------------------------------------------------------------------------------------------------------------------
Earnings on common stock assuming full
dilution ($) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.15 0.61 3.03 3.16
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE These calculations are submitted in accordance with the Securities
Exchange Act of 1934 Release No. 9083 although not required by
footnote 2 to paragraph 14 of Accounting Principles Opinion No. 15
because they result in dilution of less than 3%.
32
<PAGE> 1
Exhibit 12
THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
Statements of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
($ in millions)
<TABLE>
<CAPTION>
Twelve Months Twelve Months
Ended June 30, Ended December 31,
----------------- -------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Income (Loss) from Continuing Operations
before Income Taxes, Extraordinary Item and Cumulative
Effect of Accounting Change . . . . . . . (650.7) 341.6 (643.0) 392.2 288.1 161.4 (1,205.8)
Adjustments:
Interest during construction . . . . . . (20.8) - (20.2) - - - (3.4)
Distributed (Undistributed) equity income (3.1) (3.1) (7.9) (0.9) (0.1) (0.1) (2.4)
Fixed charges . . . . . . . . . . . . . 1,112.6 37.2 1,040.8 14.8 101.5 13.7 139.9
------- ----- ------- ----- ----- ----- -------
Earnings Available . . . . . . . . . . 438.0 375.7 369.7 406.1 389.5 175.0 (1,071.7)
Fixed Charges:
Interest on long-term and short-term debt 1,064.7 0.2 987.2 0.7 3.1 4.9 112.4
Other interest . . . . . . . . . . . . . 47.9 37.0 53.6 14.1 98.4 8.8 27.6
------- ----- ------- ----- ----- ----- -------
Total Fixed Charges before Adjustments*,** 1,112.6 37.2 1,040.8 14.8 101.5 13.7 140.0
------- ----- ------- ----- ----- ----- -------
Adjustments:
Gain/(Loss) on reacquired debt . . . . . - - - - - - (0.1)
------- ----- ------- ----- ----- ----- -------
Total Fixed Charges . . . . . . . . . 1,112.6 37.2 1,040.8 14.8 101.5 13.7 139.9
------- ----- ------- ----- ----- ----- -------
Ratio of Earnings Before Taxes to Fixed Charges N/A(a) 10.10 N/A(a) 27.44 3.84 12.77 N/A(a)
======= ===== ======= ===== ===== ===== =======
</TABLE>
(a) To achieve a one-to-one coverage, the Corporation would need an
additional $674.6, $671.1 and $1,211.6 million of earnings, for the
twelve months ended June 30, 1996, and the twelve months ended
December 31, 1995 and 1991, respectively.
* This amount excludes approximately $253 million interest expense not
recorded in the twelve months ended June 30, 1995, $230 million, $210
million, $204 million and $86 million of interest expense not recorded
for 1994, 1993, 1992 and 1991. Includes interest expense of $982.9
million including write-off of unamortized discounts on debentures
recorded in 1995. Reference is made to the Statements of Consolidated
Income for the quarterly period ended June 30, 1996, as reported in
Form 10-Q.
** This amount excludes $8.6 million of interest expense not recorded
with respect to the registrant's guarantee of LESOP Trust's debentures
for the twelve months ended June 30, 1995. Also excluded are $8.6
million, $8.6 million, $8.6 million and $15.5 million of interest
expense not recorded with respect to the registrant's guarantee of
LESOP Trust's debentures for the twelve months ended December 31,
1994, 1993, 1992 and 1991, respectively.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000022099
<NAME> THE COLUMBIA GAS SYSTEM, INC. AND SUBSIDIARIES
<SUBSIDIARY>
<NUMBER>
<NAME>
<MULTIPLIER> 1,000 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<BOOK-VALUE> PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,541,700 3,541,700
<OTHER-PROPERTY-AND-INVEST> 526,300 526,300
<TOTAL-CURRENT-ASSETS> 1,008,300 1,008,300
<TOTAL-DEFERRED-CHARGES> 51,400 51,400
<OTHER-ASSETS> 422,300 422,300
<TOTAL-ASSETS> 5,550,000 5,550,000
<COMMON> 550,700 550,700
<CAPITAL-SURPLUS-PAID-IN> 736,800 736,800
<RETAINED-EARNINGS> 213,700 213,700
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,499,700 1,499,700
0 0
0 0
<LONG-TERM-DEBT-NET> 2,004,100 2,004,100
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 500 500
0 0
<CAPITAL-LEASE-OBLIGATIONS> 2,700 2,700
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,046,200 2,046,200
<TOT-CAPITALIZATION-AND-LIAB> 5,550,000 5,550,000
<GROSS-OPERATING-REVENUE> 582,400 1,785,400
<INCOME-TAX-EXPENSE> 2,300 88,600
<OTHER-OPERATING-EXPENSES> 546,400 1,471,200
<TOTAL-OPERATING-EXPENSES> 546,400 1,471,200
<OPERATING-INCOME-LOSS> 36,000 314,200
<OTHER-INCOME-NET> 13,700 16,800
<INCOME-BEFORE-INTEREST-EXPEN> 49,700 331,000
<TOTAL-INTEREST-EXPENSE> 39,200 82,900
<NET-INCOME> 8,200 159,500
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 8,200 159,500
<COMMON-STOCK-DIVIDENDS> 15 30
<TOTAL-INTEREST-ON-BONDS> 35,104 70,208
<CASH-FLOW-OPERATIONS> 254,000 554,200
<EPS-PRIMARY> 0.15 3.04
<EPS-DILUTED> 0.15 3.03
</TABLE>
