FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________to ____________
Commission File number 1-7924
VALLEY RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Rhode Island 05-0384723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1595 Mendon Road 02864
Cumberland, Rhode Island (Zip Code)
(Address of principal executive offices)
(401) 334-1188
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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.
Outstanding at
Class of Common Stock May 31, 1996
$1 Par Value 4,263,710
<PAGE>
VALLEY RESOURCES, INC.
FORM 10-Q
MAY 31, 1996
Page of
Form 10-Q
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations--for
the three and nine months ended May 31, 1996
and 1995................................................. 3
Consolidated Condensed Balance Sheets--May 31,
1996 and August 31, 1995................................. 4 & 5
Consolidated Condensed Statements of Cash Flows--for
the nine months ended May 31, 1996 and 1995.............. 6
Notes to Consolidated Condensed Financial Statements..... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 8
Item 6(a) Exhibits................................................. 9
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................... 10
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
(in thousands except share and per share numbers)
<S> <C> <C> <C> <C>
Operating Revenues:
Utility Gas Revenues $ 19,126 $ 16,993 $ 53,088 $ 48,811
Nonutility Revenues 4,539 4,445 14,923 14,366
---------- ---------- ---------- ----------
Total 23,665 21,438 68,011 63,177
---------- ---------- ---------- ----------
Operating Expenses:
Cost of Gas Sold 10,152 8,905 27,950 26,715
Cost of Sales - Nonutility 3,095 3,109 10,372 9,988
Operations 4,488 4,294 13,470 13,125
Maintenance 430 388 1,232 1,200
Depreciation and Amortization 750 668 2,212 2,020
Taxes - Other Than Federal Income 1,121 1,066 3,273 3,219
- Federal Income 920 637 2,330 1,367
---------- ---------- ---------- ----------
Total 20,956 19,067 60,839 57,634
---------- ---------- ---------- ----------
Operating Income 2,709 2,371 7,172 5,543
Other Income - Net of Tax 61 31 332 69
---------- ---------- ---------- ----------
Total Income 2,770 2,402 7,504 5,612
---------- ---------- ---------- ----------
Interest Charges:
Long-Term Debt 489 484 1,438 1,483
Other 286 332 991 896
---------- ---------- ---------- ----------
Total 775 816 2,429 2,379
---------- ---------- ---------- ----------
Net Income $ 1,995 $ 1,586 $ 5,075 $ 3,233
========== ========== ========== ==========
Average Number of Common
Shares Outstanding 4,262,970 4,218,570 4,255,017 4,217,308
Earnings Per Average Common Share
Outstanding $ 0.47 $ 0.38 $ 1.19 $ 0.77
Dividends Declared on Common Stock $ 0.1825 $ 0.18 $ 0.5425 $ 0.53
</TABLE>
The accompanying Notes are an integral part of these statements.
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
May 31, Aug. 31,
1996 1995
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant - Net $48,889 $47,411
------- -------
Leased Property - Net 3,138 2,014
------- -------
Nonutility Property-Net 3,565 3,547
------- -------
Other Investments 1,516 1,461
------- -------
Current Assets:
Cash 760 455
Accounts Receivable - Net 13,115 10,686
Deferred Unbilled Gas Costs 483 434
Fuel and Other Inventories (Note 3) 3,717 5,385
Prepayments 528 1,159
Common Stock held for Dividend Reinvestment-amounting
to 11,608 and 26,190 shares respectively (Note 4) 133 290
------- -------
Total 18,736 18,409
------- -------
Deferred Debits:
Recoverable Postretirement Benefits 718 693
Recoverable Vacations Accrued 823 847
Unamortized Debt Discount and Expense 1,538 1,581
Prepaid Pensions 5,772 5,546
Recoverable Deferred FIT 5,856 5,713
Recoverable Transition Obligation 1,325 1,325
Other 3,667 3,791
------- -------
19,699 19,496
------- -------
Total $95,543 $92,338
======= =======
</TABLE>
The accompanying Notes are an integral part of these statements.
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets (Cont'd)
<TABLE>
<CAPTION>
(Unaudited)
May 31, Aug. 31,
1996 1995
(in thousands)
<S> <C> <C>
CAPITALIZATION & LIABILITIES
Capitalization:
Common Stock $ 4,275 $ 4,261
Paid In Capital 18,154 18,039
Retained Earnings 9,605 6,835
Less: Accounts Receivable from ESOP (3,142) (3,142)
-------- --------
Total Common Stock Equity 28,892 25,993
-------- --------
Long-Term Debt (Less Current Maturities):
8% First Mortgage Bonds, Series Due 2022 20,247 21,072
9% Notes Payable, Due 1999 2,139 2,139
Notes Payable 3,105 1,405
-------- --------
Total Long-Term Debt 25,491 24,616
-------- --------
Total Capitalization 54,383 50,609
-------- --------
Obligation Under Capital Lease 2,298 1,255
-------- --------
Current Liabilities:
Current Maturities of Long-Term Debt 500 500
Obligation Under Capital Lease 841 759
Notes Payable 9,300 11,900
Accounts Payable 4,672 4,321
Security Deposits & Refund Obligations 1,106 1,162
Taxes Accrued 2,179 508
Deferred Fuel Costs 1,293 3,151
Accrued Interest 948 655
Other 949 976
-------- --------
Total 21,788 23,932
-------- --------
Commitments and Contingencies
Deferred Credits 6,406 6,451
-------- --------
Deferred Federal Income Taxes 10,668 10,091
-------- --------
$ 95,543 $ 92,338
======== ========
</TABLE>
The accompanying Notes are an integral part of these statements.
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the 9 Months
Ended
May 31, May 31,
1996 1995
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 5,075 $ 3,233
Adjustments to Reconcile Net Income to Net Cash used in
Operating Activities:
Depreciation and Amortization 2,212 2,020
Provision for Uncollectibles 1,087 910
Deferred Federal Income Taxes 434 531
Change in Assets and Liabilities:
Accounts Receivable (3,516) (3,339)
Deferred Fuel Costs (1,858) 3,858
Unbilled Gas Costs (49) (55)
Fuel and Other Inventories 1,668 1,433
Other Current Assets 319 400
Accounts Payable, Accrued Expenses and Current Liabilities 1,966 158
Other - Net 130 252
------- -------
Net Cash Provided by Operating Activities 7,468 9,401
------- -------
Cash Flows from Investing Activities:
Utility Capital Expenditures (3,248) (2,898)
Nonutility Capital Expenditures (460) (484)
Other Investments (55) (21)
------- -------
Net Cash (Used) by Investing Activities (3,763) (3,403)
------- -------
Cash Flows from Financing Activities:
Dividends Paid (2,305) (2,234)
Capital Stock Transactions 130 54
Issuance of Long Term Debt 2,200 -0-
Retirement of Long-Term Debt (825) (1,260)
Decrease in Notes Payable (2,600) (2,100)
------- -------
Net Cash (Used) by Financing Activities (3,400) (5,540)
------- -------
Net Increase in Cash 305 458
Cash - Beginning 455 587
------- -------
Cash - Ending $ 760 $ 1,045
======= =======
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest $ 2,136 $ 1,968
======= =======
Federal Income Taxes $ 725 $ 380
======= =======
Capital Lease Obligations Incurred $ 1,804 $ 544
======= =======
</TABLE>
The accompanying Notes are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1
The Corporation computes earnings per average common share based on the
weighted average number of shares outstanding during the period.
Note 2
In the opinion of the Corporation, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals and matters discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations") necessary to present
fairly the financial position as of May 31, 1996 the results of operations for
the three and nine months ended May 31, 1996 and 1995 and Statement of Cash
Flows for the nine months ended May 31, 1996 and 1995.
The results of operations for the three- and nine-month periods ended May
31, 1996 and 1995 are not necessarily indicative of the results to be expected
for the full year.
Note 3
Inventories - Fuel and Other Inventories:
(in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
May 31, August 31,
1996 1995
<S> <C> <C>
Fuels (at average cost) $1,338 $3,255
Merchandise and Other (at average cost) 1,083 1,052
Merchandise (at LIFO) 1,296 1,078
------ ------
$3,717 $5,385
====== ======
</TABLE>
Note 4
Pursuant to the dividend reinvestment plan, stockholders can reinvest
dividends and make limited additional investments in shares of Common Stock.
Shares issued through dividend reinvestment can be acquired on the open market
or original issue.
Note 5
On May 20, 1996, Valley Resources, Inc. purchased Alternate Energy
Corporation (AEC) a Rhode Island Corporation that constructs natural gas
refueling stations, retro-fits vehicles and equipment to run on dedicated
natural gas. A form 8-K was not required to be filed.
<PAGE>
PART I - ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Utility gas revenues for the third fiscal quarter, the three months ended
May 31, 1996, totaled $19,126,200, an increase of 13 percent over the same
period in fiscal 1995. For the nine months ended May 31, 1996, utility gas
revenues increased 9 percent when compared to the same period in fiscal 1995 and
totaled $53,088,000. The revenue increases for the three- and nine-month periods
were the result of increased gas sales and rate relief. Partially offsetting the
increase in firm gas sales revenues was a reduction in the revenue generated
from seasonal and firm off-peak transportation. A reduction in revenues
generated through the purchased gas price adjustment (PGPA) clause also affected
utility gas revenues for the nine month period.
Gas sales to firm customers for the third quarter of fiscal 1996 totaled
2,569,500 Mcf, an increase of 9 percent over the same quarter in fiscal 1995.
For the nine months ended May 31, 1996, firm customer gas sales increased 13
percent over the same period in 1995 and were 7,428,300 Mcf. Colder weather is
responsible for the increases in gas sales. Weather, as measured by degree days,
was one percent colder than the prior year for the three-month period and 10
percent colder than the prior year for the nine-month period.
Rate relief granted to the utility subsidiaries in November 1995 positively
impacted revenues for both the three- and nine- month periods. The utilities
were authorized to combine their rate structures and collect an additional $1.1
million in revenues. The new rate tariffs collect an increased share of revenues
through the customer charge, thus reducing the impact of weather on total
revenues. The increase in the customer charge resulted in approximately $580,000
of the increase in utility revenues for the nine-month period and approximately
$300,000 for the three-month period.
Seasonal and dual-fuel gas sales decreased for the three and nine months
ended May 31, 1996, when compared to the prior year periods. Seasonal sales are
dependent on availability of gas and the price of competitive fuels. The margins
on seasonal sales are returned to firm customers through the PGPA, thus seasonal
sales have no impact on operating margins.
Transportation revenues decreased $77,200 and $90,500 for the three- and
nine-month periods, respectively. The reduction in transportation revenues was
due to a decrease in Mcf's delivered to Valley Gas. Valley Gas transports
customer-owned natural gas if delivered to its gate station.
Nonutility revenues totaled $4,539,000 and $14,922,600 for the three and
nine months ended May 31, 1996, respectively. Nonutility revenues for the third
fiscal quarter were 2 percent greater than the 1995 period and for the
nine-months ended May 31, 1996, nonutility sales were 4 percent greater than the
prior year. Propane revenues for the three- and nine-month period were the major
contributor to the increased revenues as a result of an increase in the number
of gallons sold. The colder weather and sales to the construction heating market
were the primary contributors to the increases in the propane sales volume.
Wholesale revenues increased over the prior year for the third fiscal quarter,
however, for the nine-month period wholesale revenues declined. Competition and
consolidation of wholesale outlets contributed to the decline in sales.
Offsetting the increases in nonutility revenues for the three-month period was a
decline in merchandising operations. A reduction in units sold to the
residential market is responsible for the revenue decline. The focus on the
commercial and industrial markets led to the increase in merchandising revenues
for the nine-month period. Service contract and rental revenues increased for
both the three- and nine-month periods as a result of new customers and price
increases.
<PAGE>
The cost of gas sold increased 14 percent for the three-month period and 5
percent for the nine-month period when compared to fiscal 1995. The cost of gas
sold was impacted by higher gas prices and increased usage of natural and
supplemental fuels as a result of increased gas sales and colder weather.
Cost of sales for nonutility operations decreased for the three-month
period as a result of decreased retail sales. The nine-month cost of sales
increased due to an increase in the related sales in the commercial and
industrial market. Other operation expenses increased 5 percent for the
three-month period and were 2 percent greater for the nine-month period when
compared to fiscal 1995. The increases in operation expenses resulted from an
increase in uncollectible accounts and an increase in the costs to operate
supplemental fuel facilities.
Other income increased $30,000 and $263,300 for the three and nine months
ended May 31, 1996, respectively, over the prior fiscal periods as a result of
off-system natural gas sales. Off-system sales are natural gas sales, arranged
by the utility, to customers outside the franchise area at market clearing
prices. Gas is available for sale through acquisition rights available to the
utility and from supplies not required to meet firm customer demand. The
opportunities for off-system sales are dependent upon market demand and the
ability of other gas suppliers to meet their delivery requirements. As a result,
the ability to affect this market is beyond the Corporation's total control.
While Valley will continue to make excess gas supplies and transportation
capacity available to this new market, there is no assurance that this level of
off-system sales opportunities will continue.
Interest expense decreased by 5 percent for the three-month period but
increased 2 percent for the nine months ended May 31, 1996, when compared to the
prior fiscal periods. A reduction in the deferred fuel cost liability and
therefore the related interest accrual is responsible for the decrease in
interest expense for the third fiscal quarter. For the nine-month period
interest expense increased due to a higher balance of short-term debt.
Liquidity and Capital Resources
During the third fiscal quarter the liquidity position of the Corporation
improved due to the collection of accounts receivable, the timing of tax
payments and rate relief. The improved liquidity position allowed the
corporation to reduce its short-term borrowings. Management believes the
available lines of credit are sufficient to meet cash requirements for the
foreseeable future. The available borrowings under lines of credit at May 31,
1996, were $17,700,000.
On November 20, 1995, the Rhode Island Public Utilities Commission
authorized the utilities to adjust their tariffs to collect an additional $1.1
million in revenue annually. This rate increase favorably impacted liquidity
during the third fiscal quarter.
Construction expenditures increased during the third fiscal quarter due to
more favorable weather, thereby negatively impacting liquidity.
The liquidity position of the Corporation will be adversely affected during
the fourth quarter when gas inventories are replenished for use during winter
months and revenues decline as a result of the lack of heat-sensitive sales in
the utility companies. Increased construction activities during the summer
months will also adversely impact the Corporation's liquidity.
PART I - ITEM 6(a)
Item 6(a) - Exhibits
27. Financial Data Schedule
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) None.
(b) The Company did not file a Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
S/K. W. Hogan
K. W. Hogan
Senior Vice President, Chief Financial Officer and
Secretary
July 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 760
<SECURITIES> 0
<RECEIVABLES> 13,837
<ALLOWANCES> 722
<INVENTORY> 3,717
<CURRENT-ASSETS> 18,736
<PP&E> 82,908
<DEPRECIATION> 30,454
<TOTAL-ASSETS> 95,543
<CURRENT-LIABILITIES> 21,788
<BONDS> 20,247
0
0
<COMMON> 4,275
<OTHER-SE> 24,617
<TOTAL-LIABILITY-AND-EQUITY> 95,543
<SALES> 68,011
<TOTAL-REVENUES> 68,011
<CGS> 38,322
<TOTAL-COSTS> 60,839
<OTHER-EXPENSES> 22,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,429
<INCOME-PRETAX> 7,538
<INCOME-TAX> 2,463
<INCOME-CONTINUING> 5,075
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,075
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
