<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File No. 0-234
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MOBILE GAS SERVICE CORPORATION
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(Exact name of registrant as specified in its charter)
Alabama 63-0142930
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2828 Dauphin Street, Mobile, Alabama 36606
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 205-476-2720
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No Change
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Former name, former address and former fiscal year,
if changed since last report
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 issuer's
classes of Common Stock, as of the close of the period covered by this report.
Common Stock (2.50 par value) outstanding - 3,206,502 shares.
Total pages in this report 12
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1
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MOBILE GAS SERVICE CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. Financial Information:
Consolidated Balance Sheets - March 31,
1995 and 1994 and September 30, 1994 3 - 4
Consolidated Statements of Income - Three, Six,
and Twelve Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Retained Earnings -
Three, Six, and Twelve Months Ended March 31, 1995
and 1994 6
Consolidated Statements of Cash Flows - Six
Months Ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
PART II. Other Information 10
Exhibit Index 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, September 30,
Assets 1995 1994 1994
------------------------ -------------
(Unaudited)
<S> <C> <C> <C>
Property, Plant, and Equipment - At Cost $142,942 $100,558 $136,592
Less Accumulated Depreciation and Amortization 30,226 28,165 28,657
-------- -------- --------
Net Property, Plant, and Equipment in Service 112,716 72,393 107,935
Construction Work in Progress 974 22,526 1,154
-------- -------- --------
Total Property, Plant, and Equipment 113,690 94,919 109,089
-------- -------- --------
Current Assets:
Cash and Cash Equivalents 1,736 7,670 4,045
Temporary Investments (at cost which
approximates market) 2,950 1,900
Special Deposits 1,717
Receivables:
Gas 4,814 5,164 2,484
Merchandise 1,673 1,620 1,611
Other 388 398 255
Less Allowance for Doubtful Accounts (280) (268) (215)
Materials, Supplies, and Merchandise (at avg. cost) 1,142 1,001 978
Gas Stored Underground for Current Use (at avg. cost) 778 896
Deferred Gas Costs 366 597 195
Deferred Income Taxes 3,438 2,039 2,408
Prepayments 697 652 1,163
-------- -------- --------
Total Current Assets 14,752 21,823 17,437
-------- -------- --------
Regulatory Asset 1,688 1,899 1,736
-------- -------- --------
Merchandise Receivables Due After One Year 4,991 3,706 4,365
-------- -------- --------
Deferred Charges 1,582 2,018 1,902
-------- -------- --------
Total $136,703 $124,365 $134,529
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, September 30,
Capitalization and Liabilities 1995 1994 1994
------------------------ -------------
(Unaudited)
<S> <C> <C> <C>
Capitalization:
Stockholders' Equity
Common Stock, $2.50 Par Value
(Authorized 4,000,000 Shares;
Outstanding: March, 1995 -
3,207,000 Shares; March, 1994 -
2,739,000 Shares; September, 1994 -
3,202,000 Shares) $ 8,016 $ 6,847 $ 8,005
Capital in Excess of Par Value 9,041 715 8,962
Retained Earnings 29,150 28,734 27,284
-------- -------- --------
Total Stockholders' Equity 46,207 36,296 44,251
Minority Interest in Consolidated Subsidiary 1,927 621 1,835
Long-Term Debt (Less Current Maturities) 58,007 59,673 59,047
-------- -------- --------
Total Capitalization 106,141 96,590 105,133
-------- -------- --------
Current Liabilities:
Long-Term Debt Due Within One Year 1,666 1,060 1,369
Notes Payable 900
Accounts Payable 1,692 2,910 3,236
Take or Pay Costs 716 1,150
Dividends Declared 833 685 833
Customer Deposits 1,539 1,535 1,549
Taxes Accrued 3,744 3,153 2,207
Interest Accrued 1,819 1,840 1,698
Overcollected Costs 5,596 2,434 3,085
Other Liabilities 1,978 1,645 1,777
-------- -------- --------
Total Current Liabilities 19,767 15,978 16,904
-------- -------- --------
Accrued Postretirement Benefit Cost 1,597 1,424 1,507
Accrued Pension Cost 1,708 1,654 1,652
Accumulated Deferred Income Taxes 6,981 6,357 6,753
Accumulated Deferred Investment Tax Credits 509 533 521
Other Liabilities 1,829 2,059
-------- -------- --------
Total $136,703 $124,365 $134,529
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
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CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Six Months Twelve Months
Ended March 31, Ended March 31, Ended March 31,
----------------- ----------------- ------------------
1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues
Gas Revenues $22,505 $24,118 $35,334 $40,526 $55,278 $61,317
Merchandise Sales and Jobbing 651 619 1,605 1,432 2,998 2,618
------- ------- ------- ------- ------- -------
Total Operating Revenues 23,156 24,737 36,939 41,958 58,276 63,935
------- ------- ------- ------- ------- -------
Operating Expenses
Cost of Gas 9,299 11,524 13,150 18,813 19,587 26,596
Cost of Merchandise and Jobbing 487 500 1,216 1,115 2,298 2,015
Operations 4,265 3,792 8,279 7,587 15,604 14,716
Maintenance 335 368 707 649 1,549 1,317
Depreciation 1,278 981 2,543 1,961 4,595 3,763
Taxes, Other Than Income Taxes 1,675 1,632 2,824 2,804 4,621 4,557
------- ------- ------- ------- ------- -------
Total Operating Expenses 17,339 18,797 28,719 32,929 48,254 52,964
------- ------- ------- ------- ------- -------
Operating Income 5,817 5,940 8,220 9,029 10,022 10,971
------- ------- ------- ------- ------- -------
Other Income and (Expense)
Interest Expense (1,424) (1,310) (2,772) (2,586) (5,605) (4,901)
Allowance for Borrowed Funds Used
During Construction 29 459 48 871 1,180 1,571
Interest Income 184 137 346 303 601 896
Minority Interest (85) (68) (169) (145) (308) (256)
------- ------- ------- ------- ------- -------
Total Other Income (Expense) (1,296) (782) (2,547) (1,557) (4,132) (2,690)
------- ------- ------- ------- ------- -------
Income Before Income Taxes 4,521 5,158 5,673 7,472 5,890 8,281
------- ------- ------- ------- ------- -------
Income Taxes 1,729 1,918 2,141 2,674 2,263 2,927
------- ------- ------- ------- ------- -------
Net Income 2,792 3,240 3,532 4,798 3,627 5,354
Preferred Stock Div. Requirements 5 20
------- ------- ------- ------- ------- -------
Earnings Applicable to Common Stock $2,792 $3,240 $3,532 $4,793 $3,627 $5,334
======= ======= ======= ======= ======= =======
Earnings Per Share of Common Stock $0.87 $1.18 $1.10 $1.75 $1.21 $1.95
======= ======= ======= ======= ======= =======
Cash Div. Per Share of Common Stock $0.26 $0.25 $0.52 $0.50 $1.04 $1.00
======= ======= ======= ======= ======= =======
Average Common Shares Outstanding 3,207 2,739 3,205 2,738 2,986 2,736
======= ======= ======= ======= ======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 6
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Six Months Twelve Months
Ended March 31, Ended March 31, Ended March 31,
---------------- ---------------- -----------------
1995 1994 1995 1994 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at Beginning of Period $27,191 $26,179 $27,284 $25,352 $28,734 $26,179
Net Income for Period 2,792 3,240 3,532 4,798 3,627 5,354
------- ------- ------- ------- ------- -------
Total 29,983 29,419 30,816 30,150 32,361 31,533
Less: Dividends 833 685 1,666 1,374 3,211 2,757
Premium on Redemption of
Preferred Stock 42 42
------- ------- ------- ------- ------- -------
Balance at End of Period $29,150 $28,734 $29,150 $28,734 $29,150 $28,734
======= ======= ======= ======= ======= =======
</TABLE>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months
Ended March 31,
-------------------------
1995 1994
------ -------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Cash Provided by Operating Activities $4,408 $10,379
------ -------
Cash Flows From Investing Activities:
Capital Expenditures (7,198) (13,149)
Decrease in Temporary Investments 1,900 9,950
------ -------
Net Cash Used in Investing Activities (5,298) (3,199)
------ -------
Cash Flows From Financing Activities:
Repayment of Debts (743) (1,232)
Short-Term Borrowings, Net 900
Payment of Dividends, Net of Dividend Reinvestment (1,576) (1,291)
Redemption of Preferred Stock (642)
------ -------
Net Cash Provided by (Used In) Financing Activities (1,419) (3,165)
------ -------
Net Increase (Decrease) in Cash and Cash Equivalents (2,309) 4,015
------ -------
Cash & Cash Equivalents at Beginning of Period 4,045 3,655
------ -------
Cash & Cash Equivalents at End of Period $1,736 $7,670
====== =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The consolidated financial statements include the accounts of Mobile
Gas Service Corporation, its wholly-owned subsidiaries, MGS Energy Services,
Inc., MGS Storage Services, Inc., MGS Marketing Services, Inc. its 87.5% owned
partnership, Bay Gas Storage Company, Ltd. (Bay Gas), and its 51% owned
partnership, Southern Gas Transmission Company (collectively the "Company").
Minority interest represents the respective other owner's proportionate share
of the equity of Bay Gas and Southern Gas Transmission Company. All
significant intercompany balances and transactions have been eliminated.
Note 2. Due to the high percentage of customers using gas for heating, the
Company's operations are seasonal in nature. Therefore, the results of
operations for the three and six month periods ended March 31, 1995 and 1994
are not indicative of the results to be expected for the full year.
Note 3. The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments, consisting of
normal and recurring accruals, which are, in the opinion of management,
necessary to present fairly the results for the interim periods have been made
and are of a recurring nature. The statements should be read in conjunction
with the summary of accounting policies and notes to financial statements
included in the Company's annual report on Form 10-K for the fiscal year ended
September 30, 1994.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Mobile Gas Service Corporation (Mobile Gas), an investor owned natural
gas utility incorporated under the laws of the State of Alabama, is engaged
principally in the distribution of natural gas to customers in Southwest
Alabama. Mobile Gas serves nearly 100,000 residential, commercial, and
industrial customers. Gas deliveries to these customers are regulated by the
Alabama Public Service Commission (APSC).
Bay Gas Storage Company, Ltd. (Bay Gas) is a limited partnership in
which MGS Storage Services, Inc., a wholly owned subsidiary of Mobile Gas, is
general partner and 87.5% owner. Bay Gas developed and constructed an
underground cavern for the storage of natural gas which commenced operations in
September 1994. Bay Gas is a separate utility with rates independently
regulated by the APSC for intrastate contracts and by the Federal Energy
Regulatory Commission at market-based rates for interstate contracts.
Unregulated operations include the sale and financing of gas
appliances, jobbing work, and contract and consulting work for utilities and
industrial customers.
FINANCIAL CONDITION
Normal cash requirements in the second quarter of the fiscal year have
been met through internally generated funds. Funds for the Company's working
capital needs in the near future are expected to come from internal cash
generation and drawings upon the Company's unused lines of credit totaling $10
million at March 31, 1995.
RESULTS OF OPERATIONS
Earnings applicable to common stock for the three, six and twelve
month periods ended March 31, 1995 were, respectively, $2,792,000, $3,532,000,
and $3,627,000. The figures for the same periods a year ago were $3,240,000,
$4,793,000, and $5,334,000. The decrease in earnings resulted primarily from
warmer weather.
Operating revenues decreased 6%, 12%, and 9%, respectively, for the
three, six and twelve month periods ended March 31, 1995, when compared to the
corresponding periods of the preceding year. Decreased gas revenues for these
periods were due to warmer weather which affects our temperature sensitive
customers. Based on heating degree days billed, temperature in our service
area during the three, six and twelve months ended March 31, 1995,
respectively, was 13%, 28% and 30% warmer than same periods last year and 16%,
22% and 22% warmer than normal. As a result, volumes of gas sold and delivered
to temperature sensitive customers decreased 10%, 17% and 14% during these
periods as compared to last year.
Merchandise and jobbing revenues increased for all three periods ended
March 31, 1995 due to increased sales volumes. The cost of merchandise and
jobbing for the six and twelve months ended March 31, 1995 increased as a
result of the increased sales volumes. Manufacturers'
8
<PAGE> 9
rebates received during the three months ended March 31, 1995 decreased cost of
merchandise and jobbing compared to the same period in the prior year despite
increased sales volumes during the current year three month period.
Changes in the cost of gas for the three, six and twelve month periods
ended March 31, 1995 were due in part to the same factors affecting gas
revenues. The Company has traditionally relied on interstate pipelines for its
firm gas supply with a fee paid to the pipelines to assure that a certain
amount of gas supply would be available during peak demand periods. With the
commencement of operations of Bay Gas, the Company has reduced the cost of gas
paid to others for such peaking service. However, while cost of gas has
decreased, operations and maintenance expense, depreciation expense and
interest expense related to the new storage facilities have increased.
Operations and maintenance expense, in the aggregate, increased 11%,
9% and 7%, respectively, for the three, six and twelve month periods ended
March 31, 1995. The commencement of operations of Bay Gas was the primary
factor in these increases. Other factors were increases in employee benefits
and administration and general expenses.
Depreciation expense increased 30% for the three and six months ended
March 31, 1995 and 22% for the twelve months ended March 31, 1995. Increases
were due to continued growth in depreciable plant in service and a result of the
commencement of Bay Gas operations.
Taxes, other than income taxes, consist primarily of state and local
taxes which are based on gross revenues and fluctuate accordingly. These taxes
are passed through to customers and thus do not impact the Company's net
income.
Income tax expense changed primarily in relation to changes in pre-tax
income for the periods ending March 31, 1994.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. 27 Financial Data Schedule
(b) Reports on Form 8-K
During the quarter for which this report is filed, the Company
filed one report on Form 8-K.
<TABLE>
<CAPTION>
Date of Report Items Reported Under Item 5 Financial Statement
-------------- --------------------------- -------------------
<S> <C> <C>
January 27, 1995 (filed Retirement of Walter L. None
February 9, 1995) Hovell as President and
Chief Executive Officer
of the Company and election
of John S. Davis to that
position.
Entering into an Amendment
to Amended and Restated
Supplemental Deferred
Compensation Agreement dated
January 27, 1995 and a
Consulting Agreement dated
January 27, 1995 between
the Company and Walter L.
Hovell.
Adoption of new Bylaws of the
Company and adopted Mobile
Gas Service Corporation
Non-Employee Directors
Deferred Fee Plan.
</TABLE>
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.
MOBILE GAS SERVICE CORPORATION
------------------------------
(Registrant)
Date May 15, 1995 /s/ John S. Davis
- ----------------------------- ------------------------------
John S. Davis
President
Date May 15, 1995 /s/ Charles P. Huffman
- ----------------------------- ------------------------------
Charles P. Huffman
Treasurer
10
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EXHIBIT INDEX
Exhibit No. Page No.
- ----------- --------
27 Financial Data Schedule 12
11
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND INCOME STATEMENT FOR MOBILE GAS SERVICE CORPORATION FOR THE THREE
MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 112,716
<OTHER-PROPERTY-AND-INVEST> 974
<TOTAL-CURRENT-ASSETS> 14,752
<TOTAL-DEFERRED-CHARGES> 1,582
<OTHER-ASSETS> 6,679
<TOTAL-ASSETS> 136,703
<COMMON> 8,016
<CAPITAL-SURPLUS-PAID-IN> 9,041
<RETAINED-EARNINGS> 29,150
<TOTAL-COMMON-STOCKHOLDERS-EQ> 46,207
0
0
<LONG-TERM-DEBT-NET> 58,007
<SHORT-TERM-NOTES> 900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,666
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 29,923
<TOT-CAPITALIZATION-AND-LIAB> 136,703
<GROSS-OPERATING-REVENUE> 23,156
<INCOME-TAX-EXPENSE> 1,729
<OTHER-OPERATING-EXPENSES> 17,339
<TOTAL-OPERATING-EXPENSES> 17,339
<OPERATING-INCOME-LOSS> 5,817
<OTHER-INCOME-NET> 99
<INCOME-BEFORE-INTEREST-EXPEN> 4,187
<TOTAL-INTEREST-EXPENSE> 1,395
<NET-INCOME> 2,792
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,792
<COMMON-STOCK-DIVIDENDS> 833
<TOTAL-INTEREST-ON-BONDS> 1,237<F1>
<CASH-FLOW-OPERATIONS> 4,408
<EPS-PRIMARY> .87
<EPS-DILUTED> 0
<FN>
<F1>TOTAL INTEREST ON BONDS REPRESENTS INTEREST EXPENSE RELATED TO LONG-TERM DEBT
OUTSTANDING UNDER FIRST MORTGAGE BONDS AND LONG-TERM SECURED NOTES.
</FN>
</TABLE>
