U.S. Securities and Exchange Commission
Washington, D.C. 20549
(X) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 (Fee Required)
For the twelve month period ended September 30, 1997
Commission file number 0-643
Corning Natural Gas Corporation
(Name of small business issuer in its charter)
New York 16-0397420
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
330 W. William St., Corning NY 14830
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (607) 936-3755
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - $5.00 par value
(Title of class)
Check whether the issurer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-ISV. (X)
Revenues for 12 month period ended September 30, 1997 $17,835,687
The aggregate market value of the 331,362 shares of the Common Stock held by
non-affiliates of the Registrant at the $20 average of bid and asked prices as
of November 1, 1997 was $6,627,240.
Number of shares of Common Stock outstanding as of the close of business on
November 1, 1997 - 460,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Shareholders for the twelve month
period ended September 30, 1997, and definitive proxy statement and notice of
annual meeting of shareholders, dated February 15, 1998, are incorporated by
reference into Part I, Part II and Part II hereof.
Information contained in this Form 10-KSB and the Annual Report to
shareholders for fiscal 1997 period which is incorporated by reference
contains certain forward looking comments which may be impacted by factors
beyond the control of the Company, including but not limited to natural gas
supplies, regulatory actions and customer demand. As a result, actual
conditions and results may differ from present expectations.
CORNING NATURAL GAS CORPORATION
FORM 10-KSB
For the 12 Month Period Ended September 30, 1997
Part I
ITEM 1 - DESCRIPTION OF BUSINESS
(a) Business Development
Corning Natural Gas Corporation (the "Company" or "Registrant"), incorporated
in 1904, is a natural gas utility. The Company purchases its entire supply of
gas, and distributes it through its own pipeline distribution and transmission
systems to residential, commercial, industrial and municipal customers in the
Corning, New York area and to two other gas utilities which service the Elmira
and Bath, New York areas. The Company is under the jurisdiction of the Public
Service Commission of New York State which oversees and sets rates for New
York gas distribution companies. The Company also sells, leases and services
appliances, primarily gas burning, through its wholly owned subsidiary,
Corning Natural Gas Appliance Corporation.
(b) Business of Issuer
(1) The Company maintains a gas supply portfolio of numerous contracts
and is not dependent on a single supplier. Additionally, the Company has
capabilities for storing 793,000 Mcf through storage operations with two of
its suppliers. The Company had no curtailments during fiscal 1997 and expects
to have an adequate supply available for its customers during fiscal 1998
providing that no abnormal conditions or actions occur.
(2) The Company is franchised to supply gas service in all the
political subdivisions in which it operates.
(3) Since the Company's business is seasonal by quarters, sales for
each quarter of the year vary and are not comparable. Sales for different
periods vary depending on variations in temperature, but the Company's Weather
Normalization Clause (WNC) serves to stabilize net revenue from the effects of
temperature variations. The WNC allows the Company to adjust customer
billings to compensate for fluctuations in net revenue caused by temperatures
which are higher or lower than the thirty year average temperature for the
period. Degree days, which represent the number of degrees that the average
daily temperature falls below 65 degrees Fahrenheit, totaled 6,831 for the
period October 1, 1996 through September 30, 1997 and 7,076 for the same
period ended September 30, 1996.
(4) The Company has three major customers, Corning Incorporated, New
York State Electric & Gas (NYSEG), and Bath Electric, Gas & Water Systems
(BEGWS). The loss of any of these customers could have a significant impact
on the Company's financial results.
(5) Historically, the Company's competition in the residential market
has been primarily from electricity in cooking, water heating and clothes
drying, and to a very small degree, in heating. The price of gas remains low
in comparison to that of electricity in the Company's service territory and
the Company's competitive position in the residential market continues to be
very strong. Approximately 99% of the Company's general service customers
heat with gas.
In recent years competition from oil has developed in the industrial
market. The Company has been able to counteract much of this competition, to
date, through the transportation of customer owned gas for a transportation
charge. The customer arranges for their own gas supply, then moves it through
the Company's facilities for a transportation fee. The Company's
transportation rate is equal to the lowest unit rate of the appropriate rate
classification, exclusive of gas costs, hence the profit margin is maintained.
Additionally, under an increasingly deregulated environment there is
opportunity for the Company to increase revenue by selling its upstream
pipeline capacity to transportation customers. The Company is authorized to
retain 15% of such revenue and 85% is returned to firm customers in the form
of lower gas costs. Transportation customers that pay for this capacity are
virtually assured that their supply will not be interrupted. Revenues derived
from the resale of this capacity were $242,289 for 12 months ended September
30, 1997 and $181,681 for the 12 months ended September 30, 1996.
For those willing to bear some risk, the Company has an interruptible
transportation rate for its large industrial customers whereby the customer
may elect to avoid payment of demand charges but bears the risk of partial or
total upstream interruption of service during certain periods. To maintain
industrial load in the event that oil prices temporarily drop below the
equivalent gas price, the Company continues to maintain a flexible
transportation rate schedule. This flexible rate has been used infrequently
since its inception.
In September 1995 the Company purchased the assets of a local gas
distribution company, Finger Lakes Gas Company, through the Federal Bankruptcy
Court. Finger Lakes Gas served customers in the Hammondsport, NY area and had
a customer base of approximately 320 customers. The Company was able to
purchase this all plastic system with a bid of $560,000. The Company was
pleased to purchase these assets that originally cost over $1.5 million to
construct for its relatively low bid. The nearly new, all plastic, system was
already connected and serving 320 customers with a potential to add 200 more
in the near future. On a per customer basis, this represents a very low
investment. The capital to purchase these assets was obtained through short
term debt. The Company has not found it necessary to apply for an increase in
rates on this part of our system which means the original rates made effective
in 1990 remain in effect currently.
Shortly after the Company took possession of the system, Mercury
Aircraft, Inc. announced it would purchase the former Taylor Wine Company
facilities and centralize their other plants. The reopening of this major
facility will most certainly contribute toward the stability and future
viability of the new gas system which is now part of the Company. The former
Finger Lakes Gas Company's operations contributed in excess of $150,000 to
gross margin for the period ended September 30, 1996, and in excess of
$218,000 for the 12 months ended September 30, 1997.
In December, 1994 the New York Public Service Commission instituted a
proceeding to address issues related to the merging competitive natural gas
market. This proceeding is intended to provide a framework whereby access to
facilities on upstream pipelines made available by FERC Order 636 would be
available to end use customers on the Local Distribution Company level. New
tariff filings were approved and became effective September 1, 1996. The
Company considers this a transitional step towards full unbundling of services
with future changes made as circumstances warrant.
In 1997 the PSC instituted another proceeding designed to assess the
issues associated with the future of the natural gas industry and the role of
the local gas utility. The staff of the PSC has made certain proposals which,
if instituted, will effectively separate the structure of the industry into
four distinct segments. Under the proposed structure, production,
transportation, marketing and distribution will become distinct businesses.
Gas utilities would no longer sell natural gas, they would merely provide the
distribution facilities to get gas to the burnertip. The PSC staff proposal
indicates that this change should be complete within five years.
Such a drastic change will obviously require much effort in working out
the details to ensure that customers are provided with the same safe,
reliable service that has historically been provided. This company has taken
the position that it does not oppose this transition to a fully competitive
market but that it must be allowed to evolve naturally. In order to minimize
the potential for unintended consequences which could have a negative effect
on the customer, arbitrary deadlines and regulations designed to accelerate
the process need to be avoided. If, in fact, marketers can provide a more
economic product than the gas utility, customers will be quick to respond.
(6) The Company believes compliance with present federal, state and
local provisions relating to the protection of the environment will not have
any material adverse effect on capital expenditures, earnings and financial
position of the Company and its subsidiary.
(7) Sixty-nine persons were employed on a full-time basis and seven on
a part-time basis by the Company in 1997 and 67 full-time and six part-time in
fiscal 1996.
(8) The Company's labor-management relationship is good. Typical labor
negotiations are completed in one to two days. The current labor contract
was signed September 1, 1995 for a three year period.
ITEM 2 - DESCRIPTION OF PROPERTY
The Company completed the construction of a new office building at 330
West William Street, Corning, NY in the fall of 1991. This structure is
physically connected to the operations center built three years earlier. The
Company had outgrown its general offices at 27 East Denison Parkway. The
property has been sold, and the gain on the sale was returned to ratepayers.
The Company's pipeline system is thoroughly surveyed each year. Any
necessary replacements are included in the construction budget. Approximately
105 miles of transmission main, 284 miles of distribution main, 13,800
services and 86 measuring and regulating stations, along with various other
property are distributed throughout the service area. All of the above
described property is owned by the Company, except for one short section of
10" gas main which is under a long-term lease and is used primarily to serve
Corning Incorporated. All of the above described property which is owned by
the Company is adequately insured, and is subject to the lien of the Company's
first mortgage indenture.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings,
nor is the Company aware of any problems of any consequence which it
anticipates may result in legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the third
quarter of 1997.
Additional Item
Executive Officers of the Registrant
(Including Certain Significant Employees)
Business Experience Years Served
Name Age During Past 5 Years In This Office
Thomas K. Barry 52 Chairman of the Board of Directors 4
President & C.E.O. 13
Edgar F. Lewis 60 Senior Vice President - Operations 17
Kenneth J. Robinson 53 Executive Vice President 6
Phyllis J. Groeger 57 Secretary 10
Thomas S. Roye 44 Vice President - Administration 6
Gary K. Earley 43 Treasurer 6
Term of office is for one year. (Normally from April to April)
Part II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The principal market on which the Registrant's common stock is traded,
the range of high and low bid quotations for each quarterly period during the
past two years, the amount and frequency of dividends, and a description of
restrictions upon the Registrant's ability to pay dividends, appear in the
table below. The number of stockholders of record of the Registrant's Common
Stock was 372 at September 30, 1997. The high and low bid quotations reflect
inter-dealer prices, without retail markup, markdown or commission and may not
represent actual transactions.
MARKET PRICE - (OTC)
Dividend
Quarter Ended High Low Paid
March 31, 1996 $ 23 $ 22 $ .315
June 30, 1996 23 22 .315
September 30, 1996 22 21 1/2 .315
December 31, 1996 22 21 1/2 .32
March 31, 1997 22 21 1/2 $ .32
June 30, 1997 21 1/4 20 .32
September 30, 1997 21 1/4 20 .32
The Company incurred $4,700,000 in new long-term debt in 1997. The
proceeds of this new issue were used to pay off $3.1 million in short-term
debt and retire a 10% First Mortgage Bond with a balance of $1.6 million. The
new debt is an unsecured senior note at 7.9 percent interest with a maturity
date of September 25, 2017. Canada Life Assurance Company of Toronto is the
debt holder; interest payments are made quarterly with sinking fund payments
as follows: $355,000 annually starting September, 2006 with a $795,000
payment due September 1, 2017.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion of financial condition and results of operations
of the Company appears in the 1997 Annual Report to Shareholders which is
incorporated by reference.
ITEM 7 - FINANCIAL STATEMENTS
The consolidated financial statements, together with the independent
auditors' report thereon of KPMG Peat Marwick LLP dated November 7, 1997 are
included in the 1997 Annual Report to Shareholders attached hereto, and are
incorporated in this Form 10-KSB by reference thereto.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
Part III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The information required regarding the executive officers of the
Registrant is included in Part 1 under "Additional Item".
ITEM 10 - EXECUTIVE COMPENSATION
The information required regarding the compensation of the executive
officers appears in the Definitive Proxy Statement attached hereto.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required regarding the security ownership of certain
beneficial owners and management appears in the Definitive Proxy Statement
attached hereto.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required regarding certain relationships and related
transactions appears in the Definitive Proxy Statement attached hereto.
Part IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed with this Form 10-KSB or incorporated
herein by reference: (Exhibit numbers correspond to numbers assigned to
exhibits in Item 601 of Regulation S-B)
Exhibit Name of Exhibit Page
3 A copy of the Corporation's Articles of Incorporation,
as currently in effect, including all amendments, was
filed with the Company's Form 10-K for December 31, 1987.
3 A copy of the Corporation's complete by-laws, as
currently in effect, was filed with the Corporation's
report on Form 10-Q for the quarter ended March 31, 1984.
10 A copy of the "Agreement Between Corning Natural Gas
Corporation and Local 139", dated September 1, 1995
was filed with Form 10-KSB for December 31, 1995.
10 Consulting Agreement and Employment Contracts with
three executive officers were filed with the Company's
Form 10-K for December 31, 1987.
10 A copy of the Service Agreement with CNG
Transmission Corporation was filed with the Company's
Form 10-KSB for December 31, 1993.
10 A copy of the Sales Agreement with Bath Electric, Gas
and Water was filed with the Company's Form 10-K for
December 31, 1989.
10 A copy of the Transportation Agreement between the Company
and New York State Electric and Gas Corporation was filed
with the Company's Form 10-KSB for December 31, 1992.
10 A copy of the Transportation Agreement between the
Company and Corning Incorporated was filed with the
Company's Form 10-KSB for December 31, 1992.
10 A copy of the Service Agreement with Columbia Gas
Transmission Co. was filed with the Company's
10-KSB for December 31, 1993.
13 A copy of the Corporation's Annual Report to
Shareholders for 1997, is filed herewith.
22 Information regarding the Company's sole subsidiary was
filed as Exhibit 22 with the Company's Form 10-K for
the period ended December 31, 1981.
28 Corning Natural Gas Corporation Proxy Statement is
filed herewith.
99 Order from the U.S. Bankruptcy Court, Northern District of
New York re: Approval of Acquisition of Finger Lakes Gas Company was
filed with the Company's 10-KSB for the period ended December 31, 1995.
99 Order from the Public Service Commission of New York State
re: Approval of Acquisition of Finger Lakes Gas Company was
filed with the Company's 10-KSB for the period ended December 31, 1995.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the three month period
ended September 30, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CORNING NATURAL GAS CORPORATION
(R
egistrant)
Date December 19 1997 THOMAS K. BARRY
Thomas K. Barry, Chairman of the Board, President and C.E.O.
Date December 19, 1997 GARY K. EARLEY
Gary K. Earley, Treasurer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date December 19, 1997 J.E. BARRY
J.E. Barry, Director
Date December 19, 1997 DONALD R. PATNODE
Donald R. Patnode, Director
Date December 19, 1997 J.A. FINLEY
J.A. Finley, Director
??
Corning Natural Gas Corporation
330 W. William Street
P.O. Box 58
Corning, New York 14830
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on Thursday, February 12, 1998
Corning, New York
January 15, 1998
To the Common Stockholders of
Corning Natural Gas Corporation
Notice is hereby given that the Annual Meeting of Stockholders of Corning
Natural Gas Corporation will be held at the office of the Company,
330 W. William Street, in the City of Corning, New York, on Thursday,
February 12, 1998 at 10:30 A.M., local time, for the following purposes:
(1) To fix the number of Directors at seven and to elect a Board of
Directors for the ensuing year.
(2) To transact such other business as may properly come before the
meeting.
The stock transfer books will not be closed, but only common stockholders
of record at the close of business on January 8, 1998 will be entitled to
vote at the meeting or any adjournment thereof.
You are cordially invited to attend the meeting and vote your shares. In
the event that you cannot attend, please date, sign and mail the enclosed
proxy in the enclosed self-addressed envelope. A stockholder who executes
and returns a proxy in the accompanying form has the power to revoke such
proxy at any time prior to the exercise thereof.
By Order of the Board of Directors
PHYLLIS J. GROEGER, Secretary
CORNING NATURAL GAS CORPORATION
PROXY STATEMENT
January 15, 1998
By Whom Proxy Solicited and Solicitation Expenses. The accompanying proxy
is solicited by the Board of Directors of the Company for use at the Annual
Meeting of Stockholders to be held on Thursday, February 12, 1998. Proxies
in substantially the accompanying form, properly executed and received
prior to or delivered at the meeting and not revoked, will be voted in
accordance with the specification made. The expense of soliciting proxies
will be borne by the Company.
The approximate date upon which this proxy statement and the accompanying
proxy will first be mailed to stockholders is January 15, 1998.
Right to Revoke Proxy. Any stockholder giving the proxy enclosed with
this statement has the power to revoke it at any time prior to the
exercise thereof. Such revocation may be by writing (which may include a
later dated proxy) received by the Office of the Secretary, Corning
Natural Gas Corporation, 330 W. William Street, P.O. Box 58, Corning,
New York, 14830, no later than February 11, 1998 if by mail, or prior to
the exercise thereof if delivered by hand. Such revocation may also be
effected orally at the meeting prior to the exercise of the proxy.
Proposals of Stockholders. Stockholders' proposals intended to be
presented at the 1999 Annual Meeting of Stockholders must be received by
the Office of the Secretary, Corning Natural Gas Corporation, 330 W.
William Street, P.O. Box 58, Corning, New York 14830, by September 17, 1998.
Voting Securities Outstanding. There were 460,000 shares of common stock
outstanding and entitled to vote on January 8, 1998 (the "Record Date").
Each share of common stock is entitled to one vote. Only stockholders of
record on the Record Date are entitled to notice of and to vote at the
meeting or any adjournment thereof.
Abstentions and broker non-votes are each included in calculating the
number of shares present and voting for purposes of determining quorum
requirements. However, each is tabulated separately. Abstentions are
counted in tabulating the votes cast on proposals presented to
shareholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
The following table sets forth the shares of the Company's common stock,
and the percent of total outstanding shares represented thereby,
beneficially owned* by the nominees for director of the Company, the Chief
Executive Officer of the Company, all directors and officers as a group,
and all persons or groups known to the Company to beneficially own more
than 5% of such stock.
* As used in this Proxy Statement, "beneficial ownership" includes direct
or indirect, sole or shared power to vote, or to direct the voting of,
and/or investment power to dispose of, or to direct the disposition of,
shares of the common stock of the Company. Except as otherwise indicated
in the footnotes below, the listed beneficial owners held direct and sole
voting and investment power with respect to the stated shares.
Shares of Stock
Beneficially Owned
Directly or Indirectly
Percent
Beneficial Owners as of September 30, 1997 of Class
J. Edward Barry (Director) 45,999(1) 10.0%
330 W. William Street
Corning, New York
Thomas K. Barry (Director and 15,300(2) 3.3%
Chief Executive Officer)
330 W. William Street
Corning, New York
Thomas H. Bilodeau (Director) 3,788(3) 0.8%
1648 Jupiter Cove Dr., Apt. 312
Jupiter, Florida
Bradford J. Faxon (Director) 27,210(4) 5.9%
225 Hix Bridge Road
Westport, Massachusetts
Jay A. Finley (Director) 15,900(5) 3.5%
27 Spring Terrace
Corning, New York
Liselotte R. Lull and 45,029(6) 9.8%
Robert E. Lull
231 Watauga Avenue
Corning, New York
Jack R. McCormick (Director) 1,969(7) 0.4%
2560 Riverside Avenue
Somerset, Massachusetts
Donald R. Patnode (Director) 14,194(8) 3.1%
91 Stage Harbor Road
Chatham, Massachusetts
All directors and officers 128,638(9) 28.0%
of the Company, twelve persons
as a group
(1) Includes 25,066 shares held in trust, with respect to which J. Edward
Barry has shared voting and investment power, and 20,933 shares
beneficially owned and held in trust on behalf of Virginia S. Barry, with
respect to which J. Edward Barry also has shared voting and investment
power. Percentage reflects rounding; actual percentage is less than 10
percent.
(2) Includes indirect beneficial ownership of 1,100 shares owned by children
of Thomas K. Barry, and as to which Thomas K. Barry has shared voting and
investment power. Also includes 1,200 shares owned by two daughters of
Thomas K. Barry, as to which shares Mr. Barry disclaims beneficial
ownership.
(3) All shares are held in trusts and Mr. Bilodeau is a beneficiary or
contingent beneficiary of such trusts.
(4) Includes indirect beneficial ownership of 5,431 shares owned by children
of Bradford J. Faxon, and as to which Bradford J. Faxon has shared voting
and investment power.
(5) Includes indirect beneficial ownership of 7,900 shares owned by Gertrude
C. Finley, who has sole voting and investment power over such shares.
(6) Includes 23,378 shares owned by Liselotte R. Lull and 21,651 shares
owned by Robert E. Lull.
(7) All shares are owned jointly with Madeline McCormick.
(8) Includes 2,000 shares owned by spouse, who has sole voting and
investment power over such shares. Also includes 6,994 shares held in two
trusts, of which Donald R. Patnode is co-trustee.
(9) Aggregate record or imputed beneficial ownership, with sole or shared
voting or investment power.
Election of Directors. (Proposal No. 1) It is the intention of the
persons named in the enclosed proxy to vote the shares represented by the
proxy to fix the number of directors at seven and to elect the nominees
listed below to serve until the next Annual Meeting of Stockholders and
until their successors are duly elected and qualified. In the event of a
vacancy in the list of nominees, an event which the Board of Directors does
not anticipate, the holders of the proxies will vote for the election of a
nominee acceptable to the remiaining nominees. The directors must be
elected by a plurality of votes cast. The following is a brief description
of each nominee, including his principal employment or professional
experience for the past five years.
J. Edward Barry, 85, Consultant to the Company. Former Chairman of
the Board of Directors 1975 - 1993; former Chief Executive Officer,
President, Executive Vice President, Vice President and Secretary of the
Company. A Director since 1953 and Chairman of the Executive and Pension
Fund Committees. Father of Thomas K. Barry, Chairman of the Board, Chief
Executive Officer and President of the Company.
Thomas K. Barry, 52, Chairman of the Board of Directors since 1993,
President of the Company since 1983, Chief Executive Officer since 1984. A
Director since 1983 and a member of the Executive and Pension Fund
Committees. A Director of Fall River Gas Company. Son of J. Edward Barry,
Consultant to the Company.
Thomas H. Bilodeau, 55, Vice President - Finance, Medical &
Environmental Coolers, Inc. since 1990. A Director since 1984 and a
member of the Compensation and Audit Committees. A Director of Fall River
Gas Company.
Bradford J. Faxon, 59, Chairman of the Board of Directors, President
and Director of Fall River Gas Company since 1986. A Director since 1984,
Chairman of the Compensation Committee and a member of the Pension Fund
Committee.
Jay A. Finley, 82, Retired; former President of the Company,
1977-1983. A Director since 1975 and a member of the Executive Committee.
Jack R. McCormick, 73, Utility Consultant; current Director and former
President (1974-1986) of Fall River Gas Company. A Director since 1985 and
a member of the Audit Committee.
Donald R. Patnode, 69, Retired; former President of Industrial Filters
and Equipment Corporation 1989-1994. A Director since 1964, Chairman of the
Audit Committee and a member of the Compensation Committee. Director also
of Fall River Gas Company.
The Board of Directors does not have a standing nominating committee, or
any committee performing similar functions. The Board of Directors has a
standing Audit Committee, of which Messrs. D.R. Patnode, J.R. McCormick and
T.H. Bilodeau are the members, the function of which is to recommend the
selection of independent auditors, review the plan and results of the
independent audit and approve each professional service provided by the
independent auditors. The Audit Committee had one meeting in 1997. The
Board of Directors also has a standing compensation committee, of which
Messrs. D. R. Patnode, B. J. Faxon and T.H. Bilodeau are the members. This
committee met once during 1997. This committee reviews officer performance
and duties and decides upon appropriate remuneration. The Board of
Directors met five times in 1997. Each Director attended more than 75% of
the aggregate number of meetings of the Board and committees on which he
served during the year.
At the most recent annual meeting of stockholders of the Company, held on
February 13, 1997, out of a total of 460,000 shares entitled to vote at the
meeting, 404,457 shares (87.9% of the total) were actually voted at the
meeting with respect to the election of Directors. Nominees proposed for
election by the Board of Directors were elected by requisite vote at such
meeting. Each nominee received an affirmative vote of over 99% of the
votes cast.
Cash Compensation of Executive Officers. The following table sets forth
the compensation paid or accrued by the Company and its subsidiary during
the fiscal years ended December 31, 1995, September 30, 1996 and
September 30, 1997 to the Company's Chief Executive Officer. Other than
the Chief Executive Officer, no other executive officer of the Company was
paid an annual salary and bonus in 1997 that aggregated $100,000. Although
only principal capacities are listed, the compensation figures include all
compensation received in any capacity, including directorships, for services
rendered during the fiscal years indicated.
SUMMARY COMPENSATION TABLE
Annual Compensation(1)
Name and Other Annual
Principal Position Year Salary Bonus Compensation
Thomas K. Barry 1997 $150,167 --- $ 4,220
President and Chief 1996 106,800(2) --- 2,970(2)
Executive Officer 1995 134,967 --- 3,721
(1) The Company did not pay any long-term compensation to its Chief
Executive Officer or to its other executive officers during the fiscal
years ended December 31, 1995, September 30, 1996 and September 30, 1997.
(2) 1996 amounts reflect compensation received with respect to the Company's
nine month 1996 fiscal year (ended September 30, 1996) that result from
the adoption by the Company of a fiscal year end of September 30 instead
of December 31 each year.
A description of the executive officers, other than Mr. Thomas K. Barry,
for whom a description is provided above, is set forth below.
Kenneth J. Robinson (age 53) is Executive Vice President. Mr. Robinson
joined the Company in 1978 as an accountant. Most recently he served as
Financial Vice President and Treasurer for 4 years and in his current
position for 6 years.
Edgar F. Lewis (age 60) is Senior Vice President - Operations. Mr. Lewis'
career with the Company dates back to 1956. He has been in charge of
operations for the past 25 years; 17 years in his current position.
Thomas S. Roye (age 44) is Vice President - Administration. Mr. Roye has
served 6 years in his current position and was previously Assistant
Treasurer & Assistant Secretary. He has prior utility experience and
accounting education and has been employed since 1978.
Gary K. Earley (age 43) is Treasurer. Mr. Earley has been a practicing
accountant since 1976. He joined the firm in 1987 as an accountant in the
rates and regulations department and has served as Treasurer for the past
6 years.
Phyllis J. Groeger (age 57) is Corporate Secretary. Mrs. Groeger has been
employed since 1973 in a number of positions advancing to Assistant
Secretary in 1986 and has been Secretary of the Company for the past
10 years.
Compensation Pursuant to Plans. The Company has entered into separate
supplemental benefits agreements with Thomas K. Barry and one other
executive officer (collectively, the "Supplemental Benefits Agreements"),
which provide that the officer covered thereby and retiring after the age
of 62 is entitled to receive monthly payments equal to 35% of such
officer's monthly salary at retirement for either life or 180 months,
whichever is longer. Such amount payable shall increase by 4% annually on
the anniversary date of such officer's retirement. Retirement benefits
otherwise available upon retirement at age 62 under the Supplemental Benefit
Agreements are reduced cumulatively by 4% for each year prior to age 60 in
which the covered officer retires; provided, however, that an officer
covered under a Supplemental Benefits Agreement receives no retirement
benefits thereunder in the event that such officer retires before age 55.
Furthermore, the Supplemental Benefits Agreements provide that in the event
that an officer covered by a Supplemental Benefits Agreement dies prior to
retirement, such officer's designated beneficiary is entitled to receive
monthly payments equal to 50% of such officer's monthly salary at death
for 180 months.
The Company has also entered into an additional, more limited, Supplemental
Benefits Agreement with one other employee, which contains terms similar to
the foregoing agreements. However, such limited Supplemental Benefits
Agreement provides for monthly payments equal to 20% of the subject
employee's monthly salary in the event of retirement, monthly payments
equal to 35% of his monthly salary in the event of his death prior to
retirement, and does not include an annual escalator.
Eligibility to enter into a Supplemental Benefits Agreement, or equivalent
thereof, is based upon employee performance, service and value to the
Company; such eligibility is determined on an individual basis by the Board
of Directors. Currently, Mr. Thomas K. Barry and two other executive
officers (as discussed, above) are the only employees of the Company
covered by a Supplemental Benefits Agreement, and no payments have been
made to date under such agreements. The Supplemental Benefits Agreements
are in addition to the amounts shown in the Summary Compensation Table and
are not subject to limitation. As of September 30, 1997, the estimated
annual benefits payable under a Supplemental Benefits Agreement upon
retirement at the normal retirement age for Mr. Thomas K. Barry are $ 51,800.
The Company also maintains the Corning Natural Gas Corporation Employees
Savings Plan (the "Savings Plan"). All employees of the Company
who work for more than 1,000 hours per year and who have completed one year
of service may participate in the Savings Plan as of the following
January 1 or July 1. Under the Savings Plan, participants may contribute
up to 15% of their wages. For non-union employees, the Company will match
one-half of the participant's contributions up to a total of 3% of the
participant's wages.
Company matching contributions vest in the participants account at a rate
of 20% per year and become fully vested after five years. All participants
may select one of five investment plans, or a combination thereof, for their
account. Distribution of amounts accumulated under the Savings Plan occurs
upon termination of employment or death of the participant. The Savings
Plan also contains loan and hardship withdrawal provisions. During the
fiscal year ended September 30, 1997 no amounts were distributed to executive
officers under the Savings Plan. Mr. Thomas K. Barry had $4,220 accrued
to his account under the Savings Plan during said period. This accrual is
included in the figures appearing in the summary compensation table on page
4.
Compensation of Directors. The current annual Director's compensation is
$5,000. In addition, Directors are paid $300 for each Board meeting
attended. Additionally, the chairmen of the Board's Executive, Audit,
Compensation and Pension Fund committees and those directors who serve on
more than one committee receive an annual fee of $1,500 for such services.
Committee members other than the chairmen are paid $1,000 annually for
their services, subject to the limitation that no committee chairman or
member may receive than $1,500 annually for such services regardless of
the number of committees on which he serves.
As allowed by New York law, the Company currently has in effect an
insurance policy, with an effective date of June 1, 1997, with National
Union Fire Insurance Company for the indemnification of officers and
directors at an annual premium cost of $ 43,000.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements. In January of 1992, the Company entered into an employment
contract with its President and Chief Executive Officer, Mr. Thomas K.
Barry. Under the terms of such employment contract, Mr. Barry is
compensated for his duties as an officer and director with such salary as
is determined from time to time by the Board of Directors. The term of Mr.
Barry's employment contract is five years, unless earlier terminated by an
act of either the Company or Mr. Barry. Beginning in 1994, however, Mr.
Barry's employment contract is automatically extended for an additional
one-year period. Mr. Barry's employment contract further provides that
upon any change in control of the Company leading to the termination of
Mr. Barry's employment with the Company, the Company shall pay Mr. Barry
three times his then-present annual salary, or such lesser amount as may
be required to comply with certain provisions of the Internal Revenue Code.
Selection of Auditors. KPMG Peat Marwick, Certified Public Accountants of
Rochester, New York, have been selected as auditors for the Company for
the ensuing year. KPMG Peat Marwick, who served as principal accountants
for the Company for the past fiscal year, have no direct or indirect
financial interest in the Company or its subsidiaries in the capacity of
promoter, underwriter, voting director, officer or employee. A
representative of KPMG Peat Marwick will be present at the meeting, with
the opportunity to make a statement if such representative desires to do
so, and will be available to respond to appropriate questions.
Other Matters. Except for the matters set forth above, the Board of
Directors knows of no matters which may be presented to the meeting, but
if any other matters properly come before the meeting, it is the intention
of the persons named in the accompanying form of proxy to vote such proxy
in accordance with their judgment in such matters.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY.
By Order of the Board of Directors,
PHYLLIS J. GROEGER, Secretary
Persons whose proxies are solicited by the Board of Directors of the Company
may obtain, without charge, a copy of the Company's Annual Report on
Form 10-KSB, including the financial statements and schedules thereto,
required to be filed with the Securities and Exchange Commission for the
Company's most recent fiscal year. The report will be furnished upon
request made in writing to:
Thomas K. Barry
Chairman of the Board of Directors
Corning Natural Gas Corporation
330 W. William Street
P.O. Box 58
Corning, New York 14830
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