SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
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For Quarter Ended March 31, 1995
Commission file number 1-8223
NATIONAL GAS & OIL COMPANY
(Exact name of registrant)
Ohio 31-1004640
(State) (I.R.S. Employer
Identification No.)
1500 Granville Road, Newark, Ohio 43055
(Address of principal executive office)
Registrant's telephone number (614) 344-2102
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 (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
Indicate the number of shares outstanding of each of the issuers'
classes of common stock, as of the close of the period covered by
this report (applicable only to corporate issuers).
$1.00 Par Value - Common 6,661,477 shares
<PAGE> Page 1 of 13
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31,
1995 1994
OPERATING REVENUES:
Gas sales $10,533,731 $13,486,913
Transportation 1,691,300 1,652,621
Oil and gas production 5,806,393 9,571,532
TOTAL OPERATING REVENUES 18,031,424 24,711,066
OPERATING EXPENSES:
Purchased gas - gas sales 6,124,433 9,342,554
Purchased gas - oil and gas production 4,290,632 8,243,825
Operation and maintenance 2,243,976 2,076,295
Depreciation, depletion and amortization 883,749 852,729
Taxes other than income 1,038,778 1,016,605
TOTAL OPERATING EXPENSES 14,581,568 21,532,008
OPERATING INCOME 3,449,856 3,179,058
Other income 31,147 31,105
Interest expense 269,595 179,176
Federal income taxes 1,047,918 989,632
NET INCOME $ 2,163,490 $ 2,041,355
=========== ===========
Net income per share $ 0.32 $ 0.31
=========== ===========
Average number of shares outstanding 6,661,477 6,661,477
=========== ===========
Cash dividend per share $ 0.06 $ 0.06
=========== ===========
The per share amounts and the average number of shares outstanding have
been restated to reflect the three-for-two stock split in December 1994.
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, December 31,
1995 1994
PROPERTY, PLANT AND EQUIPMENT
Gas utility properties $58,758,969 $58,155,708
Less - Accumulated depreciation 21,107,854 20,637,405
37,651,115 37,518,303
Oil and gas properties,
successful efforts 21,304,371 21,543,577
Less - Accumulated depreciation,
depletion and amortization 6,796,549 6,414,352
14,507,822 15,129,225
Other - net 5,560,700 5,748,532
CURRENT ASSETS
Cash and cash equivalents 3,629,530 1,271,186
Short-term investments 1,641,885 1,842,848
Accounts receivable - net 10,226,704 9,770,469
Gas in underground storage 643,700 3,333,358
Materials and supplies,
at average cost 1,070,645 1,004,369
Other, primarily prepaid taxes 2,187,675 2,802,679
19,400,139 20,024,909
OTHER ASSETS
Recoverable gas cost 930,321 1,206,941
Other 867,540 901,178
1,797,861 2,108,119
TOTAL ASSETS $78,917,637 $80,529,088
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY
CONSOLIDATED BALANCE SHEET
CAPITALIZATION AND LIABILITIES
March 31, December 31,
1995 1994
CAPITALIZATION
Shareholders' equity -
Common stock, par value $1 per
share, authorized 7,000,000
shares, issued 6,819,400 shares $ 6,819,400 $ 6,819,400
Paid in capital 29,498,108 29,498,107
Retained earnings 6,042,767 4,278,964
Treasury stock, 157,923 shares
at cost (1,550,509) (1,550,509)
TOTAL SHAREHOLDERS' EQUITY 40,809,766 39,045,962
Long-term debt 11,287,197 12,955,973
CURRENT LIABILITIES
Current maturities of long-term debt 877,254 877,695
Short-term loans 1,300,000 3,050,000
Accounts payable 4,218,557 4,498,197
Accrued income and other taxes 3,713,517 3,988,887
Refundable gas cost 2,342,703 1,450,973
LIFO inventory reserve 299,277 --
Other 1,467,186 1,522,889
14,218,494 15,388,641
DEFERRED CREDITS AND OTHER LIABILITIES
Federal income taxes 7,964,962 8,521,800
Investment tax credits 1,157,601 1,182,072
Accrued transition costs 1,177,621 1,177,621
Health care and other 2,301,996 2,257,019
12,602,180 13,138,512
TOTAL CAPITALIZATION AND LIABILITIES $78,917,637 $80,529,088
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,163,490 $ 2,041,355
Reconciliation of net income to net
cash provided by operating activities
Depreciation, depletion and
amortization 938,957 884,759
Deferred income taxes (946,198) (361,480)
Other, net 69,356 (24,994)
Change in assets and liabilities:
Accounts receivable (550,062) (225,994)
Short-term investments 200,963 523,780
Gas in underground storage and
LIFO reserve 2,988,935 2,786,610
Materials and supplies (66,276) 27,207
Deferred gas costs 1,168,350 619,222
Accounts payable (279,640) (1,648,031)
Prepaid taxes 615,004 1,088,785
Other, net 720,988 (73,692)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,023,867 5,637,527
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (872,302) (1,281,462)
Salvage on retirement of facilities 25,685 37,759
NET CASH USED IN INVESTING ACTIVITIES (846,617) (1,243,703)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt (369,217) (1,391,055)
Proceeds from long-term debt -- 6,000,000
Net borrowings under short-term
bank loans (3,050,000) (3,450,000)
Dividends paid (399,689) (399,713)
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (3,818,906) 759,232
NET INCREASE IN CASH & CASH EQUIVALENTS 2,358,344 5,153,056
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 1,271,186 554,761
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 3,629,530 $ 5,707,817
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated balance sheet and related
statement of cash flows, and the comparative income statement have
been prepared by National Gas & Oil Company (the Company) without
audit by independent accountants. In the opinion of the Company,
all adjustments necessary for a fair presentation of its
consolidated results of operation at March 31, 1995 and 1994 have
been included, and were normal recurring adjustments. Certain
minor reclassification have been made for comparative purposes.
2. Gas in underground storage under the LIFO method is determined
using calendar year-end quantities and costs. LIFO inventory is
estimated at interim periods. At March 31, 1995, gas in
underground storage decreased 544,486 Mcf from December 31, 1994,
due to the seasonal nature of the Company's business. That nature
is injecting natural gas into underground storage in the summer and
withdrawing the gas in the winter during high demand periods. The
reserve for LIFO inventory of $299,277 is the difference between
the cost to replace this temporary reduction and the LIFO cost
assigned to these volumes.
3. Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Three Months Ended March 31,
1995 1994
Income taxes $450,000 $ --
Interest $393,717 $178,401
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated Results
Operating revenues have been separated into revenues
generated from the sale and transportation of natural gas by
National Gas & Oil Corporation (National Gas) and Producers Gas
Sales, Inc. (Producers) and the sale of oil and gas produced and
purchased by NGO Development Corporation (NGO Development). The
revenues of the holding company, National Gas & Oil Company, and
other income from all subsidiaries are included under other income.
Consolidated revenue of $18,031,000 in the first quarter
of 1995 decreased by 27 percent from first quarter 1994
consolidated revenue. The major change in revenue can be
attributed to decreased gas marketing activity by NGO Development
and decreased gas sales by National Gas due to warmer weather in
the first quarter of 1995.
Net income in the first quarter of 1995 amounted to
$2,163,000, an increase of $122,000 or 6 percent from the first
quarter of 1994. The increase is attributed to increased margins
from transportation customers and increased margins related to gas
marketing activities.
Net income per common share in the first quarter of 1995
was $.32 as compared to $.31 in the first quarter of 1994.
Gas Sales and Transportation
Operating revenues associated with this segment of the
business decreased by $2,915,000 or 19 percent in the first quarter
of 1995 as compared to the first quarter of 1994 due to a decrease
in the volume of gas sold as a result of the warmer weather and due
to a decrease in the price of gas sold as a result of a lower gas
cost. Additionally, Producers Gas revenues decreased due to a loss
in incremental throughput.
Net income of the gas sales and transportation segment
during the first quarter increased $90,000 as compared to net
income in the first quarter of 1994. The increase is primarily the
result of the transportation fees associated with the now
operational pipeline to an electric generation facility.
<PAGE>
Volumes of gas sold and transported to various customer
classes for the first three months decreased 17% over the first
three months of 1994.
Three Months Ended March 31,
Gas Throughput (Mcf) 1995 1994
Gas Sales:
Industrial 30,508 35,494
Residential 995,794 1,120,356
Commercial 425,520 489,602
Total Gas Sales 1,451,822 1,645,452
Transportation 2,751,482 3,412,616
Total Gas Throughput 4,203,304 5,058,068
========= =========
Operation and maintenance expenditures have increased
4% during the first quarter as compared to the first quarter of
1994 primarily due to increased labor costs.
Oil and Gas Sales
Operating revenues from the oil and gas sales segment
decreased $3,782,653 in the first quarter of 1995 as compared to
the first quarter of 1994. The decrease is due to decreased gas
marketing sales by NGO Development as a result of decreased market
activity. Operating expenses for this business segment have
remained relatively flat with purchased gas expense decreasing to
correspond with the decrease in gas marketing revenue.
Net income for the period increased $34,000 primarily due
to increased margins from gas marketing activity.
General
The first quarter 1995 increase in interest expense as
compared to the first quarter 1994 is the result of interest on
National Gas' $6 million of Senior Unsecured Notes. These Notes
were issued in 1994 to complete a pipeline to an electric
generation facility, to upgrade storage facilities and to complete
various other capital projects.
Federal Income Taxes
The change in federal income tax expense for the quarter
reflects the changes in taxable income for the consolidated
companies.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources
The primary sources and uses of cash during the three
month period ending March 31 are summarized in the following
condensed cash flow statement:
Sources and (Uses) of Cash
1995 1994
Provided by Operating Activities $ 7,023,867 $ 5,637,527
Capital Expenditures, net of salvage (846,617) (1,243,703)
Net Borrowings (3,419,217) 1,158,945
Common Dividends (399,689) (399,713)
Net Increase in Cash &
Cash Equivalents $ 2,358,344 $ 5,153,056
=========== ===========
Cash provided by operating activities consists of net
income and noncash items including depreciation, depletion,
amortization and deferred income taxes. Additionally, changes in
working capital are also included in cash provided by operating
activities. The Company expects that internally generated cash and
cash reserves, coupled with seasonal short-term borrowings, will
continue to be sufficient to satisfy the operating, normal capital
expenditure and dividend requirements of the Company's existing
operations in the near future.
Capital Expenditures
In the first quarter of 1995 the gas sales and
transportation segment accounted for 69 percent of the total
capital expenditures. The funds were expended primarily for
expansion and upgrading of existing pipeline systems. The oil and
gas sales segment accounted for 31 percent which was primarily used
for the development and/or completion of various interest in oil
and gas wells. Capital expenditures in the first quarter 1995 have
decreased due to decreased oil and gas drilling in response to
lower gas prices.
Capital expenditures vary significantly by quarter. The
Company estimates that normal capital expenditures in 1995 to
support existing operations will be approximately $2,500,000. The
construction and drilling programs are continually evaluated and
actual expenditures may be more or less.
Financing and Liquidity
The Company continually assesses various alternatives for
expanding its business, including the acquisition of other business
entities.
<PAGE>
As of March 31, 1995, the Company and its subsidiaries
had short-term lines of credit with various banks aggregating in
excess of $6,000,000, the upper limit on short-term borrowing
imposed by the Board of Directors. The terms of each borrowing
under the lines of credit are negotiated at the time the funds are
requested with interest rates ranging from 6.6875% to 8.5000%.
During the first quarter, the Company utilized these credit lines
and as of March 31, 1995, all short-term draws were repaid. These
funds were used primarily by National Gas to satisfy seasonal
working capital requirements. The Company anticipates that it will
utilize its credit lines for additional funds during the third and
fourth quarters of 1995.
Additionally, the Company and all of its subsidiaries,
except National Gas, have a $3 million revolving line of credit
which expires in February 1996. This committed credit line is
unsecured and may be utilized by any of the subsidiaries, except
National Gas. During 1993, NGO Development borrowed $2.55 million
against this credit line for various acquisitions and pipeline
projects. During 1994 and the first quarter of 1995, $1.25 million
of the credit line was repaid and $1.3 million remained outstanding
as of March 31, 1995.
In March 1994, National Gas issued $6 million of Senior
Unsecured Notes in a private placement to a qualified investor.
The proceeds were utilized by National Gas to fund various capital
projects in 1994 and 1995, including the $3.5 million pipeline
project to provide gas service to a new customer. The notes bear
a fixed interest rate of 6.63%, have a maturity of 15 years and an
average life of 9 years. The notes carry a 100% guaranty by the
Company. The Company is not aware of any material events or
uncertainties which would materially limit or restrict its ability
to secure additional funds from external sources in either the debt
or equity markets.
Dividends
The Company paid cash dividends of $399,689 and $399,713
during the three months ended March 31, 1995 and 1994,
respectively. Presently, there are no restrictions on the payment
of dividends, as long as the Company is not in default of the terms
in its long-term loans. Dividend policy is established by the
Company's Board of Directors. The Board's decision takes into
consideration results of operations and retained earnings of the
Company. There are currently no restrictions on the present
ability to pay such dividends.
Effects of Inflation
All of the Company's long-term bank loans accrue interest
at a fluctuating rate equal to either the bank's prime rate or to
a rate tied to the London Interbank Offered Rate (LIBOR). Because
of the fluctuating rate, the Company is exposed to increases in
interest expense should rates increase due to inflation.
<PAGE>
During the third quarter of 1994, National Gas analyzed
the need for additional base rate increases and decided to apply
for rate increases to cover increases in operating expenses. Rate
increases over a three year period have been successfully
negotiated with all municipalities served by National Gas.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
NATIONAL GAS & OIL COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Default upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE>
FORM 10-Q
QUARTER ENDED
MARCH 31, 1995
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.
NATIONAL GAS & OIL COMPANY
(Registrant)
Date: May 15, 1995
Lawrence P. Haren
Executive Vice President, Chief
Financial Officer and Treasurer
Date: May 15, 1995
John B. Denison
Vice President and Secretary
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