<PAGE>
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 June 30, 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 1 of 13
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30,
1995 1994
OPERATING REVENUES:
Gas sales $ 3,071,144 $ 5,252,857
Transportation 1,324,143 1,091,442
Oil and gas production 5,009,398 6,198,703
TOTAL OPERATING REVENUES 9,404,685 12,543,002
OPERATING EXPENSES:
Purchased gas - gas sales 1,526,905 3,517,179
Purchased gas - oil and gas production 3,726,792 4,719,366
Operation and maintenance 2,169,735 2,042,957
Depreciation, depletion and amortization 883,750 852,729
Taxes other than income 666,365 692,173
TOTAL OPERATING EXPENSES 8,973,547 11,824,404
OPERATING INCOME 431,138 718,598
Other income 82,324 101,913
Interest expense 237,726 220,462
Federal income taxes 49,790 163,245
NET INCOME $ 225,946 $ 436,804
=========== ===========
Net income per share $ 0.03 $ 0.07
=========== ===========
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
JUNE 30, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30,
1995 1994
OPERATING REVENUES:
Gas sales $13,604,875 $18,889,242
Transportation 3,015,443 2,594,591
Oil and gas production 10,815,791 15,770,235
TOTAL OPERATING REVENUES 27,436,109 37,254,068
OPERATING EXPENSES:
Purchased gas - gas sales 7,651,338 12,859,733
Purchased gas - oil and gas production 8,017,424 12,963,191
Operation and maintenance 4,413,711 4,119,252
Depreciation, depletion and amortization 1,767,499 1,705,458
Taxes other than income 1,705,143 1,708,778
TOTAL OPERATING EXPENSES 23,555,115 33,356,412
OPERATING INCOME 3,880,994 3,897,656
Other income 113,474 133,018
Interest expense 507,321 399,638
Federal income taxes 1,097,708 1,152,877
NET INCOME $ 2,389,439 $ 2,478,159
=========== ===========
Net income per share $ 0.36 $ 0.37
=========== ===========
Average number of shares outstanding 6,661,477 6,661,477
=========== ===========
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
JUNE 30, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1995 1994
PROPERTY, PLANT AND EQUIPMENT
Gas utility properties $60,428,947 $58,155,708
Less - Accumulated depreciation 21,581,810 20,637,405
38,847,137 37,518,303
Oil and gas properties,
successful efforts 21,544,973 21,543,577
Less - Accumulated depreciation,
depletion and amortization 7,181,174 6,414,352
14,363,799 15,129,225
Other - net 5,502,740 5,748,532
TOTAL PROPERTY, PLANT AND EQUIPMENT 58,713,676 58,396,060
CURRENT ASSETS
Cash and cash equivalents 4,216,146 1,271,186
Short-term investments 1,005,901 1,842,848
Accounts receivable - net 6,200,652 9,770,469
Gas in underground storage 1,817,425 3,333,358
Materials and supplies,
at average cost 1,077,372 1,004,369
Other, primarily prepaid taxes 2,171,827 2,802,679
TOTAL CURRENT ASSETS 16,489,323 20,024,909
OTHER ASSETS
Recoverable gas cost 872,354 1,206,941
Other 835,650 901,178
TOTAL OTHER ASSETS 1,708,004 2,108,178
TOTAL ASSETS $76,911,003 $80,529,088
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1994
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
June 30, December 31,
1995 1994
CAPITALIZATION
Shareholders' equity -
Common stock, par value $1 per
share, authorized 14,000,000
shares, issued 6,819,400 shares $ 6,819,400 $ 6,879,400
Paid in capital 29,498,107 29,498,107
Retained earnings 5,869,025 4,278,964
Treasury stock, 157,923 shares
at cost (1,550,509) (1,550,509)
TOTAL SHAREHOLDERS' EQUITY 40,636,023 39,045,962
Long-term debt 11,615,300 12,955,973
CURRENT LIABILITIES
Current maturities of long-term debt 877,884 877,695
Short-term loans -- 3,050,000
Accounts payable 5,316,357 4,498,197
Accrued income and other taxes 1,997,699 3,988,887
LIFO inventory reserve 214,864 --
Refundable gas cost 1,830,616 1,450,973
Other 1,800,927 1,522,889
TOTAL CURRENT LIABILITIES 12,038,347 15,388,641
DEFERRED CREDITS AND OTHER LIABILITIES
Federal income taxes 7,976,328 8,521,800
Investment tax credits 1,133,130 1,182,072
Accrued transition costs 1,177,621 1,177,621
Health care and other 2,334,254 1,522,889
TOTAL DEFERRED CREDITS AND OTHER 12,621,333 13,138,512
TOTAL CAPITALIZATION AND LIABILITIES $76,911,003 $80,529,088
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 2,389,439 $ 2,478,159
Reconciliation of net income to net
cash provided by operating activities
Depreciation, depletion and
amortization 1,835,928 1,770,740
Deferred income taxes (743,630) (166,158)
Other, net 202,915 (5,634)
Change in assets and liabilities:
Accounts receivable 3,475,690 4,253,386
Short-term investments (836,947) 741,952
Gas in underground storage and
LIFO reserve 1,730,797 637,269
Materials and supplies (73,003) 25,708
Deferred gas costs 334,587 1,119,629
Accounts payable 818,160 (1,195,301)
Prepaid taxes 800,585 1,510,928
Other, net 989,400 (1,053,724)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 10,923,921 10,116,954
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (2,827,488) (3,628,302)
Salvage on retirement of facilities 38,388 42,503
NET CASH USED IN INVESTING ACTIVITIES (2,789,100) (3,585,799)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments of long-term debt (1,340,483) (1,613,296)
Proceeds from long-term debt -- 6,000,000
Net borrowings under short-term
bank loans (3,050,000) (3,450,000)
Dividends paid (799,378) (799,430)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (5,189,861) 137,274
NET INCREASE IN CASH & CASH EQUIVALENTS 2,944,960 6,668,429
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 1,271,186 554,761
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 4,216,146 $ 7,223,190
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 1995
NATIONAL GAS & OIL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying consolidated balance sheets, statement of
cash flows, and income statements 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 June 30, 1995 and 1994 have been included, and were
normal recurring adjustments. Certain reclassifications 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 June 30, 1995, gas in underground
storage which is accounted for under LIFO decreased 134,114 Mcf
from December 31, 1994, due to the seasonal nature of the Company's
business. The Company injects natural gas into underground storage
in the summer and withdraws the gas in the winter during high
demand periods. The reserve for LIFO inventory of $214,864 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:
Six Months Ended June 30,
1995 1994
Income taxes $1,400,000 $ --
Interest $ 539,507 $298,225
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 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 $9,405,000 in the second quarter
of 1995 decreased by 25 percent from second quarter 1994
consolidated revenue. The major change in revenue can be
attributed to decreased residential and commercial throughput and
the decrease in gas prices. A reduction in production and
marketing activities by NGO Development between periods also
contributed to the decline.
Net income in the second quarter of 1995 amounted to
$226,000, a decrease of $211,000 from the second quarter of 1994.
Net income per common share in the second quarter of 1995
was $.03 as compared to $.07 in the second quarter of 1994. The
decrease is primarily attributed to the decrease in income
generated by the sale and transportation of natural gas and from
the oil and gas production segment.
Gas Sales and Transportation
Operating revenues associated with this segment of the
business decreased by 31 percent in the second quarter of 1995 as
compared to the second quarter of 1994 due to a decrease in the
volume of gas sold and transported and a decrease in the price of
gas sold to residential and commercial customers as a result of
declining gas prices.
Net income of the gas sales and transportation segment
during the second quarter decreased $84,000 as compared to the
second quarter of 1994. The decrease is primarily the result of
decreased throughput and higher operations and maintenance expense
between periods.
<PAGE>
Volumes of gas sold and transported to various customer
classes for the second quarter decreased 14% over the second
quarter of 1994.
Three Months Ended June 30,
Gas Throughput (Mcf) 1995 1994
Gas Sales:
Industrial 11,183 10,341
Residential 335,931 362,591
Commercial 143,209 150,451
Total Gas Sales 490,323 523,383
Transportation 1,684,757 1,998,692
Total Gas Throughput 2,175,080 2,522,075
========= =========
The decrease in purchased gas expense is the result of
the corresponding decrease in gas sales revenues. Operations and
maintenance expenditures have increased 6% during the second
quarter as compared to the second quarter of 1994 primarily due to
increased labor costs.
Oil and Gas Production
Operating revenues from the oil and gas production
segment decreased $1,189,000 in the second quarter of 1995 as
compared to the second quarter of 1994. The decrease is due
primarily to the decrease in gas prices and decreased gas marketing
activity by NGO Development. 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 decreased $94,000 primarily due
to decreasing margins and the reduction in gas marketing activity.
General
Interest expense increased $17,000 between periods due
to higher interest rates on the variable rate portions of the
Company's long-term debt. Other income decreased $20,000 in the
second quarter of 1995 as compared to the second quarter of 1994,
primarily due to a reduction in investment income.
Federal Income Taxes
The change in federal income tax expense for the quarter
reflects the changes in taxable income for the consolidated
companies. Taxable income has decreased due to an increase in the
estimated percentage depletion between periods.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Capital Resources
The primary sources and uses of cash during the six month
period ending June 30 are summarized in the following condensed
cash flow statement:
Sources and (Uses) of Cash
1995 1994
Provided by Operating Activities $10,923,921 $10,116,954
Capital Expenditures, net of salvage (2,789,100) (3,585,799)
Net Borrowings (4,390,483) 936,704
Common Dividends (799,378) (799,430)
Net Increase in Cash &
Cash Equivalents $ 2,944,960 $ 6,668,429
=========== ===========
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 six months of 1995 the gas sales and
transportation segment accounted for 80 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 20 percent which was primarily used
for the development and/or completion of various interest in oil
and gas wells. Capital expenditures in the first six months of
1995 have decreased due to decreased oil and gas drilling in
response to lower gas prices.
Financing and Liquidity
The Company continually assesses various alternatives for
expanding its business, including the acquisition of other business
entities.
As of June 30, 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
<PAGE>
lines of credit are negotiated at the time the funds are requested
with interest rates ranging form 6.6875% to 8.5000%. During the
first six months, the Company utilized these credit lines and as
of June 30, 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 1997. 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 six months of 1995, $2 million
of the credit line was repaid and $550,000 remained outstanding as
of June 30, 1995.
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 $799,378 and $799,430
during the six months ended June 30, 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.
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.
During the third quarter of 1993, 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
JUNE 30, 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.
The 1995 Annual Meeting of Shareholders was held on May
18, 1995, at Newark, Ohio. There were 6,026,168 shares
(90%) represented at the meeting. The following person
were elected as Directors for a term of three years:
David C. Easley (6,010,620), Patrick J. McGonagle
(6,015,012) and Graham R. Robb (6,014,400).
By a vote of 5,856,509 (87.9%) in favor, with 119,620
(1.8%) against and 48,756 (0.7%) abstaining, the
shareholders resolved to adopt the amendment to the
Company's Articles of Incorporation to increase the
maximum number of common shares which the Company shall
be authorized to have outstanding from 7,000,000 to
14,000,000.
The shareholders further voted in favor of a motion to
ratify the appointment of Price Waterhouse LLP to audit
the financial statements of the Company and its
subsidiaries for the year ending December 31, 1995.
There were 5,999,480 (90.1%) votes cast in favor, 7,132
(0.1%) against and 18,273 (0.3%) abstaining.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE>
FORM 10-Q
QUARTER ENDED
JUNE 30, 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: August 9, 1995 /s/ John B. Denison
John B. Denison
Vice President and Secretary
Date: August 9, 1995 /s/ Lawrence P. Haren
Lawrence P. Haren
Executive Vice President, Chief
Financial Officer and Treasurer
<PAGE>
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<PERIOD-END> JUN-30-1995
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<TOTAL-NET-UTILITY-PLANT> 38,847,137
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