File No. 70-8541
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
AMENDMENT NO. 1 TO
FORM U-1
APPLICATION OR DECLARATION
under
the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
National Fuel Gas Company National Fuel Gas
10 Lafayette Square Distribution Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
Seneca Resources Corporation National Fuel Gas Supply
10 Lafayette Square Corporation
Buffalo, New York 14203 10 Lafayette Square
Buffalo, New York 14203
National Fuel Resources, Inc. Utility Constructors, Inc.
10 Lafayette Square 10 Lafayette Square
Buffalo, New York 14203 Buffalo, New York 14203
(Names of companies filing this statement
and addresses of principal executive offices)
_____________________________________________
NATIONAL FUEL GAS COMPANY
(Name of top registered holding company)
_____________________________________________
Philip C. Ackerman Robert J. Reger, Jr., Esq.
Senior Vice President Reid & Priest LLP
National Fuel Gas Company 40 West 57th Street
10 Lafayette Square New York, New York 10019
Buffalo, New York 14203
(Names and addresses of agents for service)
<PAGE>
This Application-Declaration is amended and revised in its
entirety to read as follows:
"Item 1. Description of Proposed Transactions.
National Fuel Gas Company ("National") is a public utility
holding company registered under the Public Utility Holding Company Act of
1935, as amended (the "Holding Company Act"). National Fuel Gas
Distribution Corporation ("Distribution"), National Fuel Gas Supply
Corporation ("Supply"), Seneca Resources Corporation ("Seneca"), National
Fuel Resources, Inc. ("NFR") and Utility Constructors, Inc. ("Utility
Constructors"), wholly-owned subsidiaries of National, are joining in this
Application-Declaration. Three other wholly-owned subsidiaries of
National, Highland Land & Minerals, Inc., Data-Track Account Services, Inc.
and Leidy Hub, Inc., have not joined in this Application or Declaration.
Neither National nor any subsidiary of National currently has an ownership
interest in an exempt wholesale generator ("EWG") or a foreign utility
company ("FUCO") as defined in Sections 32 and 33 of the Holding Company
Act.
The Applicant-Declarants have filed this Application-Declaration
in connection with their 1995-1997 long-term financing program. The
Applicant-Declarants seek to obtain long-term debt authority from the
Commission through December 31, 1997.
DEBENTURES AND MEDIUM-TERM NOTES REQUIREMENTS
---------------------------------------------
National proposes to issue and sell at one time or from time to
time not to exceed $350,000,000 aggregate principal amount of debt
securities consisting of (i) one or more series of its Debentures (the "New
Debentures") and/or (ii) one or more series of its Debentures designated as
Medium-Term Notes (the "New MTNs"), in each case on terms to be determined
at the time of bidding or when the agreement to sell is made, as the case
may be.
The New Debentures will be offered by use of negotiated sales or
competitive bidding.
The New MTNs will be offered, on a periodic basis, as the need
for funds arises. New MTN offerings will be handled by or through an agent
or agents. National may also sell New MTNs to an agent acting as
principal. Any such New MTN may be resold by such agent to one or more
investors or other purchasers, including other dealers, from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices related to prevailing market
prices at the time of resale.
The New Debentures and/or New MTNs will be issued under an
Indenture dated as of October 15, 1974, between the Company and a trustee,
who is currently The Bank of New York (formerly Irving Trust Company), as
Trustee (the "Trustee"), as heretofore supplemented (the "Indenture"), and
as it will be supplemented by one or more supplemental indentures in the
form attached as Exhibit A-3. The New Debentures will have a term not less
than one year and not more than forty years. The maturities of the New
MTNs, which will range from 9 months to forty years, from date of issue,
will be determined by agreement between National and the respective
purchasers. The price and annual interest rate (which may either be fixed
or variable) of each series of New Debentures and/or each issuance of New
MTNs will be determined at the time of bidding or when the agreement to
sell is made, as the case may be. The prices will range between 95% and
105% of the principal amount. Interest will be paid on pre-established
dates and at stated maturities.
The supplemental indentures, which provide for the issuance of
New Debentures and/or New MTNs, may include provisions for the redemption
prior to maturity at various percentages of the principal amount and may
include various restrictions on optional redemption for a given number of
years which could be for the term of the New Debenture or New MTNs. Market
conditions at the time of sale will determine the applicable redemption
terms. National may issue New Debentures and/or New MTNs containing terms,
conditions and features setting forth covenants, put and call rights and/or
amortization and/or sinking fund provisions that may attract investors and
reduce National's interest costs and/or risks.
National will not issue New MTNs or New Debentures at rates in
excess of those generally obtained at the time of pricing for sales of
medium-term notes or debentures having the same maturity, issued by
companies of comparable credit quality and having similar terms, conditions
and features.
The New Debentures and, to the extent that their terms exceed
twelve months, the New MTNs will be considered funded debt under National's
Indenture and as such National will not be permitted to issue New
Debentures and/or New MTNs unless:
(a) The consolidated income available for interest and
subsidiary preferred stock dividends for any twelve consecutive calendar
months within the fifteen calendar months immediately preceding the date of
such issue shall have been not less than two times the sum of (i) the total
annual interest charges upon the consolidated debt (as defined) of National
and its subsidiaries; and (ii) the total annual dividend requirements on
subsidiary preferred stock, in each case to be outstanding immediately
after such issue; and
(b) After giving effect to the issue of such New Debentures
and/or New MTNs and to the application of the proceeds thereof, the sum of
(i) the principal amount of outstanding consolidated debt (as defined) of
National and its subsidiaries; and (ii) the amount of outstanding
subsidiary preferred stock, shall, in the aggregate, not be more than 60%
of consolidated net tangible assets.
An Officer's Certificate and, to the extent required, an
Independent Accountants' Certificate will be supplied to the Trustee from
time to time in accordance with the Indenture certifying compliance with
these requirements.
The advantages that National may realize through the use of a
medium-term note program are:
-- Lower interest costs may be obtained because medium-term notes
are offered on a continuous basis so that the supply does not exceed the
investors' demand at any given time. By contrast, large underwritten
offerings must be priced in an effort to assure that the entire proposed
offering will be purchased by investors at one time.
-- It provides the flexibility to issue debt maturing at any point
along the yield curve. Previously, there was not a convenient method of
issuing smaller amounts of shorter-term debt in the public markets.
-- The size of the offering can be tailored to National's immediate
need for funds.
-- Market timing risks are reduced due to the averaging of interest
rates over the offering period.
-- The ability to price and issue medium-term notes immediately will
allow National to take advantage of market opportunities.
None of the proceeds from the sale of the New Debentures or New
MTNs proposed herein will be used by National or any subsidiary of National
for the acquisition of an interest in an EWG or a FUCO. Additionally,
neither National nor any subsidiary of National is a party to, or has any
rights under, a service, sales or construction agreement with an EWG or a
FUCO. In the event that National or any subsidiary of National does
acquire an interest in an EWG or a FUCO and proceeds from the sale of the
New Debentures or New MTNs are required, National will file an application-
declaration in accordance with the Holding Company Act, if required.
National proposes to lend, by December 31, 1997, not to exceed
$250,000,000 to Distribution, not to exceed $150,000,000 to Supply, not to
exceed $150,000,000 to Seneca, not to exceed $20,000,000 to NFR and not to
exceed $20,000,000 to Utility Constructors, in exchange for unsecured
subsidiary notes; but the total amount lent by National to such
subsidiaries pursuant to the order herein requested will not exceed the
proceeds received by National from the issuance of the New Debentures
and/or New MTNs. The interest rates and maturity dates of such notes and
their terms, conditions and features will be designed to parallel the
effective cost of capital and other terms, conditions and features of the
corresponding New Debentures and/or New MTNs. This means, among other
things, that National will have the option to require payment of such notes
at any time to the extent that the New Debentures and/or New MTNs mature,
are redeemed, or otherwise reacquired by National.
Distribution, Supply, Seneca, NFR and Utility Constructors will
issue subsidiary notes to National bearing interest at the effective
interest cost of the principal amount of the related New Debentures and/or
New MTNs (which will include the coupon rate of the New Debenture and/or
New MTN issued by National, an amortization of the underwriters' or agents'
fees and an allocation of the other recoverable costs associated with the
long-term debt financing program), in each case rounded to the next highest
1/100th of 1%. For example, if National (i) issued $10,000,000 of New MTNs
with a term of 30 years, a coupon of 8.50% and an all-in effective cost of
8.6235% (8.6235% equals 8.50% plus (a) the effect of amortizing the agents'
fees over the life of the New MTN (such fees for a 30-year New MTN would
equal .750 of the aggregate principal amount of the New MTNs Notes sold),
and (b) an allocation over the life of the New MTN of the other costs
associated with the long-term debt financing program (estimated to be an
additional 5 basis points per issue)), and (ii) lent those proceeds to
Seneca, Seneca would execute an unsecured promissory note to National
promising to pay $10,000,000 in 30 years with an interest rate of 8.63%.
Seneca's interest payment dates would be the same as those of National
under the corresponding New MTNs, and Seneca would promise to repay
principal to National early if National redeemed or tendered for the
corresponding New MTNs.
The proceeds from the sale of such notes may be used by
Distribution, Supply, Seneca, NFR and Utility Constructors (i) to reduce
their respective outstanding short-term borrowings under the lines of
credit described more fully in the Application or Declaration, as amended,
filed with the Commission (File No. 70-8297) and the Commission's related
orders and any successor Application or Declaration and Commission Order,
(ii) to repay notes payable to National which relate to outstanding
debentures or medium-term notes of National that have been redeemed or
tendered for or matured and, to the extent such debentures or medium-term
notes are redeemed or tendered for by National, any premium to the extent
that National and such subsidiaries incur a premium in refinancing, plus
unrecovered debt discount and expense on the outstanding issue tendered for
or redeemed, (iii) for their construction or other capital expenditure
programs, and/or (iv) for general corporate purposes. (Please refer to
Item 6 Exhibit (B) S-10 "Projected Statement of Cash Flows by Subsidiary
for Calendar Years 1995, 1996 and 1997" for an analysis of the projected
borrowing needs of each National subsidiary joining in this Application or
Declaration.)
In the event that proceeds are used to repay subsidiary notes
payable to National which relate to outstanding debentures or medium-term
notes of National that have been redeemed or tendered for, National may
elect to issue New Debentures and/or New MTNs shortly before the redemption
(or discharge) or shortly thereafter. If the New Debentures and/or New
MTNs are issued after a redemption (or discharge) of existing debentures or
medium-term notes, the subsidiary which borrowed the proceeds from the
issuance of the existing debentures or medium-term notes will repay the
notes payable to National by borrowing under the money pool arrangement,
and National will then redeem (or discharge) the existing debentures or
medium-term notes.
National shall not use the proceeds from the sale of New
Debentures and/or New MTNs to enter into refinancing transactions unless
the estimated present value savings derived from the net difference between
interest payments on a new issue of comparable securities and those
securities refunded is, on an after-tax basis, greater than the present
value of all repurchasing, redemption, tendering and issuing costs,
assuming an appropriate discount rate.
INTEREST RATE SWAP REQUIREMENTS
-------------------------------
In conjunction with the Applicant-Declarants' long-term financing
plan, National may enter into one or more interest rate swap agreements
("swaps") in notional amounts aggregating not in excess of $350,000,000 at
any one time outstanding. As a result, National is seeking additional
authority to enter into one or more swaps, and one or more derivative
instruments, such as interest rate caps, interest rate floors and interest
rate collars (collectively, the swaps and derivative instruments are
sometimes referred to as "Swap and Derivative Transactions"), with one or
more counterparties from time to time through December 31, 1997.
National already has certain authority to enter into swaps with
notional amounts not in excess of $200,000,000 pursuant to the SEC order
granted in connection with National's short-term borrowing and system Money
Pool arrangements (File No. 70-8297, Release No. 35-25964 dated December
29, 1993). However, this Application-Declaration requests additional
authority to enter into Swaps and Derivative Transactions in connection
with National's long-term debt, as described in Strategy 1 and Strategy 2
below. National has not engaged in any swap transactions pursuant to the
December 29, 1993 order (File No. 70-8297) as of the date of this
Application - Declaration. All Swap and Derivative Transactions will be
directly related to then outstanding long or short-term debt.
Additionally, should the notional amount of any Swap and Derivative
Transaction exceed by more than $25,000,000 the notional or outstanding
principal amount of the underlying instrument, National will within 90 days
following such event either (a) reduce, restructure or terminate such Swap
and Derivative Transaction or (b) issue a new instrument or restructure the
underlying instrument such that the notional amount of such Swap and
Derivative Transaction will not exceed by more than $25,000,000 the
notional or outstanding principal amount of the underlying instrument.
National proposes to use two different swap strategies. Under
one swap strategy ("Strategy 1"), National would agree to make payments of
interest to a counterparty, payable periodically. The interest would be
payable at a variable or floating rate index and would be calculated on a
notional (i.e., principal) amount. In return, the counterparty would agree
to make payments to National based upon the same notional amount and at an
agreed upon fixed interest rate. This would be a "floating-to-fixed swap"
on National's part. Under another swap strategy ("Strategy 2"), National
and the counterparty may exchange roles. National would pay a fixed
interest rate and receive a variable interest rate on a notional amount.
This would be a "fixed-to-floating swap" on National's part.
Currently, most swap counterparties are banks, which generally
act as dealers (principals) rather than brokers (agents). The
counterparties themselves sometimes represent all or part of the opposite
side of a swap transaction. Otherwise, the counterparties enter into one
or more transactions with other entities, to create the opposite side of a
swap transaction, generally intending to make a profit on the spread.
National will enter into Swap and Derivative Transactions only with
counterparties whose deposits or long-term debt have, at the time the Swap
and Derivative Transaction is entered into, no lower than an "A" rating
from Moody's Investors Service, Inc. ("Moody's"), or an equivalent rating
from Standard & Poor's Corporation, Fitch Investors Service or Duff &
Phelps (each an "Alternate Rating Agency"); provided, however, National may
enter into a Swap and Derivative Transaction with a counterparty whose
deposits or long-term debt have, at the time the Swap and Derivative
Transaction is entered into, a "Baa" rating from Moody's (or an equivalent
rating from an Alternate Rating Agency) if National has at the time
outstanding debt similarly rated. Additionally, National will enter into
only those interest rate swap agreements whose governing law provides
generally for the enforcement of the netting provisions of such agreements
upon the default of the counterparty with National.
Strategy 1
----------
National proposes to enter into Strategy 1 swaps from time to
time (i) in order to reduce the interest costs of existing high cost debt
and/or (ii) in order to reduce the interest cost of new long-term debt
issuances for part or all of their terms. A reduction in interest cost may
occur because, by using a Strategy 1 swap, National functionally converts
some or all of the fixed interest rate payments on long-term debt to
floating rate payments that vary in relation to a short-term debt index. A
Strategy 1 swap would reduce National's interest costs of the debentures or
medium-term notes associated with the swap for the term of such a swap as
long as the short-term index used in the swap to determine the floating
rate paid by National remains the same, decreases, or rises modestly. If
the short-term index rises during the term of the swap, the interest costs
saved by National would decrease until the short-term index is equal to the
fixed rate received by National. If the short-term index rises above the
fixed rate received by National, debt costs to National, going forward,
would be higher than they would be without using a Strategy 1 swap (but
only as long as this situation exists at subsequent reset dates).
Each time National issues debentures or medium-term notes, the
proceeds are lent to one or more of its subsidiaries at an all-in cost that
is equal to the coupon on the debt plus (i) the amortization of the
underwriters' or agents' fees and (ii) an allocation of the other
recoverable costs associated with the long-term debt financing program
(estimated to be an additional 5 basis points per issue). The loans are
documented by intercompany notes from the subsidiaries to National. All
the costs of both long-term and short-term debt are borne by the
subsidiaries. Furthermore, the gains and the losses of doing Swap and
Derivative Transactions will be assumed by the underlying subsidiary.
National would enter into a swap in connection with an underlying
subsidiary note only after determining it to be in the best interest of the
subsidiary at the time of consummation of the swap. Subsidiaries that
could receive the Strategy 1 allocations from National include
Distribution, Supply, Seneca, NFR and Utility Constructors. The subsidiary
that would receive the allocations related to a Strategy 1 swap would be
obligated to enter into an agreement with National to make the interest
payments (and receive the fixed rate interest) at each reset date of the
floating rate index.
A Strategy 1 swap is used to convert the existing fixed payments
made by the subsidiary of National to floating payments for part or all of
the term of the debt. National would decide which subsidiary's debt to
match against a swap under Strategy 1 based on the current cost of the
debt, the term remaining for the debt, whether the debt is redeemable,
availability of all regulatory approvals to do the swap against the
underlying debt and the individual needs of the subsidiary. The effective
net interest payments or receipts realized by National will be passed along
to the subsidiaries of National that issued the underlying debt. None of
the payments or receipts will be retained by National. No principal
payments are made by either party either upon initiation or termination of
a Strategy 1 swap.
Each Strategy 1 swap would be associated with one or more
specific fixed rate debenture(s) or medium-term note(s). More than one
Strategy 1 swap could be associated with one specific debenture or medium-
term note, but the aggregate notional amount of swaps (under Strategy 1 and
Strategy 2) would not exceed $350,000,000 at any one time outstanding.
Furthermore, the aggregate notional amount of Strategy 1 swaps will not
exceed, at the time any swap contract is entered into, the aggregate
principal amount of National's long-term debt then outstanding. Each
Strategy 1 swap would have a term (which may range from 1 month to 40
years) that is less than or equal to the remaining maturity of the
debenture or medium-term note it is associated with. National may from
time to time enter into a Strategy 1 swap or swaps with a counterparty
whereby National would pay a floating interest rate based on one of the
following indices: LIBOR (the "London Interbank Deposit Offered Rate");
the Federal Funds rate; certificate of deposit indices; or commercial paper
indices (H.15 CP index or any other commercial paper index). National
would in return receive a fixed interest rate. The fixed interest rate
would be the Treasury yield for the corresponding term of the swap plus a
swap spread that is based on the "forward curve" which is a market
expectation of the movement of the floating rate index used in the swap in
the future relative to the United States Treasury Securities rates. There
will be no maximum interest rate respecting payments that National may make
under the Strategy 1 swaps unless National purchases an interest rate cap.
In no event, under a Strategy 1 swap, will National enter into a
swap contract in which the floating interest rate paid by National,
inclusive of any intermediary fee, would exceed by more than 200 basis
points, at each reset period, the index used for such Strategy 1 swap.
National's effective net interest payments or receipts under a
Strategy 1 swap will be allocated to the subsidiary of National that issued
the unsecured subsidiary note that corresponds to the debenture or medium-
term note associated with the Strategy 1 swap. If more than one subsidiary
issued unsecured notes that correspond to the specific debenture or medium-
term note, the net interest payments and receipts of the Strategy 1 swap
will be allocated in proportion to the amounts of unsecured notes
outstanding for each subsidiary, provided all subsidiaries have the
necessary legal authority to make and receive such payments. (If a
subsidiary lacks such authority, the notional amount of the swap will not
exceed the principal amount of the note or notes issued by the subsidiaries
that have the necessary legal authority, and the payments and receipts will
only be allocated to those subsidiaries.) Thus, the subsidiaries realize
all the savings (costs) associated with the Strategy 1 swap. The
allocation of the net interest payments or receipts of the Strategy 1 swap
to the subsidiary will be made at each reset date of the respective
floating rate index. The subsidiary that issued the unsecured note that
corresponds to the debenture or medium-term note associated with the
Strategy 1 swap would be obligated to enter into an agreement with National
to make the floating rate payments (and receive the fixed rate receipts) at
each reset date of the floating rate index.
The hypothetical example below, based upon quoted market rates
and indices at December 7, 1994, illustrates the savings that National and
hence its subsidiaries could achieve by using a Strategy 1 swap.
Assume National has the following existing debenture or medium-term note:
Principal $50,000,000
Interest 8.5%
Remaining term 30 years
Proceeds were lent to Supply
Strategy 1 Swap
Notional amount $50,000,000
Term 2 years (4 reset periods,
first one beginning today)
National pays Floating rate equal to
6-month LIBOR (6.75%)
National receives fixed rate equal to 7.93% (market quote).
Savings realized by National at first reset
(pay 6.75%, receive 7.93%) $ 295,000
Savings realized by National for the term
of the swap <FN1> (four payments) $ 1,180,000
The pre-tax savings would be allocated in their entirety to
Supply, which issued the subsidiary note corresponding to the underlying
debenture.
Therefore, the effective interest cost on the 30-year issue would
be 7.32% (versus 8.50% without the swap) for 2 years of its term, assuming
that 6-month LIBOR remains unchanged.
In this example, National would realize a pre-tax savings of
$295,000 at the first reset date of the swap. Reset dates sometimes begin
on the date on which the swap is entered into, or a later date, and then
follow at agreed upon intervals.
For Strategy 1 swaps, pre-tax savings or costs at reset dates
will depend upon how the floating rate index changes, and therefore upon
how the floating rate of interest paid by National changes. Thus, for
example, if 6-month LIBOR increases to 7.0% at the time of the second reset
in this example, the pre-tax savings realized would be reduced to $232,500.
$232,500 = (7.93% - 7.0%) X ($50,000,000 divided by 2). Should 6-month
LIBOR be higher than 7.93% at the time of such reset, National would
incur an additional cost. For example, if 6-month LIBOR instead
increased to 8.5% at the time of the second reset, National (and hence
Supply) would incur a pre-tax cost of $142,500.
The accounting entries on National's and Supply's books for the
Strategy 1 swap transaction described in the above example (at the first
reset date only and assuming flat interest rates) will be as follows, for a
one-month period:
National Fuel Gas Company and Subsidiaries
------------------------------------------
Accounting Entries
------------------
Strategy 1 Swap
---------------
National Fuel Gas Company
-------------------------
Entry No. 1
Accrued Interest Expense $354,167
Interest Payable $354,167
To record accrued interest expense on $50,000,000 8.5% debentures for the
month of January 1995.
Entry No. 2
Interest Receivable $49,167
Accrued Interest Expense $49,167
To record the net proceeds on $50,000,000 swap (pay 6.75%, receive 7.93%)
for the month of January 1995.
Entry No. 3
Accounts Receivable
Associated Companies $305,000
Interest Income $305,000
To charge subsidiary company with net interest cost on $50,000,000
unsecured subsidiary note minus net swap savings (cost) for the month of
January 1995.
Subsidiary Company
------------------
Entry No. 4
Accrued Interest Expense $305,000
Accounts Payable
Associated Companies $305,000
To record interest expense on $50,000,000 unsecured subsidiary note plus
net swap savings (cost) for the month of January 1995.
Entry No. 5
Accrued Income Taxes Payable $106,750
Federal Income Tax Expense $106,750
To record the federal income tax benefit for the month of January 1995.
National Fuel Gas Company and Subsidiaries
------------------------------------------
Elimination Entries
-------------------
Entry No. 6
Interest Income $305,000
Interest Expense $305,000
To record elimination entries for the month of January 1995.
A Strategy 1 swap transaction, if material, would be disclosed in
a note to the consolidated financial statements of National in accordance
with the Generally Accepted Accounting Principles. The Strategy 1 swap
position will not be recorded on the balance sheet of National.
National will not enter into a Strategy 1 swap unless the
estimated savings at the time of initiation of the swap (derived from the
net difference between the interest to be paid by National and the interest
to be received by National under the Strategy 1 swap using then current
market rates) are, on an after-tax basis, greater than the transaction and
ancillary costs of the Strategy 1 swap.
National may also use other derivative strategies from time to
time in conjunction with a Strategy 1 swap or the issuance of a floating
rate medium-term note or debenture. Such derivative strategies may include
interest rate caps, interest rate floors and interest rate collars.<FN2>
Depending on how low the interest rate cap is set or how high the interest
rate floor is set, National may pay or receive an upfront fee, and/or share
with the counterparty a portion of the savings realized on the spread
between the capped rate and the floating rate. The notional amount of
interest rate caps, interest rate floors and interest rate collars to be
entered into in conjunction with a Strategy 1 swap or the issuance of
floating rate medium-term notes or debentures will not exceed, at the time
such derivative strategies are entered into, the sum of (a) the aggregate
notional amount of Strategy 1 swaps then outstanding and (b) the aggregate
principal amount of floating rate medium-term notes or debentures then
outstanding.
For example, National may decide to use a cap to limit its
exposure to interest rate increases that it would be exposed to by entering
into a Strategy 1 swap or issuing floating rate medium-term notes or
debentures. National may purchase a cap for a notional amount that is less
than or equal to the then outstanding notional amount of Strategy 1 swaps
or principal amount of floating rate medium-term notes or debentures , at
an interest rate that may be higher than the floating rate of interest at
the time of entering into the cap. National would therefore receive any
interest costs above the level of the cap for the notional amount for which
the cap was purchased.
National may also decide to buy a collar, where it would sell a
floor in addition to buying a cap. By selling a floor at the time the cap
would be purchased, National would receive a fee that would defray some or
all the fee paid for purchasing the cap. National may also sell the floor
independent of the cap. National would be obligated to pay the interest
costs on the notional amount if the floating rate falls below the floor
rate. The interest rate at which the floor would be sold would depend on
the floating rate that would have to be paid for the Strategy 1 swap or
floating rate medium-term notes or debentures and National's view on
interest rates at that time and in the future.
Caps, collars and floors would enable National to manage the
interest rate risks associated with floating rate payment obligations.
National would determine whether to use caps, floors or collars
at the time that National enters into a Strategy 1 swap or issues floating
rate medium-term notes or debentures or at any time during the term of the
swap or floating rate medium-term notes or debentures. The decision on
whether to use any of the derivatives listed above would depend on
National's view of the expected interest rate movements during the term of
the swap or floating rate medium-term notes or debentures, the expected
risks of loss, and the cost of buying a cap, floor or collar.
The payments or receipts associated with a cap, collar or floor
will be allocated to the subsidiary that issued the underlying obligation.
It is anticipated that each Strategy 1 swap would provide that
each party may terminate or "unwind" the agreement with the other party's
consent, by making early termination payments and/or as may otherwise be
set forth in an agreement as described below. Termination payments would
be determined in accordance with the formula provided in the agreement
between the parties, such as the one provided in the International Swap
Dealers Association Master Agreement filed as Exhibit B-4 to this
Application/Declaration, unless the parties negotiated different payment
arrangements. Termination payments are dependent upon market conditions
and could be substantial at times. Termination payments or the costs to
"unwind" a swap would depend on the movement of the interest rates for the
short term index used in the swap after the swap is consummated. If
National enters into a Strategy 1 swap where National pays a floating rate
and receives a fixed rate, the fixed rate of the swap is calculated as the
rate of interest that sets the net present value of the forward curve for
the short-term index to zero, plus the bid/ask spread. The bid/ask spread
for a swap can vary from 1 to 10 basis points depending on the market
demand for the swap at that time.
If the interest rates had moved exactly as the forward curve had
predicted, during the term of the swap, the termination or "unwind" cost
for the swap would be zero. If the interest rates move higher than
predicted by the forward curve, National would incur a cost to "unwind".
This cost would be equal to the present value of the forward curve (at the
time the termination takes place) for the short-term index for the
remaining term of the swap, discounted at the interest rate of the Treasury
zero-coupon bond having the same term as the remaining term of the swap.
Here again a bid/ask spread based on market conditions would be
added/subtracted from the "unwind" cost. If the interest rates had moved
lower than the forward curve had predicted, National would receive the
"unwind" cost, calculated as described above.
It would be very difficult to determine a dollar figure for such
a termination since the calculations depend entirely on the movement of
interest rates and the implied forward curve at the time of termination.
However, termination or "unwind" costs (or receipts) are not expected to
exceed 10% of the notional amount in most cases. Termination payments (or
receipts) associated with Strategy 1 swaps would be allocated to the
subsidiary that entered into the agreement with National regarding the
payment obligations of the terminated swap.
Strategy 2
----------
National could, from time to time, combine new or existing
floating rate debt (such as the floating rate short-term debt issued from
time to time pursuant to National's short-term borrowing and system Money
Pool arrangements (File No. 70-8297, Release No. 35-25964 dated December
29, 1993)) with a fixed-to-floating interest rate swap (Strategy 2 swap).
National would enter into a Strategy 2 swap with a counterparty whereby
National would pay a fixed interest rate based on the forward curve.
National would in return receive a floating interest rate based on such
indices as LIBOR, the Federal Funds rate, certificate of deposit indices or
commercial paper indices (H.15 CP index or any other commercial paper
index). No principal payments are made or received by either counterparty
upon either the initiation or termination of an interest rate swap,
including a Strategy 2 swap.
The hypothetical example below, based upon quoted market rates
and indices at December 7, 1994, illustrates the nature of a Strategy 2
swap and the savings that might be associated with using it.
Amount of short-term debt $50,000,000
Interest paid on short-term debt
(using the H.15 CP index (6.02%)
plus credit spread of National-
estimated at .13%) $256,250 per month
Strategy 2 Swap
Notional amount of swap $50,000,000
Term of swap 5 years (60 resets)
At each reset, (every month)
National pays a fixed rate @8.02%
(market quote) $334,167 per month
National receives H.15 CP index
at 6.02% $250,833 per month
Total cost of using a swap
($334,167 + 256,250 - 250,833) $339,584
At the next reset, if the H.15 CP
index increases to 7.0%:
Interest paid on short-term debt of
$50,000,000 (using the H.15 CP
index (7.0%) plus the credit spread of
National estimated at .13%) $297,083 per month
Fixed rate on the swap @ 8.02% $334,167 per month
National receives H.15 CP index
at 7.0% $291,667 per month
Total cost of using the swap for the
second reset would be $339,583 per month
As long as National's credit spread does not widen during the 5
years when the swap would be effective, the total interest rate to National
for the 5 years would be 8.15% (($339,583 x 12)/$50,000,000).
National would enter into a Strategy 2 swap, and not reduce its
short-term debt, as opposed to issuing a 5-year medium-term note or
debenture and reducing short-term debt, only if the estimated costs
associated with the swap, including transaction and other costs<FN3>, were
less than the costs of issuing the long-term debt and any costs associated
with reducing short-term debt.
For example, if National issued a medium-term note having the
same term as the above swap (5 years) with the following terms:
Principal amount of debt issued $50,000,000
Effective all-in interest cost <FN4> 8.25%
Monthly interest cost <FN5> $343,7504.
The net savings to National by using a swap for
each reset are ($343,750 - 339,583) $4,167
Total net savings to National by using the swap
over the 5-year period (undiscounted
and pre-tax) <FN6> $250,020
National would save 10 basis points<FN7> in interest cost
calculated on a semi-annual bond basis by using the above swap and
retaining short-term debt instead of issuing the above medium-term note.
In the example above, the subsidiary of National which is
allocated the cost of the swap will save $4,167 per month (each reset), for
a total of $250,020 over a period of 5 years (undiscounted), by keeping the
short-term debt levels constant and using the above swap to fix a
particular interest rate for the long-term, instead of issuing the above
medium-term note, as long as the H.15 CP index and National's short-term
debt costs move in unison.
In the above example, if the interest cost of National's
short-term debt does not move in unison with H.15 CP index, National may
incur additional costs or it may save more, depending on how the two
interest rates change in relation to one another.
For example, if the short-term interest cost for National
increased to 7.10% at the time of a subsequent reset, and the H.15 CP index
increased to 7%, the savings to National would be calculated as follows:
Interest paid on short-term debt @ 7.10% $295,833 per month
Strategy 2 Swap
National pays a fixed rate @ 8.02% $334,167 per month
National receives H.15 CP index
@ 7% $291,667 per month
Total cost of using a swap
($334,167 + 295,833 - 291,667) $338,333
Net savings to National for this
reset ($343,750 - 338,333) $5,417
National saved $5,417 for this reset versus $4,167 for the
previous reset because National's short-term borrowing rates did not
increase as much as the H.15 CP index did.
This savings can also decrease, or National may incur an
additional cost, if at the time of a subsequent reset the difference
between National's short-term interest costs and the H.15 CP index
increases. For example, if National's short-term interest rate is then
7.20% and the H.15 CP index is then 7%, the net monthly savings of the
Strategy 2 swap versus issuing additional debt at 8.25% declines from
$4,167 to $1,250. $343,750 (avoided long-term debt interest) - $334,167
(swap payment) + $291,667 (swap receipt) - $300,000 (short-term interest
payment) = $1,250.
National does not expect the relative differences between
short-term borrowing rates and the H.15 CP index to vary substantially over
time (i.e., by more than 10 basis points in either direction), unless
National is downgraded by the bond rating agencies. There is a possibility
that such a downgrade may erase the savings for the rest of the term of the
swap or until National is upgraded by the bond rating agencies.
The accounting entries for the Strategy 2 swap transaction will
be as follows on the books of National and the affected subsidiary, using
the first Strategy 2 example above, for a one-month period:
National Fuel Gas Company and Subsidiaries
------------------------------------------
Accounting Entries
-------------------
Strategy 2 Swap
---------------
National Fuel Gas Company
-------------------------
Entry No. 1
Accrued Interest Expense $256,250
Interest Payable $256,250
To accrue interest on $50,000,000 short-term debt at 6.15% for the month of
January 1995.
Entry No. 2
Accrued Interest Expense $83,334
Interest Payable $83,334
To record net interest expense on $50,000,000 swap (pay 8.02%, receive
6.02%) for the month of January 1995.
Entry No. 3
Accounts Receivable
Associated Companies $339,584
Interest Income $339,584
To charge subsidiary company with net interest on $50,000,000 short-term
subsidiary note for the month of January 1995.
Subsidiary Company
------------------
Entry No. 4
Accrued Interest Expense $339,584
Accounts Payable
Associated Companies $339,584
To record interest expense on $50,000,000 short-term debt for the month of
January 1995.
Entry No. 5
Accrued Income Taxes Payable $118,854
Federal Income Tax Expense $118,854
To record the federal income tax benefit for the month of January 1995.
National Fuel Gas Company and Subsidiaries
-------------------------------------------
Elimination Entries
--------------------
Entry No. 6
Interest Income $339,584
Interest Expense $339,584
To record elimination entries for the month of January 1995.
The Strategy 2 swap, if material, would be disclosed in a note to
the consolidated financial statements of National in accordance with the
Generally Accepted Accounting Principles. The Strategy 2 swap position
will not be recorded on National's balance sheet.
In no event, under any Strategy 2 swap, will National enter into
a swap contract in which the effective fixed rate of interest paid by
National, inclusive of any intermediary fee, would exceed by more than 2.0%
per annum, at the time of entering into any Strategy 2 swap contract, the
yield on direct obligations of the United States Government as published by
the Federal Reserve (i.e., Treasury Bonds, Notes and Bills) with maturities
comparable to the maturity of such Strategy 2 swap contract.
The aggregate notional amount of Strategy 2 swaps will not, at
any one time, exceed the difference between a) $350,000,000 and b) the
aggregate principal amount of New Debentures and New MTNs then outstanding.
Furthermore, the aggregate notional amount of Strategy 2 swaps will not
exceed, at the time the swap contract is entered into, the difference
between (a) the amount of short-term debt then outstanding pursuant to
National's short-term borrowing arrangements (File No. 70-8297) (which
shall not exceed $400,000,000) and (b) the aggregate notional amount of
swaps then outstanding pursuant to National's short-term borrowings and
system Money Pool arrangements (File No. 70-8297). In no event will the
aggregate notional amount of Strategy 2 swaps, at any one time, exceed
$350,000,000. The term for any Strategy 2 swaps will range from 9 months
to 40 years.
Each time National issues debentures or medium-term notes, the
proceeds are lent to one or more of its subsidiaries at an all in cost that
is equal to the coupon on the debt plus (i) the amortization of the
underwriters' or agents' fees and (ii) an allocation of the other
recoverable costs associated with the long-term debt financing program
(calculated to be an additional 5 basis points per issue). The loans are
documented by intercompany notes from the subsidiaries to National. All
the costs of both long-term and short-term debt are borne by the
subsidiaries. Furthermore, the gains and the losses of doing a swap and
one or more derivative instruments will be assumed by the underlying
subsidiary. National would enter into a swap in connection with an
underlying subsidiary only after determining it to be in the best interest
of the subsidiary at the time of consummation of the swap.
Since a Strategy 2 swap would be used in lieu of issuing New MTNs
or New Debentures under this file, the subsidiary that would have received
the proceeds of issuing long-term debt would be the one which would bear
the costs (savings) of the swap. The costs associated with the short-term
debt that is not repaid as a result of using this swap strategy would be
allocated to the subsidiary that would have paid interest associated with
the New MTNs or New Debentures that would otherwise have been issued. The
fixed rate payments and the floating rate receipts of the Strategy 2 swap
would be allocated to the same subsidiary to which the costs associated
with the short-term debt are assigned. Only those subsidiaries which would
require the use of a certain principal amount of debt for the life of a
proposed strategy 2 swap would be allocated the costs (savings) of the
swap. Subsidiaries that could receive the Strategy 2 allocations from
National include Distribution, Supply, Seneca, NFR and Utility
Constructors. The subsidiary that would receive the cost allocations
related to a Strategy 2 swap (short-term debt principal and interest
payments, fixed rate payments under the swap and floating rate receipts
under the swap) would be obligated to enter into an agreement with National
to make the interest payments (and receive the floating rate interest) at
each reset date of the floating rate index.
It is anticipated that each Strategy 2 swap would provide that
each party may terminate or "unwind" the agreement with the other party's
consent, by making early termination payments and/or as may otherwise be
set forth in an agreement. Termination payments would be determined in
accordance with the formula provided in the agreement between the parties,
such as the one provided in the International Swap Dealers Association
Master Agreement filed as Exhibit B-4 to this Application/ Declaration,
unless the parties negotiated different payment arrangements. Termination
payments are dependent upon market conditions and could be substantial at
times. The methodology for calculating the cost of "unwinding" a Strategy
2 swap would be the same as that used for a Strategy 1 swap. Termination
payments for a Strategy 2 swap could be functionally compared to a premium
that is paid to the bondholders, for redeeming or discharging high cost
debt. Termination or "unwind" costs (or receipts) are not expected to
exceed 10% of the notional amount in most cases. Termination payments (or
receipts) for Strategy 2 swaps would be allocated to the subsidiary that
entered into the agreement with National regarding the payment obligations
of the terminated swap.
National may also use interest rate caps from time to time in
conjunction with a Strategy 2 swap. The payments or receipts associated
with a cap will be allocated to the same subsidiary to which the costs
associated with the underlying strategy 2 swap are assigned.
General
-------
Since a swap is essentially an exchange of interest payment
obligations of National and a counterparty, National will neither receive
nor pay any proceeds (i.e., principal) from any swaps.
None of the Swap and Derivative Transactions will be "leveraged."
This means that changes in interest payments (receipts) under any Swap and
Derivative Transaction due to changes in the floating rate index used in
such instrument will not exceed the product of the change in such index and
the notional amount of such instrument.
Reporting Requirements
----------------------
Within thirty days following the trade date of any Swap and
Derivative Transaction or any swap completed pursuant to the SEC order
granted in connection with National's short-term borrowings and system
Money Pool arrangements (File No. 70-8297) (a "Short-term Borrowing Swap"),
National will submit a report to the Commission disclosing the following
information with respect to such Swap and Derivative Transaction or Short-
term Borrowing Swap: the trade date; the type of Swap and Derivative
Transaction or Short-term Borrowing Swap traded; the notional principal
amount; a description of the index and margin in the case of a swap or the
underlying index and strike rate in the case of a cap or a floor; the
termination date; the name of the counterparty; the material terms of the
underlying instrument (including the interest rate (or index and margin)
and the maturity or termination date of such instrument), and the name of
the subsidiary to which the cash inflows and outflows under the Swap and
Derivative Transaction will be allocated.
Within forty-five days following the close of each fiscal
quarter, National will submit a report to the Commission disclosing the net
cash outflow or inflow for each swap, and the net cash outflow for each
floor, that has been open at any time during such quarter. With respect to
swaps, the net outflow refers to the difference between the interest flow
received by National versus the interest flow paid by National during such
quarter for that swap. With respect to any floor, the cash outflow refers
to the sum of payments made by National during such quarter under any floor
sold by National.
National will additionally disclose, also within forty-five days
following the close of each fiscal quarter, the market value for each Swap
and Derivative Transaction and each Short-term Borrowing Swap that is
outstanding at the close of such quarter, as of that closing date.
National will also disclose any gains or losses realized from the
liquidation during such quarter of any position in a Swap and Derivative
Transaction or Short-term Borrowing Swap, together with the proceeds and
sale price constituting such gain or loss, and its carrying value, if any.
Further, National will disclose, also within forty-five days
following the close of each fiscal quarter, certain information if the
notional principal amount of any Swap and Derivative Transaction or any
Short-term Borrowing Swap during that quarter exceeds the outstanding or
notional principal amount of the underlying instrument. Specifically,
National will disclose the date and reason for such condition. In
addition, National will disclose the date (a) the related Swap and
Derivative Transaction or Short-term Borrowing Swap was terminated or the
notional principal amount of such instrument was reduced or (b) a new
instrument related to the open Swap and Derivative Transaction or Short-
term Borrowing Swap was entered into. If National enters into a new
underlying instrument for a Swap and Derivative Transaction or Short-term
Borrowing Swap, it will also disclose the terms of the new underlying
instrument.
Item 2. Fees, Commissions and Expenses.
The estimated fees and expenses to be incurred by National in
connection with the transactions proposed are set forth in Exhibit I-1
hereto.
Item 3. Applicable Statutory Provisions.
(A) Sections 6(a), 7, 9(a), 10 and 12(b) of the Holding Company
Act and Rules 23, 24 and 45 under the Holding Company Act are applicable to
the transactions. To the extent any other Sections of the Holding Company
Act may be applicable to the proposed transactions, the Company hereby
requests appropriate orders thereunder.
Item 4. Regulatory Approval.
No Federal regulatory authority, other than the Commission, has
jurisdiction over the proposed transaction.
No State regulatory authority has jurisdiction over the proposed
transactions except that the Public Service Commission of New York and the
Pennsylvania Public Utility Commission have jurisdiction over the issuance
and sale of the notes to be issued by Distribution and the allocation of
costs and benefits to Distribution, and Applications or Petitions (Exhibits
D-1 and D-3) will be filed by Distribution requesting the approval of such
commissions.
Item 5. Procedure.
In light of the sensitivity of the proposed transactions to
market interest rates and the substantial cost savings associated with the
potential redemption by National of certain series of its Debentures,
National respectfully requests that the Commission's action with respect to
the transactions proposed in this Application or Declaration be taken on or
before February 10, 1995.
National currently has $220,000,000 principal amount of New
Debentures and/or New MTNs registered under the Securities Act of 1933.
National will file, if needed, a Registration Statement on Form S-3 under
the Securities Act of 1933 covering the remaining $130,000,000 principal
amount of New Debentures and/or New MTNs. Until such Registration
Statement is filed with the Commission, National requests that the
Commission reserve jurisdiction over the issuance of $130,000,000 principal
amount of New Debentures and/or New MTN's.
National respectfully requests that the Commission's order herein
be entered pursuant to the provisions of Rule 23. If a hearing be ordered,
National waives a recommended decision by a Hearing Officer, or any other
responsible officer of the Commission, agrees that the Office of Public
Utility Regulation may assist in the preparation of the Commission decision
and requests that there be no waiting period between the issuance of the
Commission's order and the date on which it becomes effective.
Item 6. Exhibits and Financial Statements.
The following exhibits are made a part of this statement:
(A) Exhibits
A-1 Indenture, dated as of October 15, 1974, between
National and The Bank of New York (formerly Irving
Trust Company) (Exhibit 2(b), File No. 2-51796).
A-2 Ninth Supplemental Indenture, dated as of January 1,
1990 (Exhibit 4.4, Form 10-K for fiscal year ended
September 30, 1992); Tenth Supplemental Indenture,
dated as of February 1, 1992 (Exhibit 4(a), Form 8-K
dated February 14, 1992, in File No. 1-3880); Twelfth
Supplemental Indenture, dated as of June 1, 1992
(Exhibit 4(c), Form 8-K dated June 18, 1992, in File
No. 1-3880); Thirteenth Supplemental Indenture, dated
as of March 1, 1993 (Exhibit 4(a)(14), File No. 33
-49401); and Fourteenth Supplemental Indenture, dated
as of July 1, 1993 (Exhibit 4.1, Form 10-K for fiscal
year ended September 30, 1993).
A-3 Proposed form of Supplemental Indenture for New
Debentures and/or New MTNs. File No. 70-8143
A-4 Form of New Debenture. File No. 70-8143
A-5 Forms of New MTN. File No. 70-8143
B-1 Form of Proposal and Purchase Agreement for New
Debentures. File No. 70-8143
B-2 Form of Sales Agency and/or Distribution Agreement for
MTNs. File No. 70-8143
B-3 Form of Underwriting Agreement for New Debentures.
File No. 70-8143
B-4 Form of Proposed Swap Agreement. File No. 70-8143
C-1 Form S-3 Registration Statement of National under the
Securities Act of 1933 relating to sale of $220,000,000
aggregate principal amount of the New Debentures and/or
MTNs (File No. 33-49401).
C-2 Form T-1 Statement of Eligibility under the Trust
Indenture Act of 1939 of the Bank of New York, as
Trustee under the Indenture (Exhibit 26, File No. 33
-49401).
D-1 Copy of Petition of Distribution to the Public Service
Commission of New York.*
D-2 Copy of Order of the Public Service Commission of New
York in Case No. __________.*
D-3 Copy of Securities Certificate Application of
Distribution filed with the Pennsylvania Public Utility
Commission.*
D-4 Copy of Pennsylvania Public Utility Commission's
Securities Certificates No. S-_________ and G-
________.*
F-1 Opinion of Reid & Priest LLP, Counsel for National.*
F-2 Opinion of Stryker, Tams & Dill, New Jersey Counsel for
National.*
F-3 Opinion of Richard M. DiValerio, Counsel for
Distribution, Supply, Seneca, NFR and Utility
Constructors.*
G Financial Data Schedules.*
H-1 Suggested form of notice of proposed transactions.
I-1 Schedule of Estimated Fees and Expenses.*
(B) Financial Statements
S-1 Pro Forma Consolidated Statement of Income and Earnings
Reinvested in the Business for the twelve months ended
September 30, 1994, Pro Forma Consolidated Balance
Sheet at September 30, 1994 and Pro Forma Adjusting
Entries.
S-2 National Fuel Gas Company Pro Forma Statement of Income
and Earnings Reinvested in the Business for the twelve
months ended September 30, 1994, Pro Forma Balance
Sheet at September 30, 1994 and Pro Forma Adjusting
Entries.
S-3 National Fuel Gas Distribution Corporation Pro Forma
Statement of Income and Earnings Reinvested in the
Business for the twelve months ended September 30,
1994, Pro Forma Balance Sheet at September 30, 1994 and
Pro Forma Adjusting Entries.
S-4 National Fuel Gas Supply Corporation Pro Forma
Statement of Income and Earnings Reinvested in the
Business for the twelve months ended September 30,
1994, Pro Forma Balance Sheet at September 30, 1994 and
Pro Forma Adjusting Entries.
S-5 Seneca Resources Corporation Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-6 Utility Constructors, Inc. Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-7 National Fuel Resources, Inc. Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-8 Notes to Financial Statements.
S-9 Computation of the income test as of September 30,
1994, required for the issuance of additional Funded
Debt, as required by National Fuel Gas Company's
Indenture.
S-10 Projected Statement of Cash Flows by Subsidiary for
Calendar Years 1995, 1996 and 1997.
There have been no material changes not in the ordinary course of
business since September 30, 1994.
*To be supplied by amendment.
Item 7. Information as to Environmental Effects
The proposed transactions outlined herein concern financing
arrangements contemplated by National, Distribution, Supply, Seneca, NFR
and Utility Constructors and involve no major action which will
significantly affect the quality of the environment.
No Federal agency has prepared or is preparing an environmental
impact statement with respect to the transactions proposed in this
Application or Declaration."
[FN]
<FN1> Assuming that the 6-month LIBOR is constant over the 2-year
period of the swap. The amount of savings calculated in this example is
undiscounted.
<FN2> An interest rate collar occurs when National buys a cap and sells
a floor.
<FN3> These costs may include any intermediary fees, credit spreads,
and legal and other costs associated with using a Strategy 2 swap versus a
debenture or medium-term note. These other costs could include (i)
slightly higher long-term debt costs that occur because National's debt
rating did not increase as a result of higher short-term debt levels,
and/or (ii) increased bank fees (e.g., costs of committed credit
facilities) occasioned by the existence of higher short-term debt levels.
<FN4> Effective all-in interest cost means the coupon rate of interest
for the medium-term note plus the agent/underwriter fee allocated over the
life of the medium-term note.
<FN5> Monthly interest is used to compare the cost of the medium-term
note to the swap because the swap resets monthly.
[FN]6 Assuming that the H.15 CP index and National's short-term debt
costs move in unison for the term of the swap.
<FN7> The savings do not include transaction and other costs. Please
see footnote 3 for more details concerning these costs.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused this
amendment to be signed on their behalf by the undersigned thereunto duly
authorized.
NATIONAL FUEL GAS COMPANY
By /s/ Gerald T. Wehrlin
---------------------
Gerald T. Wehrlin
Controller
NATIONAL FUEL GAS
DISTRIBUTION CORPORATION
By /s/ Gerald T. Wehrlin
---------------------
Gerald T. Wehrlin
Senior Vice President,
Controller
SENECA RESOURCES CORPORATION
By /s/ Gerald T. Wehrlin
---------------------
Gerald T. Wehrlin
Secretary, Treasurer and
Controller
NATIONAL FUEL GAS SUPPLY
CORPORATION
By /s/ Joseph P. Pawlowski
-----------------------
Joseph P. Pawlowski
Treasurer
NATIONAL FUEL RESOURCES, INC.
By /s/ David F. Smith
------------------
David F. Smith
President
UTILITY CONSTRUCTORS, INC.
By /s/ Joseph P. Pawlowski
-----------------------
Joseph P. Pawlowski
Treasurer
DATED: January 20, 1995
<PAGE>
EXHIBIT INDEX
H-1 Suggested form of notice of proposed transactions.
S-1 Pro Forma Consolidated Statement of Income and Earnings
Reinvested in the Business for the twelve months ended
September 30, 1994, Pro Forma Consolidated Balance
Sheet at September 30, 1994 and Pro Forma Adjusting
Entries.
S-2 National Fuel Gas Company Pro Forma Statement of Income
and Earnings Reinvested in the Business for the twelve
months ended September 30, 1994, Pro Forma Balance
Sheet at September 30, 1994 and Pro Forma Adjusting
Entries.
S-3 National Fuel Gas Distribution Corporation Pro Forma
Statement of Income and Earnings Reinvested in the
Business for the twelve months ended September 30,
1994, Pro Forma Balance Sheet at September 30, 1994 and
Pro Forma Adjusting Entries.
S-4 National Fuel Gas Supply Corporation Pro Forma
Statement of Income and Earnings Reinvested in the
Business for the twelve months ended September 30,
1994, Pro Forma Balance Sheet at September 30, 1994 and
Pro Forma Adjusting Entries.
S-5 Seneca Resources Corporation Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-6 Utility Constructors, Inc. Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-7 National Fuel Resources, Inc. Pro Forma Statement of
Income and Earnings Reinvested in the Business for the
twelve months ended September 30, 1994, Pro Forma
Balance Sheet at September 30, 1994 and Pro Forma
Adjusting Entries.
S-8 Notes to Financial Statements.
S-9 Computation of the income test as of September 30,
1994, required for the issuance of additional Funded
Debt, as required by National Fuel Gas Company's
Indenture.
S-10 Projected Statement of Cash Flows by Subsidiary for
Calendar Years 1995, 1996 and 1997.
Exhibit H-1
[Suggested Form of Notice of Proposed Transaction
for Publication in the Federal Register]
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- ; 70- )
NATIONAL FUEL GAS COMPANY
NATIONAL FUEL GAS DISTRIBUTION CORPORATION
NATIONAL FUEL RESOURCES, INC.
NATIONAL FUEL GAS SUPPLY CORPORATION
SENECA RESOURCES CORPORATION
UTILITY CONSTRUCTORS, INC.
Notice of Proposal by Holding Company to Issue and Sell Debt Securities and
to enter into Interest Rate Swaps and Derivative Transactions
_______________, 1995
National Fuel Gas Company ("National"), 10 Lafayette Square,
Buffalo, New York 14203, a registered holding company, and its
subsidiaries, National Fuel Gas Distribution Corporation ("Distribution"),
National Fuel Resources, Inc. ("NFR"), National Fuel Gas Supply Corporation
("Supply"), Seneca Resources Corporation ("Seneca") and Utility
Constructors, Inc. ("Utility Constructors"), 10 Lafayette Square, Buffalo,
New York 14203, have proposed one or more transactions to this Commission
pursuant to Sections 6(a), 7, 9(a), 10 and 12(b) of the Public Utility
Holding Company Act of 1935 ("Act") and Rules 23, 24 and 45 thereunder.
National proposes to issue and sell prior to December 31, 1997,
in one or more transactions pursuant to Rule 415 under the Securities Act
of 1933, as amended, an aggregate of not to exceed $350,000,000 principal
amount of debt securities consisting of (i) one or more series of its
Debentures ("New Debentures") and/or (ii) one or more series of its
Debentures designated Medium Term Notes ("New MTNs"), in each case on terms
to be determined at the time of bidding or when the agreement to sell is
made, as the case may be.
The New Debentures will be offered at competitive biddings or by
use of negotiated sales. New MTNs are sold on the basis of their credit
ratings and, as a result, are usually sold with interest rates negotiated
at the time of the sale on the basis of spreads over comparable maturity
Treasury securities.
The proceeds from the issuance and sale of New Debentures or New
MTNs will be loaned by National to Distribution, Supply, Seneca, NFR and
Utility Constructors (i) to reduce short-term borrowings under credit
lines, (ii) to repay notes held by National and issued in exchange for
loans received by its subsidiaries in connection with the sale of
outstanding debentures and/or medium term notes and, to the extent such
debentures and/or medium term notes are redeemed by National, any
prepayment premium to the extent that National and such subsidiaries incur
a prepayment premium in refinancing the aforementioned debentures and/or
medium term notes, (iii) for their construction or other capital
expenditure programs and/or (iv) for general corporate purposes.
National further seeks authority to enter into one or more
interest rate swap agreements ("swaps") in notional amounts aggregating not
in excess of $350 million at any one time outstanding, plus one or more
derivative instruments, such as interest rate caps, interest rate floors
and interest rate collars, with one or more counterparties from time to
time through December 31, 1997.
The effective net interest payments or receipts realized by
National will be passed along to the subsidiaries of National that hold
the underlying debt. None of the interest payments or receipts will be
retained by National.
The swaps would provide that National may terminate the
agreements with the consent of the other party and/or with early
termination payments.
The application or declaration and any amendments thereto are
available for public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a hearing
should submit their views in writing by ____________, to the Secretary,
Securities and Exchange Commission, Washington, D.C. 20549, and serve a
copy on the applicants at the addresses specified above. Proof of service
(by affidavit or, in case of an attorney at law, by certificate) should be
filed with the request. Any request for a hearing shall identify
specifically the issues of fact or law that are disputed. A person who
requests will be notified of any hearing, if ordered, and will receive a
copy of any notice or order issued in this matter. After said date, the
proposal, as filed or as amended, may be authorized.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
<PAGE 1>
S-1
National Fuel Gas Company ("National"), National Fuel Gas Distribution
("Distribution),National Fuel Gas Supply Corporation ("Supply"), Seneca
Resources Corporation ("Seneca"), Utility Constructors, Inc. ("UCI") and
National Fuel Resources, Inc. ("NFR"), wholly-owned subsidiaries of National,
have joined in this application seeking to obtain authorization from the
Commission to renew their long-term debt authority. The following pro forma
financial statements give effect to the proposed transactions.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1994
(Thousands of Dollars)
Adjustments Pro Forma
Per Books Dr. (Cr.) (Unaudited)
ASSETS
PROPERTY, PLANT AND
EQUIPMENT $2,166,256 $2,166,256
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND
AMORTIZATION 623,517 623,517
1,542,739 0 1,542,739
CURRENT ASSETS
CASH & TEMP. CASH
INVESTMENTS 29,016 44,793 (a,b,c,d) 73,809
RECEIVABLES - NET 95,993 95,993
UNBILLED UTILITY REVENUE 17,311 17,311
GAS STORED UNDERGROUND 34,711 34,711
MATERIALS AND SUPPLIES 23,796 23,796
PREPAYMENTS 20,111 20,111
220,938 44,793 265,731
OTHER ASSETS
RECOVERABLE FUTURE TAXES 99,742 99,742
UNAMORTIZED DEBT EXPENSE 28,396 3,052 (a,d,e) 31,448
OTHER REGULATORY ASSETS 47,737 47,737
DEFERRED CHARGES 15,796 15,796
OTHER 26,309 26,309
217,980 3,052 221,032
TOTAL ASSETS $1,981,657 $47,845 $2,029,502
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON STOCK $37,278 $37,278
PAID IN CAPITAL 379,156 379,156
EARNINGS REINVESTED
IN THE BUSINESS 363,854 7,240 (e,f,g) 356,614
780,288 7,240 773,048
LONG TERM DEBT, NET OF
CURRENT PORTION 462,500 (211,500)(a,b) 674,000
TOTAL CAPITALIZATION 1,242,788 (204,260) 1,447,048
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE TO BANKS
AND COMMERCIAL PAPER 112,500 67,200 (c) 45,300
CURRENT PORTION OF
LONG-TERM DEBT 96,000 96,000 (b) 0
ACCOUNTS PAYABLE 66,667 66,667
AMOUNTS PAYABLE TO
CUSTOMERS 38,714 38,714
OTHER ACCRUALS AND CURRENT
LIABILITIES 61,368 (6,785)(f,g) 68,153
375,249 156,415 218,834
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 273,560 273,560
TAXES REFUNDABLE TO
CUSTOMERS 31,688 31,688
UNAMORTIZED INVESTMENT
TAX CREDIT 14,057 14,057
OTHER DEFERRED CREDITS 44,315 44,315
363,620 0 363,620
TOTAL CAPITALIZATION AND
LIABILITIES $1,981,657 ($47,845) $2,029,502
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-1
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS
OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(Thousands of Dollars)
Adjustments Pro Forma
Per Books Dr. (Cr.) (Unaudited)
OPERATING REVENUES $1,141,324 $1,141,324
OPERATING EXPENSES:
PURCHASED GAS 497,687 497,687
OPERATION EXPENSE 260,411 260,411
MAINTENANCE 30,979 30,979
PROPERTY, FRANCHISE
& OTHER TAXES 103,788 103,788
DEPRECIATION, DEPLETION
& AMORTIZATION 74,764 74,764
INCOME TAXES - NET 47,792 (3,898)(g) 43,894
1,015,421 (3,898) 1,011,523
OPERATING INCOME 125,903 (3,898) 129,801
OTHER INCOME 3,656 3,656
INCOME BEFORE INTEREST CHARGES 129,559 (3,898) 133,457
INTEREST CHARGES:
INTEREST ON LONG-TERM
DEBT 36,699 13,190 (f) 49,889
OTHER INTEREST 10,425 (2,052)(e,f) 8,373
47,124 11,138 58,262
INCOME BEFORE CUMULATIVE EFFECT 82,435 7,240 75,195
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING 3,237 3,237
NET INCOME AVAILABLE FOR COMMON
STOCK 85,672 7,240 78,432
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 335,907 335,907
421,579 7,240 414,339
DIVIDENDS ON COMMON STOCK (57,725) (57,725)
BALANCE AT SEPTEMBER 30, 1994 $363,854 $7,240 $356,614
EARNINGS PER COMMON SHARE
INCOME BEFORE CUMULATIVE
EFFECT $2.23 $0.20 $2.03
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING 0.09 0.00 0.09
NET INCOME AVAILABLE FOR
COMMON STOCK $2.32 $0.20 $2.12
WEIGHTED AVG. COMMON SHARES
OUTSTANDING 37,046,249 37,046,249
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 3>
S-1
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
PRO FORMA CONSOLIDATED ADJUSTING JOURNAL ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $347,375
UNAMORTIZED DEBT EXPENSE $2,625
LONG-TERM DEBT $350,000
To record the sale of ____________%
debentures, due___________ and record
agent's fees assumed to be 0.750%.
(b)
LONG-TERM DEBT $138,500
CURRENT PORTION OF LONG-TERM DEBT $96,000
CASH $234,500
To record the retirement of certain
existing long-term debt.
(c)
NOTES PAYABLE TO BANKS AND COMMERCIAL
PAPER $67,200
CASH $67,200
To record the payment by National
of Notes Payable to Banks and
Commercial Paper.
(d)
UNAMORTIZED DEBT EXPENSE $882
CASH $882
To record the payment of expenses
associated with the debt issuance.
(e)
OTHER INTEREST EXPENSE $455
UNAMORTIZED DEBT EXPENSE $455
To record one year's amortization of
the agent's fees and expenses
associated with the long-term debt.
(f)
INTEREST ON LONG-TERM DEBT $13,190
INTEREST PAYABLE $10,683
OTHER INTEREST $2,507
To record interest expense due on
new long-term debt, net of reduction
in interest expense on long-term debt
retired, and to show reduction in
interest on short-term debt retired.
Interest on new long-term debt assumed
to be 8.5%, weighted average interest on
long-term and short-term debt retired
assumed to be 7.05% and 3.73%, respectively.
(g)
FEDERAL INCOME TAXES PAYABLE $3,898
FEDERAL INCOME TAX EXPENSE $3,898
To record the federal income tax effect
(35%) of entries (e) & (f).
<PAGE 1>
S-2
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND
EQUIPMENT $244 $244
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND AMORTIZATION 107 107
137 0 137
CURRENT ASSETS
CASH & TEMP. CASH (a,b,c,d,
INVESTMENTS 7,138 (3,507) e,f,g) 3,631
NOTES RECEIVABLE -
INTERCOMPANY 259,500 (67,200)(e) 192,300
ACCOUNTS RECEIVABLE -
INTERCOMPANY 13,617 11,138 (j) 24,755
OTHER ACCOUNTS RECEIVABLE 7,784 7,784
DIVIDENDS RECEIVABLE -
INTERCOMPANY 11,848 11,848
PREPAYMENTS 226 226
300,113 (59,569) 240,544
OTHER ASSETS
INVESTMENT IN ASSOCIATED
COMPANIES 709,453 (7,240)(k) 702,213
NOTES RECEIVABLE -
INTERCOMPANY 513,465 115,500 (b,c) 628,965
UNAMORTIZED DEBT EXPENSE 4,645 3,052 (a,g,h) 7,697
DEFERRED CHARGES 895 895
OTHER 215 215
1,228,673 111,312 1,339,985
TOTAL ASSETS $1,528,923 $51,743 $1,580,666
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
COMMON STOCK $37,278 $37,278
PAID IN CAPITAL 379,156 379,156
EARNINGS REINVESTED
IN THE BUSINESS 363,854 7,240 (h,i,j,k) 356,614
780,288 7,240 773,048
LONG-TERM DEBT, NET OF CURRENT
PORTION 462,500 (211,500)(a,d) 674,000
TOTAL CAPITALIZATION 1,242,788 (204,260) 1,447,048
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE TO BANKS AND
COMMERCIAL PAPER 112,500 67,200 (f) 45,300
NOTES PAYABLE -
INTERCOMPANY 42,600 42,600
CURRENT PORTION OF
LONG-TERM DEBT 96,000 96,000 (d) 0
ACCOUNTS PAYABLE-OTHER 210 210
ACCOUNTS PAYABLE -
INTERCOMPANY 7,855 7,855
OTHER ACCRUALS AND CURRENT
LIABILITIES 26,163 (10,683)(i) 36,846
285,328 152,517 132,811
DEFERRED CREDITS
ACCUMULATED DEFERRED
INCOME TAXES (180) (180)
OTHER DEFERRED CREDITS 987 987
807 0 807
TOTAL CAPITALIZATION AND
LIABILITIES $1,528,923 ($51,743) $1,580,666
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-2
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA STATEMENTS OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $0 $0
OPERATING EXPENSES:
OPERATION EXPENSE 5,525 5,525
PROPERTY, FRANCHISE
& OTHER TAXES 1,274 1,274
DEPRECIATION, DEPLETION
& AMORTIZATION 6 6
INCOME TAXES - NET 212 212
7,017 0 7,017
OPERATING INCOME (7,017) 0 (7,017)
OTHER INCOME:
UNREMITTED EARNINGS OF
SUBSIDIARIES 36,958 7,240 (k) 29,718
DIVIDENDS OF
SUBSIDIARIES 47,395 47,395
INTEREST -
INTERCOMPANY 47,731 (11,138)(j) 58,869
OTHER INTEREST 558 558
132,642 (3,898) 136,540
INCOME BEFORE INTEREST CHARGES 125,625 (3,898) 129,523
INTEREST CHARGES:
INTEREST ON LONG-TERM
DEBT 36,699 13,190 (i) 49,889
INTEREST -
INTERCOMPANY 791 791
OTHER INTEREST 5,700 (2,052)(h,i) 3,648
43,190 11,138 54,328
INCOME BEFORE CUMULATIVE
EFFECT 82,435 7,240 75,195
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING 3,237 3,237
NET INCOME 85,672 7,240 78,432
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 335,907 335,907
421,579 7,240 414,339
DIVIDENDS ON COMMON STOCK (57,725) (57,725)
BALANCE AT SEPTEMBER 30,
1994 $363,854 $7,240 $356,614
EARNINGS PER COMMON SHARE
INCOME BEFORE CUMULATIVE
EFFECT $2.23 $0.20 $2.03
CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING 0.09 0.00 0.09
NET INCOME AVAILABLE FOR
COMMON STOCK $2.32 $0.20 $2.12
WEIGHTED AVG. COMMON SHARES
OUTSTANDING 37,046,249 37,046,249
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 3>
S-2
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA ADJUSTING ENTRIES
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $347,375
UNAMORTIZED DEBT EXPENSE $2,625
LONG-TERM DEBT $350,000
To record the sale of _______ % Debentures,
due _______, and record agent's fees
assumed to be 0.75%.
(b)
LONG-TERM NOTES RECEIVABLE - INTERCOMPANY:
DISTRIBUTION-________% NOTES DUE ________ $150,000
SUPPLY -________% NOTES DUE ________ $90,000
SENECA -________% NOTES DUE ________ $90,000
UCI -________% NOTES DUE ________ $10,000
NFR -________% NOTES DUE ________ $10,000
CASH $350,000
To record the purchase of long term -
promissory notes by National from
Distribution, Supply, Seneca, UCI
and NFR.
(c)
CASH $234,500
LONG-TERM NOTES REC. -
INTERCOMPANY:
DISTRIBUTION $101,000
SUPPLY $53,500
SENECA $80,000
To record the payment by Distribution,
Supply and Seneca of certain long-term
notes payable to National, maturing
within the calendar years 1995-1997.
(d)
LONG-TERM DEBT $138,500
CURRENT PORTION OF LONG-TERM DEBT $96,000
CASH $234,500
To record the retirement of certain
existing long-term debt.
(e)
CASH $67,200
SHORT-TERM NOTES REC. -
INTERCOMPANY:
DISTRIBUTION $49,000
SUPPLY $4,700
SENECA $10,000
UCI $3,500
To record the payment by Distribution,
Supply, Seneca and UCI of short-term
notes payable to National.
<PAGE 4>
S-2
NATIONAL FUEL GAS COMPANY - PARENT
PRO FORMA ADJUSTING ENTRIES-continued
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(f)
NOTES PAYABLE TO BANKS COMMERCIAL PAPER $67,200
CASH $67,200
To record the payment by National of Notes
Payables to Banks and Commercial Paper.
(g)
UNAMORTIZED DEBT EXPENSE $882
CASH $882
To record the payment of expenses
associated with the long-term debt issuance.
(h)
OTHER INTEREST $455
UNAMORTIZED DEBT EXPENSE $455
To record one year's amortization of the
agent's fees and expenses associated
with the long-term debt.
(i)
INTEREST ON LONG-TERM DEBT $13,190
INTEREST PAYABLE $10,683
OTHER INTEREST $2,507
To record interest expense due on new
long-term debt, net of reduction in
interest expense on long-term debt retired,
and to show reduction in interest on short-
term debt retired. Interest on new long-term
debt assumed to be 8.5%, weighted average
interest on long-term and short-term debt
retired assumed to be 7.05% and 3.73%,
respectively.
(j)
INTEREST RECEIVABLE - INTERCOMPANY $11,138
INTEREST INCOME - INTERCOMPANY $11,138
To record intercompany interest income on
long-term debt.
(k)
UNREMITTED EARNINGS OF SUBSIDIARIES $7,240
INVESTMENT IN ASSOCIATED COMPANIES $7,240
To adjust National's investment in
associated companies.
<PAGE 1>
S-3
DISTRIBUTION CORPORATION
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND
EQUIPMENT $1,036,225 $1,036,225
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND
AMORTIZATION 248,431 248,431
787,794 0 787,794
CURRENT ASSETS
CASH & TEMP. CASH
INVESTMENTS 15,133 0 (a,b,c) 15,133
RECEIVABLES - NET 62,390 62,390
ACCOUNTS RECEIVABLE -
INTERCOMPANY 14,217 14,217
UNBILLED UTILITY REVENUE 17,311 17,311
GAS STORED UNDERGROUND 31,900 31,900
MATERIALS AND SUPPLIES 8,322 8,322
PREPAYMENTS 14,413 14,413
163,686 0 163,686
OTHER ASSETS
RECOVERABLE FUTURE TAXES 94,039 94,039
UNAMORTIZED DEBT EXPENSE 18,907 18,907
OTHER REGULATORY ASSETS 44,112 44,112
DEFERRED CHARGES 4,605 4,605
OTHER 7,403 7,403
169,066 0 169,066
TOTAL ASSETS $1,120,546 $0 $1,120,546
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF
SUBSIDIARIES $59,170 $59,170
PAID IN CAPITAL 121,668 121,668
EARNINGS REINVESTED
IN THE BUSINESS 205,226 2,161 (d,e) 203,065
386,064 2,161 383,903
NOTES PAYABLE - INTERCOMPANY 256,000 (49,000)(a,b) 305,000
TOTAL CAPITALIZATION 642,064 (46,839) 688,903
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE-INTERCOMPANY 145,600 49,000 (c) 96,600
ACCOUNTS PAYABLE 41,552 41,552
ACCOUNT PAYABLE -
INTERCOMPANY 19,575 (3,325)(d) 22,900
AMOUNTS PAYABLE TO
CUSTOMERS 18,342 18,342
DIVIDENDS PAYABLE -
INTERCOMPANY 7,468 7,468
OTHER ACCRUALS AND CURRENT
LIABILITIES 27,936 1,164 (e) 26,772
260,473 46,839 213,634
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 155,323 155,323
TAXES REFUNDABLE TO
CUSTOMERS 23,390 23,390
UNAMORTIZED INVESTMENT TAX
CREDIT 13,611 13,611
OTHER DEFERRED CREDITS 25,685 25,685
218,009 0 218,009
TOTAL CAPITALIZATION AND
LIABILITIES $1,120,546 $0 $1,120,546
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-3
DISTRIBUTION CORPORATION
PRO FORMA STATEMENTS OF INCOME
AND EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $931,673 $931,673
OPERATING EXPENSES:
PURCHASED GAS 530,978 530,978
OPERATION EXPENSE 170,753 170,753
MAINTENANCE 22,272 22,272
PROPERTY, FRANCHISE
& OTHER TAXES 88,870 88,870
DEPRECIATION, DEPLETION
& AMORTIZATION 28,216 28,216
INCOME TAXES - NET 25,125 (1,164)(e) 23,961
866,214 (1,164) 865,050
OPERATING INCOME 65,459 (1,164) 66,623
OTHER INCOME 1,580 0 1,580
INCOME BEFORE INTEREST CHARGES 67,039 (1,164) 68,203
INTEREST CHARGES:
INTEREST -
INTERCOMPANY 25,975 3,325 (d) 29,300
OTHER INTEREST 3,500 3,500
29,475 3,325 32,800
NET INCOME 37,564 2,161 35,403
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 178,842 0 178,842
216,406 2,161 214,245
DIVIDENDS ON COMMON STOCK (29,872) (29,872)
RETAINED EARNINGS ADJUSTMENT* 18,692 18,692
BALANCE AT SEPTEMBER 30,
1994 $205,226 $2,161 $203,065
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
* Reflects the recording of unbilled utility revenue on the books of
Distribution Corporation in March 1994, in accordance with a State of New
York Public Service Commission Order. Unbilled utility revenue was
previously only record in the consolidated financial statements of National
Fuel Gas Company.
<PAGE 3>
S-3
DISTRIBUTION CORPORATION
PRO FORMA ADJUSTING ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $150,000
LONG-TERM NOTES PAYABLE -
INTERCOMPANY:
_____% NOTES DUE _______. $150,000
To record the sale of long-term promissory
notes by Distribution to National.
(b)
LONG-TERM NOTES PAYABLE - INTERCOMPANY:
_____% NOTES DUE _______. $101,000
CASH $101,000
To record payment by Distribution of
long-term debt maturing within the
calendar years 1995-1997.
(c)
CURRENT NOTES PAYABLE - INTERCOMPANY $49,000
CASH $49,000
To record the payment by Distribution
of notes payable to National.
(d)
INTEREST EXPENSE-INTERCOMPANY $3,325
INTEREST PAYABLE - INTERCOMPANY $3,325
To record the impact on interest expense of
the issuance of new debt less the repayment
of certain existing debt.
(e)
FEDERAL INCOME TAXES PAYABLE $1,164
FEDERAL INCOME TAX EXPENSE $1,164
To record the income tax effect of entry (d).
<PAGE 1>
S-4
SUPPLY CORPORATION
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND
EQUIPMENT $640,123 $640,123
LESS - ACCUMULATED DEPRECIATION,
DEPLETION AND
AMORTIZATION 199,313 199,313
440,810 0 440,810
CURRENT ASSETS
CASH & TEMP. CASH
INVESTMENTS 3,554 31,800 (a,b,c) 35,354
RECEIVABLES 5,487 5,487
ACCOUNTS RECEIVABLE -
INTERCOMPANY 14,143 14,143
NOTES RECEIVABLE -
INTERCOMPANY 37,700 37,700
GAS STORED UNDERGROUND 2,811 2,811
MATERIALS AND SUPPLIES 13,800 13,800
PREPAYMENTS 3,820 3,820
81,315 31,800 113,115
OTHER ASSETS
RECOVERABLE FUTURE TAXES 5,703 5,703
UNAMORTIZED DEBT EXPENSE 4,844 4,844
OTHER REGULATORY ASSETS 3,626 3,626
DEFERRED CHARGES 10,035 10,035
INVESTMENT IN ASSOCIATED
COMPANIES 61 61
OTHER 4,867 4,867
29,136 0 29,136
TOTAL ASSETS $551,261 $31,800 $583,061
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF
SUBSIDIARIES $25,345 $25,345
PAID IN CAPITAL 35,894 35,894
EARNINGS REINVESTED
IN THE BUSINESS 134,663 2,201 (d,e) 132,462
195,902 2,201 193,701
NOTES PAYABLE - INTERCOMPANY 209,465 (36,500)(a,b) 245,965
TOTAL CAPITALIZATION 405,367 (34,299) 439,666
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE -
INTERCOMPANY 21,400 4,700 (c) 16,700
ACCOUNTS PAYABLE 8,448 8,448
ACCOUNTS PAYABLE -
INTERCOMPANY 12,429 (3,386)(d) 15,815
DIVIDEND PAYABLE -
INTERCOMPANY 4,380 4,380
AMOUNTS PAYABLE TO
CUSTOMERS 20,372 20,372
OTHER ACCRUALS AND
CURRENT 0
LIABILITIES 12,125 1,185 (e) 10,940
79,154 2,499 76,655
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 48,079 48,079
TAXES REFUNDABLE TO
CUSTOMERS 8,298 8,298
UNAMORTIZED INVESTMENT TAX
CREDIT 446 446
OTHER DEFERRED CREDITS 9,917 9,917
66,740 0 66,740
TOTAL CAPITALIZATION AND
LIABILITIES $551,261 ($31,800) $583,061
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-4
SUPPLY CORPORAITON
PRO FORMA STATEMENTS OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $155,879 $155,879
OPERATING EXPENSES:
OPERATION EXPENSE 54,060 54,060
MAINTENANCE 8,697 8,697
PROPERTY, FRANCHISE
& OTHER TAXES 11,373 11,373
DEPRECIATION, DEPLETION
& AMORTIZATION 17,904 17,904
INCOME TAXES - NET 18,680 (1,185)(e) 17,495
110,714 (1,185) 109,529
OPERATING INCOME 45,165 (1,185) 46,350
OTHER INCOME 1,257 1,257
INCOME BEFORE INTEREST CHARGES 46,422 (1,185) 47,607
INTEREST CHARGES:
INTEREST -
INTERCOMPANY 14,764 3,386 (d) 18,150
OTHER INTEREST 1,007 1,007
15,771 3,386 19,157
NET INCOME 30,651 2,201 28,450
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 121,535 121,535
152,186 2,201 149,985
DIVIDENDS ON COMMON STOCK (17,523) (17,523)
BALANCE AT SEPTEMBER 30,
1994 $134,663 $2,201 $132,462
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 3>
S-4
SUPPLY CORPORATION
PRO FORMA ADJUSTING JOURNAL ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $90,000
LONG-TERM NOTES PAYABLE -
INTERCOMPANY:
_____% NOTES DUE _______. $90,000
To record the sale of long-term promissory
notes by Supply to National.
(b)
LONG-TERM NOTES PAYABLE - INTERCOMPANY:
_____% NOTES DUE _______. $53,500
CASH $53,500
To record payment by Supply of long-term
debt maturing within the calendar years
1995-1997.
(c)
CURRENT NOTES PAYABLE - INTERCOMPANY $4,700
CASH $4,700
To record the payment by Supply of notes
payable to National.
(d)
INTEREST EXPENSE - INTERCOMPANY $3,386
INTEREST PAYABLE - INTERCOMPANY $3,386
To record the impact on interest expense
of the issuance of new debt less the
repayment of certain existing debt.
(e)
FEDERAL INCOME TAXES PAYABLE $1,185
FEDERAL INCOME TAX EXPENSE $1,185
To record the income tax effect of entry (d).
<PAGE 1>
S-5
SENECA RESOURCES CORPORATION
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $476,877 $476,877
LESS - ACCUMULATED DEPRECIATION,
DEPLETION & AMORTIZATION 168,211 168,211
308,666 0 308,666
CURRENT ASSETS
CASH & TEMP. CASH
INVESTMENTS 1,744 0 (a,b,c) 1,744
RECEIVABLES - NET 10,059 10,059
ACCOUNTS RECEIVABLE -
INTERCOMPANY 1,269 1,269
MATERIALS AND SUPPLIES 1,327 1,327
PREPAYMENTS 1,382 1,382
15,781 0 15,781
OTHER ASSETS
DEFERRED CHARGES 1,068 1,068
OTHER 716 716
1,784 0 1,784
TOTAL ASSETS $326,231 $0 $326,231
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF
SUBSIDIARIES $500 $500
PAID IN CAPITAL 104,035 104,035
EARNINGS REINVESTED
IN THE BUSINESS 5,004 1,841 (d,e) 3,163
109,539 1,841 107,698
NOTES PAYABLE - INTERCOMPANY 48,000 (10,000)(a,b) 58,000
TOTAL CAPITALIZATION 157,539 (8,159) 165,698
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE INTERCOMPANY 85,000 10,000 (c) 75,000
ACCOUNTS PAYABLE 17,350 17,350
ACCOUNTS PAYABLE -
INTERCOMPANY 388 (2,832)(d) 3,220
OTHER ACCRUALS AND CURRENT
LIABILITIES (1,541) 991 (e) (2,532)
101,197 8,159 93,038
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 64,783 64,783
OTHER DEFERRED CREDITS 2,712 2,712
67,495 0 67,495
TOTAL CAPITALIZATION AND
LIABILITIES $326,231 $0 $326,231
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-5
SENECA RESOURCES CORPORATION
PRO FORMA STATEMENTS OF INCOME
AND EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $71,503 $71,503
OPERATING EXPENSES:
PURCHASED GAS 1,181 1,181
OPERATION EXPENSE 19,325 19,325
MAINTENANCE 10 10
PROPERTY, FRANCHISE
& OTHER TAXES 1,856 1,856
DEPRECIATION, DEPLETION
& AMORTIZATION 26,964 26,964
INCOME TAXES - NET 3,282 (991)(e) 2,291
52,618 (991) 51,627
OPERATING INCOME 18,885 (991) 19,876
OTHER INCOME 107 107
INCOME BEFORE INTEREST CHARGES 18,992 (991) 19,983
INTEREST CHARGES:
INTEREST - INTERCOMPANY 6,732 2,832 (d) 9,564
OTHER INTEREST 207 207
6,939 2,832 9,771
INCOME BEFORE CUMULATIVE EFFECT 12,053 1,841 10,212
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING 3,866 3,866
NET INCOME
15,919 1,841 14,078
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 (26,611) (26,611)
(10,692) 1,841 (12,533)
DIVIDENDS ON COMMON STOCK 0 0
ADJUSTMENT TO RETAINED
EARNINGS* 15,696 15,696
BALANCE AT SEPTEMBER 30, 1994 $5,004 $1,841 $3,163
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
* Reflects reversal of the effect of a prior period write-down on a separate
company basis, of Seneca's full cost pool. After giving effect to the
transfer of Supply's oil and gas production assets to Empire Exploration,
Inc. ("Empire") and the subsequent merger of Empire into Seneca, effective
July 1, 1994, this write-down on the separate company books of Seneca is no
longer necessary. Prior to the merger noted above, the write-down on
Seneca's books was reversed in the consolidated financial statements of
National Fuel Gas Company.
<PAGE 3>
S-5
SENECA RESOURCES CORPORATION
PRO FORMA ADJUSTING ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $90,000
LONG-TERM NOTES PAYABLE -
INTERCOMPANY:
_____% NOTES DUE _______. $90,000
To record the sale of long-term promissory
notes by Seneca to National.
(b)
LONG-TERM NOTES PAYABLE - INTERCOMPANY:
_____% NOTES DUE _______. $80,000
CASH $80,000
To record payment by Seneca of long-term
debt maturing within the calendar years
1995-1997.
(c)
CURRENT NOTES PAYABLE - INTERCOMPANY $10,000
CASH $10,000
To record the payment by Seneca of
notes payable to National.
(d)
INTEREST EXPENSE-INTERCOMPANY $2,832
INTEREST PAYABLE - INTERCOMPANY $2,832
To record the impact on interest expense
of the issuance of new debt less the
repayment of certain existing debt.
(e)
FEDERAL INCOME TAXES PAYABLE $991
FEDERAL INCOME TAX EXPENSE $991
To record the income tax effect of entry (d).
<PAGE 1>
S-6
UTILITY CONSTRUCTORS, INC.
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $9,869 $9,869
LESS - ACCUMULATED DEPRECIATION,
DEPLETION & AMORTIZATION 5,360 5,360
4,509 0 4,509
CURRENT ASSETS
CASH & TEMP. CASH INVESTMENTS 97 6,500 (a,b) 6,597
RECEIVABLES 4,264 4,264
ACCOUNTS RECEIVABLES -
INTERCOMPANY 640 640
PREPAYMENTS 77 77
5,078 6,500 11,578
OTHER ASSETS 2,464 2,464
TOTAL ASSETS $12,051 $6,500 $18,551
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF
SUBSIDIARIES $1 $1
PAID IN CAPITAL 5,959 5,959
EARNINGS REINVESTED
IN THE BUSINESS (3,070) 476 (c,d) (3,546)
2,890 476 2,414
NOTES PAYABLE - INTERCOMPANY 0 (10,000)(a) 10,000
TOTAL CAPITALIZATION 2,890 (9,524) 12,414
CURRENT AND ACCRUED LIABILITIES
NOTES PAYABLE - INTERCOMPANY 7,300 3,500 (b) 3,800
ACCOUNTS PAYABLE 1,376 1,376
ACCOUNTS PAYABLE -
INTERCOMPANY 32 (732)(c) 764
OTHER ACCRUALS AND CURRENT
LIABILITIES (392) 256 (d) (648)
8,316 3,024 5,292
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 207 207
OTHER DEFERRED CREDITS 638 638
845 0 845
TOTAL CAPITALIZATION AND
LIABILITIES $12,051 ($6,500) $18,551
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-6
UTILITY CONSTRUCTORS, INC.
PRO FORMA STATEMENTS OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $13,589 $13,589
OPERATING EXPENSES:
OPERATION EXPENSE 14,254 14,254
PROPERTY, FRANCHISE
& OTHER TAXES 78 78
DEPRECIATION, DEPLETION
& AMORTIZATION 1,330 1,330
INCOME TAXES - NET (411) (256)(d) (667)
15,251 (256) 14,995
OPERATING INCOME (1,662) (256) (1,406)
OTHER INCOME 628 628
INCOME BEFORE INTEREST CHARGES (1,034) (256) (778)
INTEREST CHARGES:
INTEREST -
INTERCOMPANY 250 732 (c) 982
OTHER INTEREST 5 5
255 732 987
INCOME BEFORE CUMULATIVE EFFECT (1,289) 476 (1,765)
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING (714) (714)
NET INCOME (2,003) 476 (2,479)
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 (1,067) (1,067)
(3,070) 476 (3,546)
DIVIDENDS ON COMMON STOCK 0 0
BALANCE AT SEPTEMBER 30, 1994 ($3,070) $476 ($3,546)
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 3>
S-6
UTILITY CONSTRUCTORS, INC.
PRO FORMA ADJUSTING JOURNAL ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $10,000
LONG-TERM NOTES PAYABLE -
INTERCOMPANY:
_____% NOTES DUE _______. $10,000
To record the sale of long-term promissory
notes by UCI to National.
(b)
CURRENT NOTES PAYABLE - INTERCOMPANY $3,500
CASH $3,500
To record the payment by UCI of notes
payable to National.
(c)
INTEREST EXPENSE-INTERCOMPANY $732
INTEREST PAYABLE-INTERCOMPANY $732
To record the impact on interest expense
of the issuance of new debt less the
repayment of certain existing debt.
(d)
FEDERAL INCOME TAXES PAYABLE $256
FEDERAL INCOME TAX EXPENSE $256
To record the income tax effect of entry (c).
<PAGE 1>
S-7
NATIONAL FUEL RESOURCES
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
ASSETS
PROPERTY, PLANT AND EQUIPMENT $19 $19
LESS - ACCUMULATED DEPRECIATION,
DEPLETION & AMORTIZATION 6 6
13 0 13
CURRENT ASSETS
CASH & TEMP. CASH INVESTMENTS 993 10,000 (a) 10,993
RECEIVABLES - NET 3,653 3,653
ACCOUNTS RECEIVABLE -
INTERCOMPANY 540 540
NOTES RECEIVABLE -
INTERCOMPANY 2,400 2,400
PREPAYMENTS 132 132
7,718 10,000 17,718
OTHER ASSETS
DEFERRED CHARGES 9 9
OTHER 542 542
551 0 551
TOTAL ASSETS $8,282 $10,000 $18,282
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
CAPITAL STOCK OF
SUBSIDIARIES $10 $10
PAID IN CAPITAL 3,490 3,490
EARNINGS REINVESTED
IN THE BUSINESS 2,160 561 (b,c) 1,599
5,660 561 5,099
NOTES PAYABLE - INTERCOMPANY 0 (10,000)(a) 10,000
TOTAL CAPITALIZATION 5,660 (9,439) 15,099
CURRENT AND ACCRUED LIABILITIES
ACCOUNTS PAYABLE 534 534
ACCOUNTS PAYABLE-INTERCOMPANY 630 (863)(b) 1,493
OTHER ACCRUALS AND CURRENT
LIABILITIES 1,014 302 (c) 712
2,178 (561) 2,739
DEFERRED CREDITS
ACCUMULATED DEFERRED INCOME
TAXES 371 371
OTHER DEFERRED CREDITS 73 73
444 0 444
TOTAL CAPITALIZATION AND
LIABILITIES $8,282 ($10,000) $18,282
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 2>
S-7
NATIONAL FUEL RESOURCES
PRO FORMA STATEMENTS OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
Adjustments
Per Books Dr. (Cr.) Pro Forma
OPERATING REVENUES $50,764 $50,764
OPERATING EXPENSES:
PURCHASED GAS 47,964 47,964
OPERATION EXPENSE 919 919
PROPERTY, FRANCHISE
& OTHER TAXES 268 268
DEPRECIATION, DEPLETION
& AMORTIZATION 2 2
INCOME TAXES - NET 506 (302)(c) 204
49,659 (302) 49,357
OPERATING INCOME 1,105 (302) 1,407
OTHER INCOME 127 127
INCOME BEFORE INTEREST CHARGES 1,232 (302) 1,534
INTEREST CHARGES:
INTEREST - INTERCOMPANY 0 863 (b) 863
OTHER INTEREST 6 6
6 863 869
NET INCOME 1,226 561 665
EARNINGS REINVESTED IN THE BUSINESS
BALANCE AT OCTOBER 1, 1993 934 934
2,160 561 1,599
DIVIDENDS ON COMMON STOCK 0 0
BALANCE AT SEPTEMBER 30, 1994 $2,160 $561 $1,599
SEE NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE 3>
S-7
NATIONAL FUEL RESOURCES
PRO FORMA ADJUSTING JOURNAL ENTRIES
AS OF SEPTEMBER 30, 1994
(UNAUDITED)
(Thousands of Dollars)
DEBIT CREDIT
(a)
CASH $10,000
LONG-TERM NOTES PAYABLE -
INTERCOMPANY:
_____% NOTES DUE _______. $10,000
To record the sale of long-term promissory
notes by NFR to National.
(b)
INTEREST EXPENSE-INTERCOMPANY $863
INTEREST PAYABLE-INTERCOMPANY $863
To record the impact on interest expense
of the issuance of new debt less the
repayment of certain existing debt.
(c)
FEDERAL INCOME TAXES PAYABLE $302
FEDERAL INCOME TAX EXPENSE $302
To record the income tax effect of entry (b).
<PAGE 1>
S-9
NATIONAL FUEL GAS COMPANY
Determination of Qualification to Issue Additional Long-Term
Indebtedness Pursuant to the Indenture Earnings Test
Pro-Forma for the Fiscal Year Ended September 30, 1994
(Thousands of Dollars)
Section 6.05(a) - Earnings Test $
Net Income Available for Common Stock 85,672
Revenues Subject to Refund 625
Federal Income Taxes 36,630
State Income Taxes 6,309
Deferred Income Taxes - Net (Includes effect
of accounting changes) 1,619
Investment Tax Credit - Net (685)
Interest Charges 45,450
Income Available for Interest 175,620
Adjustments:
Depreciation Deficiency (if applicable) -
Excess of Net Non-Operating Revenues
or Losses (see attachment) -
Adjusted Income Available for Interest 175,620
Annual Interest Charges Based on Long-Term 40,900
Debt Outstanding at the End of the Period x 2.0
Indenture Interest Requirement 81,800
Adjusted Income Available for Interest 175,620
Indenture Interest Requirement 81,800
Unused Income Available for Interest 93,820
Additional Allowable Interest on Long-Term
Indebtedness ($93,820/2.0) 46,910
Indenture Interest Coverage ($175,620/$40,900) 4.29 times
Based upon current market conditions and pursuant to either the Section
6.05 (a) Earnings Test or the Section 6.05(b) 60% Consolidated Asset Test
of the Indenture, National Fuel Gas Company could issue additional
long-term indebtedness up to a maximum of approximately $434,500,000.
<PAGE 2>
S-9
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES
Consolidated Income Available for Interest
and Subsidiary Preferred Stock Dividend
for the Fiscal Year Ended September 30, 1994
(Thousands of Dollars)
(a) Total operating revenues (including
revenues subject to refund) $1,141,948
Income from plants leased $ -
Net non-operating revenues 2,974
Less - Gains or losses resulting
from the sale, abandonment, re-
valuation or other disposition
of or increase or diminution in
the book costs or recorded values
of, securities or other invest-
ments:
Profit or (loss) on securities (net)$ None
Profit or (loss) on disposal of
capital assets (net) None 2,974
Total 1,144,922
(b) Deduct
(i) Operating expense:
Purchased gas 497,686
Operation expense 262,085
Property, franchise, and
other taxes 103,788
Maintenance 30,979
Depreciation, depletion and
amortization, as provided
in the Indenture 74,764
Total operating expense 969,302
(ii) Net non-operating losses None
Less - Deductions for elimination,
other than through periodic
amortization against earnings
or of any account included in
utility plant acquisition adjust-
ment accounts or utility plant
adjustment accounts or any
accounts for similar purposes
Balance None 969,302
175,620
Balance as above 175,620
Net non-operating revenues or (losses) not
otherwise excluded by subdivision:
Net non-operating revenues, as above 2,974
Net non-operating losses, as above -
Consolidated income available for
interest and subsidiary preferred
stock dividends determined without
consideration of net non-operating
revenues or losses $172,646
Ten per centum (10%) thereof 17,264
Excess of net non-operating
revenues or losses -0- -0-
(c) Amount applicable to minority holdings None
Consolidated Income Available for Interest and
Subsidiary Preferred Stock Dividends for the
Fiscal Year Ended September 30, 1994 175,620
<PAGE 3>
S-9
NATIONAL FUEL GAS COMPANY
Annual Interest Charges on
Debt Outstanding at September 30, 1994
Annual
Principal Interest
Outstanding Charges
$ 55,000,000 @ 6.07% (1995) $ 3,338,500
21,000,000 @ 6.10% (1995) 1,281,000
50,000,000 @ 6.42% (1997) 3,210,000
20,000,000 @ 8.875% (1995) 1,775,000
38,500,000 @ 8.90% (1995) 3,426,500
20,000,000 @ 9.32% (1995) 1,864,000
30,000,000 @ 4.53% (1996) 1,359,000
50,000,000 @ 7.25% (1999) 3,625,000
50,000,000 @ 6.60% (2000) 3,300,000
125,000,000 @ 7-3/4% (2004) 9,687,500
49,000,000 @ 7.395% (2023) 3,623,550
50,000,000 @ 8.48% (2024) 4,240,000
558,500,000 40,730,050
2,067,913 @ 7.00% (Seneca - North) 144,754
496,805 @ 5.0375%* (2004 - Distribution) 25,027
$561,064,718 40,899,831
x 2.0
$81,799,662
*Interest rate represents 65% of the prime commercial interest rate in effect
at Manufacturers and Traders Trust Company at Sept. 30, 1994 (7.75%).
<PAGE 4>
S-9
NATIONAL FUEL GAS COMPANY
Consolidated Assets at September 30, 1994 and Pro-Forma
Assuming the Sale of $434,500,000 of Long-Term Debt
(Thousands of Dollars)
Actual Pro-Forma
Total Assets $1,981,657 $2,416,157
Less: Deferred Charges $20,441
Current Liabilities 375,249
Deferred Credits 361,056
Excess, if any, of the
minimum amount of depre-
ciation, depletion and
amortization as provided
in clause (b) of the
definition of "Income
Available for Interest
and Subsidiary Preferred"
over the aggregate amount
of depreciation, depletion
and amortization charges
on the books of the Company
and its subsidiaries from
January 1, 1968 -0- (756,746) (756,746)
Consolidated Assets $1,224,911 $1,659,411
Restrictions on Additional Funded Debt
National Fuel Gas Company (Sec. 6.05(b))
60% of Consolidated Assets $734,947 995,647
Less: Consolidated Debt 561,065 995,565
Excess of 60% of Consolidated
Assets over Consolidated Debt $173,882 $ 82
Estimated Additional Permissible Debt (2.5) $434,705 $ 205
<PAGE 5>
S-9
NATIONAL FUEL GAS COMPANY
ADJUSTMENTS TO INDENTURE & FIXED CHARGE COVERAGES
AND TO THE 60% CONSOLIDATED ASSET TEST
FISCAL YEAR ENDED SEPTEMBER 30, 1994
Revenues Subject to Refund:
Distribution $ -
Supply 624,859
Penn-York -
$ 624,859
Interest Charges:
Per Income Statement 47,124,080
Adjustment for Amortization
of Loss on Reacquired Debt
(A/C 428100):
Distribution $(1,453,225)
Supply (149,976)
Penn-York (70,873)
(1,674,074)
Total - Indenture Coverage 45,450,006
Adjustment for Borrowed Funds
Used in Construction 209,415
Total - SEC Fixed Charge Coverage $45,659,421
Income Before Interest Charges:
Per Income Statement $129,558,771
Adjustment for Amortization
of Loss on Reacquired Debt (1,674,074)
$127,884,697
Operation Expense:
Per Income Statement $260,410,773
Adjustment for Amortization
of Loss on Reacquired Debt 1,674,074
$262,084,847
<PAGE 6>
S-9
NATIONAL FUEL GAS COMPANY
ADJUSTMENTS TO INDENTURE & FIXED CHARGE COVERAGES
AND TO THE 60% CONSOLIDATED ASSET TEST
FISCAL YEAR ENDED SEPTEMBER 30, 1994
Deferred Charges:
Deferred Charges Per Balance Sheet $15,796,354
Unamortized Debt Discount & Expense - NFG
(includes unallocated costs of 1993/94
MTN Program) 4,644,814
$20,441,168
Deferred Credits:
Per Balance Sheet $363,620,286
Other Long-Term Debt Reclassified
to Deferred Credits:
Seneca - NE (2,067,913)
Distribution (496,805)
$361,055,568
<PAGE 1>
S-10
NATIONAL FUEL GAS COMPANY
PROJECTED STATEMENT OF CASH FLOWS
BY SUBSIDIARY
CALENDAR YEARS 1995 -1997
$000 OMITTED
DISTRIBUTION SUPPLY SENECA UCI NFR
CASH NEEDS
CAPITAL
EXPENDITURES $176,891 $223,824 (1) $227,114 $17,634 (2) $20,000 (3)
RETIREMENT OF
LONG-TERM DEBT 101,000 53,500 80,000 0 0
SHORT-TERM DEBT
BALANCE 129,800 4,700 73,000 3,500 0
TOTAL CASH NEEDS 407,691 282,024 380,114 21,134 20,000
FUNDS AVAILABLE
DEPRECIATION &
AMORTIZATION 96,138 63,585 141,280 3,678 1,323
DEFERRED INCOME
TAXES 15,984 985 46,694 (570) 0
NET INCOME AFTER
DIVIDENDS 45,347 27,299 59,405 221 2,821
OTHER WORKING
CAPITAL 11,862 (1,695) (8,287) 8 24
NET INTERNAL FUNDS 169,331 90,174 239,092 3,337 4,168
EXTERNAL FUNDS
REQUIRED $238,360 $191,850 $141,022 $17,797 $15,832
MAXIMUM AUTHORIZATION
REQUESTED $250,000 $150,000 $150,000 $20,000 $20,000
(1) Includes approximately $150,000,000 with respect to the Laurel Fields
Project.
(2) Includes approximately $15,000,000 with respect to turn-key contracts
should opportunities to enter into such contracts arise.
(3) Includes approximately $20,000,000 with respect to acquisitions should
opportunities arise.
