<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 January 31, 1996
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 1-6196
------
PIEDMONT NATURAL GAS COMPANY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0556998
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1915 Rexford Road, Charlotte, North Carolina 28211
- --------------------------------------------------------------------------------
(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 March 6, 1996
- ----------------------------- -----------------------------
Common Stock, no par value 29,000,160
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Page 1 of 13 pages
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
January 31, October 31,
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Utility Plant, at original cost $1,097,379 $1,074,666
Less accumulated depreciation 282,109 273,350
---------- ----------
Utility plant, net 815,270 801,316
---------- ----------
Other Physical Property (net of accumulated
depreciation of $13,282 in 1996 and $12,869
in 1995) 26,606 26,299
---------- ----------
Current Assets:
Cash and cash equivalents 12,466 5,811
Restricted cash 18,195 17,948
Receivables (less allowance for doubtful
accounts of $2,322 in 1996 and $972
in 1995) 110,326 21,118
Gas in storage 15,703 39,992
Deferred cost of gas 20,074 3,352
Refundable income taxes 574 15,265
Other 13,208 13,799
---------- ----------
Total current assets 190,546 117,285
---------- ----------
Deferred Charges and Other Assets 16,831 19,995
---------- ----------
Total $1,049,253 $ 964,895
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock equity:
Common stock $ 234,328 $ 230,964
Retained earnings 150,166 124,015
---------- ----------
Total common stock equity 384,494 354,979
Long-term debt 361,000 361,000
---------- ----------
Total capitalization 745,494 715,979
---------- ----------
Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 7,000 7,000
Notes payable 20,000 13,500
Accounts payable 89,324 38,303
Deferred income taxes 20,124 14,166
Taxes accrued 16,407 9,008
Refunds due customers 4,409 22,289
Other 17,470 19,392
---------- ----------
Total current liabilities 174,734 123,658
---------- ----------
Deferred Credits and Other Liabilities 129,025 125,258
---------- ----------
Total $1,049,253 $ 964,895
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Income
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended Ended
January 31 January 31
--------------- ---------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues $239,160 $202,476 $541,907 $544,721
Cost of Gas 132,707 104,707 275,567 299,662
-------- -------- -------- --------
Margin 106,453 97,769 266,340 245,059
-------- -------- -------- --------
Other Operating Expenses:
Operations 25,669 24,145 95,612 93,804
Maintenance 3,561 3,705 16,266 15,627
Depreciation 9,015 7,872 33,086 26,412
General taxes 9,380 8,836 27,936 26,722
Income taxes 19,924 17,841 24,161 21,380
-------- -------- -------- --------
Total other operating expenses 67,549 62,399 197,061 183,945
-------- -------- -------- --------
Operating Income 38,904 35,370 69,279 61,114
Other Income, Net 3,290 2,605 5,824 3,885
-------- -------- -------- --------
Income Before Utility Interest Charges 42,194 37,975 75,103 64,999
Utility Interest Charges 8,096 7,742 30,927 27,003
-------- -------- -------- --------
Net Income $ 34,098 $ 30,233 $ 44,176 $ 37,996
======== ======== ======== ========
Average Shares of Common Stock
Outstanding 28,909 26,665 28,455 26,467
Earnings Per Share of Common Stock $ 1.18 $ 1.13 $ 1.55 $ 1.44
Cash Dividends Declared Per Share
of Common Stock $ .275 $ 0.26 $ 1.10 $ 1.04
</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 Twelve Months
Ended Ended
January 31 January 31
------------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $34,098 $30,233 $44,176 $37,996
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 10,015 8,854 36,918 30,277
Other, net 2,403 2,511 9,807 6,050
Change in operating assets and
liabilities (17,422) (13,066) 547 (10,213)
------- ------- -------- --------
Net cash provided by operating
activities 29,094 28,532 91,448 64,110
------- ------- -------- --------
Cash Flows from Investing Activities:
Utility construction expenditures (22,608) (23,403) (98,385) (108,595)
Other (592) (839) (3,064) (4,098)
------- ------- -------- --------
Net cash used in investing activities (23,200) (24,242) (101,449) (112,693)
------- ------- -------- --------
Cash Flows from Financing Activities:
Increase (Decrease) in bank
loans, net 6,500 500 (44,000) 31,000
Issuance of long-term debt - - 55,000 40,000
Retirement of long-term debt - - (5,000) (5,000)
Sale of common stock, net of expenses - - 33,023 -
Issuance of common stock through
dividend reinvestment and employee
stock plans 2,208 2,099 8,543 8,350
Dividends paid (7,947) (6,939) (31,572) (27,524)
------- ------- -------- --------
Net cash provided by (used in)
financing activities 761 (4,340) 15,994 46,826
------- ------- -------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents 6,655 (50) 5,993 (1,757)
Cash and Cash Equivalents at
Beginning of Period 5,811 6,523 6,473 8,230
------- ------- -------- --------
Cash and Cash Equivalents at
End of Period $12,466 $ 6,473 $ 12,466 $ 6,473
======= ======= ======== ========
Cash Paid During the Period for:
Interest $ 8,909 $ 7,235 $ 28,984 $ 26,175
Income Taxes $ 199 $ 124 $ 30,163 $ 26,114
</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 (Unaudited)
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 1995 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 January 31, 1996, and October 31,
1995, and the results of its operations and its cash flows for the three
months and twelve months ended January 31, 1996 and 1995.
3. The Company's business is seasonal in nature. The results of operations
for the three-month period ended January 31, 1996, are not necessarily
indicative of the results to be expected for the full year.
4. Certain financial statement items for 1995 have been reclassified in
order to conform with the 1996 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 and the
demand for gas during the winter season, inventory of stored gas decreased and
receivables increased from October 31, 1995, to January 31, 1996.
The Company has a substantial capital expansion program to sustain its
approximately 6% current annual growth in customer base. The capital expansion
program is dependent on the continuing ability to generate the necessary funds
required for this growth. Utility construction expenditures for the three and
twelve months ended January 31, 1996, were $22.9 million and $99.8 million,
respectively, as compared with $23.9 million and $110.9 million, respectively,
for similar prior periods.
At January 31, 1996, the Company's capital structure consisted of long-term
debt of 48% and common equity of 52%.
Results of Operations
Margin for the three months ended January 31, 1996, increased $8.7 million
compared with the same period last year due to regulatory-approved rate changes
and to greater volumes of gas sold, particularly to weather-sensitive
residential and commercial customers on which a higher margin is earned.
Delivered volumes of natural gas for the current three-month period increased
over the similar prior period by 8.6 million dekatherms, a 21% increase.
Weather for the three months ended January 31, 1996, was 31% colder than in the
similar prior period. As a result, the weather normalization adjustment (WNA),
in effect from November 1 through March 31, decreased operating revenues by
$8.6 million for the three months ended January 31, 1996, as compared with an
increase of $8.9 million for the similar prior period.
Margin for the twelve months ended January 31, 1996, increased $21.3 million
compared with the similar prior period due to regulatory-approved rate changes
and greater volumes of gas sold.
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<PAGE> 7
Weather for the twelve months ended January 31, 1996, was 18% colder than the
similar prior period. The WNA decreased operating revenues by $7.1 million in
the current period and increased operating revenues by $12.1 million in the
similar prior period. Delivered volumes of natural gas for the current twelve
months increased over the similar prior period by 11.2 million dekatherms, a 9%
increase.
The Company's rate schedules include gas cost recovery provisions that permit
the recovery of prudently incurred gas costs, subject to annual prudence
reviews covering an historical twelve-month period. The Company's rates are
revised periodically without formal rate proceedings to reflect changes in the
cost of gas. Charges to cost of gas are based on the amount recoverable under
approved rate schedules. The net of any over- or under-recoveries of gas costs
are charged or credited to cost of gas and included in refunds due customers.
Operations and maintenance expenses for the three months and twelve months
ended January 31, 1996, increased over similar prior periods primarily due to
increases in maintenance and repairs of mains, advertising, payroll and
employee benefit costs.
Depreciation expense for the three months and twelve months ended January 31,
1996, increased over similar prior periods due to the growth of plant in
service and to an increase in depreciation rates for South Carolina operations
effective November 1, 1995. For the current twelve-month period as compared
with the similar prior period, the increase is also due to an increase in
depreciation rates for North Carolina operations effective November 1, 1994.
The two state commissions have approved recovery of the increased depreciation
rates in rates charged to customers.
General taxes for the three months ended January 31, 1996, increased over the
similar prior period primarily due to an increase in gross receipts taxes
resulting from increased revenues. This increase was partially offset by
decreases in property taxes and payroll taxes. General taxes for the twelve
months ended January 31, 1996, increased over the similar prior period
primarily due to increases in property taxes from rate increases and additions
to taxable property and to increases in payroll taxes.
Other income for the three months and twelve months ended January 31, 1996,
increased over similar prior periods primarily due to increases in earnings
from propane operations attributable to the colder weather noted above. The
twelve-month period also reflects an increase in interest earned on temporary
cash investments. Such increases were partially offset by decreases in the
allowance for funds used during construction (AFUDC) due to changes in rates
and decreases in the balances on which AFUDC is computed, decreases in earnings
from merchandise activities and, for the three month-period only, to a decrease
in earnings from energy marketing services.
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<PAGE> 8
Utility interest charges for the three months ended January 31, 1996, increased
over the similar prior period primarily due to interest on long-term debt
resulting from higher balances outstanding. This increase was partially offset
by decreases in interest on short-term debt and refunds due customers due to
lower balances outstanding. Utility interest charges for the twelve months
ended January 31, 1996, increased over the similar period due to increases in
interest on long-term debt for the same reason noted above, increases in
short-term debt due to higher balances outstanding and at higher rates and
increases in interest on refunds due customers due to higher balances
outstanding.
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<PAGE> 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the Company was held on February 23,
1996, for the purpose of electing four directors and ratifying the selection of
independent auditors. The record date for the determination of shareholders
entitled to notice of and to vote at the meeting was January 10, 1996. Proxies
for the meeting were solicited pursuant to section 14(a) of the Securities and
Exchange Act of 1934. There was no solicitation in opposition to management's
solicitations.
All of management's nominees for directors for terms expiring in 1999 as listed
in the proxy statement were elected as indicated below:
<TABLE>
<CAPTION>
Shares Shares Shares Share
Voted Voted Voted NOT
FOR WITHHELD ABSTAINING VOTED
----- -------- ---------- -----
<S> <C> <C> <C>
Muriel W. Helms
- ---------------
23,560,888 260,853 -0- 5,077,214
Ned R. McWherter
- ----------------
23,584,690 237,051 -0- 5,077,214
Donald S. Russell, Jr.
- ----------------------
23,611,717 210,024 -0- 5,077,214
John E. Simkins, Jr.
- --------------------
23,605,463 216,278 -0- 5,077,214
</TABLE>
Directors continuing in office until 1997 are C. M. Butler III, Sam J.
DiGiovanni and John F. McNair III. Directors continuing in office until 1998
are Jerry W. Amos, John H. Maxheim and Walter S. Montgomery, Jr.
The proposal to ratify the selection by the Board of Directors of the firm of
Deloitte & Touche LLP as independent auditors of the Company for the fiscal
year ending October 31, 1996, was approved by the following vote:
<TABLE>
<CAPTION>
Shares Shares Shares Shares
Voted Voted Voted NOT
FOR AGAINST ABSTAINING VOTED
----- ------- ---------- -----
<S> <C> <C> <C>
23,608,725 75,233 137,783 5,214,997
</TABLE>
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<PAGE> 10
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 estimated that the
expansion would require capital expenditures of $57.7 million over a period of
five years and would result in the addition of approximately 10,000 customers.
The Company also filed applications to establish an expansion fund and place
$14.8 million of supplier refunds into this fund. The Company requested
permission to use the fund 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, also filed an application to serve the
four counties; however, this company did not request permission to use
expansion funds.
On June 19, 1995, the NCUC granted a conditional certificate to the Company to
serve the four-county area but prohibited the Company from utilizing available
expansion funds. On July 10, the Company filed its exceptions to the order
declining the conditional certificate and requesting that a final order be
granted which would not prohibit the Company from using expansion funds. On
July 20, the NCUC conditionally granted a certificate to the competing
applicant. A hearing was held on December 12 to determine whether the
conditions of the certificate were met and whether an unconditional certificate
should be granted to the competing applicant.
On January 30, 1996, the NCUC granted a final certificate to the competing
applicant to serve the four-county area. On February 27, the Company requested
a rehearing before the full NCUC. The outcome of these proceedings cannot be
determined at this time.
South Carolina Consumer Advocate
On February 1, 1996, the South Carolina Consumer Advocate filed a notice of
Appeal in the Richland County Court of Appeals regarding the order of the
Public Service Commission of South Carolina (PSCSC) approving the Company's
rate increase of $7.8 million annually, effective November 7, 1995. The
Company is opposing this appeal. The outcome of this proceeding cannot be
determined at this time.
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<PAGE> 11
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits -
<S> <C>
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 -
None.
</TABLE>
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<PAGE> 12
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 March 11, 1996 /s/ David J. Dzuricky
-------------------- --------------------------------
David J. Dzuricky
Senior Vice President-Finance
(Principal Financial Officer)
Date March 11, 1996 /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, 1991 through 1995
and Twelve Months Ended January 31, 1996
(in thousands except ratio amounts)
<TABLE>
<CAPTION>
January 31,
1996 1995 1994 1993 1992 1991
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income from
continuing operations $ 44,176 $ 40,310 $35,506 $37,534 $35,310 $20,552
Income taxes 27,981 25,442 21,407 23,427 21,259 11,408
Fixed charges 35,715 35,651 29,736 26,715 26,246 26,823
-------- -------- ------- ------- ------- -------
Total Adjusted Earnings $107,872 $101,403 $86,649 $87,676 $82,815 $58,783
======== ======== ======= ======= ======= =======
Fixed Charges:
Interest $33,662 $33,224 $27,671 $24,870 $24,570 $25,253
Amortization of debt
expense 337 336 334 192 180 259
One-third of rental expense 1,716 2,091 1,731 1,653 1,496 1,311
------- ------- ------- ------- ------- -------
Total Fixed Charges $35,715 $35,651 $29,736 $26,715 $26,246 $26,823
======= ======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges 3.02 2.84 2.91 3.28 3.16 2.19
==== ==== ==== ==== ==== ====
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PIEDMONT NATURAL GAS FOR THE 3 MONTHS ENDED JANUARY
31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 815,270
<OTHER-PROPERTY-AND-INVEST> 26,606
<TOTAL-CURRENT-ASSETS> 190,546
<TOTAL-DEFERRED-CHARGES> 16,831
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,049,253
<COMMON> 234,328
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 150,166
<TOTAL-COMMON-STOCKHOLDERS-EQ> 384,494
0
0
<LONG-TERM-DEBT-NET> 361,000
<SHORT-TERM-NOTES> 20,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 7,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 276,759
<TOT-CAPITALIZATION-AND-LIAB> 1,049,253
<GROSS-OPERATING-REVENUE> 239,160
<INCOME-TAX-EXPENSE> 19,924
<OTHER-OPERATING-EXPENSES> 180,332
<TOTAL-OPERATING-EXPENSES> 200,256
<OPERATING-INCOME-LOSS> 38,904
<OTHER-INCOME-NET> 3,290
<INCOME-BEFORE-INTEREST-EXPEN> 42,194
<TOTAL-INTEREST-EXPENSE> 8,096
<NET-INCOME> 34,098
0
<EARNINGS-AVAILABLE-FOR-COMM> 34,098
<COMMON-STOCK-DIVIDENDS> 7,947
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 29,094
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 0
</TABLE>
