UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED
SEPTEMBER 30, 1994
Commission File Number 1-3196
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CONSOLIDATED NATURAL GAS COMPANY
A Delaware Corporation
CNG Tower, 625 Liberty Avenue, Pittsburgh, PA 15222-3199
Telephone (412) 227-1000
IRS Employer Identification Number 13-0596475
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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 and (2) has been subject to such filing
requirements for the past 90 days. Yes____X____ No_________
Number of shares of Common Stock, $2.75 Par Value, outstanding at October 31,
1994: 93,025,842
<PAGE>
CONSOLIDATED NATURAL GAS COMPANY
FORM 10-Q QUARTERLY REPORT
For the Quarter Ended September 30, 1994
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
for the Three and Nine Months Ended September 30, 1994 and 1993. . 1
CONDENSED CONSOLIDATED BALANCE SHEET
at September 30, 1994 (Unaudited), and December 31, 1993 . . . . . 2
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
for the Nine Months Ended September 30, 1994 and 1993. . . . . . . 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . 6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 14
ITEM 2. CHANGES IN SECURITIES. . . . . . . . . . . . . . . . . . . . 14
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . 14
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . 14
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Natural Gas Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (Thousands of Dollars)
<TABLE>
<CAPTION>
________________________________________________________________________________
____________________________
Nine Months to
Three Months to
September 30
September 30
________________________ ____________________
1994
1993 1994 1993
_____________________________________________________________________________________
_______________________
<S> <C> <C>
<C> <C>
OPERATING REVENUES
Regulated gas sales
Residential and commercial . . . . . . . . . . . . $1,176,542
$1,050,022 $132,056 $139,848
Industrial . . . . . . . . . . . . . . . . . . . . 38,090
40,767 8,179 9,018
Wholesale. . . . . . . . . . . . . . . . . . . . . 12,318
318,941 7,351 75,241
Nonregulated gas sales . . . . . . . . . . . . . . . 552,923
342,524 164,860 130,794
__________
__________ ________ ________
Total gas sales. . . . . . . . . . . . . . . . . 1,779,873
1,752,254 312,446 354,901
Other operating revenues . . . . . . . . . . . . . . 467,560
401,690 139,383 118,447
__________
__________ ________ ________
Total operating revenues (Note 3). . . . . . . . 2,247,433
2,153,944 451,829 473,348
__________
__________ ________ ________
OPERATING EXPENSES
Purchased gas. . . . . . . . . . . . . . . . . . . . 1,096,212
1,026,138 197,537 191,129
Other purchased products . . . . . . . . . . . . . . 48,367
47,165 6,463 12,839
Operation expense. . . . . . . . . . . . . . . . . . 457,156
442,319 136,403 139,108
Maintenance. . . . . . . . . . . . . . . . . . . . . 63,724
61,466 22,558 23,467
Depreciation and amortization. . . . . . . . . . . . 214,664
219,196 62,180 72,452
Taxes, other than income taxes . . . . . . . . . . . 145,720
135,503 44,678 41,873
__________
__________ ________ ________
Subtotal . . . . . . . . . . . . . . . . . . . . 2,025,843
1,931,787 469,819 480,868
__________
__________ ________ ________
Operating income before income taxes . . . . . . 221,590
222,157 (17,990) (7,520)
Income taxes - estimated (Note 4). . . . . . . . . . 55,065
64,509 (11,942) 3,869
__________
__________ ________ ________
Operating income . . . . . . . . . . . . . . . . 166,525
157,648 (6,048) (11,389)
__________
__________ ________ ________
OTHER INCOME
Interest revenues. . . . . . . . . . . . . . . . . . 3,184
2,693 857 461
Other (net). . . . . . . . . . . . . . . . . . . . . 3,076
4,381 1,117 1,286
__________
__________ ________ ________
Total other income . . . . . . . . . . . . . . . 6,260
7,074 1,974 1,747
__________
__________ ________ ________
Income before interest charges . . . . . . . . . 172,785
164,722 (4,074) (9,642)
__________
__________ ________ ________
INTEREST CHARGES
Interest on long-term debt . . . . . . . . . . . . . 66,692
65,178 22,095 19,851
Other interest expense . . . . . . . . . . . . . . . 3,391
5,212 561 2,921
Total allowance for funds used during
construction (credit). . . . . . . . . . . . . . . (6,728)
(8,053) (2,173) (2,449)
__________
__________ ________ ________
Total interest charges . . . . . . . . . . . . . 63,355
62,337 20,483 20,323
__________
__________ ________ ________
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . 109,430
102,385 (24,557) (29,965)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 (Note 4). . . . . . . . . -
17,422 - -
__________
__________ ________ ________
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 109,430 $
119,807 $(24,557) $(29,965)
==========
========== ======== ========
Earnings per share of common stock,
based on average shares outstanding
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . $ 1.18 $
1.10 $ (.26) $ (.32)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 (Note 4). . . . . . . -
.19 - -
______
______ ______ ______
Net Income . . . . . . . . . . . . . . . . . . . $ 1.18 $
1.29 $ (.26) $ (.32)
======
====== ====== ======
Average common shares outstanding
(thousands). . . . . . . . . . . . . . . . . . . . 92,991
92,769 93,017 92,893
Dividends declared per common share. . . . . . . . . $1.455 $
1.44 $ .485 $ .48
_____________________________________________________________________________________
_______________________
<FN>
The Notes to Consolidated Financial Statements are an integral part of this
statement.
</TABLE>
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued)
Consolidated Natural Gas Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
____________________________________________________________________________
At September At December
30, 1994 31, 1993
(Unaudited)
____________________________________________________________________________
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Gas utility and other plant. . . . . . . . . . . $ 4,497,097 $ 4,362,996
Accumulated depreciation and amortization. . . . (1,685,946) (1,607,606)
___________ ___________
Net gas utility and other plant. . . . . . 2,811,151 2,755,390
___________ ___________
Exploration and production properties. . . . . . 3,087,725 2,983,032
Accumulated depreciation and amortization. . . . (1,938,528) (1,822,154)
___________ ___________
Net exploration and production properties. 1,149,197 1,160,878
___________ ___________
Net property, plant and equipment. . . . . 3,960,348 3,916,268
___________ ___________
CURRENT ASSETS
Cash and temporary cash investments. . . . . . . 23,281 27,122
Accounts receivable, less allowance for
doubtful accounts. . . . . . . . . . . . . . . 303,323 629,473
Gas stored - current portion (LIFO method) . . . 211,570 140,848
Materials and supplies (average cost method) . . 35,840 38,784
Unrecovered gas costs (net). . . . . . . . . . . (79,684) (9,000)
Deferred income taxes - current portion. . . . . 49,944 23,685
Prepayments and other current assets . . . . . . 177,872 192,212
___________ ___________
Total current assets . . . . . . . . . . . 722,146 1,043,124
___________ ___________
OTHER ASSETS
Unamortized abandoned facilities . . . . . . . . 43,908 52,676
Other investments. . . . . . . . . . . . . . . . 40,396 39,600
Deferred charges and other noncurrent
assets (Notes 3 and 5) . . . . . . . . . . . . 344,759 357,918
___________ ___________
Total other assets . . . . . . . . . . . . 429,063 450,194
___________ ___________
Total assets . . . . . . . . . . . . . . . $ 5,111,557 $ 5,409,586
=========== ===========
STOCKHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION
Common stockholders' equity (Notes 7 and 8)
Common stock, par $2.75
(Issued: 1994 - 93,021,420 shares;
1993 - 92,933,828 shares). . . . . . . . . . $ 255,809 $ 255,568
Capital in excess of par value . . . . . . . . 458,407 454,081
Retained earnings. . . . . . . . . . . . . . . 1,440,873 1,466,783
___________ ___________
Total common stockholders' equity. . . . . 2,155,089 2,176,432
Long-term debt . . . . . . . . . . . . . . . . . 1,151,696 1,158,648
___________ ___________
Total capitalization . . . . . . . . . . . 3,306,785 3,335,080
___________ ___________
CURRENT LIABILITIES
Current maturities on long-term debt . . . . . . 4,000 -
Commercial paper . . . . . . . . . . . . . . . . 278,000 455,000
Accounts payable . . . . . . . . . . . . . . . . 253,885 345,126
Estimated rate contingencies and
refunds (Note 3) . . . . . . . . . . . . . . . 80,841 57,456
Taxes accrued. . . . . . . . . . . . . . . . . . 83,395 112,098
Other accruals and current liabilities . . . . . 162,132 143,218
___________ ___________
Total current liabilities. . . . . . . . . 862,253 1,112,898
___________ ___________
DEFERRED CREDITS
Deferred income taxes. . . . . . . . . . . . . . 751,591 783,511
Accumulated deferred investment tax credits. . . 33,882 35,849
Other deferred credits and noncurrent
liabilities. . . . . . . . . . . . . . . . . . 157,046 142,248
___________ ___________
Total deferred credits . . . . . . . . . . 942,519 961,608
___________ ___________
COMMITMENTS AND CONTINGENCIES
___________ ___________
Total stockholders' equity and liabilities $ 5,111,557 $ 5,409,586
=========== ===========
____________________________________________________________________________
The Notes to Consolidated Financial Statements are an integral part of this
statement.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued)
Consolidated Natural Gas Company and Subsidiaries
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (Thousands of Dollars)
____________________________________________________________________________
Nine Months to September 30
___________________________
1994 1993
____________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . $ 109,430 $ 119,807
Adjustments to reconcile net income to net
cash provided by operating activities
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . - (17,422)
Depreciation and amortization. . . . . . . . . . 214,664 219,196
Deferred income taxes (net). . . . . . . . . . . (60,633) 17,522
Certain changes in current assets and
current liabilities
Accounts receivable, less allowance for
doubtful accounts. . . . . . . . . . . . . . 325,252 181,777
Inventories. . . . . . . . . . . . . . . . . . (67,778) (4,059)
Unrecovered gas costs (net). . . . . . . . . . 70,684 27,285
Accounts payable . . . . . . . . . . . . . . . (88,962) (52,696)
Estimated rate contingencies and refunds . . . 23,385 (18,319)
Taxes accrued. . . . . . . . . . . . . . . . . (28,703) (70,960)
Other (net). . . . . . . . . . . . . . . . . . 32,926 32,171
Certain changes in noncurrent assets and
noncurrent liabilities . . . . . . . . . . . . 49,376 (5,794)
Other (net). . . . . . . . . . . . . . . . . . . 115 (91)
_________ _________
Net cash provided by operating activities. . 579,756 428,417
_________ _________
CASH FLOWS USED IN INVESTING ACTIVITIES
Plant construction and other property additions. . . (270,053) (219,264)
Proceeds from dispositions of property, plant
and equipment (net). . . . . . . . . . . . . . . . 683 2,938
Cost of other investments (net). . . . . . . . . . . (2,296) (159)
_________ _________
Net cash used in investing activities. . . . (271,666) (216,485)
_________ _________
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from issuance of common stock . . . . . . . 240 12,983
Proceeds from issuance of debentures . . . . . . . . - 147,273
Purchase of debentures . . . . . . . . . . . . . . . - (283,208)
Commercial paper (net) . . . . . . . . . . . . . . . (176,872) 42,387
Dividends paid on common stock . . . . . . . . . . . (135,298) (133,526)
Other (net). . . . . . . . . . . . . . . . . . . . . (1) (865)
_________ _________
Net cash used in financing activities. . . . (311,931) (214,956)
_________ _________
Net decrease in cash and
temporary cash investments . . . . . . . . (3,841) (3,024)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1 . . 27,122 43,355
_________ _________
CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30. $ 23,281 $ 40,331
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for
Interest (net of amounts capitalized). . . . . . . $ 53,984 $ 63,210
Income taxes (net of refunds). . . . . . . . . . . $ 117,914 $ 86,762
Non-cash financing activities
Conversion of 7 1/4% Convertible
Subordinated Debentures. . . . . . . . . . . . . $ 3,795 $ -
____________________________________________________________________________
The Notes to Consolidated Financial Statements are an integral part of this
statement.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Continued)
Consolidated Natural Gas Company and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) With the exception of the Condensed Consolidated Balance Sheet at December
31, 1993, which is derived from the Consolidated Balance Sheet at that date
which was included in the Annual Report to the Securities and Exchange
Commission ("SEC") on Form 10-K for 1993 ("1993 Form 10-K"), the consolidated
financial statements appearing on pages 1 through 3 are unaudited. In the
opinion of management, the information furnished reflects all adjustments
necessary to a fair statement of the results for the interim periods presented.
(2) Because of the seasonal nature of the subsidiary companies' heating
business, earnings for the first six months of any calendar year represent a
substantial part of full year earnings. Because of low seasonal demand for
gas during the summer months, third quarter results are usually the least
significant of the year for Consolidated. Seasonal fluctuations are further
influenced by the timing of price relief granted under regulation to compensate
for past cost increases.
(3) Certain increases in prices by subsidiaries and other rate-making issues
are subject to final modification in regulatory proceedings. The related
accumulated provisions pertaining to these matters were $17,777,000 and
$34,119,000 at December 31, 1993, and September 30, 1994, including interest.
These amounts are reported in the Condensed Consolidated Balance Sheet under
"Estimated rate contingencies and refunds" together with $39,679,000 and
$46,722,000, respectively, which are primarily refunds received from suppliers
and refundable to customers under regulatory procedures.
The Company's distribution subsidiaries have incurred or are expected to
incur obligations to upstream pipeline companies, including CNG Transmission
Corporation ("CNG Transmission," a subsidiary), for transition costs under
Federal Energy Regulatory Commission ("FERC") Order 636. The estimated
liability for such costs was $81,592,000 and $78,654,000 at December 31, 1993,
and September 30, 1994, respectively. Additional amounts are likely to be
recorded in the future once the pipeline companies receive final FERC approval
to recover their remaining transition costs. Based on management's current
estimates, the distribution subsidiaries' portion of such additional costs
could be in the range of $40 million.
Based on regulatory actions in two jurisdictions and the past rate-making
treatment of similar costs in the other jurisdictions, management believes that
the distribution companies should generally be able to pass through all Order
636 transition costs to their customers.
(4) Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." The cumulative effect of this accounting change increased net income
in the first nine months of 1993 by $17,422,000, or $.19 per share, resulting
primarily from the reduction in deferred income tax balances associated with
the Company's nonregulated activities.
The adjustment to deferred income tax assets and liabilities required by
SFAS No. 109 resulting from the increase in the federal corporate income tax
rate from 34 percent to 35 percent increased deferred income tax expense
(thereby reducing operating income) in the third quarter of 1993 by
$11,429,000, or $.12 per share. In addition, income taxes based on 1993 pretax
earnings increased by $1,603,000, or $.02 per share, in the third quarter of
1993 due to the retroactive provision of the tax law to January 1, 1993.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Concluded)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(5) Effective January 1, 1993, the Company adopted the provisions of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." SFAS No. 106 requires that the estimated future costs of providing
postretirement benefits, such as healthcare and life insurance, be recognized
as an expense and a liability during the employees' service periods. As
permitted under the standard, the Company elected to amortize the accumulated
postretirement benefit obligation existing at the date of adoption ("transition
obligation") over a 20-year period.
The majority of the Company's estimated postretirement benefit costs and of
the transition obligation is attributable to its rate-regulated subsidiaries.
Accordingly, these subsidiaries are seeking, or intend to seek as soon as
practicable, rate relief from their respective regulatory commissions for the
increased level of expense resulting from the adoption of the standard. In
this regard, regulatory authorities having jurisdiction over the Company's
subsidiaries have indicated their intention to generally allow inclusion in
rates of postretirement benefit costs determined on an accrual basis, subject
to prudency and certain other conditions. As a result, the Company's rate-
regulated subsidiaries have generally deferred the differences between SFAS No.
106 costs and amounts currently included in rates pending expected recovery of
SFAS No. 106 costs and related deferrals in regulatory proceedings. The SFAS
No. 106 costs deferred at December 31, 1993, and September 30, 1994, were
$27,662,000 and $50,307,000, respectively. These amounts are included in the
Condensed Consolidated Balance Sheet under "Deferred charges and other
noncurrent assets."
(6) Effective January 1, 1994, the Company adopted the provisions of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." The standard
requires the accrual of a liability forpostemployment benefit obligations if
certain specified conditions are met. The adoption of the standard did not
have a material effect on the Company's financial position, results of
operations or cash flows.
(7) A summary of the changes in common stock, capital in excess of par value,
and treasury stock subsequent to December 31, 1993, follows:
_____________________________________________________________________________
Common Stock
Issued Capital in Treasury Stock
___________________ ________________
Number Value Excess of Number
of Shares at Par Par Value of Shares Cost
_____________________________________________________________________________
(In Thousands)
At December 31, 1993......... 92,934 $255,568 $454,081 - $ -
Common stock issued
Conversion of debentures... 70 193 3,669 - -
Stock awards (net)......... 11 30 436 - -
Stock options.............. 6 18 222 - -
Purchase of treasury stock... - - - (6) (254)
Sale of treasury stock....... - - (1) 6 254
______ ________ ________ _____ _____
At September 30, 1994........ 93,021 $255,809 $458,407 - $ -
====== ======== ======== ===== =====
_____________________________________________________________________________
(8) The indenture relating to the Company's senior debenture issues contains
restrictions on dividend payments by the Company and acquisitions of its
capital stock. Under these provisions, $638,592,000 of consolidated retained
earnings was free from such restrictions at September 30, 1994.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Because of low seasonal demand for gas during the summer months, sales and
transportation revenues are lower during this period compared to the first and
second quarters, and third quarter results generally range from a loss to a
small profit. This seasonal decline in revenues and operating results usually
contributes to lower cash flows from operations through the first nine months
of the year as compared with the first half of the year. However, net cash
provided from operations was higher in the first nine months of 1994. As shown
in the Condensed Consolidated Statement of Cash Flows, net cash provided by
operating activities was $579.8 million and $428.4 million for the nine months
ended September 30, 1994 and 1993, respectively. Increased gas sales and
transportation revenues during the first half of 1994 were the primary factors
for the higher net operating cash flows. In addition to satisfying cash
requirements for operations, capital expenditures, and dividend payments in the
current nine-month period, available cash was used to repay a portion of the
commercial paper borrowings outstanding at the end of 1993.
Due to the seasonality of the regulated subsidiaries' heating business, the
balance sheet at the end of September customarily shows a significant decrease
in accounts receivable from the balance at the end of the previous year. Also,
by September 30, gas inventories which had been withdrawn during the early
partof the year have been substantially replenished for the forthcoming heating
season.
The credit balances in "Unrecovered gas costs (net)" at both December 31, 1993,
and September 30, 1994, reflect a temporary overrecovery position at certain
subsidiaries. The overrecovery of these costs was due in part to higher actual
gas sales volumes compared to the estimated sales levels included in regulatory
filings. Higher estimated gas costs included in these filings, as compared
with actual gas prices experienced during 1994, was also a contributing factor.
The credit balances will be reflected in future gas cost recovery filings by
the subsidiaries.
During the remainder of 1994, funds required for the capital spending program
as well as other general corporate purposes are expected to be obtained
principally from internal cash generation. The sale of commercial paper will
be used to provide short-term financing to the subsidiaries, primarily for gas
inventory and other working capital requirements. The Company currently has
back-up lines of credit totaling $475 million available to support commercial
paper borrowings. An additional $125 million of back-up lines may be obtained,
if necessary.
Borrowings under the Company's $300 million credit agreement may be used to
temporarily finance capital expenditures. There were no amounts outstanding
under this credit agreement at September 30, 1994, and December 31, 1993.
Unused portions of this credit agreement may also be utilized to provide
support for commercial paper notes. Additional funds, if necessary, could be
obtained through the issuance of new debt securities. In this regard, the
Company currently has an effective shelf registration with the SEC for the sale
of up to $500 million of debentures. The amount and timing of any future sale
of these debentures will depend on capital requirements and financial market
conditions.
In connection with this discussion of financial condition, reference is made to
Notes 3, 5, 6, 7 and 8 to the consolidated financial statements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS
A major portion of the gas sold or transported by the Company's distribution
and transmission operations is ultimately used for space heating. As a result,
earnings are affected by changes in the weather. Because most of the operating
subsidiaries are subject to price regulation by federal or state commissions,
earnings can be affected by regulatory delays when price increases are sought
through general rate filings to recover certain higher costs of operation.
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
System Results
Net income for the first nine months of 1994 was $109,430,000, or $1.18 per
share, compared with $119,807,000, or $1.29 per share, in the first nine months
of 1993. The 1993 period included the cumulative effect of an accounting
change of $17,422,000, or 19 cents per share, for the mandatory adoption of
SFAS No. 109, the accounting standard for income taxes. The effect of this
accounting change was offset in part, however, by higher income taxes due to
the increase in the federal corporate income tax rate from 34 percent to 35
percent enacted in August 1993. The impact of this rate change, which was
recorded in the third quarter of 1993, included an $11,429,000, or 12 cents a
share, adjustment to deferred income tax expense, thereby reducing 1993 net
income. Excluding the effects of these two items, Consolidated earned
$113,814,000, or $1.22 per share, in the first nine months of 1993.
Higher operating costs had an impact on the results for the first nine months
of 1994. However, four of the Company's regulated subsidiaries have recently
implemented or are pursuing rate increases that include higher operating
expense levels, as well as investments in new facilities. The Company's second
largest distribution subsidiary, The Peoples Natural Gas Company ("Peoples
Natural Gas"), placed new rates into effect on July 22, 1994. In November, the
Company's largest distribution subsidiary, The East Ohio Gas Company ("East
Ohio Gas"), received final approval of the settlement reached in its current
rate case. Under the settlement, new rates take effect in two phases: a $62.4
million annual revenue increase began November 8, 1994, and a $6.2 million
revenue increase will become effective on November 8, 1995. On July 1, the
Company's interstate pipeline subsidiary, CNG Transmission, began collecting
higher rates, subject to refund, in connection with its current general rate
increase filing with the FERC. On October 1, Virginia Natural Gas, Inc.
("Virginia Natural Gas") placed higher rates into effect, subject to refund, in
connection with its recent general rate filing.
The impact of the higher operating costs largely offset the effect of overall
colder weather in 1994. Weather in Consolidated's retail service territories
through the first nine months of 1994 was 8.1 percent colder than in 1993 and
4.9 percent colder than normal.
Third quarter 1994 results reflected a net loss of $24,557,000, or 26 cents a
share, compared with a net loss of $29,965,000, or 32 cents a share, in the
1993 period. Consolidated's utility operations normally experience a loss in
the third quarter because of low seasonal demand for gas in the summer months.
However, the third quarter 1993 results include the adjustment to deferred
income tax expense to reflect the change in the tax rate discussed above and an
additional charge of $1,603,000, or 2 cents a share, to reflect the increase in
current taxes due to the retroactive provision of the tax law to January 1,
1993. Excluding the impact of these two adjustments, the third quarter 1993
net loss was $16,933,000, or 18 cents a share. The low prices for natural gas
that have prevailed nationwide had a significant impact on Consolidated's
performance during the third quarter of 1994. The Company's average wellhead
price was $1.97 per thousand cubic feet (Mcf), down from $2.26 a year earlier.
Third quarter gas production was down 24 percent to 22.2 billion cubic feet
(Bcf), due primarily to the decision to shut-in a portion of the Company's
offshore gas production in August and September as a result of low prices.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
DATA BY BUSINESS COMPONENTS
The following table sets forth certain data for the distribution, transmission,
and exploration and production components of the Company's business.
____________________________________________________________________________
Nine Months to Three Months to
September 30 September 30
__________________ _______________
1994 1993 1994 1993
____________________________________________________________________________
OPERATING INCOME (In Millions)
Distribution . . . . . . . . . . . . . $ 65.5 $ 68.1 $ (27.4) $(23.9)
Transmission . . . . . . . . . . . . . 69.2 69.9 18.4 16.0
Exploration and production . . . . . . 28.5 20.2 4.4 (.5)
Other. . . . . . . . . . . . . . . . . .2 1.2 (.7) .2
Intercompany eliminations and
adjustments. . . . . . . . . . . . . 3.1 (1.8) (.8) (3.2)
________ ________ _______ ______
Total. . . . . . . . . . . . . . . . $ 166.5 $ 157.6 $ (6.1) $(11.4)
======== ======== ======= ======
OPERATING REVENUES (In Millions)
Distribution . . . . . . . . . . . . . $1,308.2 $1,180.3 $ 165.3 $174.2
Transmission . . . . . . . . . . . . . 348.2 682.1 112.4 177.2
Exploration and production . . . . . . 382.0 395.1 101.0 124.6
Other. . . . . . . . . . . . . . . . . 385.0 218.7 116.7 83.6
Intercompany eliminations and
adjustments. . . . . . . . . . . . . (176.0) (322.3) (43.6) (86.3)
________ ________ _______ ______
Total. . . . . . . . . . . . . . . . $2,247.4 $2,153.9 $ 451.8 $473.3
======== ======== ======= ======
GAS SALES (In Bcf)
Distribution . . . . . . . . . . . . . 207.1 201.5 20.2 22.1
Transmission . . . . . . . . . . . . . - 100.1 - 16.2
Exploration and production . . . . . . 133.3 130.2 38.6 40.9
Other. . . . . . . . . . . . . . . . . 146.1 77.7 51.1 29.7
Intercompany eliminations. . . . . . . (37.1) (82.9) (8.0) (18.8)
________ ________ _______ ______
Total sales. . . . . . . . . . . . . 449.4 426.6 101.9 90.1
======== ======== ======= ======
GAS TRANSPORTATION (In Bcf)
Distribution . . . . . . . . . . . . . 108.7 106.4 29.3 29.7
Transmission . . . . . . . . . . . . . 541.5 408.6 121.8 101.5
Exploration and production . . . . . . 1.0 .6 .6 .2
Other. . . . . . . . . . . . . . . . . 5.3 - 1.8 -
Intercompany eliminations. . . . . . . (140.7) (111.8) (26.9) (27.8)
________ ________ _______ ______
Total transportation . . . . . . . . 515.8 403.8 126.6 103.6
======== ======== ======= ======
____________________________________________________________________________
Distribution
In the first nine months of 1994, operating income of Consolidated's gas
distribution operations was $65.5 million, off 4 percent from the $68.1 million
earned in the comparable 1993 period. Total distribution throughput was 315.8
Bcf, up 3 percent compared with 307.9 Bcf in the first nine months of 1993.
Colder weather in the 1994 first quarter was the primary reason for the higher
throughput volumes. However, higher operating costs more than offset the gains
resulting from the higher throughput. Three of the Company's distribution
subsidiaries, East Ohio Gas, Peoples Natural Gas, and Virginia Natural Gas,
have been or are currently pursuing rate increases with their respective state
regulatory commissions to reflect the higher costs of doing business (see
"Federal and State Regulatory Matters," page 12).
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Residential gas sales increased 6.3 Bcf in the first nine months of 1994 to
148.4 Bcf. Commercial sales increased 1.1 Bcf to 50.7 Bcf, while volumes
transported to these customers were up 2.9 Bcf. Deliveries to industrial
customers were also higher in the 1994 period, increasing 1.4 Bcf to 96.5 Bcf.
Although industrial sales were down 1.7 Bcf to 7.8 Bcf, transportation volumes
rose 3.1 Bcf to 88.7 Bcf.
In the third quarter, the distribution operations experienced an operating loss
of $27.4 million, compared with an operating loss of $23.9 million in the 1993
quarter. The results for both quarterly periods reflect the seasonal nature of
these subsidiary companies' heating business. Consistent with the first half
of 1994, third quarter results were affected by higher operating expenses.
Third quarter throughput was 49.5 Bcf, down 2.3 Bcf from the third quarter of
1993.
Transmission
Operating income of the gas transmission operations in the first nine months of
1994 was $69.2 million, or about even with the $69.9 million earned in 1993.
For the third quarter, operating income was $18.4 million, up from $16.0
million in the 1993 third quarter. A positive factor for both 1994 periods was
the favorable resolution in the third quarter of suppliers' take-or-pay
contract matters from previous years.
Gas throughput for the transmission operations was 541.5 Bcf in the first nine
months of 1994, up from 508.7 Bcf in the comparable 1993 period. As a result
of CNG Transmission being required to abandon its traditional sales service
with the October 1, 1993 implementation of FERC Order 636, transmission
throughput in 1994 consists solely of transportation volumes. In 1993, gas
transported in the first nine months was 408.6 Bcf, while gas sales were 100.1
Bcf, including approximately 58 Bcf of gas sold from storage inventory. These
sales, made at reduced prices under alternative FERC-approved rates, increased
available storage capacity for customer-owned gas supplies. In the third
quarter of 1994, transmission throughput was 121.8 Bcf, compared to 117.7 Bcf
in 1993. The 1993 throughput volumes included 101.5 Bcf of gas transportation
and 16.2 Bcf of gas sales, including 13 Bcf of sales from storage inventory.
Exploration and Production
Operating income for Consolidated's exploration and production operations for
the first nine months of 1994 was $28.5 million, up from $20.2 million in the
comparable 1993 period. In the third quarter, operating income was $4.4
million, compared with an operating loss of $.5 million in the 1993 quarter.
These amounts are on an after-tax basis consistent with the Statement of Income
where income taxes are classified as an operating expense. However, as a
result of the increase in the federal income tax rate in 1993, the comparisons
of operating income between years are significantly distorted. On a pretax
basis, operating income of the exploration and production operations was $30.8
million and $29.1 million for the nine months ended September 30, 1994 and
1993, respectively, and $2.7 million and $7.3 million for the respective third
quarter periods.
The 1994 third quarter results were significantly affected by lower average gas
wellhead prices. The low level of prices led to the voluntary shut-in of
production during the third quarter. The lower production, together with the
recognition of additional proved gas and oil reserves in the Gulf of Mexico,
however, resulted in lower depreciation and amortization expense in the 1994
period (see "Exploration and Production," page 13).
Consolidated's average gas wellhead price in the first nine months of 1994 was
$2.26 per Mcf, compared
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
with $2.24 in the 1993 period. In the third quarter, the average gas price was
$1.97 per Mcf, significantly lower than $2.26 in the third quarter of 1993.
Gas production in the first nine months of 1994 was 88.7 Bcf, down 2 percent
from 90.3 Bcf in 1993. Third quarter gas production was 22.2 Bcf, down 24
percent from 29.2 Bcf in 1993 due to the partial shut-in of production.
Consolidated's average oil price was $14.01 a barrel in the first nine months
of 1994, down 14 percent from $16.29 in the comparable 1993 period, reflecting
the overall decline in world oil prices. Prices for the quarter averaged
$15.16 a barrel, flat compared with $15.10 a barrel in 1993. Oil production
was 2.5 million barrels in the first nine months of 1994, down from 2.8 million
barrels in 1993. For the third quarter, oil production was 708,000 barrels,
down 26 percent from 956,000 barrels in 1993. The lower oil production in both
1994 periods was attributable to normal production declines at older properties
in addition to the shut-in of production during the third quarter.
Other
Operating income from Consolidated's "Other operations" was $.2 million in the
first nine months of 1994, compared with $1.2 million in 1993. In the third
quarter, these operations experienced an operating loss of $.7 million,
compared with operating income of $.2 million in 1993. A large portion of the
operating results of these operations in the 1994 periods, and of the operating
revenues in the 1993 and 1994 periods, is attributable to CNG Energy Services
Corporation ("CNG Energy Services," a subsidiary, formerly CNG Gas Services
Corporation). Operating income of CNG Energy Services was $.5 million in the
first nine months of 1994, compared with $.1 million in the 1993 period. In
the third quarter, this subsidiary experienced an operating loss of $.4
million, compared with operating income of $.6 million in 1993. Gas sales by
CNG Energy Services totaled 146.1 Bcf in the first nine months of 1994, up from
77.7 Bcf in 1993. Gas sales in the current year quarter were 51.1 Bcf,
compared with 29.7 Bcf in 1993. Operating revenues of CNG Energy Services were
$362.0 million in the first nine months of 1994, and $108.8 million in the
third quarter. In the comparable 1993 periods, operating revenues were $194.5
million and $76.3 million, respectively.
OPERATING REVENUES
Total gas sales revenues in the first nine months of 1994 increased $27.6
million from the comparable 1993 period. Gas sales volumes were 449.4 Bcf, up
22.8 Bcf from the nine-month period a year ago. Higher residential and
commercial space heating sales due to the cold weather experienced early in the
year and higher nonregulated gas sales by CNG Energy Services were significant
factors in the increased sales volumes and revenues in the first nine months of
1994. As expected, wholesale sales in 1994 were significantly lower due to the
abandonment by CNG Transmission of its traditional sales service, while the
1993 amounts reflected the sales of gas from inventory made by CNG Transmission
in anticipation of FERC Order 636. Higher average retail sales prices and
slightly higher prices received for gas produced in the first nine months of
1994 also contributed to the higher revenues. In the third quarter of 1994,
gas sales revenues decreased $42.5 million and sales volumes increased 11.9
Bcf. Lower prices associated with nonregulated gas sales and the reduced
wholesale sales in the current quarter more than offset the increased
nonregulated gas sales volumes.
Other operating revenues increased $65.9 million in the first nine months and
$20.9 million in the third quarter over the comparable 1993 periods. The
increases were due primarily to higher gas transportation revenues, which were
up $61.4 million in the nine months and $23.5 million in the third quarter as
the result of increased volumes. Storage service revenues were also higher in
both 1994 periods, increasing $4.3 million in the nine months and $2.1 million
in the quarter, reflecting the increased level of service provided customers.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Revenues from the sale of oil and condensate production declined $11.1 million
in the first nine months of 1994, due mainly to lower wellhead prices, and $3.4
million in the third quarter, primarily due to reduced production. Revenues
from oil brokering were down $5.8 million in the first nine months, largely due
to lower prices, and declined $1.9 million in the third quarter as a result of
reduced volumes. Revenues from the sale of products extracted from natural gas
declined $1.6 million in the first nine months due to lower prices received for
most categories of by-products. Third quarter 1994 by-product revenues were
flat compared with last year. The foregoing revenue declines for the first
nine months of 1994 were offset, however, by increases in other miscellaneous
revenues, including the recovery of transport costs by the Company's
nonregulated operations.
OPERATING EXPENSES
Operating expenses, including income taxes, increased $84.6 million in the
first nine months of 1994 but were down $26.9 million in the third quarter.
Total purchased gas expense was up $70.1 million in the first nine months and
$6.4 million in the third quarter of 1994 due primarily to increased volume
requirements. Other purchased products expense was $1.2 million higher for the
first nine months of 1994 due to increased transport capacity purchased from
other pipeline companies, but was $6.4 million lower in the 1994 third quarter,
which reflected transport refunds received from other carriers. Combined
operation and maintenance expenses were up $17.1 million in the first nine
months of 1994 and declined $3.6 million in the third quarter. Higher payroll
costs, including weather-related overtime during the unusually cold weather
early in 1994, was the principal reason for the increased costs in the nine-
month period. Decreases in royalty and production-related expenses resulting
from the shut-in of production more than offset increases in other operation
and maintenance expenses during the current quarter. The decline in
depreciation and amortization charges in both 1994 periods was due to decreased
volumes of gas and oil produced and the recognition of additional reserves in
the Gulf of Mexico. Taxes, other than income taxes, were higher in the first
nine months and third quarter of 1994 due in part to higher revenue-based taxes
and increased property and payroll taxes.
Income taxes-estimated decreased $9.4 million in the first nine months of 1994
primarily as a result of the adjustment recorded in 1993 to deferred income tax
expense due to the increase in the federal corporate income tax rate. Third
quarter income tax expense was $15.8 million less than the 1993 quarter, due to
a larger current period pretax operating loss and the adjustments made during
the prior year quarter to current and deferred income tax expense resulting
from the increase in the income tax rate. Reference is made to Note 4 of the
consolidated financial statements for additional information regarding these
adjustments.
In connection with this discussion of results of operations, reference is also
made to Notes 2, 3, 5 and 6 to the consolidated financial statements.
SELECTED TWELVE-MONTH DATA
The following selected financial data (unaudited) relates to the twelve months
ended September 30, 1994 (in thousands of dollars):
______________________________________________________________________________
Operating revenues..................................... $3,277,574
Operating expenses..................................... 3,011,259
Operating income................................... 266,315
Other income........................................... 9,717
Interest charges....................................... 80,493
Net income......................................... $ 195,539
Earnings per share of common stock................. $2.10
Average common shares outstanding (thousands).......... 92,974
Times fixed charges earned............................. 3.92
______________________________________________________________________________
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
OTHER INFORMATION
FERC Order 636 Transition Costs
On July 29, 1994, the FERC accepted CNG Transmission's filing for recovery,
through a direct bill mechanism, of an additional $9.8 million of Order 636
transition costs. These billings began August 1, 1994, subject to refund, and
are in addition to the $178 million of transition costs CNG Transmission began
collecting in late 1993. In accordance with the terms of its FERC-approved
Order 636 settlement, CNG Transmission can seek recovery through March 1995 of
additional transition costs incurred relating to transactions prior to its
October 1, 1993 Order 636 implementation date.
On July 22, 1994, Peoples Natural Gas began to recover, through a volumetric
surcharge, the non-gas cost related portion of Order 636 transition costs
billed by upstream pipeline companies. The surcharge was recalculated
effective October 1, 1994 to reflect the level of transition costs billed by
the pipelines and transition cost recovery decisions made by the FERC. Peoples
Natural Gas will continue to recover gas cost related transition costs through
its periodic gas cost recovery filings.
On July 14, 1994, The Public Utilities Commission of Ohio ("PUCO") approved a
stipulation and recommendation ("Settlement") allowing the recovery of Order
636 transition costs by East Ohio Gas. In accordance with the Settlement, East
Ohio Gas will recover the unrecovered gas cost portion of transition costs from
its tariff customers through the gas cost recovery ("GCR") mechanism. Gas
supply realignment costs billed by the pipelines will be recovered by East Ohio
Gas from its sales customers, through the GCR mechanism, and from its
transportation customers, through a surcharge.
Federal and State Regulatory Matters
As previously reported, on December 30, 1993, CNG Transmission filed a general
rate filing with the FERC requesting an annual revenue increase of $106.6
million. The rate increase request was intended to cover higher operating
costs, increased plant investment, and the recovery of $9.2 million of Order
636 transition costs related to stranded facilities. This increase went into
effect on July 1, 1994, subject to refund. CNG Transmission is currently in
settlement discussions with the FERC Staff and intervenors concerning this
case.
On July 21, 1994, the Pennsylvania PUC approved a general rate increase of $7.5
million in annual revenues in the Peoples Natural Gas rate case which had been
filed in October 1993. The new rates became effective July 22, 1994.
As previously reported, on June 23, 1994, the PUCO approved the merger of the
Company's River Gas Company ("River Gas") subsidiary into East Ohio Gas.
Approval of the merger had been obtained earlier from the SEC under the Public
Utility Holding Company Act of 1935. The merger of the two subsidiaries became
effective in July 1994.
On November 3, 1994, the PUCO approved a proposed settlement of East Ohio Gas'
current rate case which will increase annual revenues by $68.6 million. Under
the settlement, new rates take effect in two phases: a $62.4 million revenue
increase began November 8, 1994, and a $6.2 million increase will become
effective on November 8, 1995. The settlement reflects an imputed return on
equity of 12.15 percent. In its January 1994 filing, East Ohio Gas had
requested a $99.1 million annual revenue increase and a 12.50 percent return on
equity.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Concluded)
On September 1, 1994, Virginia Natural Gas filed a general rate filing with the
Virginia State Corporation Commission requesting an annual revenue increase of
$9.9 million. The requested rate increase reflects additional plant
investments and higher operating and maintenance expenses. The new rates went
into effect, subject to refund, on October 1, 1994.
Gas Market Hubs
As previously reported, on July 1, 1994, the CNG/Sabine Center "superhub" began
operations. This market center, developed by CNG Transmission and Texaco's
Sabine Pipe Line Company, offers intra-hub transfers, short-term parking,
wheeling and an accounting service for gas supplies. The hub makes use of the
gas transmission and storage system of CNG Transmission, enabling customers,
such as utilities, interstate pipelines, large end-users and marketers, to
deliver or receive gas at various points in six Midwestern and Northeastern
states, including interconnections with every major pipeline in those areas.
Sabine Hub Services Company, a subsidiary of Sabine Pipe Line Company, is
currently operating the hub. On October 21, 1994, the SEC granted formal
approval for CNG's participation in the center.
Also as previously reported, in May 1994, East Ohio Gas and Williams Energy
Ventures, Inc. agreed to establish a gas trading hub at Lebanon, Ohio. East
Ohio Gas will operate and manage the hub, which opened September 6, 1994, and
is a point on "Streamline," a computerized network for cash-market natural gas
trades that has been developed by Williams. The hub is expected to be
developed in two phases, and will eventually connect with six of the nation's
largest pipelines. The Lebanon Streamline point is separate from, but
complementary to, the CNG/Sabine Center.
Exploration and Production
Earlier this year, Consolidated drilled two wells at a deep-water project in
the Gulf of Mexico known as Viosca Knoll 826. This project, in which
Consolidated holds a 50 percent interest, represents the largest single
addition to CNG's reserves in the Company's history, adding reserves equivalent
to 190 Bcf of gas. Facilities are being designed with Oryx Energy Company, the
operating partner, to produce up to 25,000 barrels of oil and 30 million cubic
feet of natural gas a day. Production is expected to begin in early 1997.
CNG Producing, acting alone or with partners, was the high bidder on two of the
tracts offered at the federal government's August 17, 1994, Gulf of Mexico
lease sale. The company's bids totaled $.3 million for 100 percent working
interest in one tract and 50 percent working interest in the other property.
One bid has been accepted by the government and the other is pending
acceptance.
**********
In connection with the financial information included in PART I of this report,
reference is made to the Company's 1993 Annual Report, its Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended December 31,
1993, and its quarterly reports to the Securities and Exchange Commission on
Form 10-Q for the quarters ended March 31 and June 30, 1994.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material new legal proceedings instituted in the third
quarter of 1994, and there have been no material developments during the
quarter in the legal proceedings disclosed in the Company's 1993 Form 10-K or
in any earlier Form 10-Q for 1994 as then pending.
Reference is made to "FERC Order 636 Transition Costs" and "Federal and State
Regulatory Matters" on page 12 for a description of certain regulatory
proceedings.
ITEM 2. CHANGES IN SECURITIES
(a) None.
(b) Limitations on the payment of dividends by the Company are set forth in
Note 8 to the consolidated financial statements, page 5, and reference is made
thereto.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None, other than as described elsewhere in this report.
14
<PAGE>
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K - None.
EXHIBITS
______________________________________________________________________________
SEC
Exhibit
Number Description of Exhibit
______________________________________________________________________________
(11) Statement re Computation of Per Share Earnings:
Computations of Earnings Per Share of Common Stock, Primary Earnings Per
Share, and Fully Diluted Earnings Per Share of Consolidated Natural Gas
Company and Subsidiaries for the three months and nine months ended
September 30, 1994 and 1993
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural Gas Company
and Subsidiaries for the twelve months ended September 30, 1994
______________________________________________________________________________
15
<PAGE>
SIGNATURES
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.
CONSOLIDATED NATURAL GAS COMPANY
_______________________________________
(Registrant)
L. D. JOHNSON
_______________________________________
L. D. Johnson, Executive Vice President
and Chief Financial Officer
S. R. MCGREEVY
_______________________________________
S. R. McGreevy, Vice President,
Accounting and Financial Control
November 10, 1994
16
<PAGE>
EXHIBIT INDEX
______________________________________________________________________________
SEC
Exhibit
Number Description of Exhibit
______________________________________________________________________________
(11) Statement re Computation of Per Share Earnings:
Computations of Earnings Per Share of Common Stock, Primary Earnings Per
Share, and Fully Diluted Earnings Per Share of Consolidated Natural Gas
Company and Subsidiaries for the three months and nine months ended
September 30, 1994 and 1993
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural Gas Company
and Subsidiaries for the twelve months ended September 30, 1994
______________________________________________________________________________
EXHIBIT 11
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS (Note 1)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
________________________________________________________________________________
_________________________
Nine Months to
Three Months to
September 30
September 30
_____________________
_____________________
1994 1993
1994 1993
________________________________________________________________________________
_________________________
<S> <C> <C>
<C> <C>
EARNINGS PER SHARE OF COMMON STOCK,
as Shown on the Consolidated
Statement of Income
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . $109,430 $102,385
$(24,557) $(29,965)
Cumulative effect prior to January 1, 1993,
of applying Statement of Financial Accounting
Standards No. 109 (SFAS No. 109) . . . . . . . . . - 17,422
- - - -
________ ________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . . $109,430 $119,807
$(24,557) $(29,965)
======== ========
======== ========
Average common shares outstanding. . . . . . . . . . 92,991 92,769
93,017 92,893
________ ________
________ ________
Earnings per share of common stock
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . $ 1.18 $ 1.10
$ (.26) $ (.32)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .19
- - - -
________ ________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . $ 1.18 $ 1.29
$ (.26) $ (.32)
======== ========
======== ========
PRIMARY EARNINGS PER SHARE
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . $109,430 $102,385
$(24,557) $(29,965)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . . - 17,422
- - - -
________ ________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . . $109,430 $119,807
$(24,557) $(29,965)
======== ========
======== ========
Average common shares outstanding. . . . . . . . . . 92,991 92,769
93,017 92,893
Incremental shares resulting from
assumed exercise of stock options. . . . . . . . . 97 342
75 394
________ ________
________ ________
Average common shares, as adjusted . . . . . . . . . 93,088 93,111
93,092 93,287
________ ________
________ ________
Primary earnings per share
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . $ 1.18 $ 1.10
$ (.26) $ (.32)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .19
- - - -
________ ________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . $ 1.18 $ 1.29
$ (.26)(2) $ (.32)(2)
======== ========
======== ========
________________________________________________________________________________
_________________________
</TABLE>
<PAGE>
EXHIBIT 11
(Cont.)
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS (Note 1) (Continued)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
________________________________________________________________________________
_________________________
Nine Months to
Three Months to
September 30
September 30
____________________
_____________________
1994 1993
1994 1993
________________________________________________________________________________
_________________________
<S> <C> <C>
<C> <C>
FULLY DILUTED EARNINGS PER SHARE (Note 2)
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . $109,430 $102,385
$(24,557) $(29,965)
Interest on 7 1/4% Convertible Subordinated
Debentures, net of tax effect. . . . . . . . . . . 9,022 9,347
2,974 3,079
________ ________
________ ________
Income before cumulative effect of change
in accounting principle, as adjusted . . . . . . . 118,452 111,732
(21,583) (26,886)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . . - 17,422
- - - -
________ ________
________ ________
Net income, as adjusted. . . . . . . . . . . . . . . $118,452 $129,154
$(21,583) $(26,886)
======== ========
======== ========
Average common shares outstanding. . . . . . . . . . 92,991 92,769
93,017 92,893
Incremental shares resulting from
assumed exercise of stock options. . . . . . . . . 117 386
75 426
Shares issuable from assumed conversion
of 7 1/4% Convertible Subordinated
Debentures . . . . . . . . . . . . . . . . . . . . 4,583 4,630
4,583 4,630
________ ________
________ ________
Average common shares, as adjusted . . . . . . . . . 97,691 97,785
97,675 97,949
________ ________
________ ________
Fully diluted earnings per share
Income before cumulative effect of change
in accounting principle, as adjusted . . . . . . $ 1.21 $ 1.14
$ (.22) $ (.27)
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .18
- - - -
________ ________
________ ________
Net income, as adjusted. . . . . . . . . . . . . . $ 1.21 $ 1.32
$ (.22) $ (.27)
======== ========
======== ========
________________________________________________________________________________
_________________________
<FN>
Notes:
(1) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although not
required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it
results in dilution of
less than 3%.
(2) This calculation is submitted in accordance with Regulation S-K Item
601(b)(11) although it is
contrary to either paragraph 30 or 40 of APB Opinion No. 15 because the
assumed conversion of the
7 1/4% Convertible Subordinated Debentures and/or the assumed exercise of
stock options
produce an antidilutive result.
</TABLE>
EXHIBIT 12
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
_____________________________________________________________________________
Twelve Months to September 30 1994
_____________________________________________________________________________
Earnings:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $195,539
Add income taxes . . . . . . . . . . . . . . . . . . . . . . 90,462
________
Income before income taxes . . . . . . . . . . . . . . . . 286,001
Distributed income from unconsolidated investee,
less equity in earnings thereof. . . . . . . . . . . . . . 280
________
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . 286,281
________
Add fixed charges:
Interest on long-term debt, including amortization
of debt discount and expense less premium. . . . . . . . 86,779
Other interest expense . . . . . . . . . . . . . . . . . . 3,174
Portion of rentals deemed to be representative
of the interest factor . . . . . . . . . . . . . . . . . 8,137
________
TOTAL FIXED CHARGES. . . . . . . . . . . . . . . . . . . . . . 98,090
________
TOTAL EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . $384,371
========
RATIO OF EARNINGS TO FIXED CHARGES . . . . . . . . . . . . . . 3.92
========
_____________________________________________________________________________
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN ITEM 1 OF CONSOLIDATED NATURAL
GAS COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,811,151
<OTHER-PROPERTY-AND-INVEST> 1,149,197
<TOTAL-CURRENT-ASSETS> 722,146
<TOTAL-DEFERRED-CHARGES> 344,759
<OTHER-ASSETS> 84,304
<TOTAL-ASSETS> 5,111,557
<COMMON> 255,809
<CAPITAL-SURPLUS-PAID-IN> 458,407
<RETAINED-EARNINGS> 1,440,873
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,155,089
0
0
<LONG-TERM-DEBT-NET> 1,151,696
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 278,000
<LONG-TERM-DEBT-CURRENT-PORT> 4,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,522,772
<TOT-CAPITALIZATION-AND-LIAB> 5,111,557
<GROSS-OPERATING-REVENUE> 2,247,433
<INCOME-TAX-EXPENSE> 55,065
<OTHER-OPERATING-EXPENSES> 2,025,843
<TOTAL-OPERATING-EXPENSES> 2,080,908
<OPERATING-INCOME-LOSS> 166,525
<OTHER-INCOME-NET> 6,260
<INCOME-BEFORE-INTEREST-EXPEN> 172,785
<TOTAL-INTEREST-EXPENSE> 63,355
<NET-INCOME> 109,430
0
<EARNINGS-AVAILABLE-FOR-COMM> 109,430
<COMMON-STOCK-DIVIDENDS> 135,340
<TOTAL-INTEREST-ON-BONDS> 172,744
<CASH-FLOW-OPERATIONS> 579,756
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.21
</TABLE>
