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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event Reported) January 27, 1997
THE COLUMBIA GAS SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-1098 13--1594808
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
12355 Sunrise Valley Drive, Suite 300, Reston, VA 20191-3420
(Address of principal executive offices)
Registrant's telephone number, including area code (703) 295-0300
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Item 5. Other Events
Information contained in a News Release dated January 27, 1997, is
incorporated herein by reference.
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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 hereunto duly authorized.
The Columbia Gas System, Inc.
-----------------------------
(Registrant)
By /s/J. W. Grossman
--------------------
Vice President &
Controller
Date: January 27, 1997
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CONTACTS:
News Media:
John H. Jennrich (703) 296-0423
Carl Ericson (703) 295-0424
Financial Community:
Tom Hughes (703) 295-0429
Melissa Bockelmann (703) 295-0427
For 9 a.m. Release Monday, January 27, 1997
COLUMBIA GAS ANNOUNCES RECORD $98 MILLION EARNINGS INCREASE
RESTON, Va., Jan. 27 -- The Columbia Gas System Inc. today announced that
1996 was a record-setting year for earnings growth and adjusted net income.
Adjusted net income for 1996 rose $98 million, or 64 percent, to nearly
$252 million from $153 million in 1995. Adjusted earnings per share for 1996
improved by $1.64 to $4.68 from $3.04 in 1995.
Oliver G. Richard III, chairman, CEO and president of Columbia Gas, said
that contributors to Columbia's $98 million adjusted net income improvement in
1996 "included nearly $45 million for higher sales and transportation rates, $24
million attributable to higher natural gas wellhead prices, $17 million
resulting from colder weather, and lower operation and maintenance (O&M) costs."
Columbia reported a 1996 net income of $221.6 million, or $4.12 per share,
before adjusting for unusual items. This compares to a net loss of $360.7
million, or $7.15 per share, for 1995, which included interest expense of $983
million on pre-petition debt recorded to reflect Columbia's emergence from
bankruptcy in November 1995.
"Columbia's strong financial performance illustrates the overall vitality,
strength and earning power of the system," Richard said. "It is clear that with
Columbia's resurgence, we have the opportunity and ability to grow and expand
into a nationwide company that provides not only energy, but a wide range of
energy-related services in the marketplace."
Richard credited the hard work and leadership of Columbia employees
throughout the wellhead-to-burner-tip system with playing a major role in
helping create the momentum that "led to record earnings and will provide the
impetus to further the growth of our businesses."
"While the record level of net income reflects the beneficial impacts of
colder weather and higher gas prices, there is more to this story than that,"
Richard emphasized. "The difference between Columbia today and previous years is
that the revenue increases from higher base rates and from increased sales were
not offset by
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higher operating and maintenance expenses. Adjusted for restructuring charges,
O&M expenses actually were down by approximately $30 million for the year. This
allowed the higher revenues to get to the bottom line, increase net income and
add value for the shareholders."
Unusual items in 1996 included $35.7 million for the after-tax effect of
restructuring costs, primarily for severance expenses. The restructuring
initiatives are designed to continue improving the ability of Columbia to
provide quality service to customers and to increase operating efficiency of the
system, Columbia officials said. A second unusual item in 1996 was a $5.6
million improvement to net income for a favorable adjustment to the sale of the
southwestern natural gas and oil production subsidiary that was sold at the end
of 1995.
Unusual items in 1995 were a $518.2 million expense for the after-tax
effect of bankruptcy-related issues; an improvement to net income of $71.6
million for the readoption of an accounting standard dealing with the treatment
of regulatory assets for Columbia's transmission companies (SFAS No. 71); a
$54.8 million after-tax loss on the sale of Columbia's southwestern natural gas
and oil production subsidiary (Columbia Development Corp.); costs associated
with organizational re-engineering; and miscellaneous expenses totaling $12.6
million.
1996 Operating Income by Segment:
The transmission and storage segment's operating income of $207.8 million
decreased $5.2 million, due primarily to $29 million of additional restructuring
costs and incentive awards for employees. Adjusting for restructuring costs in
both periods, operating income would have been $238.6 million, an improvement of
almost $24 million over 1995. Exit-fee payments received by Columbia Gulf had
improved 1995 results by $12.2 million. Results for 1996 benefitted from new
rates for Columbia Transmission starting in February 1996 as a result of its
recent rate case. The new rates provide for recovery of higher operating costs
and a return on the additional investment in plant made since Columbia
Transmission's last rate increase in 1991. Also increasing the 1996 results were
additional customers subscribing to Columbia LNG's peaking services.
Operating income for the distribution segment of $226 million increased
$62.4 million over 1995 due to the benefit of increased throughput and higher
rates. There were five major determinants of this increase:
- Larger sales volumes and an increase in volumes flowed for
higher-margin transportation customers resulted in a $20
million improvement.
- Colder weather in 1996 increased operating income by $26
million over that of 1995. While both years saw
temperature-related increases above operating income that
would be achieved in a normal year, 1996's 6-percent
colder-than-normal weather added a plus-$33 million to
operating income, whereas 1995's 2-percent colder-than-normal
weather contributed $7 million.
- A recent rate settlement in Ohio together with higher rates
for the other four
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distribution subsidiaries improved operating income $31.9
million.
- The beneficial effects of reduced operating and maintenance
costs also improved the 1996 results.
- Tempering these increases was $26.5 million of restructuring
expense plus expense associated with incentive awards to
employees.
Sharply higher natural gas prices boosted the exploration and
production segment's operating income to $30 million, an increase of $26.3
million over 1995, which included the operating income of the southwestern oil
and natural gas subsidiary that was sold at year-end 1995. Appalachian
production prices averaged $2.84 per thousand cubic feet in 1996, up 30% over
1995. Appalachian gas production in 1996 of 33.6 Bcf was essentially unchanged.
The marketing, propane and power generation segment reported operating
income of $12.5 million, a small increase of $0.3 million. Increased gas
marketing sales and margins together with additional propane sales were largely
offset by restructuring expense and incentive awards.
FOURTH-QUARTER RESULTS
Columbia Gas System's adjusted fourth-quarter 1996 results of $79.3
million, or $1.44 per share, improved $1.8 million over the same period in 1995,
reflecting higher rates for the regulated subsidiaries and increased wellhead
prices, tempered by restructuring costs and incentive awards mentioned
previously.
Before adjusting for unusual items, Columbia had a fourth-quarter net
income of $68.2 million, or $1.24 per share, versus a net loss of $539.7
million, or $10.74 per share, in the fourth quarter of 1995, when Columbia was
emerging from bankruptcy. The fourth-quarter net income included $11.1 million
of after-tax expense for restructuring.
Unusual items in fourth-quarter 1995 included the full-year unusual
items mentioned above, with two differences. In the fourth quarter, there was a
$624.9 million expense for the after-tax effect of bankruptcy-related issues.
The higher fourth-quarter figure reflects an adjustment for three months of
interest not recorded rather than a 12-month adjustment. In addition, there were
miscellaneous expenses that totaled $9.1 million for the quarter.
Fourth-Quarter 1996 Operating Income by Segment:
For the fourth quarter of 1996, operating income for the transmission
and storage segment totaled $46 million, down $14.5 million from the same period
last year. This decrease was largely due to increased restructuring expense of
$15.8 million and incentive awards that were partially offset by higher rates in
effect.
Operating income for the distribution segment of $80.3 million
reflected a small
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decrease of $0.5 million. Both years included restructuring expense, $5.2
million in 1996 and $4 million in 1995, as part of the reengineering initiatives
underway to improve customer services and operating efficiencies. Reducing
fourth-quarter results were expenses relating to the incentive awards plus
warmer weather. Largely offsetting these higher expenses was an increase of
$10.7 million for a recent rate settlement in Ohio as well as $3.8 million for
higher rates in place for the other four distribution subsidiaries.
The exploration and production segment had fourth-quarter operating
income of $7.4 million, up $3 million over fourth-quarter 1995, primarily due to
27 percent higher gas prices. Average Appalachian gas prices of $2.92 per
thousand cubic feet increased $0.62 per thousand cubic feet. Appalachian
production of 9 billion cubic feet reflected a one billion cubic foot increase
over last year.
Operating income of $1.2 million for marketing, propane and power
generation decreased $3.5 million from fourth-quarter 1995, reflecting lower
propane margins, reduced gas-marketing income and incentive awards.
Finally, there were corporate activities that added $8.2 million to
operating income; this was an increase over fourth-quarter 1995 of $9.5 million.
The bulk of this addition was due to a $6 million gain on the sale of Columbia's
former headquarters building in Wilmington, Del., in late 1996.
The Columbia Gas System is one of the nation's largest natural gas
systems, with assets of about $6 billion. Its operating companies are engaged in
all phases of the natural gas business from the wellhead to the burner tip, plus
marketing, fuel management services and electric power generation. Columbia
companies, directly or indirectly, serve more than 7 million natural gas
consumers in 15 states and the District of Columbia. Columbia's local
gas-distribution companies directly serve 2 million customers. Information about
Columbia is available on the World Wide Web at http://www.columbiaenergy.com.
Columbia Gas System stock trades on the New York Stock Exchange under the symbol
CG.
# # #
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THE COLUMBIA GAS SYSTEM, INC.
Summary of Financial Operating Data
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
----------------------------------------------
INCOME STATEMENT DATA 1996 1995 1996 1995
- - - - - - ---------------------------------------------------------------------------------------------------------
($ millions)
<S> <C> <C> <C> <C>
Total Operating Revenues 3,354.0 2,635.2 1,117.8 783.6
Total Operating Expenses 2,875.8 2,245.0 974.7 634.5
-------- -------- -------- --------
Operating Income 478.2 390.2 143.1 149.1
Total Other Income (Deductions) (140.7) (1,033.2) (45.0) (1,080.8)
-------- -------- -------- --------
Income (Loss) before income taxes and
Extraordinary item 337.5 (643.0) 98.1 (931.7)
Income taxes 115.9 (210.7) 29.9 (320.4)
-------- -------- -------- --------
Income (Loss) before Extraordinary item 221.6 (432.3) 68.2 (611.3)
Extraordinary item - 71.6 - 71.6
-------- -------- -------- --------
Net Income (Loss) 221.6 (360.7) 68.2 (539.7)
======== ======== ======== ========
PER SHARE DATA
Earnings (Loss) Before Extraordinary item ($) 4.12 (8.57) 1.24 (12.17)
Earnings (Loss) on Common Stock ($) 4.12 (7.15) 1.24 (10.74)
Average Common Shares
Outstanding (millions) 53.8 50.5 55.2 50.2
BANKRUPTCY-RELATED AND UNUSUAL ITEMS
AFTER-TAX EFFECT ON NET INCOME
($ millions)
Reported Net Income 221.6 (360.7) 68.2 (539.7)
Less:
Bankruptcy related items:
Prepetition interest costs recorded - (638.4) - (638.4)
Interest on prepetition debt not
recorded during bankruptcy - 158.0 - 28.2
Other bankruptcy issues - (37.8) - (14.7)
Adoption of SFAS No. 71 - 71.6 - 71.6
Adjustments to sale of the Southwest gas and
oil operations 5.6 (54.8) - (54.8)
Restructure costs (35.7) (3.8) (11.1) (3.8)
Other - (8.8) - (5.3)
-------- -------- -------- --------
Total adjustments (30.1) (514.0) (11.1) (617.2)
-------- -------- -------- --------
Net Income after adjusting for bankruptcy and
unusual items 251.7 153.3 79.3 77.5
======== ======== ======== ========
Adjusted Net Income per share 4.68 3.04 1.44 1.54
======== ======== ======== ========
</TABLE>
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THE COLUMBIA GAS SYSTEM, INC.
Summary of Financial Operating Data (continued)
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
OPERATING INCOME BY SEGMENT 1996 1995 1996 1995
- - - - - - --------------------------- ------------------- ------------------
($ millions)
<S> <C> <C> <C> <C>
Transmission and Storage Segment
Total Operating Revenues 810.8 760.3 224.8 208.9
Total Operating Expenses 603.0 547.3 178.8 148.4
------- ------- ------- -------
Operating Income 207.8 213.0 46.0 60.5
======= ======= ======= =======
Distribution Segment
Total Operating Revenues 2,127.7 1,783.1 711.6 566.7
Total Operating Expenses 1,901.7 1,619.5 631.3 485.9
------- ------- ------- -------
Operating Income 226.0 163.6 80.3 80.8
======= ======= ======= =======
Exploration and Production Segment
Total Operating Revenues 104.5 180.6 27.7 47.3
Total Operating Expenses 74.5 176.9 20.3 42.9
------- ------- ------- -------
Operating Income 30.0 3.7 7.4 4.4
======= ======= ======= =======
Marketing, Propane and Power
Generation Segment
Total Operating Revenues 816.4 313.3 293.9 93.0
Total Operating Expenses 803.9 301.1 292.7 88.3
------- ------- ------- -------
Operating Income 12.5 12.2 1.2 4.7
======= ======= ======= =======
Corporate 1.9 (2.3) 8.2 (1.3)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
CAPITALIZATION 1996 1995
------------ ------------
<S> <C> <C>
($ millions)
Common Stock Equity
Common Stock, par value $10 per share-
issued 55,263,659 and 50,620,180
shares, respectively 552.6 506.2
Additional paid in capital 743.2 595.8
Retained earnings 259.3 69.8
Unearned employee compensation (1.5) -
Cost of treasury stock (1,416,155 shares
outstanding as of December 31, 1995) - (57.8)
------------ ------------
Total Common Stock Equity 1,553.6 1,114.0
Preferred Stock - 399.9
Long-Term Debt 2,003.8 2,004.5
------------ ------------
Total Capitalization 3,557.4 3,518.4
============ ============
THE COLUMBIA GAS SYSTEM, INC
</TABLE>
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Summary of Financial Operating Data (continued)
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------ ------------------
1996 1995 1996 1995
------------------------------------------------------------------------------
OPERATING DATA
- - - - - - --------------
<S> <C> <C> <C> <C>
Gas and Oil Volumes:
Gas Production (billion cubic feet)
Appalachian 33.6 33.3 9.0 8.2
Southwest - 32.1 - 7.4
-------- -------- -------- --------
Total 33.6 65.4 9.0 15.6
======== ======== ======== ========
Oil Production (000 barrels)
Appalachian 281 310 64 76
Southwest - 2,539 - 598
-------- -------- -------- --------
Total 281 2,849 64 674
======== ======== ======== ========
GAS PRICE DATA
Gas Average Price ($ per Mcf)
Appalachian 2.84 2.19 2.92 2.30
Southwest - 1.71 - 1.85
System 2.84 1.96 2.92 2.09
OIL PRICE DATA
Oil Average Price ($ per Bbl)
Appalachian 19.07 16.28 21.37 16.26
Southwest - 16.16 - 16.32
System 19.07 16.17 21.37 16.31
Transmission (billion cubic feet):
Transportation
Columbia Transmission
Market Area 1,102.4 1,106.1 314.2 338.4
Columbia Gulf
Main-Line 633.7 605.0 158.5 155.0
Short haul 266.5 221.4 63.8 61.5
Intrasegment Eliminations (624.5) (596.3) (154.7) (152.5)
-------- -------- -------- --------
Total Throughput 1,378.1 1,336.2 381.8 402.4
======== ======== ======== ========
Distribution (billion cubic feet):
Gas Sales 316.2 290.7 98.5 99.8
Transportation 248.8 255.9 65.0 65.3
-------- -------- -------- --------
Total Throughput 565.0 546.6 163.5 165.1
======== ======== ======== ========
Degree Days-Distribution Service Territory
Actual 5,975 5,692 2,065 2,208
Normal 5,632 5,600 2,032 2,032
% Colder than normal 6 2 2 9
% Colder (warmer) than prior period 5 3 (7) 32
</TABLE>
