UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
FOR THE QUARTER ENDED
JUNE 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
-------------
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 July 31,
1994: 93,015,468
<PAGE>
CONSOLIDATED NATURAL GAS COMPANY
FORM 10-Q QUARTERLY REPORT
For the Quarter Ended June 30, 1994
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
for the Three and Six Months Ended June 30, 1994 and 1993.... 1
CONDENSED CONSOLIDATED BALANCE SHEET
at June 30, 1994 (Unaudited), and December 31, 1993.......... 2
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
for the Six Months Ended June 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>
________________________________________________________________________________
____________________________
Six Months to
Three Months to
June 30
June 30
________________________ ____________________
1994
1993 1994 1993
_____________________________________________________________________________________
_______________________
<S> <C> <C>
<C> <C>
OPERATING REVENUES
Regulated gas sales
Residential and commercial . . . . . . . . . . . . $1,044,486 $
910,174 $250,580 $230,064
Industrial . . . . . . . . . . . . . . . . . . . . 29,911
31,749 8,513 11,873
Wholesale. . . . . . . . . . . . . . . . . . . . . 4,967
243,700 2,220 68,980
Nonregulated gas sales . . . . . . . . . . . . . . . 388,063
211,730 173,602 115,508
__________
__________ ________ ________
Total gas sales. . . . . . . . . . . . . . . . . 1,467,427
1,397,353 434,915 426,425
Other operating revenues . . . . . . . . . . . . . . 328,177
283,243 147,093 122,645
__________
__________ ________ ________
Total operating revenues (Note 3). . . . . . . . 1,795,604
1,680,596 582,008 549,070
__________
__________ ________ ________
OPERATING EXPENSES
Purchased gas. . . . . . . . . . . . . . . . . . . . 898,675
835,009 251,357 228,959
Other purchased products . . . . . . . . . . . . . . 41,904
34,326 19,943 15,091
Operation expense. . . . . . . . . . . . . . . . . . 320,753
303,211 146,460 140,911
Maintenance. . . . . . . . . . . . . . . . . . . . . 41,166
37,999 21,589 20,113
Depreciation and amortization. . . . . . . . . . . . 152,484
146,744 74,082 72,251
Taxes, other than income taxes . . . . . . . . . . . 101,042
93,630 46,436 42,237
__________
__________ ________ ________
Subtotal . . . . . . . . . . . . . . . . . . . . 1,556,024
1,450,919 559,867 519,562
__________
__________ ________ ________
Operating income before income taxes . . . . . . 239,580
229,677 22,141 29,508
Income taxes - estimated . . . . . . . . . . . . . . 67,007
60,640 420 5,375
__________
__________ ________ ________
Operating income . . . . . . . . . . . . . . . . 172,573
169,037 21,721 24,133
__________
__________ ________ ________
OTHER INCOME
Interest revenues. . . . . . . . . . . . . . . . . . 2,327
2,232 1,072 490
Other (net). . . . . . . . . . . . . . . . . . . . . 1,959
3,095 1,070 1,758
__________
__________ ________ ________
Total other income . . . . . . . . . . . . . . . 4,286
5,327 2,142 2,248
__________
__________ ________ ________
Income before interest charges . . . . . . . . . 176,859
174,364 23,863 26,381
__________
__________ ________ ________
INTEREST CHARGES
Interest on long-term debt . . . . . . . . . . . . . 44,597
45,327 22,436 22,243
Other interest expense . . . . . . . . . . . . . . . 2,830
2,291 425 231
Total allowance for funds used during
construction (credit). . . . . . . . . . . . . . . (4,555)
(5,604) (2,067) (2,729)
__________
__________ ________ ________
Total interest charges . . . . . . . . . . . . . 42,872
42,014 20,794 19,745
__________
__________ ________ ________
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . 133,987
132,350 3,069 6,636
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 (Note 4). . . . . . . . . -
17,422 - -
__________
__________ ________ ________
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 133,987 $
149,772 $ 3,069 $ 6,636
==========
========== ======== ========
Earnings per share of common stock,
based on average shares outstanding
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . $1.44
$1.43 $ .03 $ .07
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 (Note 4). . . . . . . -
.19 - -
_____
_____ _____ _____
Net Income . . . . . . . . . . . . . . . . . . . $1.44
$1.62 $ .03 $ .07
=====
===== ===== =====
Average common shares outstanding
(thousands). . . . . . . . . . . . . . . . . . . . 92,977
92,706 93,014 92,802
Dividends declared per common share. . . . . . . . . $ .97 $
.96 $.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 June At December
30, 1994 31, 1993
(Unaudited)
_____________________________________________________________________________
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Gas utility and other plant.................... $ 4,426,593 $ 4,362,996
Accumulated depreciation and amortization...... (1,660,763) (1,607,606)
___________ ___________
Net gas utility and other plant........... 2,765,830 2,755,390
___________ ___________
Exploration and production properties.......... 3,044,812 2,983,032
Accumulated depreciation and amortization...... (1,908,702) (1,822,154)
___________ ___________
Net exploration and production properties. 1,136,110 1,160,878
___________ ___________
Net property, plant and equipment......... 3,901,940 3,916,268
___________ ___________
CURRENT ASSETS
Cash and temporary cash investments............ 35,609 27,122
Accounts receivable, less allowance for
doubtful accounts............................ 392,946 629,473
Gas stored - current portion (LIFO method)..... 80,681 140,848
Materials and supplies (average cost method)... 35,663 38,784
Unrecovered gas costs (net).................... (63,592) (9,000)
Deferred income taxes - current portion........ 36,886 23,685
Prepayments and other current assets........... 192,921 192,212
___________ ___________
Total current assets...................... 711,114 1,043,124
___________ ___________
OTHER ASSETS
Unamortized abandoned facilities............... 46,860 52,676
Other investments.............................. 40,246 39,600
Deferred charges and other noncurrent
assets (Notes 3 and 5)....................... 367,656 357,918
___________ ___________
Total other assets........................ 454,762 450,194
___________ ___________
Total assets.............................. $ 5,067,816 $ 5,409,586
=========== ===========
STOCKHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION
Common stockholders' equity (Notes 7 and 8)
Common stock, par $2.75
(Issued: 1994 - 93,015,468 shares;
1993 - 92,933,828 shares).................. $ 255,793 $ 255,568
Capital in excess of par value............... 458,197 454,081
Retained earnings............................ 1,510,545 1,466,783
___________ ___________
Total common stockholders' equity......... 2,224,535 2,176,432
Long-term debt................................. 1,151,420 1,158,648
___________ ___________
Total capitalization...................... 3,375,955 3,335,080
___________ ___________
CURRENT LIABILITIES
Current maturities on long-term debt........... 4,000 -
Commercial paper............................... 141,000 455,000
Accounts payable............................... 244,485 345,126
Estimated rate contingencies and
refunds (Note 3)............................. 58,349 57,456
Taxes accrued.................................. 115,713 112,098
Temporary replacement reserve - gas
inventory (LIFO)............................. 2,708 -
Other accruals and current liabilities......... 150,870 143,218
___________ ___________
Total current liabilities................. 717,125 1,112,898
___________ ___________
DEFERRED CREDITS
Deferred income taxes.......................... 764,033 783,511
Accumulated deferred investment tax credits.... 34,538 35,849
Other deferred credits and noncurrent
liabilities.................................. 176,165 142,248
___________ ___________
Total deferred credits.................... 974,736 961,608
___________ ___________
COMMITMENTS AND CONTINGENCIES
___________ ___________
Total stockholders' equity and liabilities $ 5,067,816 $ 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)
_____________________________________________________________________________
Six Months to June 30
1994 1993
_____________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income....................................... $ 133,987 $ 149,772
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................ 152,484 146,744
Deferred income taxes (net).................. (36,044) (22,094)
Certain changes in current assets and
current liabilities
Accounts receivable, less allowance for
doubtful accounts........................ 236,445 160,420
Inventories................................ 63,288 72,116
Unrecovered gas costs (net)................ 54,592 38,988
Accounts payable........................... (99,490) (67,276)
Estimated rate contingencies and refunds... 893 (2,093)
Taxes accrued.............................. 3,615 125
Temporary replacement reserve - gas
inventory (LIFO)......................... 2,708 42,852
Other (net)................................ 5,695 15,461
Certain changes in noncurrent assets and
noncurrent liabilities..................... 40,855 (5,454)
Other (net).................................. 111 (138)
_________ _________
Net cash provided by operating activities 559,139 512,001
_________ _________
CASH FLOWS USED IN INVESTING ACTIVITIES
Plant construction and other property additions.. (147,601) (132,228)
Proceeds from dispositions of property, plant
and equipment (net)............................ 839 (351)
Cost of other investments (net).................. (763) 569
_________ _________
Net cash used in investing activities.... (147,525) (132,010)
_________ _________
CASH FLOWS USED IN FINANCING ACTIVITIES
Proceeds from issuance of common stock........... 156 10,512
Purchase of debentures........................... - (132,993)
Notes under credit agreement (net)............... - 50,000
Commercial paper (net)........................... (313,097) (215,906)
Dividends paid on common stock................... (90,185) (88,948)
Other (net)...................................... (1) (144)
_________ _________
Net cash used in financing activities.... (403,127) (377,479)
_________ _________
Net increase in cash and temporary
cash investments.............................. 8,487 2,512
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1. 27,122 43,355
_________ _________
CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30 .. $ 35,609 $ 45,867
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for
Interest (net of amounts capitalized).......... $ 44,376 $ 50,842
Income taxes (net of refunds).................. $ 85,031 $ 48,610
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. 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
$14,714,000 at December 31, 1993, and June 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
$43,635,000, 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 $92,785,000 at December 31, 1993,
and June 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 $45 million.
Based on recent 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 six 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.
(5) Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Statement No. 106 requires that
the estimated future costs of providing postretirement benefits, such as health
care 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.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (Concluded)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
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
Statement No. 106 costs and related deferrals in regulatory proceedings. The
SFAS No. 106 costs deferred at December 31, 1993, and June 30, 1994, were
$27,662,000 and $42,609,000, 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 Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." The standard requires the accrual of a liability for
postemployment 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)......... 7 21 303 - -
Stock options.............. 4 11 145 - -
Purchase of treasury stock... - - - (4) (179)
Sale of treasury stock....... - - (1) 4 179
______ ________ ________ ____ _____
At June 30, 1994............. 93,015 $255,793 $458,197 - $ -
====== ======== ======== ==== =====
_____________________________________________________________________________
(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, $708,339,000 of consolidated retained
earnings was free from such restrictions at June 30, 1994.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Because of the seasonal nature of the regulated subsidiaries' heating business,
a substantial portion of the Company's cash receipts for the year are realized
in the first six months of the year. As shown in the Condensed Consolidated
Statement of Cash Flows, net cash provided by operating activities was $559.1
million and $512.0 million for the six months ended June 30, 1994 and 1993,
respectively. In addition to satisfying cash requirements for operations,
capital expenditures, and dividend payments in the current six-month period,
available cash was used to repay a substantial portion of the commercial paper
borrowings outstanding at the end of 1993.
Due to the significant amount of revenues generated during the first six months
of a year, the consolidated balance sheet at the end of June customarily shows
an increase in cash and temporary cash investments over the balance at the end
of the previous year. After the winter heating season and by June 30, accounts
receivable have declined, as is customary, from the high levels at the end of
December of the previous year and March of the current year. In addition, the
inventory of stored gas was reduced during the first six months of 1994 due to
the increased demand for gas during the winter heating season. Under the LIFO
accounting method, the excess of the estimated current cost of replacing
inventories of gas withdrawn from storage during the early part of the year
over LIFO inventory cost at the time of withdrawal is recorded in the income
statement and as a current liability. This liability is reduced as the
inventory is replenished, and by year-end the liability is eliminated.
The credit balances in "Unrecovered gas costs (net)" at both December 31, 1993,
and June 30, 1994, reflect a temporary overrecovery position by 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 in the first six months, 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
replenishing gas inventories 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 June 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 SIX MONTHS ENDED JUNE 30, 1994 AND 1993
System Results
Net income for the first six months of 1994 was $133,987,000, or $1.44 per
share, compared with $149,772,000, or $1.62 per share, in the first six months
of 1993. Earnings for the first half of 1993, however, 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 new accounting standard for income
taxes. Excluding the impact of the accounting change, net income was
$132,350,000, or $1.43 per share, in the six months of 1993. For the second
quarter of 1994, net income was $3,069,000, or 3 cents per share, down from
$6,636,000, or 7 cents per share, earned in the 1993 second quarter. Due to
the seasonal nature of the regulated subsidiaries' heating business, the second
quarter normally is not a significant part of Consolidated's business in any
year.
Higher operating costs had an impact on the results for both 1994 periods,
particularly the second quarter. However, three of the Company's regulated
subsidiaries have recently implemented or are pursuing rate increases that
reflect 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. Also, 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. The
Company's largest distribution subsidiary, The East Ohio Gas Company ("East
Ohio Gas") expects to have new rates in effect by the winter heating season.
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 half of 1994 was 9.3 percent colder than in 1993 and 5.2
percent colder than normal. In the second quarter of 1994, weather was 4.3
percent colder than the year-ago period and about normal for the quarter as a
whole. But in April, normally the coldest month of the quarter, the weather
was 18 percent warmer than both normal and the previous April.
Other factors that affected the 1994 results were the higher federal corporate
income tax rate that went into effect in the third quarter last year, lower oil
prices and, in the second quarter, lower gas wellhead prices.
While the resolution of the subsidiaries' pending rate proceedings should
contribute favorably to future operating results, earnings for the full year
will be influenced, in large part, by weather in the fourth quarter of the
year. Other factors which may significantly impact earnings during the
remainder of 1994 include the levels of gas and oil prices. Since the end of
the second quarter, gas prices have remained soft while oil prices have
continued to slowly improve.
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.
____________________________________________________________________________
Six Months to Three Months to
June 30 June 30
__________________ ________________
1994 1993 1994 1993
____________________________________________________________________________
OPERATING INCOME (In Millions)
Distribution . . . . . . . . . . . . . $ 92.9 $ 92.0 $ (2.7) $ .9
Transmission . . . . . . . . . . . . . 50.8 53.9 16.5 17.2
Exploration and production . . . . . . 24.1 20.7 9.8 11.7
Other. . . . . . . . . . . . . . . . . .9 1.0 (.5) -
Intercompany eliminations and
adjustments. . . . . . . . . . . . . 3.9 1.4 (1.4) (5.7)
________ ________ _______ _______
Total. . . . . . . . . . . . . . . . $ 172.6 $ 169.0 $ 21.7 $ 24.1
======== ======== ======= =======
OPERATING REVENUES (In Millions)
Distribution . . . . . . . . . . . . . $1,142.9 $1,006.1 $ 288.7 $ 268.5
Transmission . . . . . . . . . . . . . 235.8 504.9 97.9 170.1
Exploration and production . . . . . . 281.0 270.5 132.0 136.8
Other. . . . . . . . . . . . . . . . . 268.3 135.1 114.4 74.1
Intercompany eliminations and
adjustments. . . . . . . . . . . . . (132.4) (236.0) (51.0) (100.4)
________ ________ _______ _______
Total. . . . . . . . . . . . . . . . $1,795.6 $1,680.6 $ 582.0 $ 549.1
======== ======== ======= =======
GAS SALES (In Bcf)
Distribution . . . . . . . . . . . . . 186.9 179.4 41.6 42.2
Transmission . . . . . . . . . . . . . - 83.9 - 17.2
Exploration and production . . . . . . 94.7 89.3 46.5 42.5
Other. . . . . . . . . . . . . . . . . 95.0 48.0 44.4 25.4
Intercompany eliminations. . . . . . . (29.1) (64.1) (13.0) (25.1)
________ ________ _______ _______
Total sales. . . . . . . . . . . . . 347.5 336.5 119.5 102.2
======== ======== ======= =======
GAS TRANSPORTATION (In Bcf)
Distribution . . . . . . . . . . . . . 79.4 76.7 33.3 31.8
Transmission . . . . . . . . . . . . . 419.7 307.1 142.4 108.9
Exploration and production . . . . . . .4 .4 .2 .2
Other. . . . . . . . . . . . . . . . . 3.5 - 2.9 -
Intercompany eliminations. . . . . . . (113.8) (84.0) (33.8) (34.8)
________ ________ _______ _______
Total transportation . . . . . . . . 389.2 300.2 145.0 106.1
======== ======== ======= =======
_____________________________________________________________________________
Distribution
Operating income of Consolidated's gas distribution operations was $92.9
million in the first six months of 1994, up slightly from $92.0 million in
1993. Total distribution throughput was 266.3 billion cubic feet (Bcf), up 4
percent compared with 256.1 Bcf in the first half of 1993. Colder weather in
the 1994 first quarter was the primary reason for the higher throughput
volumes. However, higher operating costs largely offset the impact of the
increased throughput. Residential gas sales increased 7.8 Bcf in the first
half of 1994 to 135.1 Bcf. Commercial sales increased 1.3 Bcf to 45.6 Bcf and
volumes transported for these customers were up 2.4 Bcf. Deliveries to
industrial customers were also higher in the 1994 period, increasing 1.2 Bcf to
68.3 Bcf. Although industrial sales were down 1.5 Bcf to 6.1 Bcf,
transportation volumes rose 2.7 Bcf to 62.2 Bcf.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
In the second quarter of 1994, the distribution operations experienced an
operating loss of $2.7 million, compared with operating income of $856,000 in
the comparable 1993 quarter. Operating results for the 1994 period reflect
both higher operating costs and the warm April weather. Residential gas sales
were up .8 Bcf to 30.2 Bcf, while commercial sales were 9.8 Bcf, unchanged from
the year-ago period. However, gas transported for commercial customers in the
1994 quarter was 4.4 Bcf, up .8 Bcf from 1993. Industrial deliveries were
flat, totaling 29.4 Bcf in the 1994 quarter and 29.6 Bcf in 1993, as lower
sales were offset by higher transportation volumes.
The Company's two largest distribution subsidiaries, East Ohio Gas and Peoples
Natural Gas, have been pursuing rate increases with their respective state
regulatory commissions in order to reflect the higher cost of doing business in
their rates. In July 1994, the rate proceedings of Peoples Natural Gas were
resolved and new rates were placed into effect on July 22, reflecting an
increase in annual revenues of $7.5 million. A decision on the rate increase
request by East Ohio Gas is expected in October 1994.
Transmission
Operating income of the gas transmission operations in the first six months of
1994 was $50.8 million, down 6 percent from $53.9 million in 1993. For the
second quarter, operating income was $16.5 million, down from $17.2 million in
the 1993 second quarter. Factors affecting transmission operating results in
the first six months of 1994 included higher operating costs which have not yet
been reflected in rates, higher taxes, and lower by-products prices. The
comparison of the six-month periods is also affected by the one-time sale by
CNG Transmission of gas from storage inventory in the 1993 period in
anticipation of the implementation of FERC Order 636. The higher operating
costs are being addressed in CNG Transmission's latest general rate filing with
the FERC. The rate increase filing was placed into effect July 1, 1994,
subject to refund.
Gas throughput for the transmission operations was 419.7 Bcf in the first six
months of 1994, up from 391.0 Bcf in the first half of 1993. 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. Gas transported in the
first half of 1993 was 307.1 Bcf, while gas sales were 83.9 Bcf, including
approximately 45 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 second quarter of
1994, transmission throughput was 142.4 Bcf, compared with 126.1 Bcf in 1993.
The 1993 throughput volumes included 108.9 Bcf of gas transportation and 17.2
Bcf of gas sales.
Exploration and Production
Operating income of the exploration and production operations in the first six
months of 1994 was $24.1 million, up from $20.7 million in 1993. In the second
quarter, operating income was $9.8 million, down from $11.7 million in the 1993
quarter. Higher gas wellhead prices and increased gas production were the
primary reasons for the improvement in operating results in the first six
months of 1994. However, in the second quarter of 1994, lower wellhead prices
offset the benefit of higher gas production volumes. Also, both 1994 periods
were adversely affected by lower oil wellhead prices and lower oil production.
Consolidated's average gas wellhead price in the first six months of 1994 was
$2.35 a thousand cubic feet, compared with $2.23 in the 1993 period. In the
second quarter, the average gas price fell to $2.17 a thousand cubic feet, down
10 percent from $2.40 in the second quarter of 1993. Gas production in the
first half of 1994 was 66.5 Bcf, up 9 percent from 61.1 Bcf in 1993. Second
quarter gas production was 31.8 Bcf, up 12 percent from 28.5 Bcf in the 1993
quarter. Consolidated's average oil prices were lower in both 1994 periods,
reflecting the overall decline in world oil prices. Wellhead prices averaged
$13.54 a barrel in the six months compared with $16.90 in 1993, while prices
for the quarter averaged $15.09 a barrel, down
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
from $16.89 a year ago. Oil production was 1.8 million barrels in the first
half of 1994, down from 1.9 million barrels in 1993. For the second quarter,
oil production was 882,000 barrels, compared with 897,000 barrels in the 1993
quarter. The lower oil production in both 1994 periods was attributable to
normal production declines at older properties.
Other
Operating income from Consolidated's "Other operations" was $.9 million in the
first six months of 1994, compared with $1.0 million in 1993. In the second
quarter, these operations experienced an operating loss of $.5 million,
compared with a marginal profit in 1993. A large portion of the operating
income of these operations in the 1994 periods, and of the operating revenues
in the 1993 and 1994 periods, is attributable to CNG Gas Services Corporation
("CNG Gas Services," a subsidiary). Operating income of CNG Gas Services was
$.9 million in the first six months of 1994, compared with an operating loss of
$.5 million in the 1993 period. In the second quarter, this subsidiary
recorded an operating loss of $.3 million, compared with a loss of $.4 million
in 1993. Gas sales by CNG Gas Services totaled 95.0 Bcf in the first half of
1994, up from 48.0 Bcf in 1993. Gas sales in the second quarter were 44.4 Bcf,
compared with 25.4 Bcf in 1993. Operating revenues of CNG Gas Services were
$253.2 million in the first half of 1994, and $107.2 million in the second
quarter. In the comparable 1993 periods, operating revenues were $118.2
million and $66.5 million, respectively.
OPERATING REVENUES
Total gas sales revenues in the first six months of 1994 increased $70.1
million from the comparable 1993 period. Gas sales volumes were 347.5 Bcf in
the first half of 1994, up 11.0 Bcf from a year ago. The average unit selling
price of all gas was $4.22 per thousand cubic feet (Mcf) in the 1994 six-month
period, up from $4.15 per Mcf in 1993. Higher residential and commercial space
heating sales due to the cold weather experienced early in the year was a
significant factor for the increased sales volumes and revenues in the six
months of 1994. Higher nonregulated gas sales, including increased sales of
produced gas and higher sales by CNG Gas Services, also contributed to the
higher revenues in 1994. As expected, wholesale sales in 1994 were
significantly lower due to the abandonment by CNG Transmission of its
traditional wholesale sales service, while 1993 reflected the sales of gas from
inventory made by CNG Transmission in anticipation of FERC Order 636. Higher
average retail sales prices and higher prices received for gas produced in the
first half of 1994 also contributed to the higher revenues. In the second
quarter of 1994, gas sales revenues increased $8.5 million and gas sales
volumes were up 17.3 Bcf. The nationwide decline in gas prices during the 1994
quarter held back the growth in revenues, while the volume increase was mainly
attributable to CNG Gas Services.
Other operating revenues increased by $45.0 million in the first six months and
$24.5 million in the second quarter over the comparable 1993 periods. The
increases were due primarily to higher gas transportation revenues, which were
up $37.9 million in the six months and $18.1 million in the second quarter as
the result of increased volumes. Storage service revenues were also higher in
both 1994 periods, increasing $2.2 million in the six months and $2.4 million
in the quarter, reflecting the increased level of service provided customers.
Revenues from the sale of oil and condensate production declined $7.7 million
in the first half of 1994 and $2.4 million in the second quarter primarily as
the result of lower wellhead prices. Revenues from oil brokering were down
$3.8 million in the six months of 1994 due to lower prices, but increased $.5
million in the 1994 second quarter as the result of higher volumes. Revenues
from the sale of products extracted from natural gas declined $1.6 million in
the first half of 1994 due to lower prices received for most categories of
by-products. In the second quarter, by-product revenues increased $.8 million
as higher sales volumes more than offset the impact of lower product prices.
The foregoing revenue declines were offset, however, by increases in other
miscellaneous revenues in both 1994 periods, including the recovery of
transport costs by the Company's nonregulated operations.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
OPERATING EXPENSES
Operating expenses, including income taxes, increased $111.5 million in the
first six months of 1994 and $35.4 million in the second quarter. Total
purchased gas expense was up $63.7 million in the first half and $22.4 million
in the second quarter of 1994 due primarily to increased volume requirements.
Other purchased products expense was higher in both 1994 periods, increasing
$7.6 million in the first half and $4.9 million in the second quarter, due to
increased transport capacity purchased from other pipeline companies. Combined
operation and maintenance expenses were up $20.7 million in the first six
months and $7.0 million in the second quarter of 1994. 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 six-month period.
Higher maintenance charges, increased production and gathering expenses, and
higher products extraction expenses also contributed to the increases in both
1994 periods. The higher depreciation and amortization charges in both 1994
periods were due to the increased plant investment of the regulated
subsidiaries and to higher gas production volumes by the exploration and
production operations. Taxes, other than income taxes, were higher in both the
first half and second quarter of 1994 due in part to higher revenue-based
taxes, and increased property and payroll taxes.
"Income taxes -- estimated" increased $6.4 million in the first six months of
1994 due in part to higher pretax earnings and to the increase in the federal
corporate income tax rate from 34 percent to 35 percent enacted in August 1993.
Although the tax rate increase was retroactive to January 1, 1993, the higher
taxes for the period prior to August 1993 were not recorded until the new tax
law was enacted, which occurred in the third quarter of 1993. Lower pretax
earnings was the primary factor for the reduction in income tax expense in the
1994 second quarter.
In connection with this discussion of results of operations, reference is also
made to Notes 2 through 6 to the consolidated financial statements.
SELECTED TWELVE-MONTH DATA
The following selected financial data (unaudited) relates to the twelve months
ended June 30, 1994 (in thousands of dollars):
______________________________________________________________________________
Operating revenues..................................... $3,299,093
Operating expenses..................................... 3,038,119
Operating income................................... 260,974
Other income........................................... 9,490
Interest charges....................................... 80,333
Net income......................................... $ 190,131
Earnings per share of common stock................. $2.05
Average common shares outstanding (thousands)...... 92,942
Times fixed charges earned............................. 4.02
______________________________________________________________________________
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 June 30, 1994, CNG Transmission filed with the FERC for recovery, through a
direct bill mechanism, of an additional $9.8 million of Order 636 transition
costs. These billings are in addition to the $178 million of transition costs
CNG Transmission began collecting in late 1993. On July 29, 1994, the FERC
accepted CNG Transmission's filing with an effective date of July 30, 1994,
subject to refund. 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 21, 1994, the Pennsylvania Public Utility Commission ("PUC") granted
Peoples Natural Gas approval to recover, through a volumetric surcharge, the
non-gas cost related portion of Order 636 transition costs billed by upstream
pipeline companies. The surcharge will be recalculated every three months
depending on 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 was allowed
to go into effect on July 1, 1994, subject to refund. In its June 30, 1994
compliance filing, CNG Transmission reduced its proposed recovery of stranded
facilities costs from $9.2 million to approximately $3 million while
maintaining an overall revenue increase of $106.6 million.
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. In its filing, Peoples Natural Gas had requested a
$28.4 million increase in base rates. The new rates became effective July 22,
1994.
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 was effected in July 1994.
East Ohio Gas and River Gas will maintain separate base rates at current levels
as well as separate gas cost recovery rates until a decision is rendered by the
PUCO on the East Ohio Gas rate increase request currently pending. A decision
by the PUCO in that proceeding is expected in October 1994.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Concluded)
Gas Market Hubs
On July 1, 1994, the previously announced 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. CNG Transmission will join in operating the
center when SEC approval under the Public Utility Holding Company Act of 1935
is obtained.
Also, 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 will be a point on "Streamline," a computerized network
for cash-market natural gas trades that has been developed by Williams.
Streamline will handle cash-market transactions from the time traders enter a
buy or sell position, through matching and credit checking, to contract
administration and physical delivery at a market hub. 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
The federal government awarded CNG Producing Company ("CNG Producing," a
subsidiary) all 10 leases on which it, either alone or with partners, was high
bidder in the March 1994 Gulf of Mexico lease sale. CNG Producing acquired 100
percent working interests in six tracts and 50 percent working interests in
four others at a cost of $6.6 million. All of the properties are located in
the central Gulf of Mexico.
**********
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 report to the Securities and Exchange Commission on
Form 10-Q for the quarter ended March 31, 1994.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material new legal proceedings instituted in the second
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
The Company's Annual Meeting of Shareholders was held on May 17, 1994. Common
shareholders voted on the election of two Directors for a three-year term
expiring May 1997, the ratification of the appointment of independent
accountants for the year 1994, and a proposal to approve the adoption of a
Restricted Stock Plan for non-employee Directors. The voting results on these
matters were as follows:
1. Election of Directors
Votes Votes Broker
Nominees For Exceptions Withheld Non-Votes
________ __________ __________ ________ _________
Steven A. Minter 77,654,157 24,149 1,670,363 0
Lois Wyse 77,314,919 363,387 1,670,363 0
Directors whose term of office continued after the meeting:
Term expiring May 1995: J. W. Connolly, George A. Davidson, Jr.,
Lester D. Johnson and Richard P. Simmons
Term expiring May 1996: Paul E. Lego, Theodore Levitt and Walter R. Peirson
2. Appointment of
Price Waterhouse as Votes Votes Broker
Independent Accountants For Against Abstentions Non-Votes
__________ _______ ___________ _________
78,080,049 844,585 424,035 0
3. Adoption of Non-Employee
Directors' Restricted Votes Votes Broker
Stock Plan For Against Abstentions Non-Votes
__________ _______ ___________ _________
70,216,872 7,526,362 1,605,435 0
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 six months ended
June 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 June 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
August 12, 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 six months ended
June 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 June 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>
________________________________________________________________________________
_________________________
Six Months to
Three Months to
June 30
June 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. . . . . . . . . . . . . . $133,987 $ 132,350
$ 3,069 $ 6,636
Cumulative effect prior to January 1, 1993,
of applying Statement of Financial Accounting
Standards No. 109 (SFAS No. 109) . . . . . . . . . - 17,422
- - - -
________ _________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . . $133,987 $ 149,772
$ 3,069 $ 6,636
======== =========
======== ========
Average common shares outstanding. . . . . . . . . . 92,977 92,706
93,014 92,802
________ _________
________ ________
Earnings per share of common stock
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . $ 1.44 $ 1.43
$ .03 $ .07
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .19
- - - -
________ _________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . $ 1.44 $ 1.62
$ .03 $ .07
======== =========
======== ========
PRIMARY EARNINGS PER SHARE
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . $133,987 $ 132,350
$ 3,069 $ 6,636
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . . - 17,422
- - - -
________ _________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . . $133,987 $ 149,772
$ 3,069 $ 6,636
======== =========
======== ========
Average common shares outstanding. . . . . . . . . . 92,977 92,706
93,014 92,802
Incremental shares resulting from
assumed exercise of stock options. . . . . . . . . 110 317
61 387
________ _________
________ ________
Average common shares, as adjusted . . . . . . . . . 93,087 93,023
93,075 93,189
________ _________
________ ________
Primary earnings per share
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . $ 1.44 $ 1.42
$ .03 $ .07
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .19
- - - -
________ _________
________ ________
Net income . . . . . . . . . . . . . . . . . . . . $ 1.44 $ 1.61
$ .03 $ .07
======== =========
======== ========
________________________________________________________________________________
_________________________
</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>
________________________________________________________________________________
_________________________
Six Months to
Three Months to
June 30
June 30
____________________
_____________________
1994 1993
1994 1993
________________________________________________________________________________
_________________________
<S> <C> <C>
<C> <C>
FULLY DILUTED EARNINGS PER SHARE
Income before cumulative effect of change
in accounting principle. . . . . . . . . . . . . . $133,987 $ 132,350
$ 3,069 $ 6,636
Interest on 7 1/4% Convertible Subordinated
Debentures, net of tax effect. . . . . . . . . . . 6,048 6,268
3,019 3,093
________ _________
________ ________
Income before cumulative effect of change
in accounting principle, as adjusted . . . . . . . 140,035 138,618
6,088 9,729
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . . - 17,422
- - - -
________ _________
________ ________
Net income, as adjusted. . . . . . . . . . . . . . . $140,035 $ 156,040
$ 6,088 $ 9,729
======== =========
======== ========
Average common shares outstanding. . . . . . . . . . 92,977 92,706
93,014 92,802
Incremental shares resulting from
assumed exercise of stock options. . . . . . . . . 181 368
171 430
Shares issuable from assumed conversion
of 7 1/4% Convertible Subordinated
Debentures . . . . . . . . . . . . . . . . . . . . 4,595 4,630
4,595 4,630
________ _________
________ ________
Average common shares, as adjusted . . . . . . . . . 97,753 97,704
97,780 97,862
________ _________
________ ________
Fully diluted earnings per share
Income before cumulative effect of change
in accounting principle, as adjusted . . . . . . $ 1.43 $ 1.42
$ .06 $ .10
Cumulative effect prior to January 1, 1993,
of applying SFAS No. 109 . . . . . . . . . . . . - .18
- - - -
________ _________
________ ________
Net income, as adjusted. . . . . . . . . . . . . . $ 1.43 $ 1.60
$ .06(2) $ .10(2)
======== =========
======== ========
________________________________________________________________________________
_________________________
<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 paragraph 40 of APB Opinion No. 15 because the assumed
conversion of the 7 1/4%
Convertible Subordinated Debentures produces an antidilutive result.
</TABLE>
EXHIBIT 12
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
_____________________________________________________________________________
Twelve Months to June 30 1994
_____________________________________________________________________________
Earnings:
Net income................................................ $190,131
Add income taxes.......................................... 106,273
________
Income before income taxes.............................. 296,404
Distributed income from unconsolidated investee,
less equity in earnings thereof......................... 748
________
Subtotal................................................ 297,152
________
Add fixed charges:
Interest on long-term debt, including amortization
of debt discount and expense less premium............. 84,535
Other interest expense.................................. 5,534
Portion of rentals deemed to be representative
of the interest factor................................ 8,449
________
Total Fixed Charges......................................... 98,518
________
Total Earnings.............................................. $395,670
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Ratio of Earnings to Fixed Charges.......................... 4.02
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