<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1995
Commission File Number 0-10833
--------
CLINTON GAS SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-0813959
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4770 Indianola Avenue Columbus, Ohio 43214
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(614) 888-9588
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(Registrant's telephone number including 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 issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 5,657,626 shares outstanding
$ -0- par value
Page One of Eleven pages.
Exhibit Index appears on Page 10.
<PAGE> 2
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
1995 December 31,
ASSETS: (Unaudited) 1994
- ------------------------------------------------- ----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,539,000 $ 1,169,000
Receivables 9,682,000 10,140,000
Prepaid expenses and other 947,000 1,141,000
Deferred income taxes 486,000 486,000
Costs in excess of billings on uncompleted wells 0 301,000
----------- -----------
TOTAL CURRENT ASSETS 12,654,000 13,237,000
=========== ===========
PROPERTY - At Cost:
Proved natural gas and oil properties 53,500,000 53,000,000
Pipeline systems and other 12,455,000 12,330,000
Land, building and improvements 2,107,000 2,097,000
Well and field equipment 2,817,000 2,722,000
Office equipment 1,927,000 1,850,000
----------- -----------
Total Property 72,806,000 71,999,000
Accumulated depreciation, depletion
and amortization 38,549,000 37,207,000
----------- -----------
PROPERTY - NET 34,257,000 34,792,000
=========== ===========
INVESTMENTS IN REAL ESTATE 1,393,000 1,590,000
=========== ===========
OTHER ASSETS 570,000 564,000
=========== ===========
TOTAL ASSETS $48,874,000 $50,183,000
=========== ===========
</TABLE>
Page 2 of 11 pages.
<PAGE> 3
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1995 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY: (Unaudited) 1994
- ------------------------------------- ----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt:
Notes payable $ 268,000 $ 276,000
Mortgages payable 108,000 106,000
Accounts payable 8,487,000 10,210,000
Accrued liabilities and expenses 1,089,000 1,089,000
Receipts in excess of costs on uncompleted wells 98,000 0
----------- -----------
TOTAL CURRENT LIABILITIES 10,050,000 11,681,000
----------- -----------
LONG-TERM DEBT (Less current maturities):
Notes payable 15,747,000 15,773,000
Mortgages payable 1,310,000 1,333,000
----------- -----------
TOTAL LONG-TERM DEBT 17,057,000 17,106,000
----------- -----------
DEFERRED INCOME TAXES 566,000 506,000
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; Authorized -
2,000,000 shares; Issued and oustanding - none.
Common stock, $.0833 stated value; Authorized -
15,000,000 shares; Issued 1995 and 1994 -
6,175,000 shares 514,000 514,000
Additional paid-in capital 7,552,000 7,552,000
Retained earnings 14,260,000 13,949,000
----------- -----------
TOTAL 22,326,000 22,015,000
Less treasury stock of 517,000 shares, at cost (1,125,000) (1,125,000)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 21,201,000 20,890,000
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $48,874,000 $50,183,000
=========== ===========
</TABLE>
Page 3 of 11 pages.
<PAGE> 4
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
For the Quarters Ended March 31, 1995 and 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended March 31,
1995 1994
----------- -----------
<S> <C> <C>
REVENUE:
Natural gas marketing $15,187,000 $26,702,000
Natural gas and oil sales 3,870,000 2,553,000
Well operating, transportation and other 814,000 912,000
Drilling 795,000 0
----------- -----------
TOTAL REVENUE 20,666,000 30,167,000
----------- -----------
COSTS AND EXPENSES:
Natural gas marketing 14,343,000 26,151,000
Natural gas and oil production:
Depreciation, depletion and amortization 1,200,000 791,000
Production costs 1,192,000 1,035,000
Other costs and expenses 1,432,000 1,144,000
Drilling 1,023,000 6,000
Selling, general and administrative expenses 720,000 1,095,000
----------- -----------
TOTAL COSTS AND EXPENSES 19,910,000 30,222,000
----------- -----------
OPERATING INCOME (LOSS) 756,000 (55,000)
OTHER INCOME (EXPENSE):
Interest expense (370,000) (272,000)
Interest, dividend, and other income 12,000 10,000
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 398,000 (317,000)
INCOME TAXES (BENEFIT) 87,000 (153,000)
----------- -----------
NET INCOME (LOSS) 311,000 ($164,000)
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $0.055 ($0.029)
----------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,658,000 5,658,000
----------- ----------
</TABLE>
Page 4 of 11 pages.
<PAGE> 5
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the Quarters Ended March 31, 1995 and 1994 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter Ended March 31,
OPERATING ACTIVITIES 1995 1994
- ----------------------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Net income (loss) $311,000 ($164,000)
Adjustments to reconcile net income(loss) to cash provided by operating activities:
Depreciation, depletion, and amortization 1,637,000 1,038,000
Provision(benefit) for deferred income taxes 60,000 (177,000)
Loss (gain) from disposition of property and investments 4,000 (3,000)
Change in operating assets and liabilities:
Decrease in receivables 458,000 494,000
Decrease(increase) in prepaid expenses and other current assets 194,000 (44,000)
Decrease in costs in excess of billings on uncompleted wells 301,000 0
(Decrease) increase in accounts payable (1,100,000) 504,000
(Decrease) in accrued liabilities and expenses 0 (72,000)
Increase(decrease) in receipts in excess of costs on uncompleted wells 98,000 (634,000)
(Decrease) in accrued and deferred income taxes 0 (51,000)
Increase in deferred income 0 4,000
---------- -----------
Net cash provided by operating activities 1,963,000 895,000
---------- -----------
INVESTING ACTIVITIES
- -----------------------------------------------------------------------------------
Purchase of property (1,537,000) (523,000)
Proceeds from sale of property 13,000 61,000
Collection of mortgage loans receivable and changes in other assets (14,000) (9,000)
---------- -----------
Net cash (used in) investing activities (1,538,000) (471,000)
---------- -----------
FINANCING ACTIVITIES
- -----------------------------------------------------------------------------------
Proceeds from notes and mortgages payable 2,750,000 5,900,000
Principal payments on notes and mortgages payable (2,805,000) (7,300,000)
---------- -----------
Net cash (used in) financing activities (55,000) (1,400,000)
---------- -----------
Increase(decrease) in cash and cash equivalents 370,000 (976,000)
Cash and cash equivalents at beginning of year 1,169,000 1,103,000
---------- -----------
Cash and cash equivalents at end of period $1,539,000 $ 127,000
========== ===========
</TABLE>
Page 5 of 11 pages.
<PAGE> 6
CLINTON GAS SYSTEMS, INC. AND SUBSIDIARIES
SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Accounting Policies : The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be "cash equivalents."
Non-Cash Investing and Financing Activities : The Company incurred capital lease
and other obligations of $36,000 in 1994 in connection with agreements to
purchase equipment. Included in accounts payable at December 31, 1994 is an
unpaid liability of $623,000 to purchase natural gas and oil properties.
Interest Expense : The Company incurred interest expense and made interest
payments as follows:
<TABLE>
<CAPTION>
Total Interest Total Interest
Period Expense Incurred Payments Made
------ ---------------- --------------
<S> <C> <C>
Quarter ended
March 31, 1995 $387,000 $215,000
Quarter ended
March 31, 1994 $279,000 $173,000
</TABLE>
Income Taxes : The Company made income tax payments of $0 and $77,000,
respectively, for the quarters ended March 31, 1995 and March 31, 1994.
Page 6 of 11 pages.
<PAGE> 7
CLINTON GAS SYSTEMS, INC. AND SUBSIDIARIES
Notes to Interim Financial Statements
1.) In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
necessary to present fairly Clinton Gas Systems, Inc.'s financial
position as of March 31, 1995, and the results of its operations and
changes in cash flow for the three months then ended.
2.) The results of operations for the three months ended March 31, 1995
are not necessarily indicative of the results to be expected for the
full year.
Page 7 of 11 pages.
<PAGE> 8
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's credit facility and cash flow from operations are the
major sources of funds for the acquisition of natural gas and oil reserves and
the drilling of exploratory wells. At March 31, 1995 the Company had a
$15,000,000 credit arrangement with its two banks and $13,750,000 had been
borrowed. The amount owed to banks at May 10, 1995 was $12,500,000. The credit
line is reviewed semiannually and the amount of credit is based on estimated net
revenues from the Company's proved developed natural gas and oil reserves. The
net cash provided by operating activities was $1,963,000 for the first quarter
of 1995 compared to $895,000 for the first quarter of 1994.
From January 1, 1995 through May 10, 1995 the Company has participated
in the successful completion of 9 exploratory wells. The future sale of natural
gas and oil production from these discoveries will provide future liquidity to
the Company.
The Company's working capital increased to $2,604,000 at March 31, 1995
from $1,556,000 at December 31, 1994. Total current and long term debt decreased
slightly to $17,433,000 at March 31, 1995 from $17,488,000 at December 31, 1994.
Capital expenditures were $914,000 for the first quarter of 1995
compared to $561,000 for the first quarter of 1994. In the current quarter
approximately $557,000 was expended for the drilling and completion of
exploratory wells. The remaining 1995 capital outlays consisted of $357,000 for
transportation systems and other expenditures.
Results of Operations
Net income was $311,000 or $.055 per share for the first quarter of 1995
compared to a net loss of $164,000 or $.029 per share in 1994. Operating income
also increased by $811,000 to $756,000 in 1995 from a loss of $55,000 in 1994.
These improvements were due to greater operating income from natural gas
marketing activities combined with higher income from natural gas and oil
production. In addition, the 1994 period included a $332,000 provision for an
uncollectible accounts receivable.
Revenues from natural gas marketing decreased to $15,187,000 in 1995
from $26,702,000 in 1994. The change was due to a 23% decrease in volumes sold
combined with lower prices for natural gas. Purchases of natural gas also
decreased to $14,343,000 in the current quarter from $26,151,000 in the prior
quarter as a result of the reduced volume and lower prices. Overall, the
operating income from gas marketing activities improved by $293,000 to $844,000
in 1995 from $551,000 in 1994 due to improved margins.
Page 8 of 11 pages.
<PAGE> 9
Natural gas and oil sales increased by $1,317,000 due primarily to
increased revenues from exploratory wells and higher crude oil prices offset, in
part, by lower prices for natural gas and the normal production declines from
existing wells. Depreciation, depletion and amortization of natural gas and oil
properties increased to $1,200,000 in 1995 from $791,000 due to increased
production from exploratory wells combined with higher amortization for older
wells. Production costs rose by 15% to $1,192,000 in 1995 from $1,035,000 in
1994. The change was due to expenses associated with exploratory wells and
reserve acquisitions. As a result of these factors, the operating income from
natural gas and oil production increased by $751,000 to $1,478,000 in 1995 from
$727,000 in 1994.
Revenues from well operating, transportation and other decreased to
$814,000 in 1995 from $912,000 in 1994. The decrease was due to lower
transportation income from pipeline systems from reduced usage. Other costs
include expenses related to operating and managing producing wells, maintenance
of transportation systems, real estate operations and support costs for
exploratory activities. Costs increased by $288,000 to $1,432,000 in 1995 from
$1,144,000 in 1994. Approximately $221,000 of the increase can be attributed to
higher personnel, delay rental, and seismic costs related to expanded
exploratory activities.
Drilling revenues from the completion of exploratory wells increased to
$795,000 in 1995 due to the increase in the number wells completed in the
current quarter. Drilling and completion expense consists of costs incurred for
exploratory wells and dry hole costs. Total costs increased to $1,023,000 in
1995 from $6,000 in 1994. The Company incurred operating losses of $228,000 in
1995 and $6,000 in 1994 as a result of dry hole costs on exploratory wells.
Selling, general, and administrative expenses decreased by $375,000 to
$720,000 in 1995 from $1,095,000 in 1994. The 1994 period included a $332,000
provision for an uncollectible account from an industrial natural gas customer.
The remaining change was primarily due to lower administrative costs for gas
marketing activities.
Interest expense increased to $370,000 in 1995 from $272,000 in 1994
largely as a result of greater interest rates. The weighted average interest
rate on the Company's credit facility increased to 8.9% in 1995 from 6.1% in
1994. The weighted average debt level on the credit line also increased to
$13,458,000 for the first quarter of 1995 compared to $12,616,000 in 1994.
The federal income tax expense was $87,000 in 1995 compared to a benefit
of $153,000 in 1994. The amounts for both periods include the tax benefits of
percentage depletion that are earned by the Company during the year.
Page 9 of 11 pages.
<PAGE> 10
PART II OTHER INFORMATION
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
Item 1. Legal Proceedings.
N/A
Item 2. Changes in Securities.
N/A
Item 3. Defaults Upon Senior Securities.
N/A
Item 4. Submission of Matters to a Vote of Security Holders.
N/A
Item 5. Other Information.
N/A
Item 6. Exhibits and Reports on Form 8-K.
N/A
Page 10 of 11 pages.
<PAGE> 11
CLINTON GAS SYSTEMS, INC.
AND SUBSIDIARIES
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.
CLINTON GAS SYSTEMS, INC.
-------------------------
(Registrant)
Date:
---------------- -----------------------------------------
Jerry D. Jordan, Chairman of the Board
Date:
---------------- -----------------------------------------
Donald A. Nay, Vice President, Treasurer,
Chief Financial Officer
Page 11 of 11 pages.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,539,000
<SECURITIES> 0
<RECEIVABLES> 9,682,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,654,000
<PP&E> 72,806,000
<DEPRECIATION> 38,549,000
<TOTAL-ASSETS> 48,874,000
<CURRENT-LIABILITIES> 10,050,000
<BONDS> 0
<COMMON> 514,000
0
0
<OTHER-SE> 20,687,000
<TOTAL-LIABILITY-AND-EQUITY> 48,874,000
<SALES> 19,057,000
<TOTAL-REVENUES> 20,666,000
<CGS> 16,735,000
<TOTAL-COSTS> 19,910,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 370,000
<INCOME-PRETAX> 398,000
<INCOME-TAX> 87,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311,000
<EPS-PRIMARY> .055
<EPS-DILUTED> 0
</TABLE>
