SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1997
Commission File Number 0-643
Corning Natural Gas Corporation
(Exact name of registrant as specified in its charter)
New York 16-0397420
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
330 W. William Street, PO Box 58, Corning, New York 14830
607-936-3755
(Registrant's telephone number, including area code)
Former name, former address and former fiscal year, if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
There were 460,000 shares of Common Stock outstanding at the end of the
quarter. There is only one class of Common Stock and no Preference Stock
outstanding.
Management's Discussion
Operating revenues for the quarter ending December 31, 1997 were $3,104,176
or 199% more than the quarter ending September 30, 1997 and $217,165 or 4%
less than the quarter ending December 31, 1996.
Degree days for the quarter ending December 31, 1997 were 2,111 or 818%
more than the quarter ending September 30, 1997 and 51 or 2% less than the
quarter ending December 31, 1996. Since much of the Company's sales are
dependent on weather conditions, the effects of the changes in degree days
are reflected in the total MCF (thousand cubic feet) deliveries.
Increase (Decrease)
From Quarter Ending
Actual MCF Deliveries 12/31/97
Quarter Ending 12/31/97 2,169,630
Quarter Ending 9/30/97 824,993 (1,344,637)
Quarter Ending 12/31/96 2,126,330 ( 43,300)
MCF deliveries include transportation of customer owned gas for specific
end use customers for which the Company receives a fee equal to its normal
markup for transporting the gas.
Operating expenses, made up largely of the cost of purchased gas, were
$2,494,357 or 141% more than the quarter ending September 30, 1997 and
$105,021 or 3% less than the quarter ending December 31, 1996.
Net Income was $391,567 or 219% more than the quarter ended September 30,
1997 and $67,051 or 24% less than the quarter ending December 31, 1996.
Since the Company's business is seasonal by quarters, results for the first
three months of fiscal year 1998 should not be used as an indication of
what results for the full twelve months of fiscal year 1998 may be.
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 considered 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 staff proposal
suggests that this change could 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. Management
believes that 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.
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.
Late in September, 1997, the Company completed a long-term debt financing
in the amount of $4.7 million. These funds were obtained as a senior note
with interest at 7.9 percent over a 20 year term. This financing allowed
the Company to reduce short-term debt in the amount of $3.1 million and to
retire a 10 percent bond with a balance of $1.6 million. Savings of over
$200,000 were estimated on the bond retirement while the entire package
served to strengthen the capitalization structure.
The Company received approval for a rate increase from the New York State
Public Service Commission of approximately $124,000 in revenues with an
effective date of September 1, 1996.
Internal generation of funds should be sufficient to meet the needs of the
Company coupled with some intermittent short-term borrowings.
There has been no change in independent public accountants. The Company
has not filed any reports on Form 8-K for the quarter ended
December 31, 1997.
The Information furnished herewith reflects all adjustments which are in
the opinion of management necessary to a fair statement of the results for
the period. Certain information and footnote disclosure normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to SEC rules
and regulations, although the Company believes the disclosures which are
made are adequate to make the information presented not misleading.
The condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's latest
annual report on Form 10-KSB.
The statements contained herein have not been examined or certified by a
firm of certified public accountants.
There were no sales of unregistered securities (debt or equity) during the
fiscal quarter ending December 31, 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
Date January 30, 1998 THOMAS K. BARRY
Thomas K. Barry, Chairman of the Board,
President and C.E.O.
Date January 30, 1998 GARY K. EARLEY
Gary K. Earley, Treasurer
CORNING NATURAL GAS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
UNAUDITED
FORM 10 QSB
FOR QUARTER ENDED
Dec. 31, 1997 Dec. 31,
1996
------------------
- ----------------------
Operating Revenues $4,668,028 $ 4,885,193
Cost and Expense
Operating Expenses 4,262,742 4,367,763
Interest Expense 236,343 231,300
Income Tax 41,783 87,562
Other Deductions Net 2,519 637
------------- -------------
Total Costs and Expenses 4,543,387 4,687,262
-------------
- ---------------
Operating Income 124,641 197,931
Other Income 0 789
Corning Natural Gas Appliance Corp.:
Operating Revenues 717,677 692,621
Depreciation 61,166 61,463
Other Operating Expense 500,630 503,088
Federal Income Tax 67,811 47,028
-------------- ---------------
Net Income of Appliance Corp. 88,070 81,042
------------ --------------
Net Income $ 212,711 $ 279,762
======= =========
Earnings Per Share $ .462 $ 0.608
Dividends Per Share $ .325 $ 0.640
Total Dividends Paid $ 149,500 $ 147,200
Shares of common stock outstanding were 460,000 at December 31, 1997
Earnings per share = Net Income as shown above divided by 460,000 shares.
Dividends per share = Dividends paid divided by shares outstanding at the time.
See Management's Discussion & Analysis on Page 5.
CORNING NATURAL GAS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FORM 10-QSB - UNAUDITED
DEC. 31, 1997 DEC. 31, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $
212,710 $ 279,762
Adjustments to Reconcile Net Income
to Net Cash
Provided by Operating Activities:
Depreciation
184,567 180,279
Allowance for Funds Used During Const. 0
0
Changes in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable (1,418,827)
(1,181,052)
Materials, Supplies & Appliance Inventory ( 664,184) 232,174
Other Deferred Charges 25,221
311,465
Prepaid and Other Assets 490,069
494,035
Increase (Decrease) in:
Accounts Payable 2,181,991
1,266,475
Accrued General Taxes ( 104,170) ( 10,232)
Accrued Federal Income Tax ( 141,813) (
51,603)
Deferred Federal Income Tax 148,087 57,087
Other Liabilities and Deferred Credits ( 575,785) ( 965,395)
Net Cash Provided (used) by
Operating Activities 337,866
612,995
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures ( 269,046) (
228,135)
Allowance for Funds Used During Const. 0 0
Net Cash Used in Investing Activities ( 269,046) ( 228,135)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) Under
Line-of-Credit Agreement 275,000
715,000
Dividends Paid ( 149,500)
( 294,400)
Repayment of Long-Term Debt 0 ( 100,000)
Restricted Funds used for
Qualified Additions 0
0
Common Stock Issued 0
0
Net Cash Provided (used in)
Financing Activities 125,500
320,600
NET INC. (DEC.) IN CASH AND CASH EQUIV. 194,320 705,460
CASH AND CASH EQUIV. AT BEG. OF PERIOD 904,651 180,595
CASH AND CASH EQUIV. AT END OF PERIOD $ 1,098,971 $ 886,055
======== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid During the Year for:
Interest (Net of Amount Capitalized) $ 238,478 $ 296,588
Income Taxes $ 0 $
0
CORNING NATURAL GAS CORPORATION
Consolidated Balance Sheet At December 31, 1997
Form 10-QSB Unaudited
Assets 12/30/97
09/30/97
Gas Utility Plant $20,634,140
$20,378,449
Non-Utility-Principally Rented Gas App. 2,536,465 2,533,498
23,170,605 22,911,947
Less: Accum. Provision for Depreciation (8,652,625) (8,478,446)
$14,517,980 $14,433,501
Current Assets:
Cash and Equivalents 1,098,971
904,651
Restricted Short-Term Investments 0 0
Accounts Receivable 2,414,042
995,215
Materials, Supplies and Inventories 2,653,582 1,989,398
Prepayments and Other 556,613
1,046,682
Total Current Assets 6,723,208
4,935,946
Non-Current Assets
Def. Tax Assets 401,242
62,000
Def. Debits - Acctg. for Income Taxes 864,872 1,016,661
Deferred Debits 1,222,177
1,247,398
Total Non-Current Assets 2,488,291
2,326,059
Total Assets $23,729,479
$21,695,506
=========== ============
Capitalization & Liabilities
Capitalization:
Common Stock 2,300,000
2,300,000
Premium on Capital Stock - Common 653,346 653,346
Retained Earnings 2,319,301 2,256,091
5,272,647 5,209,437
Long Term Debt 9,400,000
9,400,000
Total Capitalization 14,678,647
14,609,437
Current Liabilities:
Short Term Notes Payable 1,050,000
775,000
Accounts Payable 4,012,331
1,830,340
Customer Deposits and Accrued Interest 232,354 673,114
Accrued Federal Income Tax (141,813)
0
Other Accrued Taxes 8,197
112,367
Current Maturities of Long Term Debt 0 0
Other Current and Accrued Liabilities 300,034 624,790
Total Current Liabilities 5,461,103
4,015,611
Accumulated Deferred FIT 2,780,506
2,444,966
Reserves and Other Liabilities 815,223 625,492
Total Liab. and Capitalization $ 23,729,479 $ 21,695,506
======
==== ==========
See Management's Discussion & Analysis on Page 5
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C> <C>
<C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1997
SEP-30-1998 SEP-30-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997
DEC-31-1997 DEC-31-1996
<BOOK-VALUE> PER-BOOK PER-BOOK
PER-BOOK PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 13488259 13378436
0 0
<OTHER-PROPERTY-AND-INVEST> 1029721 1055065
0 0
<TOTAL-CURRENT-ASSETS> 6723208 4935946
0 0
<TOTAL-DEFERRED-CHARGES> 2488291 2326059
0 0
<OTHER-ASSETS> 0 0
0 0
<TOTAL-ASSETS> 23729479 21695506
0 0
<COMMON> 2300000 2300000
0 0
<CAPITAL-SURPLUS-PAID-IN> 653346 653346
0 0
<RETAINED-EARNINGS> 2319301 2256091
0 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5272647 5209437
0 0
0 0
0 0
0 0
0 0
<LONG-TERM-DEBT-NET> 9400000 9400000
0 0
<SHORT-TERM-NOTES> 1050000 775000
0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
0 0
<LEASES-CURRENT> 0 0
0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8006832 6311069
0 0
<TOT-CAPITALIZATION-AND-LIAB> 23729479 21695506
0 0
<GROSS-OPERATING-REVENUE> 0 0
4668028 4885193
<INCOME-TAX-EXPENSE> 0 0
41783 87562
<OTHER-OPERATING-EXPENSES> 0 0
4265261 4368400
<TOTAL-OPERATING-EXPENSES> 0 0
4307044 4455962
<OPERATING-INCOME-LOSS> 0 0
360984 429231
<OTHER-INCOME-NET> 0 0
88070 81831
<INCOME-BEFORE-INTEREST-EXPEN> 0 0
449054 511062
<TOTAL-INTEREST-EXPENSE> 0 0
236343 231300
<NET-INCOME> 0 0
212711 279762
0 0
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 0 0
212711 279762
<COMMON-STOCK-DIVIDENDS> 0 0
149500 147200
<TOTAL-INTEREST-ON-BONDS> 0 0
196083 145758
<CASH-FLOW-OPERATIONS> 0 0
337866 612995
<EPS-PRIMARY> 0 0
.462 .608
<EPS-DILUTED> 0 0
0 0
</TABLE>
