<PAGE> 1
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) October 10, 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
<PAGE> 2
Item 5. Other Events
Information contained in a News Release dated October 10, 1997, is
incorporated herein by reference.
<PAGE> 3
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: October 14, 1997
<PAGE> 4
For Immediate Release Contact: Carl Ericson (703) 295-0424
Oct. 10, 1997
COLUMBIA GAS REPORTS BETTER 3rd QUARTER RESULTS
COMPARED TO SAME PERIOD LAST YEAR
RESTON, Va., Oct. 10 -- The Columbia Gas System Inc. today reported
third-quarter 1997 net income of $100,000. This is an improvement of $6.2
million, or 11 cents per share, over the same period last year, when Columbia
had an after-tax loss of $6.1 million, or 11 cents per share.
Oliver G. Richard III, chairman, CEO and president of Columbia, said,
"Columbia's improved third-quarter results were due in part to implementation
of restructuring initiatives that are also improving customer services and
operating efficiencies."
In addition, Richard said, results were affected by recording an
after-tax $6.6 million loss for certain pipeline assets, whose sale currently is
being negotiated, and $3.8 million of higher costs from restructuring
activities. He also said that after-tax results were improved by $3.5 million
for a settlement reached for a 1985 regulatory issue involving Order 94 of the
Federal Energy Regulatory Commission; that order involves the allocation to
customers of certain gas-production related costs charged to interstate
pipelines.
THIRD-QUARTER RESULTS
The transmission and storage segment's operating income of $39.6
million increased $2.9 million over the third quarter last year. Not counting
unusual items, discussed below, the increase was largely due to lower operating
costs. One unusual item included in the results was a before-tax increase of
$5.4 million for the Order 94 regulatory issue mentioned above regarding
production-related costs dating back to 1985. In the third quarter of 1996, a
$4.3 million reserve was established for this issue; however, the settlement
was $1.1 million less than the reserve level. Mitigating these improvements
were additional restructuring costs and a $10.1 million loss on the anticipated
sale of certain pipeline facilities in New York and Pennsylvania. Absent these
unusual items, operating income improved by $17 million.
The distribution segment reported a seasonal operating loss of $11.4
million compared to a loss of $19.3 million in the same quarter last year.
Lower operating costs and additional off-system sales revenues were the
principal reasons for the improvement. Because the seasonal nature of natural
gas use for heating results in reduced sales in the summer months, the third
quarter of any year typically shows a loss for the distribution companies.
The exploration and production segment's operating income was
essentially unchanged at $5.6 million. Increased natural gas production of 600
million cubic feet (MMcf) reflected the 1997 acquisition of Alamco Inc., a gas
and oil production company in Appalachia. However, the benefit of this
production increase was offset by a 4 percent decrease in the average price for
<PAGE> 5
natural gas. For the third quarter, natural gas production was 8.6 billion
cubic feet (Bcf), with an average price of $2.36 per thousand cubic feet (Mcf).
An operating loss of $3.1 million for the marketing, propane and power
generation segment was $900,000 greater than the $2.2 million loss experienced
in the same period last year. Reduced margins for gas marketing activities and
start-up costs for new services were partially offset by increased gas
marketing volumes sold. Due largely to the acquisition of PennUnion Energy
Services LLC and the agreement to purchase and market offshore production for
the Kerr-McGee Corp., gas marketing volumes in the current quarter were 323
Bcf, a significant increase over the 64.8 Bcf in the third quarter of 1996.
NINE-MONTH RESULTS
Columbia posted net income for the first nine months of 1997 of $197.7
million, or $3.57 per share, an increase of $44.3 million, or 69 cents per
share, over the same period last year, despite weather in the first nine months
of 1997 being about 7 percent warmer than last year.
The net effect of lower operating costs, increased revenues from
off-system sales, transportation and storage services as well as higher rates
for regulated subsidiaries more than offset the impact of milder weather. Other
factors affecting net income included $12.4 million for the sale of
approximately 9 Bcf of Columbia Transmission's base gas as provided for under
its rate settlement, a $12.8 million reduction to tax expense resulting from
benefits gained through the filing of a consolidated state tax return, a $5.5
million gain on the temporary deactivation of a storage field, reduced interest
costs and the loss on the anticipated sale of certain pipeline facilities. Last
year's net income was reduced $21.9 million for restructuring activities, while
in the current period net income was reduced by $14.4 million for that item.
Last year's results benefited from the effect of a $5.6 million increase for a
favorable adjustment to the sale of Columbia's southwest gas and oil subsidiary.
The transmission and storage segment's operating income of $198.5
million for the first nine months of 1997 increased $37.3 million over the same
period last year. Included in this improvement were the sale of base gas, lower
operating costs, incremental storage and transportation revenues and the full
period effect of higher Columbia Transmission rates implemented in early 1996.
Also improving results were additional revenues for peaking services
generated by the Cove Point LNG facility. Additional restructuring costs and
the loss on the sale of certain pipeline facilities tempered these improvements.
The distribution segment recorded operating income of $150.5 million,
an increase of $4.8 million over last year despite warmer weather.
Restructuring costs were lower in 1997 and made possible the implementation of
cost-conservation measures and operating efficiencies that resulted in lower
operation and maintenance expenses. Also improving 1997 results were off-system
sales revenues that Columbia Gas of Ohio was allowed to retain under the terms
of its 1996 rate settlement. These improvements more than offset the $25
million decrease attributable to warmer weather.
<PAGE> 6
Operating income of $22.7 million for the exploration and production
segment was essentially unchanged from last year. A $4.1 million improvement
for a contract buyout by a cogeneration facility and a 700 MMcf increase in
production volumes was offset by an 8 percent decrease in the average price
received for gas production. The price that Columbia received for its natural
gas production averaged $2.59 per Mcf in 1997. Year-to-date natural gas
production is 25.3 Bcf.
The marketing, propane and power generation segment's operating income
of $5 million decreased $6.3 million due primarily to lower margins for gas
marketing operations and additional start-up costs for new services. Although
gas marketing volumes of more than 551 Bcf were 380 Bcf greater than last year,
lower margins mitigated this improvement. Propane operations, which were down
from last year due to lower sales volumes, primarily as a result of the warmer
first-quarter weather, were partially offset by increased margins. The current
period benefitted from $2.6 million received from the termination of a
partnership in a cogeneration facility.
The Columbia Gas System, located in Reston, Va., is one of the nation's
largest natural gas systems, with assets of about $6 billion. Its operating
companies are engaged in all phases of the gas business plus marketing, fuel
management services and electric power generation. Columbia companies, directly
or indirectly, serve more than 7 million natural gas customers -- 12 percent of
the nation's total -- in 15 states and the District of Columbia. Information
about the Columbia Gas System is available on the World Wide Web at
http://www.columbiaenergy.com. Columbia stock trades on the New York Stock
Exchange under the symbol CG.
-30-
FINANCIAL COMMUNITY CONTACTS:
Thomas Hughes (703) 295-0429
Melissa Bockelmann (703) 295-0427
<PAGE> 7
THE COLUMBIA GAS SYSTEM INC.
Summary of Financial and Operating Data
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
INCOME STATEMENT DATA 1997 1996 1997 1996
- --------------------- ---- ---- ---- ----
($ millions)
<S> <C> <C> <C> <C>
Total Operating Revenues ...................... 995.0 450.8 3,333.4 2,236.2
Operating expenses
Products Purchased .......................... 663.7 144.0 1,966.9 901.7
Operation and Maintenance ................... 223.7 210.0 674.6 682.7
Depreciation and Depletion .................. 42.8 38.8 163.2 157.8
Other Taxes ................................. 35.1 37.1 158.1 158.9
----- ----- ------- -------
Total Operating Expenses ...................... 965.3 429.9 2,962,8 1,901.1
----- ----- ------- -------
Operating Income .............................. 29.7 20.9 370.6 335.1
----- ----- ------- -------
Other Income (Deductions)
Interest income and other, net .............. 7.5 22.2 27.9 39.0
Interest expense and related charges ........ (37.0) (51.8) (115.3) (134.7)
----- ----- ------- -------
Total Other Income (Deductions) ............... (29.5) (29.6) (87.4) (95.7)
----- ----- ------- -------
Income (Loss) before Income Taxes ............. 0.2 (8.7) 283.2 239.4
Income Taxes .................................. 0.1 (2.6) 85.5 86.0
----- ----- ------- -------
Net Income (Loss) ............................. 0.1 (6.1) 197.7 153.4
===== ===== ======= =======
PER SHARE DATA
Earnings (Loss) on Common Stock ($) ........... -- (0.11) 3.57 2.88
Average Common Shares
Outstanding (millions) ...................... 55.4 55.2 55.4 53.3
</TABLE>
OPERATING INCOME (LOSS) BY SEGMENT
- ----------------------------------
($ millions)
TRANSMISSION AND STORAGE OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation revenues ....................... 131.8 130.5 448.8 451.1
Storage revenues .............................. 45.2 40.2 137.0 119.4
Other revenues ................................ 6.5 4.8 41.2 14.9
----- ----- ------- -------
Total Operating Revenues ........................ 183.5 175.5 627.0 585.4
----- ----- ------- -------
OPERATING EXPENSES
Operation and maintenance ..................... 105.1 103.6 308.8 303.9
Depreciation .................................. 25.8 20.9 78.7 76.1
Other taxes ................................... 13.0 14.3 41.0 44.2
----- ----- ------- -------
Total Operating Expenses ........................ 143.9 138.8 425.8 424.2
----- ----- ------- -------
OPERATING INCOME ................................ 39.6 36.7 198.5 161.2
===== ===== ======= =======
</TABLE>
<PAGE> 8
THE COLUMBIA GAS SYSTEM INC.
Summary of Financial and Operating Data (continued)
DISTRIBUTION OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- -----------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
NET REVENUES
Sales revenues................... 166.5 171.5 1,534.5 1,328.1
Less: Cost of gas sold........... 77.6 84.0 1,004.2 771.5
----- ----- -------- -------
Net Sales Revenues............... 88.9 87.5 530.3 556.6
----- ----- -------- -------
Transportation revenues.......... 22.4 21.6 97.8 88.0
Less: Associated gas costs....... 1.7 3.2 7.9 10.6
----- ----- -------- -------
Net Transportation Revenues...... 20.7 18.4 89.9 77.4
----- ----- -------- -------
Net Revenues....................... 109.6 105.9 620.2 634.0
----- ----- -------- -------
OPERATING EXPENSES
Operation and maintenance........ 94.8 97.5 307.6 332.6
Depreciation..................... 7.8 7.9 55.8 51.7
Other taxes...................... 18.4 19.8 106.3 104.0
----- ----- -------- -------
Total Operating Expenses........... 121.0 125.2 469.7 488.3
----- ----- -------- -------
OPERATING INCOME (LOSS)............ (11.4) (19.3) 150.5 145.7
===== ===== ======== =======
</TABLE>
EXPLORATION AND PRODUCTION OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- -----------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Gas............................. 23.9 21.6 77.6 72.8
Oil and liquids................. 0.8 1.2 2.8 4.0
----- ----- -------- -------
Total Operating Revenues.......... 24.7 22.8 80.4 76.8
----- ----- -------- -------
OPERATING EXPENSES
Operation and maintenance...... 10.8 8.4 30.9 26.4
Depreciation and depletion..... 6.0 7.0 20.6 21.3
Other taxes.................... 2.3 2.0 6.2 6.5
----- ----- -------- -------
Total Operating Expenses......... 19.1 17.4 57.7 54.2
----- ----- -------- -------
OPERATING INCOME................. 5.6 5.4 22.7 22.6
===== ===== ======== =======
</TABLE>
<PAGE> 9
THE COLUMBIA GAS SYSTEM INC.
Summary of Financial and Operating Data (continued)
MARKETING, PROPANE AND POWER GENERATION OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- -----------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
NET REVENUES
Gas marketing revenues........... 680.2 151.9 1,282.3 462.3
Less: Products purchased......... 673.4 149.7 1,265.5 449.1
----- ----- -------- -------
Net Gas Marketing Revenues....... 6.8 2.2 16.8 13.2
----- ----- -------- -------
Propane revenues................. 11.1 10.8 52.3 54.0
Less: Products purchased......... 6.4 6.9 29.6 31.1
----- ----- -------- -------
Net Propane Revenues............. 4.7 3.9 22.7 22.9
----- ----- -------- -------
Other Revenues................... 1.1 0.9 9.5 6.2
----- ----- -------- -------
Net Revenues....................... 12.6 7.0 49.0 42.3
----- ----- -------- -------
OPERATING EXPENSES
Operation and maintenance........ 13.5 8.3 38.4 27.1
Depreciation..................... 1.6 0.8 3.5 2.3
Other taxes...................... 0.6 0.1 2.1 1.6
----- ----- -------- -------
Total Operating Expenses........... 15.7 9.2 44.0 31.0
----- ----- -------- -------
OPERATING INCOME (LOSS)............ (3.1) (2.2) 5.0 11.3
===== ===== ======== =======
</TABLE>
CORPORATE
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------- -----------------------
1997 1996 1997 1996
------ ------ ------- -------
<S> <C> <C> <C> <C>
OPERATING INCOME (LOSS)............ (1.0) 0.3 (6.1) (5.7)
===== ===== ======== =======
</TABLE>
<PAGE> 10
THE COLUMBIA GAS SYSTEM INC.
Summary of Financial and Operating Data (continued)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
CAPITALIZATION
($ millions)
Common Stock Equity
Common Stock, $10 par value, outstanding
55,441,917 and 55,263,659 shares, respectively..... 554.4 552.6
Additional paid in capital......................... 748.8 743.2
Retained earnings.................................. 420.9 259.3
Unearned employee compensation..................... (1.1) (1.5)
-------- -------
Total Common Stock Equity............................ 1,723.0 1,553.6
Long-Term Debt....................................... 2,003.6 2,003.8
-------- -------
Total Capitalization................................. 3,726.6 3,557.4
======== =======
Short-Term Debt...................................... 80.0 250.0
======== =======
</TABLE>
<PAGE> 11
THE COLUMBIA GAS SYSTEM INC.
Summary of Financial and Operating Data (continued)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------ ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
AVERAGE PRICE OF GAS PRODUCTION ($ PER Mcf) ......... 2.36 2.45 2.59 2.81
====== ====== ====== ======
OPERATING DATA
Gas production (billion cubic feet) ............... 8.6 8.0 25.3 24.6
====== ====== ====== ======
Propane gallons sold (millions) ................... 10.9 10.9 47.8 52.9
====== ====== ====== ======
Marketing volumes sold (billion cubic feet) ....... 323.0 64.8 551.4 171.2
====== ====== ====== ======
THROUGHPUT
Transmission (billion cubic feet):
Transportation
Columbia Transmission
Market area ................................. 145.4 161.1 719.6 788.2
Columbia Gulf
Main-line ................................... 145.4 145.9 458.3 475.2
Short-haul .................................. 66.1 69.3 185.1 202.7
Intrasegment Eliminations ................... (142.6) (145.1) (488.0) (469.8)
------ ------ ------ ------
Total Throughput .................................. 214.3 231.2 915.0 996.3
====== ====== ====== ======
Distribution (billion cubic feet):
Gas Sales ....................................... 16.6 17.6 180.4 209.4
Transportation .................................. 54.0 52.1 187.0 183.8
------ ------ ------ ------
Total Throughput .................................. 70.6 69.7 367.4 393.2
------ ------ ------ ------
Off-system sales ................................ 3.1 3.0 45.3 8.3
------ ------ ------ ------
Total sold and transported ........................ 73.7 72.7 412.7 401.5
====== ====== ====== ======
DEGREE DAYS-DISTRIBUTION SERVICE TERRITORY
Actual ............................................ 108 103 3,638 3,910
Normal ............................................ 41 41 3,568 3,600
% Colder (warmer) than normal ..................... 163 151 2 9
% Colder (warmer) than prior period ............... 5 1 (7) 12
</TABLE>
