-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FUay9HyAxEldXe5oPDqB+iYG1kWGSc+T4LH1o2+TpEyEwhaJtn+MefrxIvEH4YH3 82LyVzoV6f9xtz/qAAbsxA== 0000070145-96-000014.txt : 19960216 0000070145-96-000014.hdr.sgml : 19960216 ACCESSION NUMBER: 0000070145-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL FUEL GAS CO CENTRAL INDEX KEY: 0000070145 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 131086010 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03880 FILM NUMBER: 96518284 BUSINESS ADDRESS: STREET 1: 10 LAFAYETTE SQ CITY: BUFFALO STATE: NY ZIP: 14203 BUSINESS PHONE: 2125417533 MAIL ADDRESS: STREET 2: 10 LAFAYETTE SQ CITY: BUFFALO STATE: NY ZIP: 14203 10-Q 1 - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended December 31, 1995 ----------------- Commission File Number 1-3880 ----------------------------- NATIONAL FUEL GAS COMPANY (Exact name of registrant as specified in its charter) New Jersey 13-1086010 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10 Lafayette Square Buffalo, New York 14203 ------------------- ----- (Address of principal executive offices) (Zip Code) (716) 857-6980 -------------- (Registrant's telephone number, including area code) ---------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------- ------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common stock, $1 par value, outstanding at January 31, 1996: 37,550,736 shares. - ------------------------------------------------------------------------------- Company or Group of Companies for which Report is Filed: - ------------------------------------------------------- NATIONAL FUEL GAS COMPANY (Company or Registrant) SUBSIDIARIES: National Fuel Gas Distribution Corporation (Distribution Corporation) National Fuel Gas Supply Corporation (Supply Corporation) Seneca Resources Corporation (Seneca) Highland Land & Minerals, Inc. (Highland) Leidy Hub, Inc. (Leidy Hub) Data-Track Account Services, Inc. (Data-Track) National Fuel Resources, Inc. (NFR) Horizon Energy Development, Inc. (Horizon) Utility Constructors, Inc. (UCI) INDEX Part I. Financial Information Page ----------------------------- ---- Item 1. Financial Statements a. Consolidated Statements of Income and Earnings Reinvested in the Business - Three Months Ended December 31, 1995 and 1994 3 b. Consolidated Balance Sheets - December 31, 1995 and September 30, 1995 4 - 5 c. Consolidated Statement of Cash Flows - Three Months Ended December 31, 1995 and 1994 6 d. Notes to Consolidated Financial Statements 7 - 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 - 21 Part II. Other Information -------------------------- Item 1. Legal Proceedings 22 - 23 Item 2. Changes in Securities * Item 3. Defaults Upon Senior Securities * Item 4. Submission of Matters to a Vote of Security Holders * Item 5. Other Information * Item 6. Exhibits and Reports on Form 8-K 23 Signature 24 * The Company has nothing to report under this item. Part I. - Financial Information - ------------------------------- Item 1. Financial Statements - ----------------------------- National Fuel Gas Company ------------------------- Consolidated Statements of Income and Earnings ---------------------------------------------- Reinvested in the Business -------------------------- (Unaudited) ----------- Three Months Ended December 31, ----------------------- 1995 1994 ---- ---- (Thousands of Dollars) INCOME Operating Revenues $316,328 $279,332 -------- -------- Operating Expenses Purchased Gas 132,958 103,407 Operation Expense 66,666 66,843 Maintenance 6,024 5,892 Property, Franchise and Other Taxes 23,902 23,066 Depreciation, Depletion and Amortization 21,593 18,329 Income Taxes - Net 18,841 18,507 -------- -------- 269,984 236,044 -------- -------- Operating Income 46,344 43,288 Other Income 943 844 -------- -------- Income Before Interest Charges 47,287 44,132 -------- -------- Interest Charges Interest on Long-Term Debt 10,287 10,373 Other Interest 4,608 3,188 -------- -------- 14,895 13,561 -------- -------- Net Income Available for Common Stock 32,392 30,571 EARNINGS REINVESTED IN THE BUSINESS Balance at October 1 380,123 363,854 -------- -------- 412,515 394,425 Dividends on Common Stock (1995 - $.405; 1994 - $.395) 15,117 14,702 -------- -------- Balance at December 31 $397,398 $379,723 ======== ======== Earnings Per Common Share $ .87 $ .82 ===== ===== Weighted Average Common Shares Outstanding 37,440,778 37,326,041 ========== ========== See Notes to Consolidated Financial Statements Item 1. Financial Statements (Cont.) - ------------------------------------- National Fuel Gas Company ------------------------- Consolidated Balance Sheets --------------------------- December 31, 1995 September 30, (Unaudited) 1995 ----------- ------------- (Thousands of Dollars) ASSETS Property, Plant and Equipment $2,351,989 $2,322,335 Less - Accumulated Depreciation, Depletion and Amortization 688,846 673,153 ---------- ---------- 1,663,143 1,649,182 ---------- ---------- Current Assets Cash and Temporary Cash Investments 17,365 12,757 Receivables - Net 144,838 75,933 Unbilled Utility Revenue 68,925 20,838 Gas Stored Underground 13,776 25,589 Materials and Supplies - at average cost 23,839 24,374 Unrecovered Purchased Gas Costs 187 - Prepayments 20,648 29,753 ---------- ---------- 289,578 189,244 ---------- ---------- Other Assets Recoverable Future Taxes 93,658 94,053 Unamortized Debt Expense 26,328 26,976 Other Regulatory Assets 42,911 37,040 Deferred Charges 9,594 8,653 Other 35,488 33,154 ---------- ---------- 207,979 199,876 ---------- ---------- $2,160,700 $2,038,302 ========== ========== See Notes to Consolidated Financial Statements Item 1. Financial Statements (Cont.) - ------------------------------------- National Fuel Gas Company ------------------------- Consolidated Balance Sheets --------------------------- December 31, 1995 September 30, (Unaudited) 1995 ------------ ------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES Capitalization: Common Stock Equity Common Stock, $1 Par Value Authorized - 100,000,000 Shares; Issued and Outstanding - 37,471,382 Shares and 37,434,363 Shares, Respectively $ 37,471 $ 37,434 Paid in Capital 383,932 383,031 Earnings Reinvested in the Business 397,398 380,123 ---------- ---------- Total Common Stock Equity 818,801 800,588 Long-Term Debt, Net of Current Portion 474,000 474,000 ---------- ---------- Total Capitalization 1,292,801 1,274,588 ---------- ---------- Current and Accrued Liabilities Notes Payable to Banks and Commercial Paper 268,700 147,600 Current Portion of Long-Term Debt 30,000 88,500 Accounts Payable 66,887 53,842 Amounts Payable to Customers 41,488 51,001 Other Accruals and Current Liabilities 84,550 52,118 ---------- ---------- 491,625 393,061 ---------- ---------- Deferred Credits Accumulated Deferred Income Taxes 289,255 288,763 Taxes Refundable to Customers 23,080 23,080 Unamortized Investment Tax Credit 13,213 13,380 Other Deferred Credits 50,726 45,430 ---------- ---------- 376,274 370,653 ---------- ---------- Commitments and Contingencies - - ---------- ---------- $2,160,700 $2,038,302 ========== ========== See Notes to Consolidated Financial Statements Item 1. Financial Statements (Cont.) - ------------------------------------- National Fuel Gas Company ------------------------- Consolidated Statement of Cash Flows ------------------------------------ (Unaudited) ----------- Three Months Ended December 31, ------------------- 1995 1994 ---- ---- (Thousands of Dollars) OPERATING ACTIVITIES Net Income Available for Common Stock $ 32,392 $ 30,571 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Depreciation, Depletion and Amortization 21,593 18,329 Deferred Income Taxes 3,377 2,607 Other (463) (6,332) Change in: Receivables and Unbilled Utility Revenue (116,992) (58,214) Gas Stored Underground and Materials and Supplies 12,348 13,378 Unrecovered Purchased Gas Costs (187) (178) Prepayments 9,105 2,490 Accounts Payable 13,045 (14,828) Amounts Payable to Customers (9,513) (4,390) Other Accruals and Current Liabilities 29,532 23,250 Other Assets and Liabilities - Net (3,675) 3,505 -------- -------- Net Cash Provided by (Used in) Operating Activities (9,438) 10,188 -------- -------- INVESTING ACTIVITIES Capital Expenditures (34,038) (49,783) Other 112 2,681 -------- -------- Net Cash Used in Investing Activities (33,926) (47,102) -------- -------- FINANCING ACTIVITIES Change in Notes Payable to Banks and Commercial Paper 121,100 42,100 Reduction of Long-Term Debt (58,500) - Proceeds from Issuance of Common Stock 474 1,414 Dividends Paid on Common Stock (15,102) (14,671) -------- -------- Net Cash Provided by Financing Activities 47,972 28,843 -------- -------- Net Increase (Decrease) in Cash and Temporary Cash Investments 4,608 (8,071) Cash and Temporary Cash Investments at October 1 12,757 29,016 -------- -------- Cash and Temporary Cash Investments at December 31 $ 17,365 $ 20,945 ======== ======== See Notes to Consolidated Financial Statements Item 1. Financial Statements (Cont.) - ------------------------------------- National Fuel Gas Company ------------------------- Notes to Consolidated Financial Statements ------------------------------------------ Note 1 - Summary of Significant Accounting Policies Quarterly Earnings. The Company, in its opinion, has included all adjustments that are necessary for a fair statement of the results of operations for the periods presented. The fiscal 1996 consolidated financial statements will be examined by the Company's independent accountants after the end of the fiscal year. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 1995, 1994 and 1993, that are included in the Company's combined Annual Report to Shareholders / Form 10-K for 1995. The earnings for the quarter ended December 31, 1995, should not be taken as a prediction for the fiscal year ending September 30, 1996, as most of the Company's business is seasonal in nature and is influenced by weather conditions. Because of the seasonal nature of the Company's heating business, earnings during the winter months normally represent a substantial part of earnings for the entire fiscal year. The impact of abnormal weather on earnings during the heating season is partially reduced by the operation of a weather normalization clause included in Distribution Corporation's New York tariff. The weather normalization clause is effective for October through May billings. In addition, Supply Corporation's straight fixed-variable rate design, which allows for recovery of substantially all fixed costs in the demand or reservation charge, reduces the earnings impact of weather. Consolidated Statement of Cash Flows. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents. Cash interest payments during the three months ended December 31, 1995 and 1994, amounted to $13.9 million and $9.5 million, respectively. Income taxes paid during the three months ended December 31, 1995 and 1994 amounted to $12.0 million and $4.5 million, respectively. NOTE 2 - Regulatory Matters FERC Order 636 Transition Costs. As a result of the industrywide restructuring under the FERC's Order 636, Distribution Corporation is incurring transition costs billed to it by Supply Corporation and other upstream pipeline companies. As of December 31, 1995, Distribution Corporation's estimate of its exposure to outstanding transition cost claims is in the range of $7.1 million to $70.1 million. The estimated maximum exposure is declining as transition costs are incurred and paid. At December 31, 1995, Distribution Corporation has recorded the minimum liability and corresponding regulatory asset of $7.1 million. Distribution Corporation is currently recovering transition costs from its sales customers in New York and its sales and transportation customers in Pennsylvania. Recovery of the allocable portion of transition costs related to Distribution Corporation's transportation customers in New York is expected to begin upon the Public Service Commission of the State of New York's (PSC) acceptance of a compliance filing made in November 1995. It is expected that the compliance filing will be accepted by the spring of 1996. Item 1. Financial Statements (Cont.) - ------------------------------------- Distribution Corporation will continue to actively challenge relevant FERC filings made by the upstream pipeline companies to ensure the eligibility and prudency of all transition cost claims. Management believes that any transition costs resulting from the implementation of Order 636 which have been determined to be both eligible and prudently incurred should be fully recoverable from customers. Gathering Rates. Supply Corporation has approximately $20.0 million of net production and gathering plant used, in part, to gather natural gas of local producers, including the Company's production in the Appalachian Region. In its restructuring orders, the FERC has directed Supply Corporation to fully unbundle the production and gathering cost of service from the transmission cost of service, and to establish a separate gathering rate. A Stipulation and Agreement complying with the FERC's directives was filed with the FERC in September 1995 and the Administrative Law Judge certified it as uncontested to the FERC. Approval is expected early in calendar 1996. If approved, it will permit Supply Corporation to fully recover its net investment in production and gathering plant, as well as its production and gathering cost of service. NOTE 3 - Income Taxes The components of federal and state income taxes included in the Consolidated Statement of Income are as follows (in thousands): Three Months Ended December 31, ------------------ 1995 1994 ---- ---- Operating Expenses: Current Income Taxes - Federal $14,086 $13,739 State 1,378 2,161 Deferred Income Taxes 3,377 2,607 ------- ------- 18,841 18,507 Other Income: Deferred Investment Tax Credit (167) (172) ------- ------- Total Income Taxes $18,674 $18,335 ======= ======= Item 1. Financial Statements (Cont.) - ------------------------------------- Total income taxes as reported differ from the amounts that were computed by applying the federal income tax rate to income before income taxes. The following is a reconciliation of this difference (in thousands): Three Months Ended December 31, ------------------ 1995 1994 ---- ---- Net income available for common stock $32,392 $30,571 Total income taxes 18,674 18,335 ------- ------- Income before income taxes $51,066 $48,906 ======= ======= Income tax expense, computed at statutory rate of 35% in 1995 and 1994 17,873 17,117 Increase (reduction) in taxes resulting from: Current state income taxes 896 1,405 Depreciation 523 555 Production tax credits (146) (283) Miscellaneous (472) (459) ------- ------- Total Income Taxes $18,674 $18,335 ======= ======= Significant components of the Company's deferred tax liabilities (assets) were as follows (in thousands):
At December 31, 1995 At September 30, 1995 ------------------------- ------------------------- Accumulated Deferred Accumulated Deferred Deferred Income Taxes Deferred Income Taxes Income Taxes Current* Income Taxes Current* ------------ ------------ ------------ ------------ Deferred Tax Liabilities: Excess of tax over book depreciation $186,269 $ - $185,595 $ - Exploration and intangible well drilling costs 86,574 - 84,380 - Other 67,845 - 67,831 - -------- ------- -------- ------- Total Deferred Tax Liabilities 340,688 - 337,806 - -------- ------- -------- ------- Deferred Tax Assets: Deferred investment tax credits (7,861) - (7,860) - Overheads capitalized for tax purposes (12,213) - (11,766) - Unrecovered purchased gas costs - (5,832) - (8,322) Other (31,359) - (29,417) - -------- ------- -------- ------- Total Deferred Tax Assets (51,433) (5,832) (49,043) (8,322) -------- ------- -------- ------- Total Net Deferred Income Taxes $289,255 $(5,832) $288,763 $(8,322) ======== ======= ======== =======
* Included on the Consolidated Balance Sheets in "Other Accruals and Current Liabilities." Item 1. Financial Statements (Cont.) - ------------------------------------- NOTE 4 - Capitalization Common Stock. During the three months ended December 31, 1995, the Company issued 8,200 shares of common stock under the Company's Section 401(k) plans and 3,257 shares to participants in the Company's Dividend Reinvestment Plan. Additionally, 25,562 shares of common stock were issued under the Company's stock option and stock award plans. New Accounting Pronouncement. In October 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). This statement establishes a fair value based method of accounting for employee stock options or similar equity instruments and encourages all companies to adopt that method of accounting for all of their employee stock compensation plans. Measurement of compensation cost under SFAS 123, if adopted, is effective for all awards granted after the beginning of the fiscal year in which that method is first applied. Management is currently reviewing the provisions of SFAS 123 and has not decided whether to adopt the fair value based measurement provisions. If the fair value based measurement provisions of SFAS 123 are adopted, they are not expected to have a material impact on the results of operations or financial condition of the Company. SFAS 123 allows companies to continue to measure compensation cost for employee stock options or similar equity instruments using the method of accounting prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Companies electing to remain with this method are required to make pro forma disclosures of net income and earnings per share as if SFAS 123 accounting had been applied. The Company is required to adopt the disclosure requirements of SFAS 123 for its fiscal year ending September 30, 1997. NOTE 5 - Derivative Financial Instruments The Company, in its Exploration and Production operations, has entered into certain price swap agreements that effectively hedge a portion of the market risk associated with fluctuations in the price of natural gas and crude oil. These agreements are not held for trading purposes. The price swap agreements call for the Company to receive monthly payments from (or make payment to) other parties based upon the difference between a fixed and a variable price as specified by the agreement. The variable price is either a crude oil price quoted on the New York Mercantile Exchange or a quoted natural gas price in "Inside FERC." These variable prices represent the current market prices at the locations where the company delivers its natural gas and crude oil production. Item 1. Financial Statements (Cont.) - ------------------------------------- The following summarizes the Company's activity under swap agreements for the quarters ended December 31, 1995 and 1994, respectively: Quarter Ended Quarter Ended December 31, 1995 December 31, 1994 ----------------- ----------------- Natural Gas Swap Agreements: Notional Amount - Equivalent Billion Cubic Feet (Bcf) 5.4 1.7 Fixed Prices per Thousand Cubic Feet (Mcf) $1.75 - $2.17 $2.32 - $2.39 Variable Prices per Mcf $1.67 - $2.34 $1.36 - $1.73 Gain $358,000 $1,415,000 Crude Oil Swap Agreements: Notional Amount - Equivalent Barrels (bbl) 214,000 151,000 Fixed Prices per bbl $17.40 - $19.00 $16.68 - $18.50 Variable Prices per bbl $17.40 - $19.04 $17.16 - $18.10 Gain $4,000 $2,000 The Company had the following swap agreements outstanding at December 31, 1995: Natural Gas Swap Agreements: Notional Amount Fiscal Year (Equivalent Bcf) Fixed Price Per Mcf - ----------- ---------------- ------------------- 1996 17.6 $1.71 - $3.05 1997 14.1 $1.71 - $1.99 1997 1.7 (1) 1998 3.4 $1.82 - $1.88 1998 0.6 (1) ---- 37.4 ==== Crude Oil Swap Agreements: Notional Amount Fiscal Year (Equivalent bbl) Fixed Price Per bbl - ----------- ---------------- ------------------- 1996 732,000 $17.40 - $18.50 1997 738,000 $17.40 - $18.33 1998 96,000 $18.31 --------- 1,566,000 ========= (1) Price to be set according to market prices at a future date. Gains or losses from these price swap agreements are reflected in operating revenues on the Consolidated Statement of Income at the time of settlement with the other parties. At December 31, 1995, most of the variable prices of these price swap agreements exceeded the fixed prices, resulting in an unrealized loss of approximately $17.0 million. However, the Company utilizes these price swap agreements as a hedge of its natural gas and crude oil production, meaning that any decreases in revenues associated with hedging losses are offset by increased revenues from the increase in prices received for the Company's actual natural gas and crude oil production. The unrealized loss on the Company's outstanding price swap agreements at December 31, 1995 was calculated as the difference between the fixed price associated with those agreements and the variable prices which were used to settle similar price swap agreements for the month of December 1995. The actual gain or loss realized upon settlement of these price swap agreements will depend upon the variable price at the time of settlement. Item 1. Financial Statements (Concl.) - -------------------------------------- The Company has SEC authority to enter into interest rate swaps and other derivative instruments associated with long-term borrowings up to a notional amount of $350.0 million at any one time outstanding. All such interest rate swaps and other derivative instruments must be directly related to then outstanding long or short-term debt. The Company also has SEC authority to enter into interest rate and currency exchange agreements associated with short-term borrowings covering a total principal amount of $300.0 million. No such agreements were entered into during the quarter ended December 31, 1995 and none are currently outstanding. Credit Risk. Credit risk relates to the risk of loss that the Company would incur as a result of nonperformance by counterparties pursuant to the terms of their contractual obligations. The Company is at risk in the event of nonperformance by counterparties on its derivative financial instruments. The counterparties to the Company's derivative financial instruments are investment grade financial institutions. Furthermore, the Company has guarantees from counterparty affiliates on a large portion of its derivative financial instruments. Accordingly, the Company does not anticipate any material impact to its financial position, results of operations or cash flow as a result of nonperformance by counterparties. NOTE 6 - Commitments and Contingencies Environmental Matters. The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company has established procedures for on-going evaluation of its operations to identify potential environmental exposures and assure compliance with regulatory policies and procedures. It is the Company's policy to accrue estimated environmental clean-up costs when such amounts can reasonably be estimated and it is probable that the Company will be required to incur such costs. Distribution Corporation has estimated that clean-up costs related to several former manufactured gas plant sites and several other waste disposal sites are in the range of $8.0 million to $9.4 million. At December 31, 1995, Distribution Corporation has recorded the minimum liability of $8.0 million. The Company is currently not aware of any material additional exposure to environmental liabilities. However, adverse changes in environmental regulations or other factors could impact the Company. In New York, Distribution Corporation is recovering site investigation and remediation costs over a three-year period for each site. In Pennsylvania, Distribution Corporation expects to recover such costs in rates, as the Pennsylvania Public Utility Commission (PaPUC) has allowed recovery of other environmental clean-up costs in rate cases. For further discussion, see disclosure in Note H - Commitments and Contingencies under the heading "Environmental Matters" in Item 8 of the Company's 1995 Form 10-K. Other. In addition to the litigation discussed in Part II, Item 1 of this report, the Company is involved in litigation arising in the normal course of business. In addition to the regulatory matters discussed in Note 2, the Company is involved in other regulatory matters arising in the normal course of business that involve rate base, cost of service and purchased gas cost issues. While the resolution of such litigation or other regulatory matters could have a material effect on earnings and cash flows, none of this litigation, and none of these other regulatory matters, is expected to have a material effect on the financial condition of the Company at this time. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations --------------------- RESULTS OF OPERATIONS Earnings. The Company's earnings were $32.4 million, or $0.87 per common share, during the quarter ended December 31, 1995. This compares with earnings of $30.6 million, or $0.82 per common share, during the quarter ended December 31, 1994. The $0.05 per common share increase in earnings resulted from an increase in earnings of the Company's Utility Operation and Exploration and Production segment which outweighed the decline in earnings of its Pipeline and Storage segment and its Other Nonregulated operations. The earnings of the Utility Operation increased mainly because of colder weather and rate increases effective in September 1995 in both the New York and Pennsylvania jurisdictions combined with a rate increase effective in December 1994 in the Pennsylvania jurisdiction. The earnings of the Exploration and Production segment increased because of higher natural gas and oil production coupled with an increase in the weighted average price received for this production. The earnings of the Pipeline and Storage segment decreased as revenues related to unbundled pipeline sales and open access transportation decreased from the prior year. The loss in the Other Nonregulated operations, compared to earnings in the quarter ended December 31, 1994, resulted from expenses which were expected to be incurred while exploring new opportunities in the international market. Additionally, last year's earnings of the Company's pipeline construction subsidiary were not repeated because of the discontinuance of its operations in the latter part of fiscal 1995. The Company's timber operations had lower earnings as a result of a general decline in demand and price for furniture quality timber. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- OPERATING REVENUES (in thousands) Three Months Ended December 31, ----------------------------- 1995 1994 % Change ---- ---- -------- Utility Operation Retail Revenues: Residential $192,240 $166,578 15.4 Commercial 45,796 39,702 15.3 Industrial 5,292 5,467 (3.2) -------- -------- 243,328 211,747 14.9 Off-System Sales 9,672 2,227 334.3 Transportation 10,850 8,880 22.2 Other 808 1,271 (36.4) -------- -------- 264,658 224,125 18.1 -------- -------- Pipeline and Storage Storage Service 14,893 14,890 - Transportation 23,046 22,277 3.5 Other 2,297 8,684 (73.5) -------- -------- 40,236 45,851 (12.2) -------- -------- Exploration and Production 22,973 14,274 60.9 Other Nonregulated 12,336 17,089 (27.8) -------- -------- 35,309 31,363 12.6 -------- -------- Less-Intersegment Revenues 23,875 22,007 8.5 -------- -------- $316,328 $279,332 13.2 ======== ======== OPERATING INCOME (LOSS) BEFORE INCOME TAXES (in thousands) Three Months Ended December 31, ----------------------------- 1995 1994 % Change ---- ---- -------- Utility Operation $40,632 $33,348 21.8 Pipeline and Storage 16,206 23,287 (30.4) Exploration and Production 9,504 3,748 153.6 Other Nonregulated (454) 2,103 (121.6) Corporate (703) (691) (1.7) ------- ------- $65,185 $61,795 5.5 ======= ======= Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- SYSTEM NATURAL GAS VOLUMES (millions of cubic feet-MMcf) Three Months Ended December 31, -------------------------- 1995 1994 % Change ---- ---- -------- Utility Gas Sales Residential 27,471 22,833 20.3 Commercial 7,356 6,212 18.4 Industrial 1,271 1,353 (6.1) Off-System 4,137 1,107 273.7 ------ ------ 40,235 31,505 27.7 ------ ------ Non-Utility Gas Sales Gas Sales for Resale 73 92 (20.7) Production(in equivalent MMcf) 10,719 6,602 62.4 ------ ------ 10,792 6,694 61.2 ------ ------ Total Gas Sales 51,027 38,199 33.6 ------ ------ Transportation Utility Operation 13,558 12,042 12.6 Pipeline and Storage 93,441 71,856 30.0 Nonregulated 305 811 (62.4) ------- ------ 107,304 84,709 26.7 ------- ------ Marketing Volumes 4,780 4,471 6.9 ------- ----- Less-Intersegment Volumes: Transportation 50,200 42,823 17.2 Production 1,292 1,009 28.0 Marketing 75 - NM Gas Sales 371 8 NM ------- ------ 51,938 43,840 18.5 ------- ------ Total System Natural Gas Volumes 111,173 83,539 33.1 ======= ====== NM = Not meaningful. Utility Operation. Operating revenues for the Utility Operation increased $40.5 million for the quarter ended December 31, 1995, compared with the same period a year ago. This increase reflects the recovery of increased gas costs mainly because of higher gas sales as well as an increase in the average cost of purchased gas. The 8.7 Bcf increase in gas sales primarily reflects weather in Distribution Corporation's service territory that was, on a weighted average basis, 27.0% colder than last year. The increase in operating revenues also reflects general rate increases of $14.2 million and $6.0 million in the New York and Pennsylvania rate jurisdictions, respectively, effective in September 1995. The Pennsylvania rate jurisdiction also had a general rate increase of $4.8 million effective in December 1994 which increased revenues during the current quarter. Operating income before income taxes for the Utility Operation increased $7.3 million for the quarter ended December 31, 1995, compared with the same period a year ago. This resulted primarily from colder weather, which contributed to an increase in gas sales, as discussed above. The impact Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- of colder weather was greatest in the Pennsylvania jurisdiction since Pennsylvania does not have a weather normalization clause (WNC). The impact of weather in the New York jurisdiction was tempered by that jurisdiction's WNC, which resulted in a benefit to customers of $2.0 million for the current quarter. In the quarter ended December 31, 1994, the WNC preserved pretax operating income of $4.3 million, as weather was warmer than normal. Degree Days. Three Months Ended December 31: - ------------------------------ Percent Colder Than Normal 1995 1994 Normal Last Year - ---------------------------------------------------------------------- Buffalo 2,254 2,430 1,936 7.8 25.5 Erie 2,045 2,239 1,715 9.5 30.6 - ---------------------------------------------------------------------- Pipeline and Storage. Operating income before income taxes for the Pipeline and Storage segment decreased $7.1 million for the quarter ended December 31, 1995, as compared with the same period a year ago. This decrease resulted primarily because of higher earnings in the quarter ended December 31, 1994 reflecting application of a final rule issued by the Federal Energy Regulatory Commission in September 1995 related to financial reporting of unbundled pipeline sales and open access transportation. While transportation volumes for the current quarter increased 21.6 Bcf from the quarter ended December 31, 1994, the increase in volumes did not have a significant impact on earnings as a result of Supply Corporation's straight fixed-variable (SFV) rate design. Exploration and Production. Operating income before income taxes from the Company's Exploration and Production operations increased $5.8 million compared with the same period a year ago, mainly because of increased natural gas and oil production combined with higher weighted average prices for both natural gas and oil. Natural gas production increased 3.5 Bcf, or 64.6%, compared with the same period a year ago, and the weighted average price received for natural gas increased $0.23 per Mcf. The increase in volumes primarily reflects bringing the West Cameron 552 well on production. Oil and condensate production increased 100,000 barrels (bbls), or 51.3%, and the weighted average price received for oil increased $0.73 per bbl. The fluctuations in prices denoted above do not reflect revenue from hedging activities, which contributed a net $0.4 million and $1.5 million to revenues for the quarters ended December 31, 1995 and 1994, respectively. Refer to further discussion of the Company's hedging activities under "Financing Cash Flow" and in Note 5 - Derivative Financial Instruments. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- PRODUCTION VOLUMES Exploration and Production. Three Months Ended December 31, ------------------------- 1995 1994 % Change ---- ---- -------- Gas Production - (MMcf) Gulf Coast 7,296 3,748 94.7 West Coast 257 165 55.8 Appalachia 1,393 1,521 (8.4) ----- ----- 8,946 5,434 64.6 ===== ===== Oil Production - (Thousands of Barrels) Gulf Coast 169 89 89.9 West Coast 123 103 19.4 Appalachia 3 3 - ----- ----- 295 195 51.3 ===== ===== WEIGHTED AVERAGE PRICES Exploration and Production. Three Months Ended December 31, -------------------------- 1995 1994 % Change ---- ---- -------- Weighted Avg. Gas Price/Mcf Gulf Coast $1.96 $1.59 23.3 West Coast $1.19 $1.70 (30.0) Appalachia $2.05 $2.04 0.5 Weighted Average Price $1.95 $1.72 13.4 Weighted Avg. Oil Price/bbl Gulf Coast $17.53 $16.16 8.5 West Coast $14.86 $15.25 (2.6) Appalachia $16.28 $15.27 6.6 Weighted Average Price $16.40 $15.67 4.7 Other Nonregulated. The Other Nonregulated operations experienced an operating loss before income taxes for the quarter ended December 31, 1995, compared with operating income before income taxes during the quarter ended December 31, 1994. This decline was mainly due to expenses which were expected to be incurred while exploring new opportunities in the international market through Horizon, the Company's foreign and domestic energy projects subsidiary. In addition, last year's pretax operating income of the Company's pipeline construction subsidiary was not repeated because of the discontinuance of pipeline construction operations in the latter part of fiscal 1995. Furthermore, the Company's timber operation had lower pretax operating income as a result of a general decline in demand and price for furniture quality timber. Income Taxes. Income taxes increased $0.3 million for the current quarter mainly because of an increase in pretax income. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- Interest Charges. Total interest charges increased $1.3 million for the quarter ended December 31, 1995, compared with the same period a year ago. Interest on long-term debt decreased $0.1 million and other interest increased $1.4 million. The increase in other interest resulted primarily from increases in short-term borrowings and short-term interest rates. It also increased because of higher interest expense associated with greater amounts payable to customers during the quarter ended December 31, 1995, compared with the same period a year ago. CAPITAL RESOURCES AND LIQUIDITY The Company's primary sources of cash during the three month period consisted of cash provided by operating activities and short-term bank loans and commercial paper. Operating Cash Flow. Internally generated cash from operating activities consists of net income available for common stock, adjusted for noncash expenses, noncash income and changes in operating assets and liabilities. Noncash items include depreciation, depletion and amortization, deferred income taxes and allowance for funds used during construction. Cash provided by operating activities in the Utility Operation and the Pipeline and Storage segments may vary substantially from period to period because of supplier refunds, the impact of rate cases and for the Utility Operation, fluctuations in weather and over- or under-recovered purchased gas costs. The impact of weather on cash flow is tempered in the Utility Operation's New York rate jurisdiction by its WNC. The Pipeline and Storage segment's cash flow is not significantly impacted by weather because of Supply Corporation's SFV rate design. Because of the seasonal nature of the Company's heating business, revenues are relatively high during the quarter ended December 31 and receivables and unbilled utility revenue historically increase from September to December with the beginning of winter weather. The storage gas inventory normally declines during the first and second quarters of the fiscal year and is replenished during the third and fourth quarters. Under the last-in, first-out (LIFO) method of accounting, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statement of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheet and is included under the caption "Other Accruals and Current Liabilities." Such reserve is reduced as the inventory is replenished. Net cash used in operating activities totaled $9.4 million for the quarter ended December 31, 1995, compared with $10.2 million provided by operating activities in the quarter ended December 31, 1994. This shift in cash flow can be attributed primarily to an increase in receivable balances, offset partly by higher payable balances, in the Utility Operation and Exploration and Production segment. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- Investing Cash Flow. Capital Expenditures - -------------------- The Company's capital expenditures totaled $34.0 million during the three month period. Total expenditures for the quarter represent 20% of the total capital expenditure budget for fiscal 1996 of $172.9 million. The following table presents first quarter capital expenditures by business segment: (in thousands) Percentage -------------- ---------- Utility Operation $14,147 41.6% Pipeline and Storage 5,788 17.0 Exploration and Production 13,780 40.5 Other Nonregulated 323 0.9 ------- ----- $34,038 100.0% ======= ====== The bulk of the Utility Operation's capital expenditures were made for replacement of mains and main extensions, as well as for the replacement of service lines. The bulk of the Pipeline and Storage capital expenditures were made for additions, improvements, and replacements to this segment's transmission and storage systems. The Exploration and Production segment spent approximately $6.8 million on its offshore program in the Gulf of Mexico, including offshore lease acquisitions and drilling expenditures. Lease acquisitions included the acquisition of Galveston Block 225 through a federal lease sale. Approximately $7.0 million was spent on the Exploration and Production segment's onshore program, including horizontal onshore drilling in central Texas and Seneca's development drilling program in California. Other Nonregulated capital expenditures consisted of equipment purchases for the Company's sawmill operation. The Company's capital expenditure program is under continuous review. The amounts are subject to modification for opportunities in the natural gas industry such as the acquisition of attractive oil and gas properties or storage facilities and the expansion of transmission line capacities. While the majority of capital expenditures in the Utility Operation are necessitated by the continued need for replacement and upgrading of mains and service lines, the magnitude of future capital expenditures in the Company's other business segments depends, to a large degree, upon market conditions. Expenditures in the Pipeline and Storage segment are also dependent on adequate rate relief. Financing Cash Flow. In December 1995, the Company retired $58.5 million of maturing medium-term notes with short-term borrowings. This consisted of $38.5 million of 8.90% medium-term notes and $20.0 million of 8.875% medium-term notes. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Cont.) ----------------------------- Consolidated short-term debt increased by $121.1 million during the first quarter. This increase reflects, among other things, the use of short-term borrowings to retire the medium-term notes discussed above. The Company considers short-term bank loans and commercial paper important sources of cash for temporarily financing construction expenditures, gas in storage inventory, unrecovered purchased gas costs and other working capital needs. The Company's present liquidity position is believed to be adequate to satisfy known demands. Under the Company's covenants contained in its indenture covering long-term debt, at December 31, 1995, the Company would have been permitted to issue up to a maximum of $656.0 million in additional long-term unsecured indebtedness, in light of then current long-term interest rates. In addition, at December 31, 1995, the Company had regulatory authorizations and unused short-term credit lines that would have permitted it to borrow an additional $331.3 million of short-term debt. The Company, through Seneca, is engaged in certain price swap agreements as a means of managing a portion of the market risk associated with fluctuations in the market price of natural gas and crude oil. These price swap agreements are not held for trading purposes. During the quarter ended December 31, 1995, Seneca utilized natural gas and crude oil swap agreements with notional amounts of 5.4 equivalent Bcf and 214,000 equivalent bbl, respectively. This activity resulted in net revenues of approximately $0.4 million. At December 31, 1995, Seneca had natural gas swap agreements outstanding with a notional amount of 37.4 equivalent Bcf at prices ranging from $1.71 per Mcf to $3.05 per Mcf. Seneca also had crude oil swap agreements outstanding at December 31, 1995 with a notional amount of 1,566,000 equivalent bbl at prices ranging from $17.40 per bbl to $18.50 per bbl. In addition, the Company has SEC authority to enter into certain interest rate swap agreements. For further discussion, refer to Note 5 - Derivative Financial Instruments. In addition to the litigation discussed in Part II, Item 1, of this report, the Company is involved in litigation arising in the normal course of business. In addition to the regulatory matters discussed in Note 2, the Company is involved in other regulatory matters arising in the normal course of business that involve rate base, cost of service and purchased gas cost issues, among other things. While the resolution of such litigation or other regulatory matters could have a material effect on earnings and cash flows, none of this other litigation and none of these other regulatory matters are expected to change materially the Company's present liquidity position. RATE MATTERS Utility Operation New York Jurisdiction - --------------------- In November 1995, Distribution Corporation filed in its New York jurisdiction a request for an annual base rate increase of $28.9 million with a requested return on equity of 11.5%. Proceedings in this rate case are ongoing and management cannot predict their outcome. New rates are expected to become effective in October 1996. Prior to this filing, Distribution Corporation entered into discussions concerning a multi-year settlement, the outcome of which is uncertain at this time. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations (Concl.) ------------------------------ In October 1994, Distribution Corporation filed in its New York jurisdiction a request for an annual base rate increase of $56.5 million with a requested return on equity of 12.85%. In September 1995, the PSC issued an order authorizing an annual base rate increase of $14.2 million with a return on equity of 10.4%. The new rates became effective as of September 20, 1995. Pennsylvania Jurisdiction - ------------------------- On March 15, 1995, Distribution Corporation filed in its Pennsylvania jurisdiction a request for an annual base rate increase of $22.0 million with a return on equity of 13.25%. In September 1995, the PaPUC approved a settlement authorizing an annual base rate increase of $6.0 million with no specified rate of return on equity. The new rates became effective as of September 27, 1995. On March 8, 1994, Distribution Corporation filed in its Pennsylvania jurisdiction a request for an annual base rate increase of $16.0 million with a return on equity of 12.25%. A proposal for a WNC was included in this filing. On December 6, 1994, an order was issued by the PaPUC authorizing an annual base rate increase of $4.8 million with a return on equity of 11.0% and without a WNC. The new rates became effective as of December 7, 1994. General rate increases do not reflect the recovery of purchased gas costs. Such costs are recovered through operation of the purchased gas adjustment clauses of the regulatory authorities having jurisdiction. Pipeline and Storage. For a discussion of Supply Corporation's gathering rates, refer to Note 2 - Regulatory Matters. On October 31, 1994, Supply Corporation filed for an annual rate increase of $21.0 million, with a requested return on equity of 12.6%. Settlement discussions to resolve the various issues have achieved a settlement in principle. This settlement in principle will increase Supply Corporation's revenues by approximately $6.4 million annually from current levels, with a return on equity of 11.3%. The services of the former Penn-York Energy Corporation (Penn-York), which was merged into Supply Corporation effective July 1, 1994, will be rolled-in for ratemaking purposes. Approximately two-thirds of the former Penn-York service is now on year-to-year contracts and Supply Corporation has agreed not to seek recovery of revenues related to terminated Penn-York service from other storage customers until April 1, 2000, as long as the terminations are not greater than approximately 30% of the terminable service. Supply Corporation also agreed not to seek recovery for increased cost of service until April 1, 1998. A Stipulation and Agreement incorporating the settlement in principle was filed with the FERC in September 1995 and the Administrative Law Judge certified the settlement as uncontested to the FERC on November 6, 1995. Approval is expected in early calendar year 1996 and rates are expected to become effective retroactive to June 1, 1995. With respect to the terminable Penn-York storage service, Supply Corporation has received notification of termination of 3.3 Bcf of service effective on March 31, 1996. An open season was recently completed concerning the 3.3 Bcf of service, and management is currently evaluating the results. Part II. Other Information - --------------------------- Item 1. Legal Proceedings - -------------------------- Paragon/TGX Litigation A. New York Litigation Since November 30, 1984, Distribution Corporation has been involved in litigation against Paragon Resources, Inc. (Paragon) and TGX Corp. (collectively Paragon/TGX), in the United States District Court for the Western District of New York (the District Court). Distribution Corporation sought a declaratory judgment concerning the contract effect of a December 20, 1983 PSC order (the Disapproval Order) which, among other things, disapproved a 1974 gas purchase agreement between Distribution Corporation's predecessor in interest, Iroquois Gas Corporation, and Paragon (the Paragon Contract). Paragon/TGX counterclaimed for (i) a declaration that the Disapproval Order did not affect the Paragon Contract in any way, whatsoever, (ii) approximately $4.4 million in respect of take-or-pay claims, and (iii) unquantified amounts in respect of other alleged breaches of the Paragon Contract. Commencing with its payment for production received in September 1984, and continuing through December 1993, when Paragon/TGX purported to assign the Paragon Contract, Distribution Corporation paid Paragon/TGX for Paragon Contract gas at prices below those developed by the Paragon Contract's price formula, as the same have been impacted, from time to time, by the Natural Gas Policy Act of 1978. On December 3, 1991, the United States Court of Appeals for the Second Circuit (the Second Circuit) issued an opinion regarding a partial summary judgment granted by the District Court. The Second Circuit essentially held that the Disapproval Order had "voided the Contract's price term," but that Paragon/TGX had elected an option available to it under the Paragon Contract to continue that contract, in the aftermath of the Disapproval Order, at "a price consistent with" that order. The Second Circuit also remanded the case to the District Court for further proceedings. In a letter dated December 13, 1991, TGX demanded that Distribution Corporation pay it $21.9 million (including interest), alleged to represent the difference between the amount received by Paragon/TGX in respect of Paragon Contract gas delivered during the period September 1984 through October 1991, and the amount allegedly due TGX in respect of such gas during such period. Distribution Corporation rejected TGX's demand. On September 29, 1994, Paragon/TGX served an amended answer and counterclaim. That pleading restates Paragon/TGX's claims for unquantified money damages respecting Distribution Corporation's alleged (i) breach of contract price and "take-or-pay" provisions, (ii) "lack of good faith . . . material breach" of the contract, and (iii) repudiation of the contract. The pleading also adds two new, but unquantified claims - (i) consequential damages suffered upon the sale of properties and assignment of the Paragon Contract at less than full value, and (ii) damages related to the allegation that Distribution Corporation "tortiously and with intent injured TGX in the conduct of its business." Distribution Corporation filed a timely reply to Paragon/TGX's claims. Various motions have been heard before the District Court. A United States Magistrate Judge is now handling other preliminary matters and discovery issues before the case is ultimately set for trial. B. State Commission Proceedings In 1992, Distribution Corporation filed two petitions with the PSC that involved the Paragon Contract. Distribution Corporation sought authority Item 1. Legal Proceeding (Concl.) - ---------------------------------- from the PSC to defer, and ultimately recover through rates, a partial settlement payment made to TGX. Distribution Corporation also requested the PSC to review the prices charged by TGX in the context of the "just and reasonable" standard of Section 110(4) of the New York Public Service Law and issue a declaratory order regarding its findings. The PSC consolidated the proceedings, and, in an order issued on May 5, 1995, (i) authorized Distribution Corporation to recover through rates the amounts previously paid to TGX, and (ii) dismissed Distribution Corporation's petition regarding the New York Public Service Law Section 110(4) issues because the PSC determined there was no "properly reviewable contract" that had been filed with it. In September 1995, Distribution Corporation filed a petition with the New York Supreme Court (Albany County, Special Term) seeking judicial review of the PSC's May 1995 order regarding the dismissal of Distribution Corporation's petition for a declaratory order. In January 1996, Distribution Corporation and the PSC stipulated to a dismissal of Distribution Corporation's September 1995 petition. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits Exhibit Number Description of Exhibit ------- ---------------------- (12) Statements regarding Computation of Ratios: Ratio of Earnings to Fixed Charges for the Twelve Months Ended December 31, 1995. (27) Financial Data Schedule (99) National Fuel Gas Company Consolidated Statement of Income for the Twelve Months Ended December 31, 1995 and 1994. (b) Reports on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NATIONAL FUEL GAS COMPANY (Registrant) /s/ Joseph P. Pawlowski ------------------------------ Joseph P. Pawlowski Treasurer and Principal Accounting Officer Date: February 14, 1996 ----------------- EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NATIONAL FUEL GAS COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 03-MOS SEP-30-1996 OCT-01-1995 DEC-31-1995 PER-BOOK 1,663,143 0 289,578 9,594 198,385 2,160,700 37,471 383,932 397,398 818,801 0 0 474,000 163,700 0 105,000 30,000 0 0 0 569,199 2,160,700 316,328 18,841 251,143 269,984 46,344 943 47,287 14,895 32,392 0 32,392 15,117 0 (9,438) .87 .87
EX-99 3 EXHIBIT 99 NATIONAL FUEL GAS COMPANY CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Twelve Months Ended December 31, ------------------- 1995 1994 (Thousands of Dollars) INCOME Operating Revenues $1,012,491 $1,110,529 ---------- ---------- Operating Expenses Purchased Gas 380,645 456,935 Operation Expense 266,609 263,706 Maintenance 25,851 31,455 Property, Franchise and Other Taxes 92,673 101,574 Depreciation, Depletion and Amortization 75,046 75,208 Income Taxes - Net 44,212 51,205 ---------- ---------- 885,036 980,083 ---------- ---------- Operating Income 127,455 130,446 Other Income 5,477 3,460 ----------- ---------- Income Before Interest Charges 132,932 133,906 ---------- ---------- Interest Charges Interest on Long-Term Debt 40,810 38,188 Other Interest 14,407 10,512 ---------- ---------- 55,217 48,700 ---------- ---------- Income Before Cumulative Effect 77,715 85,206 Cumulative Effect of Change in Accounting - (589) ---------- ---------- Net Income Available for Common Stock $ 77,715 $ 84,617 ========== ========== Earnings Per Common Share Income Before Cumulative Effect $2.08 $2.30 Cumulative Effect of Change in Accounting - (.02) ----- ----- Net Income Available for Common Stock $2.08 $2.28 ===== ===== Weighted Average Common Shares Outstanding 37,425,797 37,190,689 ========== ========== EX-12 4
COMPUTATION OF RATIO OF EXHIBIT 12 EARNINGS TO FIXED CHARGES UNAUDITED Fiscal Year Ended September 30 Twelve ------------------------------------------------- Months Ended 12/31/95 1995 1994 1993 1992 1991 -------------------------------------------------------------- EARNINGS: Income Before Interest Charges (2) $131,216 $128,061 $127,885 $125,742 $118,222 $110,240 Allowance for Borrowed Funds Used in Construction 164 195 209 174 1,088 2,278 Federal Income Tax 30,869 30,522 36,630 21,148 17,680 (3,929) State Income Tax 4,121 4,905 6,309 2,979 3,426 341 Deferred Inc. Taxes - Net (3) 9,222 8,452 4,853 16,919 14,125 26,873 Investment Tax Credit - Net (668) (672) (682) (693) (706) (738) Rentals (1) 5,431 5,422 5,730 5,621 5,857 4,915 ------------------------------------------------------------- $180,355 $176,885 $180,934 $171,890 $159,692 $139,980 ============================================================= FIXED CHARGES: Interest & Amortization of Premium and Discount of Funded Debt $40,810 $40,896 $36,699 $38,507 $39,949 $41,916 Interest on Commercial Paper and Short-Term Notes Payable 7,585 6,745 5,599 7,465 12,093 11,933 Other Interest (2) 5,270 4,721 3,361 4,727 6,958 9,679 Rentals (1) 5,431 5,422 5,730 5,621 5,857 4,915 ------------------------------------------------------------ $59,096 $57,784 $51,389 $56,320 $64,857 $68,443 ============================================================ RATIO OF EARNINGS TO FIXED CHARGES 3.05 3.06 3.52 3.05 2.46 2.05
Notes: (1) Rentals shown above represent the portion of all rentals (other than delay rentals) deemed representative of the interest factor. (2) The twelve month period ended December 31, 1995, and the fiscal years 1995, 1994, 1993 and 1992 reflect the reclassification of $1,716, $1,716, $1,674, $1,374 and $1,129, respectively, representing the loss on reacquired debt amortized during each period, from Other Interest Charges to Operation Expense. (3) Deferred Income Taxes - Net for fiscal 1994 excludes the cumulative effect of changes in accounting. -----END PRIVACY-ENHANCED MESSAGE-----