<PAGE> 1
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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 April 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6196
------
PIEDMONT NATURAL GAS COMPANY, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0556998
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1915 Rexford Road, Charlotte, North Carolina 28211
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-364-3120
----------------------------
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.
Class Outstanding at May 5, 1995
- ----------------------------- ----------------------------
Common Stock, no par value 28,623,167
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Page 1 of 12 pages
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
Utility Plant, at original cost $1,023,163 $978,218
Less accumulated depreciation 258,075 243,325
---------- --------
Utility plant, net 765,088 734,893
---------- --------
Other Physical Property (net of accumulated
depreciation of $12,191 in 1995 and $11,753
in 1994) 25,440 25,188
---------- --------
Current Assets:
Cash and cash equivalents 30,985 6,523
Restricted cash 17,529 14,961
Receivables (less allowance for doubtful
accounts of $3,085 in 1995 and $947
in 1994) 47,787 22,597
Gas in storage 17,960 44,725
Deferred cost of gas 4,476 5,162
Refundable income taxes 695 10,194
Other 11,346 13,231
---------- --------
Total current assets 130,778 117,393
---------- --------
Deferred Charges and Other Assets 14,286 10,296
---------- --------
Total $ 935,592 $887,770
========== ========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock equity:
Common stock $ 226,574 $187,592
Retained earnings 153,874 114,400
---------- --------
Total common stock equity 380,448 301,992
Long-term debt 313,000 313,000
---------- --------
Total capitalization 693,448 614,992
---------- --------
Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 5,000 5,000
Notes payable - 63,500
Accounts payable 37,175 35,903
Deferred income taxes 8,048 11,314
Taxes accrued 9,582 8,019
Refunds due customers 44,623 22,124
Other 17,057 18,183
---------- --------
Total current liabilities 121,485 164,043
---------- --------
Deferred Credits and Other Liabilities 120,659 108,735
---------- --------
Total $ 935,592 $887,770
========== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 3
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Income
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Six Months Twelve Months
Ended Ended Ended
April 30 April 30 April 30
----------------- ---------------- ----------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $179,391 $204,810 $381,867 $437,918 $519,302 $582,999
Cost of Gas 91,551 122,823 196,258 268,442 268,390 350,083
-------- -------- -------- -------- -------- --------
Margin 87,840 81,987 185,609 169,476 250,912 232,916
-------- -------- -------- -------- -------- --------
Other Operating Expenses:
Operations 23,454 22,638 47,599 45,664 94,621 88,959
Maintenance 4,019 3,757 7,724 7,361 15,888 15,230
Depreciation 7,873 6,031 15,745 12,062 28,253 23,128
General Taxes 7,726 7,521 16,562 16,200 26,928 25,550
Income Taxes 14,488 14,065 32,329 29,584 21,803 22,165
-------- -------- ------- ------- ------- -------
Total other operating expenses 57,560 54,012 119,959 110,871 187,493 175,032
-------- -------- -------- -------- -------- --------
Operating Income 30,280 27,975 65,650 58,605 63,419 57,884
Other Income, Net 1,528 1,131 4,133 4,796 4,283 4,697
-------- -------- ------- ------- ------- -------
Income Before Utility Interest Charges 31,808 29,106 69,783 63,401 67,702 62,581
Utility Interest Charges 7,782 6,118 15,524 12,670 28,668 24,094
-------- -------- -------- -------- -------- --------
Net Income $ 24,026 $ 22,988 $ 54,259 $ 50,731 $ 39,034 $ 38,487
======== ======== ======== ======== ======== ========
Average Shares of Common Stock
Outstanding 27,475 26,292 27,063 26,236 26,756 26,143
Earnings Per Share of Common Stock $ 0.87 $ 0.87 $ 2.00 $ 1.93 $ 1.46 $ 1.47
Cash Dividends Declared Per Share
of Common Stock $ 0.275 $ 0.260 $ 0.535 $ 0.505 $ 1.055 $ 0.995
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 4
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three Months Six Months Twelve Months
Ended Ended Ended
April 30 April 30 April 30
---------------- ------------------ -----------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $24,026 $22,988 $54,259 $50,731 $ 39,034 $38,487
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 8,841 6,919 17,695 13,813 32,148 26,509
Other, net 1,721 1,352 4,232 (12,103) 6,419 (1,598)
Change in operating assets and
liabilities 49,867 36,303 36,802 51,991 3,358 4,718
------- ------- ------- ------- -------- -------
Net cash provided by operating activities 84,455 67,562 112,988 104,432 80,959 68,116
------- ------- ------- ------- -------- -------
Cash Flows from Investing Activities:
Utility construction expenditures (22,784) (22,588) (46,187) (40,930) (108,791) (91,524)
Other (414) (1,657) (1,254) (2,309) (2,812) (3,602)
------- ------- ------- ------- -------- -------
Net cash used in investing activities (23,198) (24,245) (47,441) (43,239) (111,603) (95,126)
------- ------- ------- ------- -------- -------
Cash Flows from Financing Activities:
Decrease in bank loans, net (64,000) (33,000) (63,500) (42,000) - -
Issuance of long-term debt - - - - 40,000 90,000
Retirement of long-term debt - - - - (5,000) (49,025)
Sale of common stock, net of expenses 33,155 - 33,155 - 33,155 -
Issuance of common stock through dividend
reinvestment and employee stock plans 1,946 2,028 4,045 4,238 8,268 8,268
Dividends paid (7,846) (6,833) (14,785) (13,244) (28,536) (26,006)
------- ------- ------- ------- -------- -------
Net cash provided by (used in) financing
activities (36,745) (37,805) (41,085) (51,006) 47,887 23,237
------- ------- ------- ------- -------- -------
Net Increase (Decrease) in Cash and Cash
Equivalents 24,512 5,512 24,462 10,187 17,243 (3,773)
Cash and Cash Equivalents at Beginning
of Period 6,473 8,230 6,523 3,555 13,742 17,515
------- ------- ------- ------- -------- -------
Cash and Cash Equivalents at End of
Period $30,985 $13,742 $30,985 $13,742 $ 30,985 $13,742
======= ======= ======= ======= ======== =======
Cash Paid During the Period for:
Interest $ 5,966 $ 6,364 $13,202 $11,751 $ 25,778 $23,482
Income taxes $28,927 $22,216 $29,051 $23,340 $ 32,825 $30,264
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE> 5
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. The condensed consolidated financial statements have not been audited by
independent auditors. These financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements included
in the Company's 1994 Annual Report.
2. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the
financial position of the Company at April 30, 1995, and October 31,
1994, and the results of its operations and its cash flows for the three
months, six months and twelve months ended April 30, 1995 and 1994.
3. The Company's business is seasonal in nature. The results of operations
for the three- and six-month periods ended April 30, 1995, are not
necessarily indicative of the results to be expected for the full year.
4. Certain financial statement items for 1994 have been reclassified in
order to conform with the 1995 presentation.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The Company finances its current cash requirements through internally generated
cash, the issuance of new common stock through dividend reinvestment and
employee stock purchase plans and committed bank lines of credit totaling $57
million. In addition, the Company sells common stock and long-term debt to
cover cash requirements when market or other conditions warrant such long-term
financing.
Because of the seasonal nature of the natural gas business, a substantial
portion of the Company's earnings are realized in the winter period which is
the first six months of the fiscal year. Injections of natural gas into
storage occur during periods of warm weather (principally April 1 through
October 31) for withdrawal from storage during periods of cold weather
(principally November 1 through March 31). Due to this seasonality, the
inventory of stored gas was reduced due to the demand for gas during the winter
season and receivables increased from October 31, 1994, to April 30, 1995.
On March 28, 1995, the Company sold 1,725,000 shares of common stock in a
public offering which resulted in net proceeds of $33.2 million. The proceeds
are being used for general corporate purposes, including construction of
additional facilities, the repayment of short-term debt and working capital
needs. As of April 30, a portion of the proceeds is included in cash as
short-term investments and will be used for the same purposes when the need
arises.
On May 16, 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission for $150 million of debt securities,
including $20 million from a previously filed shelf registration. The Company
anticipates drawing from this shelf registration in the fall of 1995; however,
the amount and timing will depend on capital requirements and financial market
conditions. It is anticipated that the net proceeds from the sale of the debt
securities will be used for general corporate purposes, including construction
of additional facilities, the repayment of short-term debt and working capital
needs.
In order to sustain its approximately 6% annual growth in customer base, the
Company's capital expansion program is very important in meeting the growth in
the demand for natural gas. The capital expenditure program is dependent on
the Company's continuing ability to generate the necessary funds required for
this growth. Construction expenditures for the six and twelve months ended
April 30, 1995, were $47.2 million and $111.2 million, respectively, as
compared with $41.8 million and $93.1 million, respectively, for the similar
prior periods.
At April 30, 1995, the Company's capital structure consisted of long-term debt
of 45% and common equity of 55%.
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<PAGE> 7
Results of Operations
Margin for the three months ended April 30, 1995, increased $5.9 million
compared with the same period last year due to regulatory rate changes which
increased rates and updated gas cost components. Because weather for the three
months ended April 30, 1995, was 7% colder than the similar prior period, the
weather normalization adjustment (WNA), in effect from November 1 through March
31, increased operating revenues by $1.5 million for the three months ended
April 30, 1995, as compared with an increase of $3.2 million for the similar
prior period. Delivered volumes of natural gas for the current three-month
period increased over the similar prior period by 1.5 million dekatherms.
Margin earned per dekatherm of gas delivered for the three months ended April
30, 1995, increased over the similar prior period by $.07.
Margin for the six months ended April 30, 1995, increased $16.1 million
compared with the same period last year due to regulatory rate changes which
increased rates and updated gas cost components. Weather for the six months
ended April 30, 1995, was 11% warmer than the similar prior period which
resulted in the WNA increasing operating revenues by $10.4 million for the six
months ended April 30, 1995, as compared with an increase of less than $200,000
for the similar prior period. Delivered volumes of natural gas for the current
six months decreased from the similar prior period by 1.6 million dekatherms.
Margin earned per dekatherm of gas delivered for the six months ended April 30,
1995, increased over the similar prior period by $.23.
Margin for the twelve months ended April 30, 1995, increased $18 million
compared with the similar prior period due to regulatory rate changes and the
impact of the WNA. Weather for the twelve months ended April 30, 1995, was 10%
warmer than the similar prior period. The WNA increased operating revenues by
$10.4 million in the current period and less than $300,000 in the similar prior
period. Delivered volumes of natural gas for the current twelve months
increased over the similar prior period by 849,000 dekatherms. Margin earned
per dekatherm of gas delivered for the twelve months ended April 30, 1995,
increased over the similar prior period by $.13.
Cost of gas per dekatherm of gas sold for the three months, six months and
twelve months ended April 30, 1995, decreased by $.24, $.22 and $.14,
respectively, compared with similar prior periods, primarily due to reduced
commodity gas costs, a lower demand cost component and a change in the sales
mix between industrial sales and industrial transportation. Certain
large-volume customers purchase gas directly from gas producers or third-party
gas marketers and transport it through the Company's distribution system. The
Company does not include in its operating revenues and cost of gas the
commodity cost of this transported gas. Transportation volumes as a percentage
of total industrial volumes was 66% for the three months and 58% for the six
and twelve months ended April 30, 1995, as compared with 19%, 17% and 26%,
respectively, for the similar prior periods. Changes in purchased
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<PAGE> 8
gas costs from suppliers have no significant impact on margin as the Company
recovers 100% of its prudently incurred gas costs through various regulatory
mechanisms.
Operations and maintenance expenses for the three months, six months and twelve
months ended April 30, 1995, increased over similar prior periods primarily due
to increases in maintenance and repairs of mains, uncollectible accounts, rents
and leases, outside labor, payroll and employee benefit costs.
Depreciation expense for the three months, six months and twelve months ended
April 30, 1995, increased over similar prior periods due to the growth of plant
in service and to increases in depreciation rates for North Carolina operations
effective November 1, 1994.
General taxes for the three months, six months and twelve months ended April
30, 1995, increased over similar prior periods primarily due to increases in
property taxes from rate increases and additions to taxable property and to
increases in payroll taxes. These increases were partially offset by decreases
in gross receipts taxes resulting from decreased revenues.
Other income for the three months ended April 30, 1995, increased over the
similar prior period primarily due to increases in earnings from propane
operations and energy marketing services which were partially offset by a
decrease in earnings from merchandise operations. Other income for the six
months and twelve months ended April 30, 1995, decreased from similar prior
periods primarily due to decreases in earnings from merchandise and propane
operations. Propane operations were negatively impacted by the
warmer-than-normal weather noted above. These decreases were partially offset
by increases in earnings from energy marketing services and in the allowance
for funds used during construction.
Utility interest charges for the three months, six months and twelve months
ended April 30, 1995, increased over similar prior periods due to increases in
the amounts of debt and refunds due customers outstanding and to increases in
short- term interest rates.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 5. Other Information
Expansion of Services
As previously reported, the Company filed a petition in September 1994 with the
North Carolina Utilities Commission (NCUC) for a certificate of public
convenience and necessity to serve four counties in North Carolina not
presently receiving natural gas service. The Company estimates that the
expansion would require capital expenditures of $57.7 million over a period of
five years. The Company has filed applications to establish an expansion fund
and to place $14.8 million of supplier refunds into this fund. The Company has
also requested permission to use the $14.8 million to offset a portion of the
cost of the construction in the four counties. Another company, not currently
providing natural gas service in North Carolina or elsewhere, has also filed an
application to serve the four counties; however, this company did not request
permission to use expansion funds. Hearings have been held before the NCUC on
the various applications; however, no decisions have been rendered and the
outcome of these hearings is not presently determinable.
Transition Cost Recovery
With the restructuring of the interstate gas pipeline industry under Federal
Energy Regulatory Commission (FERC) Order No. 636, the interstate pipelines
were required to "unbundle" the gas sales, transportation and storage services
provided by them and to transport gas to their customers. The FERC approved
mechanisms for the pipelines to recover from customers certain "transition
costs" related to the unbundling with the largest component of these transition
costs being the cost of realigning existing gas supply contracts (Gas Supply
Realignment or GSR costs).
Pursuant to rules and regulations of the Tennessee Public Service Commission
(TPSC), the Company is permitted to pass through to its customers any
transition costs, including GSR costs. Effective November 1, 1993, the Company
began recovering transition costs assessed by Tennessee Gas Pipeline Company
through purchased gas adjustment procedures approved by the TPSC. A group of
the Company's industrial customers filed a complaint with the TPSC challenging
the Company's allocation methodology for these transition costs. On March 31,
1995, the TPSC approved a settlement which allows the Company to continue to
recover all of its transition costs through its gas recovery mechanism under a
new allocation methodology.
General Rate Matters
On May 8, 1995, the Company filed a general rate case with the Public Service
Commission of South Carolina to increase its rates by $8.8 million annually.
Also included in this application is a request to increase depreciation rates.
If approved, rates would become effective November 1, 1995.
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<PAGE> 10
LNG Project
On June 1, 1995, the Company and Transcontinental Gas Pipe Line Corporation
(Transco), a subsidiary of The Williams Companies, Inc., signed a letter of
intent to form Pine Needle LNG Company. The Company and Transco plan to seek
approval from the FERC to construct, own and operate a liquified natural gas
(LNG) peak demand facility in North Carolina. Pending FERC approval,
construction will begin in early 1997, to be completed in mid-1999 in time for
withdrawal service to begin in the 1999 winter heating season. The facility,
estimated to cost $107 million, will be located near Transco's mainline in
North Carolina and will have storage capacity of four billion cubic feet with
vaporization capability of 400 million cubic feet per day. The facility will
provide peak demand and storage service to the Company and other customers on
Transco's pipeline system, primarily in the southeast market area. Pine Needle
LNG Company plans to seek non-recourse project financing for the facility
investment. Affiliates of the Company and Transco will each own 50% of the LNG
facility, with Transco serving as operator and dispatch agent.
New Director
Effective June 2, 1995, Ned R. McWherter, former Governor of Tennessee, was
elected to the Board of Directors of the Company to fill a vacancy created when
the Board was expanded from nine members to ten. Mr. McWherter will stand for
reelection to the Board at the annual meeting of shareholders scheduled for
February 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for Securities and Exchange
Commission use only).
(b) Reports on Form 8-K -
On February 27, 1995, the Company filed a Form 8-K to report
unaudited financial results of operations for the periods ended
January 31, 1995, and to report an increase in the quarterly
dividend on common stock to 27 1/2 cents per share from 26 cents
per share.
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<PAGE> 11
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.
PIEDMONT NATURAL GAS COMPANY, INC.
(Registrant)
Date June 12, 1995 /s/ David J. Dzuricky
---------------- --------------------------------
David J. Dzuricky
Senior Vice President-Finance
(Principal Financial Officer)
Date June 12, 1995 /s/ Barry L. Guy
---------------- --------------------------------
Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
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<PAGE> 1
Exhibit 12
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
For Fiscal Years Ended October 31, 1990 through 1994
and Twelve Months Ended April 30, 1995
(in thousands except ratio amounts)
<TABLE>
<CAPTION>
April 30,
1995 1994 1993 1992 1991 1990
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income from
continuing operations $39,034 $35,506 $37,534 $35,310 $20,552 $25,733
Income taxes 24,638 21,407 23,427 21,259 11,408 14,859
Fixed charges 32,902 29,736 26,715 26,246 26,823 25,739
------- ------- ------- ------- ------- -------
Total Adjusted Earnings $96,574 $86,649 $87,676 $82,815 $58,783 $66,331
======= ======= ======= ======= ======= =======
Fixed Charges:
Interest $30,992 $27,671 $24,870 $24,570 $25,253 $24,271
Amortization of debt
expense 335 334 192 180 259 164
One-third of rental expense 1,575 1,731 1,653 1,496 1,311 1,304
------- ------- ------- ------- ------- -------
Total Fixed Charges $32,902 $29,736 $26,715 $26,246 $26,823 $25,739
======= ======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 2.94 2.91 3.28 3.16 2.19 2.58
======= ======= ======= ======= ======= =======
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PIEDMONT NATURAL GAS COMPANY FOR THE SIX MONTHS ENDED
APRIL 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 765,088
<OTHER-PROPERTY-AND-INVEST> 25,440
<TOTAL-CURRENT-ASSETS> 130,778
<TOTAL-DEFERRED-CHARGES> 14,286
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 935,592
<COMMON> 226,574
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 153,874
<TOTAL-COMMON-STOCKHOLDERS-EQ> 380,448
0
0
<LONG-TERM-DEBT-NET> 313,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 237,144
<TOT-CAPITALIZATION-AND-LIAB> 935,592
<GROSS-OPERATING-REVENUE> 381,867
<INCOME-TAX-EXPENSE> 32,329
<OTHER-OPERATING-EXPENSES> 283,888
<TOTAL-OPERATING-EXPENSES> 316,217
<OPERATING-INCOME-LOSS> 65,650
<OTHER-INCOME-NET> 4,133
<INCOME-BEFORE-INTEREST-EXPEN> 69,783
<TOTAL-INTEREST-EXPENSE> 15,524
<NET-INCOME> 54,259
0
<EARNINGS-AVAILABLE-FOR-COMM> 54,259
<COMMON-STOCK-DIVIDENDS> 14,785
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 112,988
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 0
</TABLE>
