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
MARCH 31, 1995
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 April 28,
1995: 93,110,452
<PAGE>
CONSOLIDATED NATURAL GAS COMPANY
FORM 10-Q QUARTERLY REPORT
For the Quarter Ended March 31, 1995
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
for the Quarters Ended March 31, 1995 and 1994............... 1
CONDENSED CONSOLIDATED BALANCE SHEET
at March 31, 1995 (Unaudited), and December 31, 1994......... 2
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
for the Quarters Ended March 31, 1995 and 1994............... 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...................................... 13
ITEM 2. CHANGES IN SECURITIES.................................. 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................ 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.... 13
ITEM 5. OTHER INFORMATION...................................... 13
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K...................... 13
SIGNATURES....................................................... 15
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Natural Gas Company and Subsidiaries
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) (Thousands of Dollars)
____________________________________________________________________________
Three Months to March 31
1995 1994*
____________________________________________________________________________
OPERATING REVENUES
Regulated gas sales............................ $ 706,326 $ 818,051
Nonregulated gas sales......................... 292,901 214,461
__________ __________
Total gas sales............................ 999,227 1,032,512
Gas transportation and storage................. 129,755 115,691
Other.......................................... 62,655 65,393
__________ __________
Total operating revenues (Note 3).......... 1,191,637 1,213,596
__________ __________
OPERATING EXPENSES
Purchased gas.................................. 637,225 638,714
Transport capacity and other
purchased products........................... 42,371 33,135
Operation expense.............................. 158,491 171,723
Maintenance.................................... 20,490 19,577
Depreciation and amortization.................. 65,903 78,402
Impairment of gas and oil producing
properties (Note 4).......................... 226,209 -
Taxes, other than income taxes................. 56,866 54,606
__________ __________
Subtotal................................... 1,207,555 996,157
__________ __________
Operating income before income taxes....... (15,918) 217,439
Income taxes................................... (17,771) 66,587
__________ __________
Operating income........................... 1,853 150,852
__________ __________
OTHER INCOME
Interest revenues.............................. 1,322 1,255
Other-net...................................... 1,368 889
__________ __________
Total other income......................... 2,690 2,144
__________ __________
Income before interest charges............. 4,543 152,996
__________ __________
INTEREST CHARGES
Interest on long-term debt..................... 21,997 22,161
Other interest expense......................... 5,443 2,405
Allowance for funds used during construction... (1,501) (2,488)
__________ __________
Total interest charges..................... 25,939 22,078
__________ __________
NET INCOME (LOSS).............................. $ (21,396) $ 130,918
========== ==========
Earnings (loss) per share of common stock,
based on average shares outstanding........ $(.23) $1.41
Average common shares outstanding (thousands) 93,045 92,941
Dividends declared per common share.......... $.485 $.485
____________________________________________________________________________
*Certain amounts reclassified for comparative purposes.
The Notes to Consolidated Financial Statements are an integral part of this
statement.
1
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ITEM 1. FINANCIAL STATEMENTS (Continued)
Consolidated Natural Gas Company and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
_____________________________________________________________________________
At March At December
31, 1995 31, 1994
(Unaudited)
_____________________________________________________________________________
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Gas utility and other plant.................... $ 4,563,690 $ 4,546,753
Accumulated depreciation and amortization...... (1,716,151) (1,686,788)
___________ ___________
Net gas utility and other plant........... 2,847,539 2,859,965
___________ ___________
Exploration and production properties.......... 3,161,488 3,130,203
Accumulated depreciation and amortization...... (2,214,847) (1,963,522)
___________ ___________
Net exploration and production properties. 946,641 1,166,681
___________ ___________
Net property, plant and equipment......... 3,794,180 4,026,646
___________ ___________
CURRENT ASSETS
Cash and temporary cash investments............ 145,796 31,923
Accounts receivable, less allowance for
doubtful accounts............................ 648,710 546,291
Gas stored - current portion (LIFO method)..... 23,631 190,196
Materials and supplies (average cost method)... 35,081 35,072
Unrecovered gas costs.......................... 981 13,135
Deferred income taxes - current................ 65,089 60,103
Prepayments and other current assets........... 183,438 188,019
___________ ___________
Total current assets...................... 1,102,726 1,064,739
___________ ___________
REGULATORY AND OTHER ASSETS
Unamortized abandoned facilities............... 37,884 40,955
Other investments.............................. 63,604 54,682
Deferred charges and other assets (Note 3)..... 322,205 331,651
___________ ___________
Total regulatory and other assets......... 423,693 427,288
___________ ___________
Total assets.............................. $ 5,320,599 $ 5,518,673
=========== ===========
STOCKHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION
Common stockholders' equity (Notes 5 and 6)
Common stock, par $2.75
(Issued: 1995 - 93,076,551 shares;
1994 - 93,027,847 shares).................. $ 255,960 $ 255,827
Capital in excess of par value............... 460,263 458,628
Retained earnings............................ 1,403,346 1,469,879
___________ ___________
Total common stockholders' equity......... 2,119,569 2,184,334
Long-term debt................................. 1,148,250 1,151,973
___________ ___________
Total capitalization...................... 3,267,819 3,336,307
___________ ___________
CURRENT LIABILITIES
Current maturities on long-term debt........... 4,000 4,000
Commercial paper............................... 283,000 440,000
Accounts payable............................... 324,109 357,611
Estimated rate contingencies and
refunds (Note 3)............................. 105,123 83,404
Amounts payable to customers................... 96,468 96,140
Taxes accrued.................................. 146,793 94,413
Temporary replacement reserve - gas
inventory (LIFO)............................. 53,069 -
Other current liabilities...................... 150,108 135,180
___________ ___________
Total current liabilities................. 1,162,670 1,210,748
___________ ___________
DEFERRED CREDITS
Deferred income taxes.......................... 673,470 758,633
Accumulated deferred investment tax credits.... 32,682 33,229
Deferred credits and other liabilities......... 183,958 179,756
___________ ___________
Total deferred credits.................... 890,110 971,618
___________ ___________
COMMITMENTS AND CONTINGENCIES
___________ ___________
Total stockholders' equity and liabilities $ 5,320,599 $ 5,518,673
=========== ===========
_____________________________________________________________________________
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)
_____________________________________________________________________________
Three Months to March 31
1995 1994
_____________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................ $ (21,396) $ 130,918
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization................ 65,903 78,402
Impairment of gas and oil producing
properties................................. 226,209 -
Deferred income taxes-net.................... (91,512) (8,128)
Changes in current assets and
current liabilities
Accounts receivable-net.................... (102,399) (58,110)
Inventories................................ 166,556 123,239
Unrecovered gas costs...................... 12,154 (7,918)
Accounts payable........................... (22,215) (66,010)
Estimated rate contingencies and refunds... 21,719 (20,629)
Amounts payable to customers............... 328 15,255
Taxes accrued.............................. 52,380 43,377
Temporary replacement reserve - gas
inventory (LIFO)......................... 53,069 104,792
Other-net.................................. 18,043 28,976
Changes in other assets and
other liabilities.......................... 27,261 14,294
Other-net.................................... 114 99
_________ _________
Net cash provided by operating activities 406,214 378,557
_________ _________
CASH FLOWS USED IN INVESTING ACTIVITIES
Plant construction and other property additions.. (80,471) (61,051)
Proceeds from dispositions of property, plant
and equipment-net.............................. 117 (269)
Cost of other investments-net.................... (8,603) (880)
_________ _________
Net cash used in investing activities.... (88,957) (62,200)
_________ _________
CASH FLOWS PROVIDED BY (OR USED IN) FINANCING ACTIVITIES
Issuance of common stock......................... 1,516 156
Unsecured loan repayment......................... (4,000) -
Commercial paper repayments-net.................. (155,775) (233,136)
Dividends paid................................... (45,114) (45,074)
Other-net........................................ (11) (2)
_________ _________
Net cash used in financing activities.... (203,384) (278,056)
_________ _________
Net increase in cash and temporary
cash investments....................... 113,873 38,301
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1. 31,923 27,122
_________ _________
CASH AND TEMPORARY CASH INVESTMENTS AT MARCH 31.. $ 145,796 $ 65,423
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for
Interest (net of amounts capitalized).......... $ 14,145 $ 10,779
Income taxes (net of refunds).................. $ (3,347) $ 10,908
Non-cash financing activities
Conversion of 7 1/4% Convertible
Subordinated Debentures...................... $ - $ 2,005
_____________________________________________________________________________
The Notes to Consolidated Financial Statements are an integral part of this
statement.
3
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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, 1994, 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 1994 (1994 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 a major portion of the gas sold or transported by the Company's
distribution and transmission operations is ultimately used for space heating,
both revenues and earnings are subject to seasonal fluctuations. 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 $52,210,000 and
$75,677,000 at December 31, 1994, and March 31, 1995, including interest.
These amounts are reported in the Condensed Consolidated Balance Sheet under
"Estimated rate contingencies and refunds" together with $31,194,000 and
$29,446,000, 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 $69,451,000 and $66,336,000 at December 31, 1994, and March 31, 1995,
respectively. Additional amounts are likely to be accrued 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 subsidiaries should generally be able to pass through all Order
636 transition costs to their customers.
(4) As described in the 1994 Form 10-K, Consolidated follows the full cost
method of accounting for its gas and oil producing activities prescribed by the
SEC. Under this method, all costs directly associated with property
acquisition, exploration and development activities are capitalized, with the
limitation that such amounts, net of related deferred taxes, not exceed the
present value of the estimated future net revenues expected from the production
of the related proved gas and oil reserves. The estimate of future revenues is
determined under guidelines established by the SEC and is not necessarily
indicative of the future economic value of the Company's proved reserves.
However, if net capitalized costs exceed the estimated value at the end of any
quarterly period, then a permanent write-down of the assets must be recognized
in that period.
Due primarily to the decline in wellhead gas prices since December 31, 1994,
the Company was required to recognize an impairment of its gas and oil producing
properties at March 31, 1995. The charge amounted to $226,209,000 and reduced
1995 first quarter net income by $145,000,000, or $1.56 per share. The charge
had no effect on the Company's cash flow.
4
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ITEM 1. FINANCIAL STATEMENTS (Concluded)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
(5) A summary of the changes in common stock, capital in excess of par value,
and treasury stock subsequent to December 31, 1994, 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, 1994......... 93,028 $255,827 $458,628 - $ -
Common stock issued
System Thrift Plans........ 43 118 1,453 - -
Stock awards............... 5 13 165 - -
Stock options.............. 1 2 28 - -
Purchase of treasury stock... - - - (15) (552)
Sale of treasury stock....... - - (11) 15 552
______ ________ ________ ____ _____
At March 31, 1995............ 93,077 $255,960 $460,263 - $ -
====== ======== ======== ==== =====
_____________________________________________________________________________
(6) The indenture between the Company and Chemical Bank, as Trustee, relating
to certain of the Company's senior debenture issues contains restrictions on
dividend payments by the Company and acquisitions of its capital stock. Under
these provisions, $600,510,000 of consolidated retained earnings was free from
such restrictions at March 31, 1995.
(7) Subsequent to the end of the first quarter, the Company sold $150,000,000
of 7 3/8% Debentures due April 1, 2005. Payment for the Debentures took place
on April 19, 1995.
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 quarter of the year. As shown in the Condensed Consolidated
Statement of Cash Flows, net cash provided by operating activities was $406.2
million and $378.6 million for the three months ended March 31, 1995 and 1994,
respectively. In addition to satisfying cash requirements for operations,
capital expenditures, and dividend payments in the current year quarter,
available cash was used to reduce the amount of commercial paper borrowings
outstanding at the end of 1994.
Due to the significant amount of revenues generated during the first quarter,
the consolidated balance sheet at the end of March customarily shows an increase
in cash and temporary cash investments and an increase in accounts receivable
over balances at the end of the previous year. In addition, the inventory of
stored gas is reduced during the first quarter of the year 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
later in the year, and by year-end the liability is eliminated.
As discussed in Note 7 to the consolidated financial statements, subsequent to
the end of the first quarter the Company sold $150 million of debentures under a
currently effective shelf registration with the SEC. The proceeds from this
transaction will be used to finance, in part, 1995 capital expenditures and/or
reduce short-term debt.
As a result of the Company's first quarter 1995 charge to recognize an
impairment of its gas and oil producing properties (see Note 4 to the
consolidated financial statements, page 4), Consolidated's ability to issue
funded debt will be restricted for a period of time (see "Restrictions Under
Certain Debt Agreements," page 4, of the 1994 Form 10-K). However, the Company
has adequate alternative financing resources available to meet expected
operating and capital requirements.
During the remainder of 1995, 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.
In connection with this discussion of financial condition, reference is also
made to Notes 3, 5 and 6 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 ENDED MARCH 31, 1995 AND 1994
System Results
The Company reported a net loss for the first three months of 1995 of
$21,396,000, or 23 cents a share, compared with net income of $130,918,000, or
$1.41 per share, in the first three months of 1994. The 1995 results include
the effect of a non-cash charge to write down the cost of gas and oil producing
properties, amounting to $145,000,000 after taxes, or $1.56 per share.
Excluding the impact of this charge, net income for the first three months of
1995 would have been $123,604,000, or $1.33 per share. Low wellhead prices for
natural gas, warmer than normal weather and lower gas and oil production in
1995 more than offset the favorable effects of higher rates in place for most
of the Company's gas distribution customers, reduced operating costs, and
higher oil wellhead prices.
The impairment charge to write down the cost of the Company's gas and oil
producing properties was due primarily to the decline in gas wellhead prices,
reflecting ample supplies nationwide and high storage inventory levels
attributable to the mild winter weather during late 1994 and the first quarter
of 1995. Consistent with the continued low prices nationwide for natural gas,
the Company's average gas wellhead price was $1.82 a thousand cubic feet (Mcf)
in the first quarter of 1995, down significantly from $2.51 in 1994.
Weather in Consolidated's retail service territories in the 1995 first quarter
was 13.3 percent warmer than 1994, and 7.4 percent warmer than normal. The
warmer weather resulted in lower space heating sales by the distribution
subsidiaries and reduced transportation volumes by the Company's transmission
operations. However, higher rates in effect for most of the Company's gas
distribution customers helped to partially offset the effects of the warmer
weather. First quarter 1995 results reflect general rate increases that went
into effect in the latter half of 1994 at The East Ohio Gas Company (East Ohio
Gas), The Peoples Natural Gas Company (Peoples Natural Gas), and Virginia
Natural Gas, Inc. (Virginia Natural Gas). The rate increase at Virginia Natural
Gas is being collected subject to refund.
Operating Revenues
Regulated gas sales revenues in the first three months of 1995 declined $111.8
million from the comparable 1994 period, with sales volumes declining 17.6
billion cubic feet (Bcf) from the prior year to 127.7 Bcf. Nonregulated gas
sales revenues increased $78.5 million, with sales volumes increasing 89.3 Bcf
to 172.0 Bcf. Regulated gas sales revenues and volumes declined for each of
the Company's major customer groups -- residential, commercial and
industrial -- in the 1995 quarter reflecting, for the most part, weather that
was warmer than the prior year. The increase in nonregulated gas sales revenues
was attributable to the growth of the energy marketing services component. The
increased volumes sold more than offset the decline in wellhead and brokered gas
prices.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Gas transportation and storage revenues were $129.8 million in the 1995 first
quarter, up $14.1 million over the comparable 1994 period. The increase was due
principally to higher gas transportation revenues, which increased $13.4 million
in part due to increased transportation volumes and higher rates in effect at
the distribution subsidiaries.
Other operating revenues declined $2.8 million to $62.6 million in the 1995
first quarter. Oil and condensate revenues increased $4.2 million due
primarily to higher prices. Revenues from oil brokering were up $2.6 million,
while revenues from the sale of oil and condensate production increased $1.6
million. Revenues from the sale of products extracted from natural gas declined
$3.1 million in the first quarter of 1995, due largely to lower sales volumes
for ethane and propane. Other revenues decreased $3.9 million in 1995 compared
to the prior year quarter due in part to reduced revenues from royalties and
other miscellaneous revenue categories.
Operating Expenses
Operating expenses, excluding income taxes, increased $211.3 million in the
first three months of 1995 to $1.21 billion. Excluding the impact of the
impairment of gas and oil producing properties of $226.2 million, first quarter
1995 operating expenses declined $14.9 million compared with the prior year.
Total purchased gas expense was relatively unchanged, down $1.5 million to
$637.2 million. Increased volume requirements resulting from the growth of
energy marketing services were offset by lower average purchase prices.
Transport capacity and other purchased products expense increased $9.3 million,
to $42.4 million, due largely to increased purchases of transport capacity by
the energy marketing services component. Combined operation and maintenance
expense in the first quarter of 1995 decreased $12.3 million due primarily to
lower payroll costs, including the payment of incentive bonuses which did not
recur in 1995. Lower royalties paid as a result of lower gas wellhead prices,
and lower production-related costs, also contributed to the decrease in
operation expense. The decline in depreciation charges in the first quarter of
1995 was due primarily to lower gas production volumes. Taxes, other than
income taxes, were up $2.1 million in the 1995 quarter due largely to higher
revenue-based taxes and increased property taxes.
Income taxes declined $84.3 million in the first quarter of 1995 reflecting a
pretax loss of $39.2 million in the 1995 quarter, compared to pretax earnings of
$197.4 million a year ago.
Other Income and Interest Charges
Total other income was up $.6 million in the first three months of 1995.
Interest revenues were relatively unchanged compared with the prior year.
"Other-net" was up $.5 million in the 1995 quarter due largely to increased net
equity in earnings of investees. Total interest charges of $26.0 million in the
first quarter of 1995 were up $3.9 million compared to the 1994 quarter
primarily due to an increased level of commercial paper borrowings.
In connection with this discussion of results of operations, reference is also
made to Notes 2 and 3 to the consolidated financial statements.
8
<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 components of the
Company's business.
_____________________________________________________________________________
Three Months to
March 31
__________________
1995 1994
_____________________________________________________________________________
OPERATING INCOME BEFORE INCOME TAXES (In Millions)
Distribution................................ $ 152.9 $ 145.0
Transmission................................ 54.2 52.5
Exploration and production.................. (227.4) 18.0
Energy marketing services*.................. 2.5 -
Other....................................... .8 3.7
Corporate and eliminations.................. 1.1 (1.8)
________ ________
Total..................................... $ (15.9) $ 217.4
======== ========
OPERATING REVENUES (In Millions)
Distribution................................ $ 749.2 $ 854.2
Transmission................................ 140.5 137.9
Exploration and production.................. 83.6 149.0
Energy marketing services*.................. 323.4 -
Other....................................... 4.4 153.9
Corporate and eliminations.................. (109.5) (81.4)
________ ________
Total..................................... $1,191.6 $1,213.6
======== ========
GAS SALES (In Bcf)
Distribution................................ 127.7 145.3
Exploration and production.................. 30.3 48.2
Energy marketing services*.................. 171.9 -
Other....................................... - 50.6
Eliminations................................ (30.2) (16.1)
________ ________
Total sales............................... 299.7 228.0
======== ========
GAS TRANSPORTATION (In Bcf)
Distribution................................ 48.0 46.1
Transmission................................ 254.9 277.3
Exploration and production.................. .4 .2
Energy marketing services*.................. 1.3 -
Other....................................... - .6
Eliminations................................ (63.0) (80.0)
________ ________
Total transportation...................... 241.6 244.2
======== ========
_____________________________________________________________________________
*Includes CNG Energy Services Corporation, CNG Power Company and CNG Power
Services Corporation. These subsidiaries were included in "Other" in 1994.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Distribution
Operating income before income taxes of the gas distribution operations was
$152.9 million in the first three months of 1995, up $7.9 million, or 5 percent,
from $145.0 million in the first quarter of 1994. Distribution throughput in
the 1995 quarter was 175.7 Bcf, an 8 percent decrease from 191.4 Bcf in 1994.
The impact on first quarter 1995 results of general rate increases put into
effect in the latter part of 1994 at East Ohio Gas, Peoples Natural Gas, and
Virginia Natural Gas offset the effects of reduced throughput resulting from
warmer weather in the 1995 period.
Residential gas sales volumes declined 12.0 Bcf in the first three months of
1995 to 92.9 Bcf. Sales to commercial customers decreased 3.9 Bcf to 31.9 Bcf
while volumes transported for these customers rose 1.1 Bcf to 10.5 Bcf. Total
deliveries to industrial customers declined .1 Bcf from the prior year to 38.8
Bcf. Industrial transport volumes were up 1.5 Bcf to 36.0 Bcf, while sales
declined 1.6 Bcf to 2.8 Bcf. Off-system transport volumes declined .7 Bcf in
the quarter.
Transmission
Operating income before income taxes of the gas transmission operations in the
first quarter of 1995 was $54.2 million, up $1.7 million from $52.5 million in
1994. Gas throughput, consisting entirely of transportation volumes, was 254.9
Bcf in the 1995 first quarter, down from 277.3 Bcf in 1994. Increased gas
transportation and storage revenues and decreased operation expense contributed
to the improved operating results in 1995. In addition, a general rate
increase which became effective July 1, 1994, subject to refund, added to
first quarter results.
Exploration and Production
Consolidated's exploration and production operations reported an operating loss
before income taxes of $227.4 million in the first three months of 1995,
compared with operating income before income taxes of $18.0 million in 1994.
The loss in 1995 reflects the non-cash charge of $226.2 million for the
impairment of gas and oil producing properties resulting primarily from low
gas wellhead prices (see Note 4 to the consolidated financial statements,
page 4). In addition, considering the current operating environment for this
business component, future exploration plans and related budgets have been, and
continue to be, reevaluated. Excluding the effect of the impairment charge,
the exploration and production operations experienced an operating loss of
$1.2 million in 1995. The impact of low gas wellhead prices and lower gas
and oil production more than offset the favorable impact of higher oil wellhead
prices, increased revenues from oil brokering, and reduced production-related
expenses.
Reflecting the continued decline in gas prices nationwide, Consolidated's
average gas wellhead price in the first quarter of 1995 was $1.82 per Mcf, down
27 percent from $2.51 in the 1994 first quarter. Gas production in the first
three months of 1995 was 24.3 Bcf, down 30 percent from 34.7 Bcf in 1994. A
combination of voluntary production shut-ins due to low prices and normal
declines at certain properties caused the decrease in production.
Consolidated's average oil wellhead price rose to $16.14 a barrel in the 1995
quarter from $12.08 a year ago. Oil production in the first quarter of 1995 was
735,200 barrels, down from 923,200 barrels in 1994. This decrease is
attributable primarily to normal oil production declines at older properties.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Energy Marketing Services
Energy marketing services reported operating income before income taxes of $2.5
million for the 1995 first quarter. This component is comprised primarily of
CNG Energy Services Corporation, a wholly-owned subsidiary that provides large
customers with natural gas, electricity and related services. The component
also encompasses the Company's ownership interests in seven independent power
plants. Total throughput for this component was 173.2 Bcf in the first quarter.
Energy marketing services also made its first wholesale sale of electric power
in the 1995 period.
SELECTED TWELVE-MONTH DATA
The following selected financial data (unaudited) relates to the twelve months
ended March 31, 1995 (in thousands of dollars):
______________________________________________________________________________
Operating revenues..................................... $3,014,069
Operating expenses..................................... 2,904,021
Operating income before income taxes............... 110,048
Income taxes........................................... (1,931)
Other income........................................... 10,240
Interest charges....................................... 91,362
Net income......................................... $ 30,857*
Earnings per share of common stock................. $.33*
Average common shares outstanding (thousands)...... 93,025
Times fixed charges earned............................. 1.26
______________________________________________________________________________
*Includes the effect of the impairment of gas and oil producing properties
in the first quarter of 1995 amounting to $145,000,000 after taxes, or $1.56
per share.
OTHER INFORMATION
Work Force Reduction Program
In March 1995, Consolidated's Board of Directors approved a work force reduction
program as part of the Company's efforts to permanently reduce costs in response
to competitive conditions. The work force reduction program consists of a
voluntary early retirement program, with eligibility based upon the employee's
age and years of service as of December 31, 1995, and an involuntary separation
program. The early retirement incentives include five additional years of age
and pension service for determining pension benefits. The early retirement
program is being offered at six of the Company's subsidiaries from April 1
through May 31, 1995, with eligible employees retiring before December 31, 1995.
The involuntary separation program will involve severance benefit payments to
affected employees. The Company is expected to permanently eliminate
approximately 470 positions as a result of this program. Management is
currently considering a work force reduction program at a seventh subsidiary.
The charges to earnings resulting from the approved work force reduction program
are expected to be material to the Company's 1995 results of operations and will
be recognized in the second quarter of 1995. However, the savings attributable
to reduced salary and benefit costs will positively impact the last six months
of 1995 and future periods. Also, the recovery of the costs of the program at
the rate-regulated subsidiaries may be sought, if appropriate, in future
rate-making proceedings.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Concluded)
Environmental Matter
The Company has determined through its environmental monitoring practices that
one of its subsidiaries, East Ohio Gas, may not have been in full compliance
with the Resource Conservation and Recovery Act (RCRA) and the Toxic Substances
Control Act (TSCA) which govern the handling, storage and disposal of pipeline
drip fluids that are contaminated with hazardous substances such as
polychlorinated biphenyls (PCBs). East Ohio Gas has taken appropriate action to
bring its operations into compliance with the TSCA and RCRA regulations and is
voluntarily reporting its non-compliance to the appropriate state and federal
environmental agencies. Although East Ohio Gas is subject to civil penalties as
a result of this non-compliance, the Company is unable to estimate the amount of
any fines at this time. Based upon its investigation, the Company does not
expect that these fines and any related remediation costs will have a material
effect on the Company's financial position, results of operations or cash
flows.
Other Matter
As described in the 1994 Form 10-K (see "The Company and its Subsidiaries,"
page 3), the Company has various options under review with respect to the coal
reserves and a related plant site owned by CNG Coal Company, a subsidiary.
Management is considering a possible disposition of the assets of CNG Coal
Company which could result in additional charges to earnings during 1995.
State Regulatory Matters
On January 4, 1995, Hope Gas filed with the Public Service Commission of West
Virginia for an $11.8 million annual revenue increase. The rate increase
request is intended primarily to recover higher costs associated with the
addition, repair, and replacement of pipelines serving customers. If approved,
the new rates would become effective November 1, 1995.
On February 1, 1995, Peoples Natural Gas filed with the Pennsylvania Public
Utility Commission a general rate case seeking $32.8 million in additional
annual revenues. The rate increase request is intended to cover higher
operating expenses and plant investment. If approved, the new rates would
become effective no later than November 2, 1995.
**********
In connection with the financial information included in PART I of this report,
reference is made to the Company's 1994 Annual Report and its Annual Report to
the SEC on Form 10-K for the year ended December 31, 1994.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material new legal proceedings instituted in the first
quarter of 1995, and there have been no material developments during the
quarter in the legal proceedings disclosed in the Company's 1994 Form 10-K as
then pending.
Reference is made to "Environmental Matter" and "State Regulatory Matters,"
page 12, for a description of an environmental matter and certain regulatory
proceedings, respectively.
ITEM 2. CHANGES IN SECURITIES
(a) None.
(b) Limitations on the payment of dividends by the Company are set forth in
Note 6 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.
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1995.
On April 10, 1995, the Company filed a Current Report on Form 8-K with the SEC
to disclose the following matters:
(a) Impairment of gas and oil producing properties (See Note 4 to the
consolidated financial statements, page 4);
(b) Work force reduction program (See "Work Force Reduction Program," page 11);
and
(c) Environmental matter (See "Environmental Matter," page 12).
Financial statements were not required with this filing.
13
<PAGE>
ITEM 6. EXHIBITS, AND REPORTS ON FORM 8-K (Concluded)
EXHIBITS
______________________________________________________________________________
SEC
Exhibit
Number Description of Exhibit
______________________________________________________________________________
(4) Indenture between Consolidated Natural Gas Company and United States
Trust Company of New York, as Trustee, dated as of April 1, 1995,
relative to $150,000,000 principal amount of 7 3/8% Debentures Due
April 1, 2005, previously filed as Exhibit (1) to Form 8-A filed
April 21, 1995, under File No. 1-3196, is hereby incorporated by
reference
(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 ended March 31, 1995 and
1994
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural Gas Company
and Subsidiaries for the twelve months ended March 31, 1995
______________________________________________________________________________
14
<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, Vice Chairman
and Chief Financial Officer
S. R. MCGREEVY
_______________________________________
S. R. McGreevy, Vice President,
Accounting and Financial Control
May 12, 1995
15
<PAGE>
EXHIBIT INDEX
______________________________________________________________________________
SEC
Exhibit
Number Description of Exhibit
______________________________________________________________________________
(4) Indenture between Consolidated Natural Gas Company and United States
Trust Company of New York, as Trustee, dated as of April 1, 1995,
relative to $150,000,000 principal amount of 7 3/8% Debentures Due
April 1, 2005, previously filed as Exhibit (1) to Form 8-A filed
April 21, 1995, under File No. 1-3196, is hereby incorporated by
reference
(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 ended March 31, 1995 and
1994, are filed herewith
(12) Statement re Computation of Ratios:
Ratio of Earnings to Fixed Charges of Consolidated Natural Gas Company
and Subsidiaries for the twelve months ended March 31, 1995, is filed
herewith
______________________________________________________________________________
EXHIBIT 11
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS (Note 1)
(In Thousands, Except Per Share Data)
____________________________________________________________________________
Three Months to March 31
1995 1994
____________________________________________________________________________
EARNINGS (LOSS) PER SHARE OF COMMON STOCK,
as Shown on the Consolidated Statement of Income
Net income (loss)............................... $(21,396) $130,918
________ ________
Average common shares outstanding............... 93,045 92,941
________ ________
Earnings (loss) per share of common stock..... $ (.23) $ 1.41
======== ========
PRIMARY EARNINGS (LOSS) PER SHARE
Net income (loss)............................... $(21,396) $130,918
________ ________
Average common shares outstanding............... 93,045 92,941
Incremental shares resulting from
assumed exercise of stock options............. 22 157
________ ________
Average common shares, as adjusted.............. 93,067 93,098
________ ________
Primary earnings (loss) per share............. $ (.23)(2) $ 1.41
======== ========
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)............................... $(21,396) $130,918
Interest on 7 1/4% Convertible Subordinated
Debentures, net of tax effect................. 2,974 3,029
________ ________
Net income (loss), as adjusted.................. (18,422) 133,947
======== ========
Average common shares outstanding............... 93,045 92,941
Incremental shares resulting from
assumed exercise of stock options............. 64 156
Shares issuable from assumed conversion of
7 1/4% Convertible Subordinated Debentures.... 4,559 4,628
________ ________
Average common shares, as adjusted.............. 97,668 97,725
________ ________
Fully diluted earnings (loss) per share....... $ (.19)(2) $ 1.37
======== ========
____________________________________________________________________________
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 exercise of stock
options and/or the assumed conversion of the 7 1/4% Convertible
Subordinated Debentures produce an antidulutive result.
EXHIBIT 12
CONSOLIDATED NATURAL GAS COMPANY AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of Dollars)
_____________________________________________________________________________
Twelve Months to March 31 1995
_____________________________________________________________________________
Earnings:
Net income................................................ $ 30,857
Add income taxes.......................................... (1,931)
________
Income before income taxes.............................. 28,926
Distributed income from unconsolidated investee,
less equity in earnings thereof......................... (536)
________
Subtotal................................................ 28,390
________
Add fixed charges:
Interest on long-term debt, including amortization
of debt discount and expense less premium............. 88,624
Other interest expense.................................. 11,030
Portion of rentals deemed to be representative
of the interest factor................................ 8,467
________
Total Fixed Charges......................................... 108,121
________
Total Earnings.............................................. $136,511
========
Ratio of Earnings to Fixed Charges.......................... 1.26
========
_____________________________________________________________________________
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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 MARCH 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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