SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission File No. 0-367
ROANOKE GAS COMPANY
_________________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 54-0359895
________________________________________________________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
No.)
519 Kimball Ave., N.E., Roanoke, VA 24016
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
(703) 983-3800
________________________________________________________________
(Registrant's Telephone Number, Including Area Code)
None
________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
______ _____
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the
period covered by this report.
Class Outstanding at June 30, 1995
__________________________ ______________________________
Common Stock, $5 Par Value 1,421,911 Shares
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS - JUNE 30, 1995 AND
SEPTEMBER 30, 1994
---------------------------------------------------------
UNAUDITED
---------
June 30, September 30,
1995 1994
------------ -------------
ASSETS (Unaudited) (Audited)
------
<S> <C> <C>
UTILITY PLANT:
In service $53,774,669 $52,234,738
Accumulated depreciation 18,920,281 17,465,598
----------- -----------
In service, net 34,854,388 34,769,140
Construction work-in-progress 3,010,912 495,234
----------- -----------
Utility plant, net 37,865,300 35,264,374
----------- -----------
NONUTILITY PROPERTY:
Propane 3,678,120 3,368,339
Accumulated depreciation 1,677,412 1,601,137
----------- -----------
Nonutility property, net 2,000,708 1,767,202
----------- -----------
CURRENT ASSETS:
Cash 78,449 177,269
Temporary cash investments 1,282,000 -
Accounts receivable - (less allowance
for doubtful accounts of $794,681
and $318,834, respectively) 3,281,428 3,179,712
Inventories 3,169,337 6,376,353
Deferred income taxes 964,171 160,291
Prepaid income taxes - 260,609
Purchased gas adjustments - 694,423
Other 346,722 480,957
----------- -----------
Total current assets 9,122,107 11,329,614
----------- -----------
OTHER ASSETS 1,536,036 1,218,257
----------- -----------
TOTAL $50,524,151 $49,579,447
=========== ===========
</TABLE>
See condensed notes to condensed consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS - JUNE 30, 1995 AND
SEPTEMBER 30, 1994
---------------------------------------------------------
UNAUDITED
---------
June 30, September 30,
1995 1994
------------ -------------
LIABILITIES (Unaudited) (Audited)
-----------
<S> <C> <C>
CAPITALIZATION:
Stockholders' equity
Common stock, $5 par value.
Authorized, 3,000,000 shares;
issued and outstanding 1,421,911
and 1,382,343 Shares, respectively $ 7,109,555 $ 6,911,715
Capital in excess of par value 4,048,888 3,631,335
Retained earnings 6,940,979 5,881,869
----------- -----------
Total stockholders' equity 18,099,422 16,424,919
Long-term debt, excluding
current maturities 18,016,555 16,414,900
----------- -----------
Total capitalization 36,115,977 32,839,819
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt 1,128,193 672,146
Notes payable - 5,235,000
Dividends payable 356,070 346,032
Accounts payable 4,036,267 5,320,481
Accrued income taxes 1,021,217 -
Customers' deposits 334,966 336,182
Accrued expenses 3,042,690 1,316,426
Refunds from suppliers - due customers 317,353 498,898
Purchased gas adjustments 1,036,153 -
----------- -----------
Total current liabilities 11,272,909 13,725,165
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 2,374,563 2,225,501
Deferred investment tax credits 580,830 609,090
Other 179,872 179,872
----------- -----------
Total deferred credits and other
liabilities 3,135,265 3,014,463
----------- -----------
TOTAL $50,524,151 $49,579,447
=========== ===========
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) FOR THE THREE-MONTH AND
NINE-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
----------------------------------------------------------------------------
UNAUDITED Three Months Ended Nine Months Ended
--------- June 30, June 30,
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $8,446,759 $9,033,103 $38,156,835 $46,893,618
Propane operations 548,445 569,152 3,903,722 4,038,757
---------- ---------- ----------- -----------
Total operating revenues 8,995,204 9,602,255 42,060,557 50,932,375
---------- ---------- ----------- -----------
COST OF GAS:
Gas utilities 5,159,327 5,873,850 23,830,539 32,071,924
Propane operations 273,402 275,512 1,842,360 1,880,770
---------- ---------- ----------- -----------
Total cost of gas 5,432,729 6,149,362 25,672,899 33,952,694
---------- ---------- ----------- -----------
OPERATING MARGIN 3,562,475 3,452,893 16,387,658 16,979,681
---------- ---------- ----------- -----------
OTHER OPERATING EXPENSES:
Gas Utilites:
Other operations 1,923,210 1,980,252 6,101,136 6,040,646
Maintenance 260,799 407,437 953,825 1,166,614
Taxes - general 423,850 462,877 1,731,029 2,052,070
Taxes - income (88,154) (206,205) 895,727 949,300
Depreciation and amortization 529,183 484,663 1,582,635 1,456,600
Propane operations
(including taxes - income of
$(69,387), $(45,653), $213,756
and $248,444, respectively) 319,942 334,040 1,615,613 1,649,052
---------- ---------- ----------- -----------
Total other operating expenses 3,368,830 3,463,064 12,879,965 13,314,282
---------- ---------- ----------- -----------
OPERATING EARNINGS (LOSS) 193,645 (10,171) 3,507,693 3,665,399
---------- ---------- ----------- -----------
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest income 13,916 16,067 14,111 20,559
Merchandising and jobbing 15,993 19,347 116,299 51,633
Other deductions (15,281) (36,851) (105,154) (93,615)
Taxes - income (5,285) 1,683 (8,464) 6,642
Propane operations, net 10,348 18,475 74,934 65,072
---------- ---------- ----------- -----------
Total other income and deductions 19,691 18,721 91,726 50,291
---------- ---------- ----------- -----------
<PAGE>
EARNINGS BEFORE INTEREST CHARGES 213,336 8,550 3,599,419 3,715,690
---------- ---------- ----------- -----------
INTEREST CHARGES:
Gas utilities:
Long-term debt 424,817 402,293 1,256,261 1,219,477
Other interest 25,315 46,241 213,373 207,698
Propane operations, net 1,095 13,522 13,337 40,652
---------- ---------- ----------- -----------
Total interest charges 451,227 462,056 1,482,971 1,467,827
---------- ---------- ----------- -----------
NET EARNINGS (LOSS) ($237,891) ($453,506) $2,116,448 $2,247,863
========== ========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE ($0.17) ($0.33) $1.51 $1.69
========== ========== =========== ===========
CASH DIVIDENDS PER SHARE $0.25 $0.25 $0.75 $0.75
========== ========== =========== ===========
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) FOR THE THREE-MONTH AND
NINE-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
----------------------------------------------------------------------------
UNAUDITED Three Months Ended Nine Months Ended
--------- June 30, June 30,
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings (loss) ($237,891) ($453,506) $2,116,448 $2,247,863
Adjustments to reconcile net
earnings (loss) to net cash
provided by operating
activities:
Depreciation and amortization 633,661 579,998 1,895,905 1,741,411
Loss from disposal of property 4,989 1,238 7,235 1,759
Changes in working capital,
operating assets and
liabilities exclusive of
changes shown separately 2,646,645 (94,832) 5,510,369 3,443,171
---------- ---------- ----------- -----------
Net cash provided by operating
activities 3,047,404 32,898 9,529,957 7,434,204
---------- ---------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Construction expenditures (759,847) (1,167,470) (4,672,733) (3,229,158)
Other (30,096) (36,253) (105,235) (74,732)
Proceeds from disposal of
equipment 2,398 20,632 50,896 21,063
---------- ---------- ----------- -----------
Net cash used in investing
activities (787,545) (1,183,091) (4,727,072) (3,282,827)
---------- ---------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
long-term debt 1,000,000 - 2,700,000 2,000,000
Retirement of long-term debt (281,727) (151,967) (652,798) (871,639)
Payments on line-of-credit
agreements, net (2,165,000) (84,000) (5,235,000) (4,284,000)
Cash dividends paid (353,082) (337,259) (1,047,300) (987,962)
Proceeds from issuance of stock 246,114 362,759 619,843 1,240,196
Capital stock expense - (11,884) (4,450) (93,987)
---------- ---------- ----------- -----------
Net cash provided by (used in)
financing activities (1,553,695) (222,351) (3,619,705) (2,997,392)
---------- ---------- ----------- -----------
<PAGE>
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 706,164 (1,372,544) 1,183,180 1,153,985
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 654,285 3,412,215 177,269 885,686
---------- ---------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,360,449 $2,039,671 $1,360,449 $2,039,671
========== ========== =========== ===========
SUPPLEMENTAL INFORMATION:
Interest paid $204,654 $274,757 $1,270,730 $1,546,725
Income taxes paid, net 187,500 - 540,250 879,500
NONCASH TRANSACTIONS:
A capital lease obligation was
incurred when the Company
entered into an equipment lease - - $10,500 $7,925
A note receivable was issued
when the Company sold
investment property resulting
in a deferred gain of $67,556 - - - 490,000
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
UNAUDITED
---------
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly Roanoke Gas Company's consolidated
financial position as of June 30, 1995 and September 30, 1994 and
the results of operations and cash flows for the three-month and
nine-month periods ended June 30, 1995 and 1994.
The condensed consolidated financial statements and
condensed notes are presented as permitted by Form 10-Q and do
not contain certain information included in the Company's annual
consolidated financial statements and notes.
Certain reclassifications have been made to the prior year's
condensed consolidated financial statements to place them on a
basis comparable with the current year's condensed consolidated
financial statements.
2. The Company offered a voluntary early retirement incentive
plan (Plan) to all employees over the age of 55 who are vested in
the Company's retirement plan. Of the twenty-five eligible
employees, twelve accepted the early retirement offer by the
April 26, 1995 deadline. The total cost of the early retirement
plan for those employees was $444,367, of which $125,904 was
expensed directly in the Company's third quarter and $318,463 was
established as a regulatory asset, with amortization beginning
when rates are placed into effect to allow recovery of the
capitalized costs. The deferred treatment is permitted by the
provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation,"
since the State Corporation Commission Accounting Division has
preliminarily agreed to allow amortization of these one-time
costs over a five-year period. The costs expensed during the
quarter ending June 30, 1995 relate to the portion of the Plan
costs that would be amortized during the period between the
recognition of the one-time Plan costs and the implementation of
new rates, which provide for Plan cost recovery, from the next
rate filing.
3. Quarterly earnings are affected by the highly seasonal
nature of the business as variations in weather conditions
generally result in greater earnings during the winter months.
4. Earnings (loss) per share is based on the weighted average
number of common shares outstanding during each period (1,417,737
and 1,356,808 for the three-month periods ended June 30, 1995 and
1994, and 1,401,779 and 1,326,619 for the nine-month periods
ended June 30, 1995 and 1994, respectively).
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
UNAUDITED
---------
5. On May 23, 1994, the Board of Directors of the Company
declared a 100% stock dividend on the Company's common stock,
payable on July 1, 1994 to holders of record on June 15, 1994.
The 100% common stock dividend has been accounted for as a stock
split, effected in the form of a dividend, and thus did not
provide any capitalization of retained earnings. A total of
681,924 whole shares of common stock were issued in connection
with the common stock dividend, and a total of $3,409,625 was
reclassified from the Company's capital in excess of par value
account to the Company's common stock account. All share and per
share amounts have been restated to retroactively reflect the
100% stock dividend.
6. Both Roanoke Gas Company and Bluefield Gas Company operated
manufactured gas plants (MGPs) as a source of fuel for lighting
and heating until the early 1950's. The process involved heating
coal in a low-oxygen environment to produce a manufactured gas
that could be distributed through the Company's pipeline system
to customers. The by-product of the process was coal tar, and the
potential exists for on-site tar waste contaminants at both
former plant sites. The extent of contaminants at these sites,
if any, is unknown at this time and the Company has not performed
formal analysis at the Roanoke Gas Company MGP site. A
preliminary analysis at the Bluefield Gas Company site indicates
further evaluation is warranted, and the Company is reviewing
alternative methods and practices for site investigation. The
Company has not received any notices of violation or liabilities
associated with environmental regulations related to the MGP
sites and is not aware of any off-site contamination or pollution
as a result of these prior operations. Should contamination
sufficient to warrant remedial action eventually be identified,
the Company will pursue all prudent and reasonable means to
recover any related costs, including insurance claims and
regulatory approval for rate case recognition of expenses
associated with any remediation work required. Based upon prior
orders of the State Corporation Commission of Virginia related to
environmental matters at other companies, the Company believes it
will be able to recover prudently incurred costs. Additionally,
the stipulated rate case agreement between the Company and the
West Virginia Public Service Commission recognizes the Company's
right to defer MGP clean-up costs and seek rate relief for such
costs. If the Company eventually incurs costs associated with a
required clean-up of either MGP site, the Company anticipates
recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in future rates. Based on
anticipated regulatory actions and current practices, management
believes that any costs incurred related to the
previously-mentioned environmental matters will not have a
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------
UNAUDITED
---------
material effect on the Company's consolidated results of
operations.
7. Roanoke Gas Company and Commonwealth Public Service
Corporation, a subsidiary of Bluefield Gas Company, currently
hold the only franchises and/or certificates of public
convenience and necessity to distribute natural gas in their
respective Virginia service areas. The franchises generally
extend for a period of twenty years and are renewable by the
municipalities. Certificates of public convenience and
necessity, which are issued by the Virginia State Corporation
Commission, are of perpetual duration, subject to compliance with
regulatory standards. The franchise for the City of Roanoke, the
Company's largest service area, expired on August 30, 1993. On
August 23, 1993, the Board of Directors of the Company approved
an agreement with the City of Roanoke under which such franchise
agreement was extended for a term of 180 days from August 30,
1993, upon the same terms and conditions, except that a provision
of the existing franchise agreement giving the City the option to
purchase the property of the Company located within the City was
deleted. The 180-day extension period expired February 26, 1994.
The parties have not yet reached an agreement on a new multi-year
franchise agreement; however, negotiations are on-going, and the
Company continues to provide natural gas services to customers in
the City of Roanoke. The Company believes that it ultimately
will secure a new franchise agreement on terms acceptable to the
Company. In addition, the franchise for the City of Salem
expired on July 22, 1994, and the franchise for the Town of
Vinton expired on December 10, 1994. Negotiations between the
Company and the City of Salem and the Town of Vinton are on-
going, and the Company continues to provide natural gas services
to customers in the City of Salem and the Town of Vinton. The
Company also believes that it will ultimately secure new
franchise agreements with the City of Salem and the Town of
Vinton on terms acceptable to the Company. Bluefield Gas Company
holds the only franchise to distribute natural gas in its West
Virginia service area. Its franchise extends for a period of
thirty years from August 23, 1979.
Management anticipates that the Company will be able to
renew all of its franchises. There can be no assurance, however,
that a given jurisdiction will not refuse to renew a franchise or
will not in connection with the renewal of a franchise, impose
certain restrictions or conditions that could adversely affect
the Company's business operations or financial condition.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------
Consolidated net earnings (loss) for the three-month and
nine-month periods ended June 30, 1995 were $(237,891) and
$2,116,448 compared to $(453,506) and $2,247,863 for the same
periods last year.
Operating margin increased $109,582 or 3.2 percent in the
current quarter from last year due to an increase in delivered
gas volumes and higher base customer charges. Total MCF
deliveries were up 2.6 percent or 43,136 MCF as a slight decline
in the more profitable firm volumes of 0.4 percent was more than
offset by a 7.0 percent increase in interruptible volumes. The
firm volume decrease correlates with the 0.8 percent warmer
weather during the quarter; however, the interruptible volume
increase resulted from greater industrial activity in the
Company's service area. The operating margin increase was most
affected by the rate increase placed into effect during the first
quarter which increased the customers' monthly base charges for
gas service. Operating margin from propane operations declined
by 6.3 percent on a 35,739 or 5.4 percent decline in propane
gallons delivered.
Other operations expenses for the quarter declined despite
recognition of $125,904 in early retirement costs as discussed in
greater detail in a subsequent paragraph. Most of the expense
reductions came in the form of reduced labor costs associated
with fewer employees and significant decline in overtime. Other
cost reductions were realized in the cutback or elimination of
expenditures on nonessential items. Maintenance expense declined
$146,638 following the trend of the previous quarter as
nonessential maintenance has been reduced and greater emphasis
has been placed on renewing facilities rather than making
repairs. General taxes declined as a result of a decline in
revenue sensitive taxes associated with lower operating revenues
from reduced gas costs. Depreciation has increased as capital
plant has grown. Propane operations declined due to lower
delivery costs and cost containment efforts by management.
Interest charges are down 2.3 percent as total outstanding debt
is 1.3 percent lower than last year.
For the nine-month period ended June 30, 1995, operating
margins declined $592,023 or 3.5 percent due to the 3.6 percent
decline in total natural gas volumes. Higher priced firm sales
volumes declined 673,365 MCF or 9.5 percent on 14.4 percent fewer
heating degree days, while the lower margin interruptible
delivered volumes increased 344,268 or 18.2 percent. The
operating margin decline would have been more pronounced due to
the weather if not for the rate increase placed into effect
during the first quarter. The increase was entirely focused on
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------
the non-weather sensitive portion of rates by increasing the
customers' monthly base charges. These new rates resulted in
total customer base charges increasing by more than $400,000.
Expenses for the nine-month period ended June 30, 1995 in
relation to the same period last year emulated the results for
the quarter. The exception is other operations where higher
labor costs earlier in the year generated much of the small
increase.
On June 15, 1994, Roanoke Gas Company filed an application
for general rate increase of $1,281,582 in additional gross
revenues. On November 13, 1994, Roanoke Gas Company placed into
effect new rates allowing for additional gross revenues of
$1,281,582 subject to refund. On January 30, 1995, a hearing was
held before a Hearing Examiner on the rate increase, at which
time the Virginia State Corporation Commission Staff submitted a
recommendation for an increase of $613,000. Based upon updated
rate base and cost information at the time of the hearing, the
Company revised its request down to $776,000. As of June 30,
1995, the Hearing Examiner had not filed a recommendation for
final rate authorization with the Commission. A final order is
not expected until the fall of 1995. Based upon the results of
the hearing, the Company has established a reserve which
management believes will be adequate to provide for the necessary
refunds following the Commission's final order.
The Company offered a voluntary early retirement incentive
plan (Plan) to all employees over the age of 55 who are vested in
the Company's retirement plan. Of the twenty-five eligible
employees, twelve accepted the early retirement offer by the
April 26, 1995 deadline. The total cost of the early retirement
plan for those employees was $444,367, of which $125,904 was
expensed directly in the Company's third quarter and $318,463 was
established as a regulatory asset, with amortization beginning
when rates are placed into effect to allow recovery of the
capitalized costs. The deferred treatment is permitted by the
provisions of Statements of Financial Accounting Standards
No. 71, "Accounting for the Effects of Certain Types of
Regulation," since the State Corporation Commission Accounting
Division has preliminarily agreed to allow amortization of these
one-time costs over a five-year period. The costs expensed
during the quarter ending June 30, 1995 relate to the portion of
the Plan costs that would be amortized during the period between
the recognition of the one-time Plan costs and the implementation
of new rates, which provide for cost recovery, from the next rate
filing.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------
Both Roanoke Gas Company and Bluefield Gas Company operated
manufactured gas plants (MGPs) as a source of fuel for lighting
and heating until the early 1950's. The process involved heating
coal in a low-oxygen environment to produce a manufactured gas
that could be distributed through the Company's pipeline system
to customers. A by-product of the process was coal tar, and the
potential exists for on-site tar waste contaminants at both
former plant sites. The extent of contaminants at these sites,
if any, is unknown at this time, and the Company has not
performed formal analysis at the Roanoke Gas Company MGP site. A
preliminary analysis at the Bluefield Gas Company site indicates
further evaluation is warranted, and the Company is reviewing
alternative methods and practices for site investigation. The
Company has not received any notices of violation or liabilities
associated with environmental regulations related to the MGP
sites and is not aware of any off-site contamination or pollution
as a result of these prior operations. Should contamination
sufficient to warrant remedial action eventually be identified,
the Company will pursue all prudent and reasonable means to
recover any related costs, including insurance claims and
regulatory approval for rate case recognition of expenses
associated with any remediation work required. Based upon prior
orders of the State Corporation Commission of Virginia related to
environmental matters at other companies, the Company believes it
will be able to recover prudently incurred costs. Additionally,
the stipulated rate case agreement between the Company and the
West Virginia Public Service Commission recognizes the Company's
right to defer MGP clean-up costs and seek rate relief for such
costs. If the Company eventually incurs costs associated with a
required clean-up of either MGP site, the Company anticipates
recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in future rates. Based on
anticipated regulatory actions and current practices, management
believes that any costs incurred related to the
previously-mentioned environmental matters will not have a
material effect on the Company's consolidated results of
operations.
Roanoke Gas Company and Commonwealth Public Service
Corporation, a subsidiary of Bluefield Gas Company, currently
hold the only franchises and/or certificates of public
convenience and necessity to distribute natural gas in their
respective Virginia service areas. The franchises generally
extend for a period of twenty years and are renewable by the
municipalities. Certificates of public convenience and
necessity, which are issued by the Virginia State Corporation
Commission, are of perpetual duration, subject to compliance with
regulatory standards. The franchise for the City of Roanoke, the
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
-----------------------------------------------------------------
Company's largest service area, expired on August 30, 1993. On
August 23, 1993, the Board of Directors of the Company approved
an agreement with the City of Roanoke under which such franchise
agreement was extended for a term of 180 days from August 30,
1993, upon the same terms and conditions, except that a provision
of the existing franchise agreement giving the City the option to
purchase the property of the Company located within the City was
deleted. The 180-day extension period expired February 26, 1994.
The parties have not yet reached an agreement on a new multi-year
franchise agreement; however, negotiations are on-going, and the
Company continues to provide natural gas services to customers in
the City of Roanoke. The Company believes that it ultimately
will secure a new franchise agreement on terms acceptable to the
Company. In addition, the franchise for the City of Salem expired
on July 22, 1994, and the franchise for the Town of Vinton
expired on December 10, 1994. Negotiations between the Company
and the City of Salem and the Town of Vinton are on going, and
the Company continues to provide natural gas services to
customers in the City of Salem and the Town of Vinton. The
Company also believes that it will ultimately secure new
franchise agreements with the City of Salem and the Town of
Vinton on terms acceptable to the Company. Bluefield Gas Company
holds the only franchise to distribute natural gas in its West
Virginia service area. Its franchise extends for a period of
thirty years from August 23, 1979.
Management anticipates that the Company will be able to
renew all of its franchises. There can be no assurance, however,
that a given jurisdiction will not refuse to renew a franchise or
will not in connection with the renewal of a franchise, impose
certain restrictions or conditions that could adversely affect
the Company's business operations or financial condition.
The three-month and nine-month periods' earnings presented
herein should not be considered as reflective of the Company's
financial results for the fiscal year ending September 30, 1995.
The total revenues during the first nine months reflect higher
billings due to the weather sensitive nature of the gas business.
As warmer weather dominates the remaining three months of the
Company's fiscal year, a net operating loss is normally expected
for the final quarter which will reduce the Company's net
earnings for the fiscal year.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
--------
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K.
-------------------
There were no reports on Form 8-K filed for
the three-months ended June 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this
report to be signed on ts behalf by the undersigned
thereunto duly authorized.
ROANOKE GAS COMPANY
Date: August 8, 1995 By: /s/Roger L. Baumgardner
_______________________
Roger L. Baumgardner
Vice President/Secretary,
Treasurer and Principal
Accounting Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROANOKE GAS
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT FOR THE QUARTER
ENDED JUNE 30, 1995, AS SET FORTH IN THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 37,865,300
<OTHER-PROPERTY-AND-INVEST> 2,000,708
<TOTAL-CURRENT-ASSETS> 9,122,107
<TOTAL-DEFERRED-CHARGES> 1,536,036
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 50,524,151
<COMMON> 7,109,555
<CAPITAL-SURPLUS-PAID-IN> 4,048,888
<RETAINED-EARNINGS> 6,940,979
<TOTAL-COMMON-STOCKHOLDERS-EQ> 18,099,422
0
0
<LONG-TERM-DEBT-NET> 18,016,555
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,128,193
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 13,279,981
<TOT-CAPITALIZATION-AND-LIAB> 50,524,151
<GROSS-OPERATING-REVENUE> 42,060,557
<INCOME-TAX-EXPENSE> 895,727
<OTHER-OPERATING-EXPENSES> 37,657,137
<TOTAL-OPERATING-EXPENSES> 38,552,864
<OPERATING-INCOME-LOSS> 3,507,693
<OTHER-INCOME-NET> 91,726
<INCOME-BEFORE-INTEREST-EXPEN> 3,599,419
<TOTAL-INTEREST-EXPENSE> 1,482,971
<NET-INCOME> 2,116,448
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,116,448
<COMMON-STOCK-DIVIDENDS> 1,057,338
<TOTAL-INTEREST-ON-BONDS> 1,019,999
<CASH-FLOW-OPERATIONS> 9,529,957
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
