<PAGE>1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..........to .......
Commission file number 0-82
NORTH CAROLINA NATURAL GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 56-0646235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Rowan Street, Fayetteville, North Carolina 28301-4993
(Address of principal executive offices)
(Zip Code)
(910) 483-0315
(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 latest practicable date.
Common Stock, $2.50 par value 6,654,571
Class Number of Shares
<PAGE>2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
ASSETS
June 30, September 30,
1997 1996
-------- -------------
Gas Utility Plant
In service $290,381 $277,212
Less-Accumulated depreciation
and amortization (102,070) (95,578)
------- -------
188,311 181,634
Construction work in progress 12,644 2,800
------- -------
Utility Plant, net 200,955 184,434
------- -------
Nonutility Property 6,533 5,947
Less-Accumulated depreciation (2,468) (2,358)
------- -------
Nonutility Property, net 4,065 3,589
------- -------
Current Assets
Cash and temporary cash investments 1,272 1,117
Restricted cash and temporary
cash investments 4,538 5,691
Accounts receivable, less reserve 15,022 17,302
Recoverable purchased gas costs - 3,237
Inventories, at average cost -
Gas in storage 6,293 9,983
Materials and supplies 4,278 2,725
Merchandise 770 1,308
Deferred gas cost-unbilled volumes 605 324
Prepaid income taxes 2,341 -
Other current assets 366 195
------- -------
Total Current Assets 35,485 41,882
------- -------
Investment in joint ventures 1,624 744
Deferred charges and other assets 2,734 2,130
------- -------
Total Assets $244,863 $232,779
======= =======
(The accompanying notes are an integral part of these balance sheets.)
<PAGE>3
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
CAPITALIZATION AND LIABILITIES
June 30, September 30,
1997 1996
-------- -------------
Capitalization
Stockholders' investment:
Common stock, par value $2.50;
12,000 shares authorized; shares
issued and outstanding:
06/30/97-6,653; 09/30/96-6,573 $16,633 $16,432
Capital in excess of par value 31,771 29,634
Retained earnings 66,857 55,892
------- -------
Total Stockholders' Investment 115,261 101,958
------- -------
Long-term debt 61,000 63,000
------- -------
Total Capitalization 176,261 164,958
------- -------
Current Liabilities
Current maturities of long-term debt 2,000 2,000
Notes payable 6,000 3,000
Accounts payable 16,552 16,339
Refunds payable 1,174 -
Customer deposits 2,135 1,964
Restricted supplier refunds 4,538 5,691
Accrued interest 1,013 2,334
Accrued income and other taxes 1,140 4,281
Other current liabilities 3,261 2,266
------- -------
Total Current Liabilities 37,813 37,875
------- -------
Other Credits
Deferred income taxes 21,054 21,015
Regulatory liability related to
income taxes, net 2,768 2,924
Unamortized investment tax credits 2,573 2,720
Postretirement and postemployment
benefit liability 2,827 2,262
Other 1,567 1,025
------- -------
Total Other Credits 30,789 29,946
------- -------
Total Capitalization and Liabilities $244,863 $232,779
======= =======
(The accompanying notes are an integral part of these balance sheets.)
<PAGE>4
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
For the Three Months Ended June 30, 1997 and 1996
(in thousands except per share amounts)
1997 1996
------ ------
Operating Revenues $30,678 $44,875
Cost of Gas 16,864 30,877
------ ------
Gross Margin 13,814 13,998
------ ------
Operating Expenses and Taxes:
Operations and Maintenance 6,118 6,308
Depreciation 2,540 2,398
General Taxes 1,678 2,156
Income Taxes 989 712
------ ------
Total Operating Expenses and Taxes 11,325 11,574
------ ------
Operating Income 2,489 2,424
Other Income (Loss), net (89) 42
------ ------
Income Before Utility Interest Charges 2,400 2,466
Utility Interest Charges 1,055 1,271
------ ------
Net Income $1,345 $1,195
====== ======
Average Common Shares Outstanding 6,639 6,544
====== ======
Earnings Per Share $0.20 $0.18
====== ======
Dividends Declared Per Share $0.350 $0.325
====== ======
(The accompanying notes are an integral part of these statements.)
<PAGE>5
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
For the Nine Months Ended June 30, 1997 and 1996
(in thousands except per share amounts)
1997 1996
------ ------
Operating Revenues $153,513 $165,218
Cost of Gas 92,649 108,387
------- -------
Gross Margin 60,864 56,831
------- -------
Operating Expenses and Taxes:
Operations and Maintenance 18,588 16,926
Depreciation 7,482 7,024
General Taxes 6,854 7,264
Income Taxes 9,287 8,127
------- -------
Total Operating Expenses and Taxes 42,211 39,341
------- -------
Operating Income 18,653 17,490
Other Income, net 2,366 1,396
------- -------
Income Before Utility Interest Charges 21,019 18,886
Utility Interest Charges 3,280 3,901
------- -------
Net Income $17,739 $14,985
======= =======
Average Common Shares Outstanding 6,609 6,514
======= =======
Earnings Per Share $2.68 $2.30
======= =======
Dividends Declared Per Share $1.025 $0.955
======= =======
(The accompanying notes are an integral part of these statements.)
<PAGE>6
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
For the Twelve Months Ended June 30, 1997 and 1996
(in thousands except per share amounts)
1997 1996
------ ------
Operating Revenues $184,933 $189,692
Cost of Gas 112,490 122,123
------- -------
Gross Margin 72,443 67,569
------- -------
Operating Expenses and Taxes:
Operations and Maintenance 24,750 22,356
Depreciation 9,906 9,101
General Taxes 8,473 8,645
Income Taxes 9,406 8,390
------- -------
Total Operating Expenses and Taxes 52,535 48,492
------- -------
Operating Income 19,908 19,077
Other Income, net 2,398 1,403
------- -------
Income Before Utility Interest Charges 22,306 20,480
Utility Interest Charges 4,379 5,062
------- -------
Net Income $17,927 $15,418
======= =======
Average Common Shares Outstanding 6,597 6,500
======= =======
Earnings Per Share $2.72 $2.37
======= =======
Dividends Declared Per Share $1.35 $1.26
======= =======
(The accompanying notes are an integral part of these statements.)
<PAGE>7
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended June 30, 1997 and 1996
(in thousands)
1997 1996
------ ------
Cash Flows From Operating Activities:
Net Income $17,739 $14,985
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,667 7,127
Change in deferred income taxes and
deferred investment tax credits, net (244) 847
Change in other current assets
and liabilities 2,570 (1,000)
Other 1,377 (347)
------ ------
Net cash provided by operating activities 29,109 21,612
------ ------
Cash Flows From Investing Activities:
Property additions (24,635) (11,695)
Other, net (882) -
------ ------
Net cash used in investing activities (25,517) (11,695)
------ ------
Cash Flows From Financing Activities:
Increase (decrease) in notes payable 3,000 (27,000)
Retirement of long-term debt (2,000) (2,000)
Issuance of long-term debt - 29,862
Cash dividends paid (6,774) (6,221)
Issuance of common stock through dividend
reinvestment, employee stock purchase,
and key employee stock option plans 2,337 1,911
------ ------
Net cash used in financing activities (3,437) (3,448)
------ ------
Net increase in cash and temporary
cash investments 155 6,469
Cash and temporary cash investments,
beginning of period 1,117 1,639
------ ------
Cash and temporary cash investments,
end of period $1,272 $8,108
====== ======
Cash paid for:
Interest, net of amounts capitalized $5,281 $4,644
Income taxes, net of refunds 16,136 4,964
(The accompanying notes are an integral part of these statements.)
<PAGE>8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
Note 1: The condensed financial statements included in this report reflect only
normal recurring adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the periods shown. Because of the
seasonal nature of the Company's business, the results of operations for the
three and nine month periods ended June 30, 1997 are not necessarily indicative
of the results for the full year. These financial statements have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's annual report for the
fiscal year ended September 30, 1996.
Note 2: Certain prior year amounts in the unaudited condensed consolidated
Financial Statements have been reclassified to conform with current year
presentation.
Note 3: Long-Term Debt at June 30, 1997:
Amount Due
Within
Issue One Year Total
--------------------------- ---------- ----------
7.15% Senior Notes,
due 11/15/15 $ - $30,000,000
9.21% Debentures, Series C,
due 11/15/11 - 25,000,000
8.75% Debentures, Series B,
due 06/15/01 2,000,000 8,000,000
----------- ----------
Long-Term Debt $ 2,000,000 $63,000,000
=========== ==========
<PAGE>9
Note 4: At June 30, 1997, the Company had $4.5 million in restricted supplier
refunds, $2.7 million of which was received in the current quarter. Upon order
of the NCUC, the Company has invested all of these funds in U.S. Treasury
securities until such time as the Commission orders the funds transferred to an
Expansion Fund ( the Fund). The Fund is administered by the Commission pursuant
to legislation passed in July 1991, and it encourages the expansion of natural
gas service into unserved areas of the State, including substantial portions of
the Company's franchised service territory. On April 30, 1993, October 19, 1994,
and November 13, 1996, respectively, the Company transferred $3.8 million, $6.6
million, and $3.9 million to the Fund. At June 30, 1997, a total of $16.9
million is in the Fund and is available to the Company only upon application to
the NCUC for an expansion project approved by the NCUC. On August 28, 1995, the
Company was granted approval by the NCUC to extend natural gas service into
Duplin and Onslow Counties using expansion fund dollars totaling $12.4 million.
On August 13, 1997, the Company received its first payment from the fund for
that project in the amount of $455,435.
Note 5: On May 5, 1996, the Company filed with the NCUC to recover net customer
costs of $3.0 million from exploration and development activities. The recovery
is a result of a true-up of distribution costs and revenue benefits from the
Company's past exploration and drilling programs. On February 7, 1997, the NCUC
issued its order granting a pretax recovery of $1.9 million. The Commission's
Order approved, in all material respects, the Stipulation of Settlement reached
by the Company and the Public Staff of the NCUC. Due to the uncertainty of
recovery, prior to the Final Order no asset or gain was recorded in the
Company's financial statements. As a result of the above, the Company realized a
gain of $.17 per share in the nine and twelve months ended June 30, 1997. The
gain has been recorded in other income for the nine and twelve months periods.
<PAGE>10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
(1) Material Changes in Financial Condition
Current cash requirements are financed primarily through internally
generated cash, the issuance of new common stock through dividend reinvestment,
employee stock purchase and key employee stock option plans along with committed
bank lines of credit totaling $24.0 million plus the cost of gas in storage. At
June 30, 1997, loans totaling $6.0 million were outstanding under the lines of
credit compared to $3.0 million outstanding at September 30, 1996.
The Company's business is seasonal in nature as fluctuations in weather
dictate injections and withdrawals from Company storage and billings to
residential and commercial customers. Injections of natural gas into storage and
a reduction in customer billings occur during the periods of warm weather (April
through October). Withdrawals from storage and increased customer billings occur
during periods of cold weather (November through March). In addition, the cost
of gas included in storage and rates is subject to changes in market conditions.
This seasonality is the primary reason for the lower volumes of gas in storage
as of June 30, 1997, which is somewhat offset by higher average gas costs. The
lower accounts receivable as of June 30, 1997, compared to September 30, 1996
was caused by a shift from sales to transportation service by several large
industrial customers.
Recoverable purchased gas costs and refunds payable primarily represent the
difference between the Company's benchmark rate charged to customers and the
actual cost of gas. When the benchmark rate charged to customers is higher than
the actual cost of gas, recoverable purchased gas costs are reduced and refunds
payable is increased. As of June 30, 1997, higher benchmark rates reduced
recoverable purchased gas cost by $3.2 million and increased refunds payable to
customers by $1.2 million compared to the same period last year.
Materials and supplies increased $1.6 million for the current fiscal year.
This increase was caused by (1) increased materials needed for pipeline
projects, and (2) the purchase of certain materials in large quantities to take
advantage of discounts offered by suppliers.
<PAGE>11
In 1997 the Company made quarterly estimated income tax payments based on
annualized income. Thus, due to high income levels in November to April,
estimated tax payments substantially exceeded the liability and prepaid income
taxes have been recorded on the June 30, 1997 balance sheet. In 1996, estimated
income tax payments were made pro rata throughout the year.
Investment in joint ventures increased $880,000 for the current fiscal
year. This increase was caused by advances to projects involving two new
subsidiaries of the Company, NCNG Cardinal Pipeline Investment Corporation and
NCNG Pine Needle Investment Corporation.
Notes payable increased $3.0 million during the current fiscal year as
compared to the fiscal year ended September 30, 1996. These additional funds
were needed to pay for current Company expansion projects.
Net cash provided by operating activities increased $7.5 million for the
nine months ended June 30, 1997, as compared to the same period last year. This
increase was due primarily to an increase in net income and depreciation, and a
decrease in accounts receivable and gas in storage, partially offset by a
decrease in accounts payable.
Construction spending was $24.6 million for the nine months ended June 30,
1997, compared to $11.7 million for the same period in 1996. The higher spending
level in 1997 was due to certain 1996 budgeted construction projects not being
completed as planned. Construction expenditures for the remainder of the fiscal
year 1997 are projected at $8.2 million. Management believes that the Company's
lines of credit and cash provided from operating activities will be sufficient
to satisfy the Company's anticipated short-term cash requirements during the
remainder of fiscal year 1997.
Net cash used in financing activities remained the same for the nine months
ended June 30, 1997, as compared to the same period last year. The primary
reason for this was the private placement of $30.0 million Senior Notes reduced
by the net repayment of short-term debt in the amount of $27.0 million in 1996
compared to net short-term borrowings of $3.0 million in 1997. Common stock
dividends increased by $533,000 during the current period, partially offset by
the issuance of common stock through the Company's dividend reinvestment and
employee stock purchase plans.
(2) Material Changes in Results of Operations
Net income increased $150,000 for the three month period ended June 30,
1997, as compared to the same period last year. This increase was caused
primarily by reductions in operations and maintenance expenses and utility
interest charges. Offsetting these reductions were decreased sales to weather-
sensitive residential and commercial customers from the Company's propane
operations caused by weather that was 11% warmer than in 1996.
<PAGE>12
Net income increased $2.8 million and $2.5 million, respectively, for the
nine and twelve month periods ended June 30, 1997, as compared to the same
periods last year. Affecting both periods were (1) a nonrecurring after-tax
credit of $1.1 million related to settlement of a long-standing regulatory
matter (see note 5); (2) customer growth at an annualized rate of 4.5%; and (3)
lower utility interest charges. Partially offsetting these gains were reduced
profits realized by the Company's propane operations as discussed above. During
the current nine month period, throughput volumes to the Company's industrial
customers increased 16% due to less curtailment caused by warmer weather.
The chart below compares margins for the three month, nine month and twelve
month periods by customer class (000's omitted):
GROSS MARGIN BY CUSTOMER CLASS
3 Months 9 Months 12 Months
----------------- -------------------- -------------------
1997 1996 1997 1996 1997 1996
------ ------- ------ ------ ------ ------
Residential $ 4,691 $ 5,084 $21,584 $21,228 $24,585 $23,609
Commercial 2,608 2,574 12,625 11,463 14,933 13,074
Industrial 5,544 5,257 20,073 17,501 25,396 23,333
Municipal 971 1,083 6,582 6,639 7,529 7,553
------ ------ ------ ------ ------- ------
Total $13,814 $13,998 $60,864 $56,831 $72,443 $67,569
====== ====== ====== ====== ====== ======
Gross margin decreased slightly during the quarter ended June 30, 1997, as
compared to the same period last year due to weather that was 11% warmer than
the same period last year. The Company's Weather Normalization Adjustment (WNA)
ratemaking mechanism largely mitigates the decrease in margin to residential and
commercial customers (including those customer classes served by the four
municipal customers) due to warmer-than-normal weather but it is in effect only
from November 16 to April 15 of each year. Partially offsetting the impact of
warmer weather was strong customer growth. Also, gross margin for the industrial
class was up 5% because of increased sales and transportation volumes to process
users.
<PAGE>13
Gross margin increased $4.0 million and $4.9 million, respectively, for the
nine and twelve month periods ended June 30, 1997, as compared to the same
periods last year. Affecting both periods were customer growth and related
increases in facilities' charges and, the change in the Company's last general
rate case to adopt the Price Sensitive Volume (PSVA) mechanism and elimination
of the Industrial Sales Tracker (IST) mechanism, which resulted in the Company's
retention of more margin from increased gas deliveries to large interruptible
customers with #6 oil as an alternative fuel. Partially offsetting margin
increases in these periods was weather that was 26% and 27% warmer,
respectively, for the nine month and twelve month periods as compared to the
same periods last year.
The chart below shows total throughput volumes (in thousands of dt) for the
three month, nine month and twelve month periods of 1997 and 1996 by customer
class:
THROUGHPUT VOLUMES (Mdt) BY CUSTOMER CLASS
----------------------------------------------------------
3 Months 9 Months 12 Months
------------------- ---------------- ----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ----- ----- ----
Residential 1,048 1,293 5,852 6,824 6,165 7,127
Commercial 1,113 1,226 4,993 5,572 6,103 6,617
Industrial 9,101 8,344 24,476 21,021 33,153 30,831
Municipal 1,712 1,636 7,614 8,151 9,026 9,480
------ ------ ------ ------ ------ ------
Total 12,974 12,499 42,935 41,568 54,447 54,055
====== ====== ====== ====== ====== ======
<PAGE>14
The following chart shows the same total throughput volumes classified by
sales and transportation:
THROUGHPUT VOLUMES (Mdt) BY TYPE OF SERVICE
------------------------------------------------------------
3 Months 9 Months 12 Months
------------------ ------------------ ----------------
1997 1996 1997 1996 1997 1996
---- ---- ---- ---- ---- ----
Sales 4,747 9,412 24,623 34,748 30,106 39,077
Transportation 8,227 3,087 18,312 6,820 24,341 14,978
------ ------ ------ ------ ------ ------
Total 12,974 12,499 42,935 41,568 54,447 54,055
====== ====== ====== ====== ====== ======
The Company earns the same profit margin on transportation of
customer-owned gas as it earns from bundled sales service to those customers.
However, changes in the mix of transportation and sales volumes can have
significant impacts on operating revenues and cost of gas, because the commodity
cost of gas associated with transportation volumes is paid by the customer
directly to the customer's supplier and is, therefore, not incurred nor billed
by the Company.
Weather in the Company's service area was 11%, 26%, and 27% warmer,
respectively, for the three month, nine month and twelve month periods compared
to the same periods last year. This warmer-than-normal weather resulted in
reduced deliveries to weather-sensitive residential, commercial and municipal
customers. During all periods the Company was able to sell or transport more
industrial volumes because the warmer-than-normal weather resulted in fewer
interruptions of service to large, interruptible customers, and the Company
added some new industrial customers.
Cost of gas decreased $14.0 million for the three month period ended June
30, 1997 as compared to the same period last year. This decrease was caused by
(1) a reduction in quantities purchased due to a 50% decrease in volumes sold;
and (2) a 13% decrease in commodity gas prices as compared to the same period
last year.
Cost of gas decreased $15.7 million and $9.6 million, respectively, for the
nine month and twelve month periods ended June 30, 1997, as compared to the same
periods last year. These decreases were caused primarily by reduced quantities
purchased due to lower sales volumes of 29% and 23%, respectively, for the nine
month and twelve months periods as compared to last year. Partially offsetting
these decreases were increases in the commodity prices of gas of 18% and 21%,
respectively, for the nine and twelve month periods as compared to last year.
<PAGE>15
Operating revenues decreased $14.2 million, $11.7 million and $4.8 million,
respectively, for the three month, nine month and twelve month periods ended
June 30, 1997 as compared to the same periods last year. These decreases were
caused by (1) 14%, 13%, and 11% reductions, respectively, in sales to the
residential and commercial markets; and (2) a mix change to greater
transportation volumes to industrial and municipal customers and lower sales
volumes to these customers as shown in the table "Throughput Volumes (Mdt) by
Type of Service" on page 14.
Operating and maintenance expenses decreased $190,000 or 3% for the three
month period ended June 30, 1997, as compared to the same period last year. This
decrease is the result of management's overall effort to control costs.
Operating and maintenance expenses increased $1.7 million and $2.4 million,
respectively, for the nine month and twelve month periods ended June 30, 1997,
as compared to the same periods last year. Affecting both periods were (1)
increased provisions for postretirement and postemployment benefit obligations
related to FAS 106 and FAS 112; (2) increased compressor fuel costs caused by
increased usage for system integrity; (3) increased distribution maintenance
expenses; (4) increased provisions for doubtful accounts due to higher
residential rates this winter season and customer growth; and (5) higher
employee compensation costs associated with the increased customer base.
Depreciation expense increased in all periods as compared to the same
periods last year due to the addition of utility plant in service, primarily
transmission and distribution plant related to expansion and customer growth.
Also affecting the twelve month period was an increase in the depreciation rate
which became effective with the Company's general rate case, November 1, 1995.
General taxes decreased in all periods as compared to the same periods last
year. The most significant tax is the state gross receipts tax which is based on
revenue and, therefore, it tracks the changes in revenues. Partially offsetting
the decline in gross receipts taxes, higher property and payroll taxes affected
all periods.
Income taxes increased $277,000, $1.2 million, and $1.0 million,
respectively, for the three month, nine month and twelve month periods ended
June 30, 1997, as compared to the same periods last year. These increases were
caused by increases in operating income for all three periods.
<PAGE>16
Other income, net, decreased $131,000 for the three months ended June 30,
1997, as compared to the same period last year. This decrease was caused by (1)
lower profits from the Company's propane operations due to warmer-than-normal
weather, and (2) reduced interest income on short-term investments.
Other income, net, increased $970,000 and $995,000, respectively, for the
nine month and twelve month periods as compared to the same periods last year.
Affecting both periods was a nonrecurring credit of $1.1 million related to the
settlement of a long-standing regulatory matter. On May 15, 1996, the Company
filed with the NCUC to recover net customer costs of $3.0 million from past
exploration and development activities. The recovery is a result of a true-up of
distribution costs and revenue benefits from the Company's exploration and
drilling programs. On February 7, 1997, the NCUC issued its Order granting a
pretax recovery of $1.9 million. The Commission's Order approved, in all
material respects, the Stipulation of Settlement reached by the Company and the
Public Staff of the NCUC. Due to the uncertainty of recovery, prior to the Final
Order no asset or gain was recorded in the Company's financial statements.
Partially offsetting these increases was a reduction in net income from the
Company's propane operations.
Utility interest charges decreased $216,000 for the quarter ended June 30,
1997, as compared to the same period last year. This decrease was caused
primarily by an increase in allowance for funds used during construction because
of more construction work in progress during the quarter.
Utility interest expense decreased $621,000 and $683,000, respectively, for
the nine month and twelve month periods as compared to the same periods last
year. These decreases were caused by (1) reduced interest expense on short-term
debt because of a reduction in short-term financing, (2) and an increase in
allowance for funds used during construction. Partially offsetting these
decreases was increased long-term debt expense associated with the November 10,
1995 issuance of $30 million principal amount of 7.15% Senior Notes.
<PAGE>17
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
None.
Item 2. Changes in the Rights of the Company's Security Holders
- ----------------------------------------------------------------
None.
Item 3. Default Upon Senior Securities
- ---------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
On July 18, 1997, the Company filed with the Securities and Exchange
Commission a Registration Statement on Form S-8 for the North Carolina Natural
Gas Corporation Long Term Incentive Plan, Directors' Deferred Compensation Stock
Plan, and Directors' Retirement Compensation Stock Plan.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>18
SIGNATURE
---------
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.
NORTH CAROLINA NATURAL GAS CORPORATION
--------------------------------------
(Registrant)
Date: August 14, 1997 /s/ Gerald A. Teele
---------------------------------------
Gerald A. Teele
Senior Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer)
Date: August 14, 1997 /s/ Ronald J. Josephson
---------------------------------------
Ronald J. Josephson
Vice President-Financial Services
(Principal Accounting Officer)
<PAGE>19
NORTH CAROLINA NATURAL GAS CORPORATION AND SUBSIDIARIES
-------------------------------------------------------
INDEX OF EXHIBITS
-------------------
The following exhibit is filed as part of this Form 10-Q for the period
ended June 30, 1997:
Exhibit
Number
- -------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000072596
<NAME> NORTH CAROLINA NATURAL GAS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 200955
<OTHER-PROPERTY-AND-INVEST> 4065
<TOTAL-CURRENT-ASSETS> 35485
<TOTAL-DEFERRED-CHARGES> 4358
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 244863
<COMMON> 16633
<CAPITAL-SURPLUS-PAID-IN> 31771
<RETAINED-EARNINGS> 66857
<TOTAL-COMMON-STOCKHOLDERS-EQ> 115261
0
0
<LONG-TERM-DEBT-NET> 61000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 6000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 60602
<TOT-CAPITALIZATION-AND-LIAB> 244863
<GROSS-OPERATING-REVENUE> 153513
<INCOME-TAX-EXPENSE> 9287
<OTHER-OPERATING-EXPENSES> 125573
<TOTAL-OPERATING-EXPENSES> 134860
<OPERATING-INCOME-LOSS> 18653
<OTHER-INCOME-NET> 2366
<INCOME-BEFORE-INTEREST-EXPEN> 21019
<TOTAL-INTEREST-EXPENSE> 3280
<NET-INCOME> 17739
0
<EARNINGS-AVAILABLE-FOR-COMM> 17739
<COMMON-STOCK-DIVIDENDS> 6774
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 29109
<EPS-PRIMARY> 2.68
<EPS-DILUTED> 2.68
</TABLE>
