FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 1OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2000
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)
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, 2000
--------------------- --------------
$1 Par Value 4,987,607
<PAGE>
VALLEY RESOURCES, INC.
FORM 10-Q
MAY 31, 2000
Page of
Form 10-Q
---------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Earnings--for
the three- and nine-months ended May 31, 2000 and
May 31, 1999................................................... 3
Consolidated Condensed Balance Sheets--May 31,
2000 and August 31, 1999................................... 4 & 5
Consolidated Condensed Statements of Cash Flows--for
the nine-months ended May 31, 2000 and May 31, 1999............ 6
Notes to Consolidated Condensed Financial Statements........... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............ 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
-------------- --------------
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
------- ------- ------- -------
(in thousands except share and per share numbers)
<S> <C> <C> <C> <C>
Operating Revenues:
Utility Gas Revenues $ 18,989 $ 18,303 $ 55,961 $ 51,471
Nonutility Revenues 6,806 5,278 19,077 16,581
---------- ---------- ---------- ----------
Total 25,795 23,581 75,038 68,052
---------- ---------- ---------- ----------
Operating Expenses:
Cost of Gas Sold 9,913 9,332 30,704 27,200
Cost of Sales - Nonutility 4,421 3,587 12,929 10,996
Operations 4,267 4,326 13,401 13,429
Maintenance 467 437 1,384 1,274
Depreciation and Amortization 914 854 2,741 2,563
Taxes - Other Than Federal Income 1,165 1,149 3,491 3,344
- Federal Income 1,271 926 2,693 2,252
---------- ---------- ---------- ----------
Total 22,418 20,611 67,343 61,058
---------- ---------- ---------- ----------
Operating Income 3,377 2,970 7,695 6,994
Other Income - Net of Tax 89 53 268 203
Merger-related (Expenses) (90) -0- (494) -0-
---------- ---------- ---------- ----------
Total Income 3,376 3,023 7,469 7,197
---------- ---------- ---------- ----------
Interest Charges:
Long-Term Debt 567 588 1,707 1,818
Other 178 115 590 403
---------- ---------- ---------- ----------
Total 745 703 2,297 2,221
---------- ---------- ---------- ----------
Net Income $ 2,631 $ 2,320 $ 5,172 $ 4,976
========== ========== ========== ==========
Average Number of Common
Shares Outstanding 4,985,111 4,975,467 4,983,720 4,978,924
Basic & Diluted Earnings Per Average
Common Share Outstanding $0.53 $0.47 $1.04 $1.00
Dividends Declared on Common Stock $0.1875 $0.1875 $0.5625 $0.5625
</TABLE>
The accompanying Notes are an integral part of these statements.
3
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
May 31, Aug. 31,
2000 1999
------- --------
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant - Net $ 53,081 $ 52,334
-------- --------
Leased Property - Net 994 1,556
-------- --------
Nonutility Property-Net 4,247 4,163
-------- --------
Other Investments 1,674 1,740
-------- --------
Current Assets:
Cash 644 750
Accounts Receivable - Net 13,247 9,817
Deferred Unbilled Gas Costs 506 432
Fuel and Other Inventories (Note 3) 3,307 5,959
Prepayments 1,042 1,511
Common Stock held for Dividend Reinvestment-amounting
to 5,421 and 10,116 shares, respectively (Note 4) 124 143
-------- --------
Total 18,870 18,612
-------- --------
Deferred Debits:
Recoverable Vacations Accrued 848 611
Unamortized Debt Discount and Expense 1,592 1,643
Prepaid Pensions 11,709 10,388
Recoverable Deferred FIT 5,950 6,062
Recoverable Transition Obligation 11 11
Other 3,709 3,103
-------- --------
Total 23,819 21,818
-------- --------
$102,685 $100,223
======== ========
</TABLE>
The accompanying Notes are an integral part of these statements.
4
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets (Cont'd)
<TABLE>
<CAPTION>
(Unaudited)
May 31, Aug. 31,
2000 1999
------- --------
(in thousands)
<S> <C> <C>
CAPITALIZATION & LIABILITIES
Capitalization:
Common Stock $ 4,993 $ 4,993
Paid In Capital 24,758 24,756
Retained Earnings 11,021 8,650
Less: Accounts Receivable from ESOP (2,447) (2,594)
-------- --------
Total Common Stock Equity 38,325 35,805
-------- --------
Long-Term Debt (Less Current Maturities):
8% First Mortgage Bonds, Series Due 2022 19,899 20,029
7.7% Debentures, Due 2027 6,935 7,000
Notes Payable 2,297 2,444
-------- --------
Total Long-Term Debt 29,131 29,473
-------- --------
Total Capitalization 67,456 65,278
-------- --------
Revolving Credit Arrangement 2,400 2,400
-------- --------
Obligation Under Capital Lease 552 775
-------- --------
Current Liabilities:
Current Maturities of Long-Term Debt 150 150
Obligation Under Capital Lease 442 781
Notes Payable 4,400 4,800
Accounts Payable 4,088 5,386
Security Deposits & Refund Obligations 988 968
Taxes Accrued 1,852 609
Deferred Fuel Costs 705 427
Accrued Interest 988 761
Other 879 716
-------- --------
Total 14,492 14,598
-------- --------
Commitment and Contingencies
Deferred Credits 4,514 4,304
-------- --------
Deferred Federal Income Taxes 13,271 12,868
-------- --------
$102,685 $100,223
======== ========
</TABLE>
The accompanying Notes are an integral part of these statements.
5
<PAGE>
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the 9 Months
Ended
------------------
May 31, May 31,
2000 1999
------- -------
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 5,172 $ 4,976
Adjustments to Reconcile Net Income to Net Cash used in
Operating Activities:
Depreciation and Amortization 2,741 2,563
Provision for Uncollectibles 934 937
Deferred Federal Income Taxes 402 183
Amortization of ITC (36) (36)
Change in Assets and Liabilities:
Accounts Receivable (4,306) (3,743)
Deferred Fuel Costs 278 2,086
Unbilled Gas Costs (74) (87)
Fuel and Other Inventories 2,652 1,194
Other Current Assets (832) (527)
Accounts Payable, Accrued Expenses and Current Liabilities (93) 2,251
Other - Net 106 40
------- -------
Net Cash Provided by Operating Activities 6,944 9,837
------- -------
Cash Flows from Investing Activities:
Utility Capital Expenditures (3,017) (2,624)
Nonutility Capital Expenditures (557) (512)
Other Investments 67 (31)
------- -------
Net Cash Used by Investing Activities (3,507) (3,167)
------- -------
Cash Flows from Financing Activities:
Dividends Paid (2,802) (2,790)
Capital Stock Transactions 1 (70)
Retirement of Long-Term Debt (342) (2,262)
Decrease in Notes Payable (400) (1,400)
------- -------
Net Cash Used by Financing Activities (3,543) (6,522)
------- -------
Net (Decrease) Increase in Cash (106) 148
Cash - Beginning 750 813
------- -------
Cash - Ending $ 644 $ 961
======= =======
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest $ 2,069 $ 2,026
======= =======
Federal Income Taxes $ 1,325 $ 750
======= =======
Capital Lease Obligations Incurred $ -0- $ 30
======= =======
</TABLE>
The accompanying Notes are an integral part of these statements.
6
<PAGE>
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1
------
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 at May 31, 2000, the results of operations for the
three- and nine-months ended May 31, 2000 and May 31,1999 and Statement of Cash
Flows for the nine-months ended May 31, 2000 and May 31, 1999.
The results of operations for the three- and nine-month periods ended May
31, 2000 and May 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
Note 2
------
The Corporation computes basic and diluted earnings per average common
share in accordance with SFAS 128, based on the weighted average number of
shares outstanding during the period.
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
3 Months Ended 9 Months Ended
------------------------ ------------------------
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Income $2,631,050 $2,320,303 $5,172,139 $4,975,811
Weighted average shares outstanding 4,985,111 4,975,467 4,983,720 4,978,924
Basic and diluted earnings per share $0.53 $0.47 $1.04 $1.00
</TABLE>
Note 3
------
Inventories - Fuel and Other Inventories:
(in Thousands)
<TABLE>
<CAPTION>
(Unaudited)
May 31, August 31,
2000 1999
------- ----------
<S> <C> <C>
Fuels (at average cost) $ 546 $3,462
Merchandise and Other (at average cost) 1,247 1,234
Merchandise (at LIFO) 1,514 1,263
------ ------
$3,307 $5,959
====== ======
</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 December 1, 1999, Southern Union Company and Valley Resources, Inc.
announced that they have signed a definitive merger agreement under which Valley
Resources, Inc. will ultimately merge into Southern Union Company in a
transaction which is valued at approximately $160 million, including assumption
of debt. See the section in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" entitled "Valley Resources Inc./Southern
Union Company Merger" for further details.
7
<PAGE>
PART I - ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The discussion and analysis that follows reflect the operations of the
Corporation and its six active "subsidiaries": Valley Gas Company and Bristol &
Warren Gas Company (collectively the "Utilities"), regulated natural gas
distribution companies; Valley Appliance and Merchandising Company ("VAMCO"), a
merchandising, appliance rental, and service company; Valley Propane, Inc.
("Valley Propane"), a propane sales and service company; Morris Merchants, Inc.
("Morris Merchants") (d/b/a the Walter F. Morris Company), a representative
distributor of franchised lines; and Alternate Energy Corporation ("AEC"), which
sells, designs and installs natural gas refueling facilities, natural gas
conversion systems and energy use control devises.
Results of Operations
---------------------
For the three months ended May 31, 2000 compared to
the three months ended May 31, 1999
The consolidated net income of Valley Resources for the third quarter of
fiscal 2000 was $2,631,000 or $0.53 per share compared to net income of
$2,320,300 or $0.47 per share for the year earlier third quarter. Net income
from utility operations totaled $2,042,700 as compared to $2,135,800 in the
fiscal 1999 third quarter. Increased interest charges was primarily responsible
for the decline in utility earnings. Nonutility operations contributed $588,300
to consolidated net income in the third quarter of fiscal 2000 as compared to
$184,500 in the prior year's third quarter. The increase in nonutility
operations were primarily attributable to the earnings generated from VAMCO's
completion of commercial and institutional projects and the Corporation's
weather insurance product.
Utility Gas Operations
----------------------
Utility gas revenues and volumes in Mcf's (thousand cubic feet) for the
third quarters of fiscal 2000 and fiscal 1999 were as follows:
<TABLE>
<CAPTION>
Revenues Volumes (Mcf's)
-------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Base Firm Sales Service $16,535,500 $16,792,900 2,275,800 2,326,400
Base Firm Transportation 142,700 173,700 140,100 143,100
----------- ----------- --------- ---------
Base Firm Gas Sales 16,678,200 16,966,600 2,415,900 2,469,500
Interruptible Service 1,244,500 581,200 1,445,900 1,096,300
PGPA Revenues 988,400 662,000 ---- ----
Other Revenues 77,300 92,900 ---- ----
----------- ----------- --------- ---------
Total Utility Gas Revenues $18,988,400 $18,302,700 3,861,800 3,565,800
----------- ----------- --------- ---------
</TABLE>
Base firm sales service and transportation are sales to utility customers
under regulated tariff schedules. Base firm gas sales revenues and volumes
decreased as a result of warmer weather in the third quarter of fiscal 2000.
Weather during this period was 4.2 percent warmer than the comparable period in
the prior year and 9 percent warmer than a normal year.
Interruptible service, seasonal and dual-fuel, is provided on both a
bundled sales basis as well as a transportation only service. Revenues from
interruptible customers are benchmarked to competitive fuel prices and gas
supply availability. Interruptible sales service revenues increased $542,900
over the year-earlier quarter level.
8
<PAGE>
Interruptible gas sales improved during the third fiscal quarter as a result of
the cost of competitive fuel pricing and increased demand for natural gas. The
margin on interruptible bundled sales is passed through to firm customers
through the PGPA (Purchased Gas Price Adjustment) and has no impact on operating
income.
Cost of gas sold increased 6.2 percent over the prior year period primarily
as a result of increased wholesale natural gas prices. The average cost per Mcf
of gas distributed was $4.11 during the third fiscal quarter of 2000 as compared
to $3.61 during the third quarter of fiscal 1999.
Other operating expenses remained flat when compared to the prior year
period.
For the three months ended May 31, 2000, interest expense increased 13.6
percent over the prior year as a result of increased short-term borrowings and
higher interest rates.
Nonutility Operations
---------------------
The nonutility operations are comprised of the sales and cost of
sales-nonutility for the Corporation's other subsidiaries and are segmented into
two categories, Contract Sales and All Other Operations. Contract Sales consists
of the Morris Merchants operations. All Other Operations is comprised of VAMCO,
Valley Propane, AEC, corporate and eliminations.
Contract Sales
--------------
Contract revenues totaled $3,798,600, an increase of 5 percent over the
prior year period. A slight increase in unit pricing was responsible for the
revenue increase.
Cost of sales - nonutility increased 6.9 percent over fiscal 1999 third
quarter levels as a direct result of the unit price increases mentioned above.
Other operating expenses remained flat during the quarter when compared
with the prior year period.
All Other Operations
--------------------
Nonutility revenues associated with this business segment totaled
$3,007,400 for the three months ended May 31, 2000, as compared with $1,659,600
during the third quarter in fiscal 1999. The completion of VAMCO's commercial
and institutional projects and the revenues related to the weather insurance
product were primarily responsible for the increase over the prior year period.
Warmer than normal weather during the period was primarily responsible for the
weather insurance product payout. Propane revenues increased during the third
quarter of fiscal 2000 as a result of increased retail pricing when compared to
the prior year period. However, propane gross profit margins declined, despite a
slight increase in propane gallons sold, due to competitive pricing of its sales
and fixed price contracts. AEC revenues increased slightly over the prior year
as a result of projects completed during the quarter.
Cost of sales - nonutility for VAMCO, AEC and propane operations were
$1,322,200 as compared to $688,900 for the prior year period. This increase was
the direct result of the increased VAMCO sales and propane sales mentioned
above.
Other operating expenses totaled $606,900, a 3.2 percent increase over the
third fiscal quarter of 1999. An increase in normal wage and commission expenses
was responsible for the increase.
Merger-Related Expenses
-----------------------
The Corporation incurred merger-related expenses comprised of legal,
regulatory, and shareholder expenses during the third quarter of fiscal 2000.
See "Valley Resources Inc./Southern Union Company Merger" below for further
details.
9
<PAGE>
For the nine months ended May 31, 2000 compared to
the nine months ended May 31, 1999
For the nine months ended May 31, 2000, the consolidated net income for
Valley Resources was $5,172,100 or $1.04 per share compared to net income of
$4,975,800 or $1.00 per share for the comparable period in the prior fiscal
year. The utility operations provided net income of $4,542,900 compared to
$4,189,600 in the comparable period in the prior fiscal year. Nonutility
operations contributed $629,200 to consolidated net income for the nine month
period of fiscal 2000 compared to $786,200 in the prior year's nine month
period. Net income for the nine months ended May 31, 2000 was positively
impacted by increased firm natural gas sales and the payment received from the
weather insurance product, offset by merger-related expenses of $494,000.
Utility Gas Operations
----------------------
Utility gas revenues and volumes for the nine months of fiscal 2000 and
fiscal 1999 were as follows:
<TABLE>
<CAPTION>
Revenues Volumes (Mcf's)
-------- ---------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Base Firm Sales Service $49,006,600 $47,134,200 6,780,600 6,523,100
Base Firm Transportation 485,500 509,600 425,300 428,900
----------- ----------- --------- ---------
Base Firm Gas Sales 49,492,100 47,643,800 7,205,900 6,952,000
Interruptible Service 2,899,900 1,637,900 4,007,400 3,684,400
PGPA Revenues 3,413,100 1,871,400 ---- ----
Other Revenues 156,100 318,300 ---- ----
----------- ----------- ---------- ----------
Total Utility Gas Revenues $55,961,200 $51,471,400 11,213,300 10,636,400
----------- ----------- ---------- ----------
</TABLE>
Base firm gas sales revenues and volumes, sold through regulated tariffs,
increased for the nine month period of fiscal 2000 primarily as a result of
weather, which was one percent colder than the prior year period although 7.5
percent warmer than normal.
Increased demand and the availability of natural gas for customers with
alternate fuel capabilities produced a 23.5 percent increase in interruptible
Mcf's sold in the fiscal 2000 period as compared to the fiscal 1999 period.
Sales to interruptible customers are dependent upon the availability of natural
gas and the price of alternate fuels. Margins earned from interruptible bundled
sales are returned to firm customers through the PGPA and do not impact the
profitability of the Corporation.
Cost of natural gas sold increased 12.9 percent over the prior year period
as a result of increased natural gas demand and higher wholesale natural gas
prices. The average cost per Mcf of natural gas distributed was $4.04 for the
nine months ended May 31, 2000 as compared to $3.52 during the nine months ended
May 31, 1999.
Other operating expenses declined 3.1 percent from the prior year nine
month period, primarily due to decreased expenses relating to funding of
post-retirement benefits and general operating expenses, offset slightly by
increased overtime labor resulting from the colder weather during the critical
heating period.
Interest expense increased 12.6 percent over the prior year's nine month
period stemming from increased short-term borrowings and higher interest rates.
10
<PAGE>
Contract Sales
--------------
Contract revenues totaled $11,224,300 for the nine months ended May 31,
2000, a one percent decline from the prior year's nine month period. A decline
in unit sales and customers building inventory at the end of fiscal 1999
accounted for the revenue decline.
Cost of sales - nonutility declined less than one percent when compared
with the prior fiscal year nine month period. The decline was the direct result
of lower unit sales as mentioned above.
Other operating expenses increased 1.8 percent when compared with the prior
fiscal year's comparable nine month period. Normal wage and benefit increases
were responsible for the increase.
All Other Operations
--------------------
The nonutility revenues for this business segment for the nine months ended
May 31, 2000 totaled $7,852,100, as compared to $5,240,700 in the fiscal 1999
corresponding period. Retail and commercial sales and installations and AEC
sales were primarily responsible for the increase over the prior fiscal year
period. Propane revenues also impacted the nine month period as a result of
higher retail pricing.
Residential retail sales of home heating equipment and installations,
retail commercial and institutional sales and AEC's sale of its first natural
gas fuel cell positively impacted nonutility revenues. Propane revenues
increased due to the slightly colder weather in this past winter period and
increased product pricing, which is being passed on to customers. Propane gross
profit margins declined slightly, despite an increase in propane gallons sold,
due to the competitive pricing of its sales and fixed price contracts. The
nonutility revenues relating to the weather insurance product increased slightly
over the prior fiscal year period, as mentioned above.
Cost of sales - nonutility for retail, AEC and propane operations were
$3,909,700 for the nine month period in fiscal 2000 as compared to $1,905,500
for the corresponding period of the prior fiscal year. This increase was the
direct result of the increased retail, commercial, propane and AEC sales
mentioned above.
Other operating expenses totaled $2,106,400, an increase of $241,400 over
the prior year's nine month fiscal period. Other operation expenses increased
over the prior fiscal year period due to normal wage and benefit increases.
Labor and servicing of customer equipment for the service contract and rental
programs also increased when compared to the prior fiscal year.
Merger-Related Expenses
-----------------------
The Corporation incurred merger-related expenses comprised of legal,
regulatory, shareholder and investment banking fees, incurred in the first three
quarters of fiscal 2000. See "Valley Resources Inc./Southern Union Company
Merger" below for further details.
Liquidity and Capital Resources
-------------------------------
During the third quarter of fiscal 2000 the liquidity position of the
Corporation improved over the second quarter as a result of the collection of
accounts receivable, the receipt of the payment for the weather insurance
product and the timing of tax payments. Management believes its available
financing arrangements are sufficient to meet cash requirements for the
foreseeable future. The funds available under lines of credit at May 31, 2000
were $24,600,000 and there were $4,400,000 of short-term borrowings outstanding.
Cash flows were favorably impacted during the third quarter of fiscal 2000
due to the collection of accounts receivable from winter heating sales. Utility
sales during the quarter were less than anticipated due to the warmer than
normal weather, thus negatively impacting liquidity.
Construction expenditures increased, as planned, during the third quarter
of fiscal 2000, due to more favorable weather, thereby adversely affecting
liquidity.
11
<PAGE>
The liquidity position of the Corporation will be seasonally affected
during the fourth quarter when revenues decline as a result of the lack of
heat-sensitive sales in the utility companies. Unprecedented increases in
natural gas pricing will negatively impact liquidity. Also, planned cash
expenditures on the construction program will increase during the fourth fiscal
quarter and will also negatively impact cash flow.
In the first quarter of fiscal 2000, the Corporation purchased a weather
insurance product which applied to the winter heating season from November 1999
through March 2000. This product provided insurance against unfavorable shifts
in weather conditions. The insurance coverage pays the Corporation cash when
degree days for the measurement period fall outside a predetermined variance.
The policy acts like a "collar" in that payments are due the insurer when
weather conditions positively impact revenues above a predetermined limit. The
measurement period occurs at the expiration of the policy. The Corporation
received a payment from the policy during the third fiscal quarter, as a result
of warm weather during the insurance period, thereby favorably impacting
liquidity.
Valley Resources, Inc./Southern Union Company Merger
----------------------------------------------------
On December 1, 1999, Southern Union Company and Valley Resources, Inc.
announced that they signed a definitive merger agreement under which Valley
Resources, Inc. will ultimately merge into Southern Union Company in a
transaction which is valued at approximately $160 million, including assumption
of debt. Under the terms of the agreement, Valley Resources, Inc. shareholders
will receive $25.00 in cash per share of common stock held. The business
combination will be accounted for under the purchase method of accounting.
On June 13, 2000 shareholders approved the Agreement of Merger between
Southern Union Company and Valley Resources, Inc. This transaction has received
the required approval by the Rhode Island Legislature and regulators in Missouri
and Pennsylvania where Southern Union currently has operations. Approval remains
to be obtained from regulators in Rhode Island and is also pending in Florida
regarding Southern Union's financing plans relating to the merger. A closing of
the merger is currently expected to occur in September 2000.
Forward Looking Statements; Risk and Uncertainties
--------------------------------------------------
Statements contained in this report that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. In addition, words such as
"believes," "anticipates," "expects" and similar expressions are intended to
identify forward looking statements. Certain factors that could cause the actual
results to differ materially from those projected in these forward-looking
statements include, but are not limited to: variations in weather, changes in
the regulatory environment, fluctuations and uncertainty in natural gas
commodity pricing, customers' preferences on energy sources, general economic
conditions, increased competition and other uncertainties, all of which are
difficult to predict, and many of which are beyond the control of the
Corporation. This provides only an example of some of the risks, uncertainties
and assumptions that may affect forward-looking statements. If any of these
risks or uncertainties materialize or fail to materialize, as applicable, or if
the underlying assumptions prove incorrect, actual results may differ materially
from those projected in the forward-looking statements.
12
<PAGE>
PART II: OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
A Special Meeting of Stockholders of Valley Resources, Inc. was held on
June 13, 2000, for the purpose of approving and adopting the Agreement of Merger
between Southern Union Company and Valley Resources, Inc. Proxies for the
meeting were solicited pursuant to Section 14 (a) of the Securities Exchange Act
of 1934 and there was no solicitation in opposition to management's
solicitations.
<TABLE>
<CAPTION>
Shares Shares Shares
Voted Voted Voted Broker
"For" "Against" "Abstained" "Non-Votes"
----- --------- ----------- -----------
<S> <C> <C> <C> <C>
Agreement of Merger between Southern
Union and Valley Resources, Inc. 3,482,093 161,069 54,724 None
</TABLE>
Item 6 - Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Financial Data Schedule.
(b) None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
S/S. Partridge
----------------------------------------
S. Partridge
Vice President, Chief Financial Officer,
Secretary and Treasurer
July 14, 2000
14
