<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 April 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 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 June 4, 1997
- --------------------------------------------------------------------------------
Common Stock, no par value 29,937,460
================================================================================
Page 1 of 11 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>
April 30, October 31,
ASSETS 1997 1996
------ ---------- ----------
<S> <C> <C>
Utility Plant, at original cost $1,210,123 $1,168,448
Less accumulated depreciation 323,415 306,419
---------- ----------
Utility plant, net 886,708 862,029
---------- ----------
Other Physical Property (net of accumulated
depreciation of $15,042 in 1997 and $14,569
in 1996) 26,265 27,072
---------- ----------
Current Assets:
Cash and cash equivalents 60,131 4,994
Restricted cash 21,243 20,481
Receivables (less allowance for doubtful
accounts of $2,264 in 1997 and $1,960
in 1996) 65,672 32,378
Gas in storage 16,998 50,065
Deferred cost of gas 11,587 6,796
Refundable income taxes 3,949 31,949
Other 8,061 11,324
---------- ----------
Total current assets 187,641 157,987
---------- ----------
Deferred Charges and Other Assets 19,558 17,828
---------- ----------
Total $1,120,172 $1,064,916
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 255,373 $ 246,907
Retained earnings 191,082 139,184
---------- ----------
Total common stock equity 446,455 386,091
Long-term debt 391,000 391,000
---------- ----------
Total capitalization 837,455 777,091
---------- ----------
Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 10,000 10,000
Notes payable -- 39,000
Accounts payable 54,233 60,150
Deferred income taxes 8,781 17,727
Taxes accrued 19,944 9,940
Refunds due customers 31,740 68
Other 16,743 16,770
---------- ----------
Total current liabilities 141,441 153,655
---------- ----------
Deferred Credits and Other Liabilities 141,276 134,170
---------- ----------
Total $1,120,172 $1,064,916
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<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
----------------------- ----------------------- -----------------------
1997 1996 1997 1996 1997 1996
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $259,306 $259,472 $571,839 $498,632 $758,262 $621,987
Cost of Gas 150,187 154,077 344,350 286,784 451,698 338,093
-------- -------- -------- -------- -------- --------
Margin 109,119 105,395 227,489 211,848 306,564 283,894
-------- -------- -------- -------- -------- --------
Other Operating Expenses:
Operations 26,233 26,192 53,207 51,861 107,168 98,350
Maintenance 4,163 3,668 8,500 7,229 17,047 15,915
Depreciation 9,663 9,015 19,391 18,030 37,400 34,229
General Taxes 9,229 9,049 20,652 18,429 33,271 29,258
Income Taxes 20,208 19,584 42,729 39,508 30,654 29,257
-------- -------- -------- -------- -------- --------
Total other operating expenses 69,496 67,508 144,479 135,057 225,540 207,009
-------- -------- -------- -------- -------- --------
Operating Income 39,623 37,887 83,010 76,791 81,024 76,885
Other Income, Net 1,111 2,161 3,673 5,451 3,490 6,457
-------- -------- -------- -------- -------- --------
Income Before Utility Interest Charges 40,734 40,048 86,683 82,242 84,514 83,342
Utility Interest Charges 8,460 7,597 17,097 15,693 32,914 30,742
-------- -------- -------- -------- -------- --------
Net Income $ 32,274 $ 32,451 $ 69,586 $ 66,549 $ 51,600 $ 52,600
======== ======== ======== ======== ======== ========
Average Shares of Common Stock
Outstanding 29,807 29,032 29,725 28,970 29,537 28,836
Earnings Per Share of Common Stock $ 1.08 $ 1.12 $ 2.34 $ 2.30 $ 1.75 $ 1.82
Cash Dividends Declared Per Share
of Common Stock $ 0.305 $ 0.29 $ 0.595 $ 0.565 $ 1.175 $ 1.115
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<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
--------------------- -------------------- ----------------------
1997 1996 1997 1996 1997 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 32,274 $ 32,451 $ 69,586 $ 66,549 $ 51,600 $ 52,600
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 11,013 10,010 22,107 20,024 42,158 38,133
Other, net 2,845 1,905 4,593 4,310 7,799 9,991
Change in operating assets and
liabilities 58,684 22,528 52,669 5,105 10,334 (26,838)
--------- -------- --------- -------- --------- --------
Net cash provided by operating activities 104,816 66,894 148,955 95,988 111,891 73,886
--------- -------- --------- -------- --------- --------
Cash Flows from Investing Activities:
Utility construction expenditures (22,998) (23,544) (43,937) (46,152) (94,544) (99,145)
Other (274) (343) (410) (935) (2,351) (2,992)
--------- -------- --------- -------- --------- --------
Net cash used in investing activities (23,272) (23,887) (44,347) (47,087) (96,895) (102,137)
--------- -------- --------- -------- --------- --------
Cash Flows from Financing Activities:
Decrease in bank loans, net (26,000) (20,000) (39,000) (13,500) -- --
Issuance of long-term debt -- -- -- -- 40,000 55,000
Retirement of long-term debt -- -- -- -- (7,000) (5,000)
Expenses of sale of common stock -- -- -- -- -- (132)
Issuance of common stock through dividend
reinvestment and employee stock plans 3,715 3,524 7,216 5,732 16,272 10,121
Dividends paid (9,090) (8,420) (17,687) (16,367) (34,714) (32,146)
--------- -------- --------- -------- --------- --------
Net cash provided by (used in) financing
activities (31,375) (24,896) (49,471) (24,135) 14,558 27,843
--------- -------- --------- -------- --------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents 50,169 18,111 55,137 24,766 29,554 (408)
Cash and Cash Equivalents at Beginning
of Period 9,962 12,466 4,994 5,811 30,577 30,985
--------- -------- --------- -------- --------- --------
Cash and Cash Equivalents at End of
Period $ 60,131 $ 30,577 $ 60,131 $ 30,577 $ 60,131 $ 30,577
========= ======== ========= ======== ========= ========
Cash Paid During the Period for:
Interest $ 5,438 $ 5,744 $ 16,118 $ 14,653 $ 32,899 $ 28,762
Income taxes $ 33,740 $ 19,772 $ 34,279 $ 19,971 $ 66,395 $ 21,008
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<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 1996 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, 1997, and October 31,
1996, and the results of its operations and its cash flows for the
three months, six months and twelve months ended April 30, 1997 and
1996.
3. The Company's business is seasonal in nature. The results of operations
for the three- and six-month periods ended April 30, 1997, are not
necessarily indicative of the results to be expected for the full year.
-5-
<PAGE> 6
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 $75
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, 1996, to April 30, 1997.
On April 30, 1997, the Company filed a shelf registration statement with the
Securities and Exchange Commission for $150 million of debt securities,
including $55 million from a previously filed shelf registration. The
registration statement became effective on May 16. The amount and timing of any
debt issuance under the program 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.
The Company has a substantial capital expansion program to sustain its
approximately 5% 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, six
and twelve months ended April 30, 1997, were $23.4 million, $44.8 million and
$96 million, respectively, as compared with $24.2 million, $47.1 million and
$100.7 million, respectively, for similar prior periods.
-6-
<PAGE> 7
At April 30, 1997, the Company's capital structure consisted of long-term debt
of 47% and common equity of 53%.
Results of Operations
Margin for the three months ended April 30, 1997, increased $3.7 million
compared with the same period last year due to regulatory-approved rate changes
and continued customer growth, with a reduction in margin due to warmer weather.
Delivered volumes of natural gas for the current three-month period decreased
from the similar prior period by 3.9 million dekatherms, a 9% decrease. Weather
for the three months ended April 30, 1997, was 26% warmer than in the similar
prior period and 16% warmer than normal. The weather normalization adjustment
(WNA), in effect from November 1 through March 31, increased operating revenues
by $8 million for the three months ended April 30, 1997, as compared with a
decrease of $3 million for the similar prior period when the weather was 14%
colder than normal.
Margin for the six months ended April 30, 1997, increased $15.6 million compared
with the same period last year due to regulatory-approved rate changes and
continued customer growth, with a reduction in margin due to warmer weather.
Delivered volumes of natural gas for the current six-month period decreased from
the similar prior period by 7.4 million dekatherms, an 8% decrease. Weather for
the six months ended April 30, 1997, was 17% warmer than in the similar prior
period and 6% warmer than normal. The WNA increased operating revenues by $9.7
million for the six months ended April 30, 1997, as compared with a decrease of
$11.6 million for the similar prior period when the weather was 13% colder than
normal.
Margin for the twelve months ended April 30, 1997, increased $22.7 million
compared with the similar prior period due to regulatory-approved rate changes
and continued customer growth, with a reduction in margin due to warmer weather.
Delivered volumes of natural gas for the current twelve months decreased from
the similar prior period by 6.4 million dekatherms, a 5% decrease. Weather for
the twelve months ended April 30, 1997, was 15% warmer than the similar prior
period and 7% warmer than normal. The WNA increased operating revenues by $9.7
million in the current period and decreased operating revenues by $11.6 million
in the similar prior period when the weather was 11% colder than normal.
The Company's rate schedules include gas cost recovery provisions that permit
the recovery of prudently incurred gas costs. Annual prudence reviews covering
an historical twelve-month period are
-7-
<PAGE> 8
required in North Carolina and South Carolina but are not required in Tennessee.
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 in the financial statements.
Operations and maintenance expenses for the three months, six months and twelve
months ended April 30, 1997, increased over similar prior periods primarily due
to increases in outside labor and consulting work and for the twelve-month
period to increases in utilities, advertising, payroll and employee benefit
costs.
Depreciation expense for the three months, six months and twelve months ended
April 30, 1997, increased over similar prior periods due to the growth of plant
in service and for the twelve-month period to an increase in depreciation rates
for South Carolina operations effective November 1, 1995.
General taxes for the three months, six months and twelve months ended April 30,
1997, increased over similar prior periods primarily due to increases in
property taxes from rate increases and additions to taxable property and
increases in payroll taxes. The current six-month and twelve-month periods also
reflect increases in gross receipts taxes due to increased revenues subject to
gross receipts taxes. The current three-month period reflects a decrease in
gross receipts taxes due to decreased revenues subject to gross receipts taxes.
Other income for the three months, six months and twelve months ended April 30,
1997, decreased from similar prior periods primarily due to decreases in
earnings from propane operations attributable to the warmer weather noted above
partially offset by increases in earnings from merchandise activities and
natural gas marketing services. The twelve-month period ended April 30, 1996,
also included a non-recurring income item associated with the Company's
investment in Pine Needle LNG Company, L.L.C.
Utility interest charges for the three months, six months and twelve months
ended April 30, 1997, increased over similar prior periods primarily due to
interest on long-term debt resulting from higher balances outstanding. For the
three months and six months ended April 30, 1997, interest on refunds due
customers also increased, and for the current six-month and twelve-month periods
interest on short-term debt increased due to greater balances outstanding.
Interest on refunds due customers decreased in the current twelve-month period.
-8-
<PAGE> 9
PART II. OTHER INFORMATION
Item 5. Other Information
South Carolina Rate Proceedings
On February 1, 1996, the South Carolina Consumer Advocate filed a notice of
Appeal in the Richland County Court of Common Pleas 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. On May 20, 1997,
the Court dismissed the appeal and affirmed the PSCSC's original order in its
entirety.
Tennessee Rate Proceedings
On December 17, 1996, the Tennessee Regulatory Authority (TRA) approved a rate
increase of $4.4 million which the Company began collecting on January 1, 1997.
The TRA's decision was confirmed by a written decision on February 19, 1997. The
Tennessee Consumer Advocate filed several pleadings with the TRA arguing, among
other things, that the Company was not entitled to recover the increased rates
prior to the date of the TRA's February 19 Order. All parties in this
proceeding, including the Company, petitioned the TRA to reconsider its February
19 Order. On May 14, the TRA issued an order denying all motions and upholding
its previous orders.
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 -
None.
-9-
<PAGE> 10
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 11, 1997 /s/ David J. Dzuricky
------------------- ------------------------------
David J. Dzuricky
Senior Vice President-Finance
(Principal Financial Officer)
Date June 11, 1997 /s/ Barry L. Guy
------------------- ------------------------------
Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
-10-
<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, 1992 through 1996
and Twelve Months Ended April 30, 1997
(in thousands except ratio amounts)
-------------------------------------------------------------
<TABLE>
<CAPTION>
April 30,
1997 1996 1995 1994 1993 1992
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income from
continuing operations $ 51,600 $ 48,562 $ 40,310 $35,506 $37,534 $35,310
Income taxes 32,982 30,928 25,442 21,407 23,427 21,259
Fixed charges 38,337 37,009 35,651 29,736 26,715 26,246
-------- -------- -------- ------- ------- -------
Total Adjusted Earnings $122,919 $116,499 $101,403 $86,649 $87,676 $82,815
======== ======== ======== ======= ======= =======
Fixed Charges:
Interest $ 36,209 $ 34,511 $ 33,224 $27,671 $24,870 $24,570
Amortization of debt
expense 350 345 336 334 192 180
One-third of rental expense 1,778 2,153 2,091 1,731 1,653 1,496
-------- -------- -------- ------- ------- -------
Total Fixed Charges $ 38,337 $ 37,009 $ 35,651 $29,736 $26,715 $26,246
======== ======== ======== ======= ======= =======
Ratio of Earnings to Fixed
Charges 3.21 3.15 2.84 2.91 3.28 3.16
======== ======== ======== ======= ======= =======
</TABLE>
-11-
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PIEDMONT NATURAL GAS COMPANY, INC. FOR THE SIX MONTHS
ENDED APRIL 30, 1997, 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-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 886,708
<OTHER-PROPERTY-AND-INVEST> 26,265
<TOTAL-CURRENT-ASSETS> 187,641
<TOTAL-DEFERRED-CHARGES> 19,558
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,120,172
<COMMON> 255,373
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 191,082
<TOTAL-COMMON-STOCKHOLDERS-EQ> 446,455
0
0
<LONG-TERM-DEBT-NET> 391,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 10,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 272,717
<TOT-CAPITALIZATION-AND-LIAB> 1,120,172
<GROSS-OPERATING-REVENUE> 571,839
<INCOME-TAX-EXPENSE> 42,729
<OTHER-OPERATING-EXPENSES> 446,100
<TOTAL-OPERATING-EXPENSES> 488,829
<OPERATING-INCOME-LOSS> 83,010
<OTHER-INCOME-NET> 3,673
<INCOME-BEFORE-INTEREST-EXPEN> 86,683
<TOTAL-INTEREST-EXPENSE> 17,097
<NET-INCOME> 69,586
0
<EARNINGS-AVAILABLE-FOR-COMM> 69,586
<COMMON-STOCK-DIVIDENDS> 17,687
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 148,955
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 0
</TABLE>
