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 March 31, 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 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 March 31, 1995
__________________________ ________________________________
Common Stock, $5 Par Value 1,391,387 Shares
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS - MARCH 31, 1995 AND
SEPTEMBER 30, 1994
----------------------------------------------------------
UNAUDITED
---------
March 31, September 30,
1995 1994
----------- -------------
ASSETS (Unaudited) (Audited)
------
<S> <C> <C>
UTILITY PLANT:
In service $53,469,173 $52,234,738
Accumulated depreciation 18,419,264 17,465,598
----------- -----------
In service, net 35,049,909 34,769,140
Construction work-in-progress 2,589,906 495,234
----------- -----------
Utility plant, net 37,639,815 35,264,374
----------- -----------
NONUTILITY PROPERTY:
Propane 3,801,241 3,368,339
Accumulated depreciation 1,723,943 1,601,137
----------- -----------
Nonutility property, net 2,077,298 1,767,202
----------- -----------
CURRENT ASSETS:
Cash 336,285 177,269
Temporary cash investments 318,000 -
Accounts receivable - (less
allowance for doubtful
accounts of $709,439 and
$318,834, respectively) 7,152,575 3,179,712
Inventories 2,390,545 6,376,353
Deferred income taxes 1,026,661 160,291
Prepaid income taxes - 260,609
Purchased gas adjustments - 694,423
Other 438,414 480,957
----------- ------------
Total current assets 11,662,480 11,329,614
----------- ------------
OTHER ASSETS 1,253,968 1,218,257
----------- ------------
TOTAL $52,633,561 $49,579,447
=========== ============
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS - MARCH 31, 1995 AND
SEPTEMBER 30, 1994
-----------------------------------------------------------
UNAUDITED
---------
March 31, 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
1,404,815 and 1,382,343 Shares,
respectively $ 7,024,070 $ 6,911,715
Capital in excess of par value 3,888,259 3,631,335
Retained earnings 7,534,965 5,881,869
----------- -----------
Total stockholders' equity 18,447,294 16,424,919
Long-term debt, excluding current
maturities 17,300,990 16,414,900
----------- ----------
Total capitalization 35,748,284 32,839,819
----------- ----------
CURRENT LIABILITIES:
Current maturities of long-term debt 1,125,485 672,146
Notes payable 2,165,000 5,235,000
Dividends payable 353,058 346,032
Accounts payable 3,818,858 5,320,481
Accrued income taxes 1,406,680 -
Customers' deposits 385,969 336,182
Accrued expenses 2,213,619 1,316,426
Refunds from suppliers - due customers 368,054 498,898
Purchased gas adjustments 1,902,510 -
----------- -----------
Total current liabilities 13,739,233 13,725,165
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 2,375,922 2,225,501
Deferred investment tax credits 590,250 609,090
Other 179,872 179,872
----------- -----------
Total deferred credits and other
liabilities 3,146,044 3,014,463
----------- -----------
TOTAL $52,633,561 $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 FOR THE THREE-MONTH AND SIX-MONTH PERIODS
ENDED MARCH 31, 1995 AND 1994
_______________________________________________________________________________________
UNAUDITED Three Months Ended Six Months Ended
_________ March 31, March 31,
________________________ ______________________
1995 1994 1995 1994
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $16,923,932 $20,330,009 $29,710,076 $37,860,515
Propane operations 2,025,695 2,047,733 3,355,277 3,469,605
----------- ----------- ----------- -----------
Total operating revenues 18,949,627 22,377,742 33,065,353 41,330,120
----------- ----------- ----------- -----------
COST OF GAS:
Gas utilities 10,543,025 13,843,076 18,671,212 26,198,074
Propane operations 940,557 962,748 1,568,958 1,605,258
----------- ----------- ----------- -----------
Total cost of gas 11,483,582 14,805,824 20,240,170 27,803,332
----------- ----------- ----------- -----------
OPERATING MARGIN 7,466,045 7,571,918 12,825,183 13,526,788
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES:
Gas Utilites:
Other operations 2,165,365 2,161,598 4,177,926 4,060,394
Maintenance 310,681 440,365 693,026 759,177
Taxes - general 717,696 881,434 1,307,179 1,589,193
Taxes - income 754,651 707,209 983,881 1,155,505
Depreciation and amortization 527,691 485,197 1,053,452 971,937
Propane operations (including taxes -
income of $209,264, $206,938,
$283,143 and $292,097, respectively) 722,442 734,487 1,295,671 1,315,012
----------- ----------- ----------- -----------
Total other operating expenses 5,198,526 5,410,290 9,511,135 9,851,218
----------- ----------- ----------- -----------
OPERATING EARNINGS 2,267,519 2,161,628 3,314,048 3,675,570
----------- ----------- ----------- -----------
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest income 195 4,492 195 4,492
Merchandising and jobbing 36,907 (3,995) 100,306 32,286
Other deductions (20,421) (17,542) (89,873) (56,764)
Taxes - income (5,589) 4,812 (3,179) 4,959
Propane operations, net 34,669 23,020 64,586 46,597
----------- ----------- ----------- -----------
Total other income and deductions 45,761 10,787 72,035 31,570
----------- ----------- ----------- -----------
EARNINGS BEFORE INTEREST CHARGES 2,313,280 2,172,415 3,386,083 3,707,140
----------- ----------- ----------- -----------
<PAGE>
INTEREST CHARGES:
Gas utilities:
Long-term debt 419,079 410,828 831,444 817,184
Other interest 91,251 83,611 188,058 161,457
Propane operations, net 7,213 13,072 12,242 27,130
----------- ----------- ----------- -----------
Total interest charges 517,543 507,511 1,031,744 1,005,771
----------- ----------- ----------- -----------
NET EARNINGS $ 1,795,737 $ 1,664,904 $ 2,354,339 $ 2,701,369
=========== =========== =========== ===========
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT $1.28 $1.25 $1.69 $2.06
=========== =========== =========== ===========
CASH DIVIDENDS PER SHARE $0.25 $0.25 $0.50 $0.50
=========== =========== =========== ===========
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE-MONTH AND SIX-MONTH PERIODS
ENDED MARCH 31, 1995 AND 1994
-----------------------------------------------------------------------------------------
UNAUDITED Three Months Ended Six Months Ended
_________ March 31, March 31,
__________________________ _______________________
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,795,737 $1,664,904 $2,354,339 $2,701,369
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 631,455 579,926 1,262,244 1,161,413
(Gain) loss from disposal of property (765) 318 2,246 521
Changes in working capital, operating
assets and liabilities exclusive of
changes shown separately 5,495,008 5,676,646 2,863,724 3,538,003
----------- ----------- ----------- -----------
Net cash provided by operating activities
7,921,435 7,921,794 6,482,553 7,401,306
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (1,808,279) (1,119,262) (3,912,886) (2,061,688)
Other (32,610) (24,336) (75,139) (38,479)
Proceeds from disposal of equipment 20,928 - 48,498 431
------------ ------------ ------------ ------------
Net cash used in investing activities (1,819,961) (1,143,598) (3,939,527) (2,099,736)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - - 1,700,000 2,000,000
Retirement of long-term debt (351,065) (351,879) (371,071) (719,672)
Payments on line-of-credit agreements, net (5,021,000) (4,600,000) (3,070,000) (4,200,000)
Cash dividends paid (348,186) (328,378) (694,218) (650,703)
Proceeds from issuance of stock 215,020 722,730 373,729 877,437
Capital stock expense - (21,260) (4,450) (82,103)
------------ ------------ ------------ ------------
Net cash used in financing activities (5,505,231) (4,578,787) (2,066,010) (2,775,041)
------------ ------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 596,243 2,199,409 477,016 2,526,529
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 58,042 1,212,806 177,269 885,686
------------ ------------ ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $654,285 $3,412,215 $654,285 $3,412,215
============ ============ =========== ===========
<PAGE>
SUPPLEMENTAL INFORMATION:
Interest paid $736,877 $590,486 $1,003,076 $1,271,968
Income taxes paid, net 277,750 1,204,500 $352,750 $879,500
NONCASH TRANSACTIONS:
A capital lease obligation was incurred when
the Company entered into an equipment lease $10,500 - $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 March 31, 1995 and September 30, 1994
and the results of operations and cash flows for the three-month
and six-month periods ended March 31, 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 has 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 is expected to be
approximately $440,000, of which $125,000 will be expensed
directly in the Company's third quarter and $315,000 will be
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 to be 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 per share is based on the weighted average number of
common and common equivalent shares outstanding during each
period (1,399,303 and 1,329,726 for the three-month periods ended
March 31, 1995 and 1994, and 1,393,800 and 1,311,524 for the six-
month periods ended March 31, 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
material effect on the Company's consolidated results of
operations.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
--------------------------------------------------------------
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 in
process, 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 for the three-month and six-month
periods ended March 31, 1995 were $1,795,737 and $2,354,339
compared to $1,664,904 and $2,701,369 for the same periods last
year.
For the three-month period ended March 31, 1995, operating
margin declined $105,873, or 1.4 percent, from last year due to
reduced delivered gas volumes associated with a quarter that was
11.5 percent warmer than the same quarter last year. Total MCF
deliveries were down 2.3 percent, or 94,881 MCF, as a decline in
the more profitable firm volumes of 8.2 percent was offset
partially by a 38.1 percent increase in interruptible volumes.
The firm volume decrease correlates strongly with the impact of
warmer weather during the quarter; the interruptible volume
increase resulted from greater industrial activity in the
Company's service area as well as reduced interruptions of gas
service due to the less severe weather. 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 the non-weather
sensitive portion of rates by increasing the customers' monthly
base charges. The volumetric portion of the rates remain
relatively unchanged. These new rates resulted in an increase in
excess of $170,000 in operating margin related to the higher
monthly base charges during the three-month period ended March
31, 1995. Operating margin from propane operations declined by 2
percent on a 35,322, or 2 percent, decline in propane gallons
delivered.
Other operations expenses for the quarter remained
consistent with prior year due to management's efforts to
maximize profitability despite reduced sales due to the warmer
weather. Maintenance expense declined $129,684 via reduction of
unessential maintenance and emphasis on renewal of facilities.
General taxes declined sharply as a result of a decline in
revenue sensitive taxes. Gross revenues are down due to lower
volume billing, reduced gas costs, and a greater proportion of
transportation volume billings. Depreciation has increased as
capital plant has grown. Propane operations declined due to
lower delivery costs and cost containment efforts by management.
Other income and deductions increased over prior year due to
greater profitability from the merchandising and jobbing function
as well as greater activity in the gas marketing portion of
Highland Propane Company. Interest charges have increased only
2.0 percent even though total outstanding debt is 4.0 percent
higher than last year. The improvement in interest charges in
relation to the higher debt balance relates directly to the cash
management system implemented during 1994 which maximizes cash
utilization and minimizes borrowings on a daily basis.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------------
For the six-month period ended March 31, 1995, operating
margins declined $701,605, or 5.2 percent, due to the 5.1 percent
decline in gas volumes. Although the current quarter's operating
margin was aided by the rate increase placed into effect in the
first quarter, the six-month operating margin was still depressed
due to the first quarter being 21 percent warmer than the same
quarter the previous year. Furthermore, the implementation of
the new rates in mid November had limited impact since only one
full month of additional base charges was realized in the first
quarter. Expenses for the six-month period ended March 31, 1995
in relation to the same period last year mirrored the results for
the quarter, except for other operations expenses where higher
labor costs during the first quarter generated much of the
$117,532 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 March 31,
1995, the Hearing Examiner had not filed a recommendation for
final rate authorization with the Commission. A final order is
not expected until the summer 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 has 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 is expected to be
approximately $440,000, of which $125,000 will be expensed
directly in the Company's third quarter and $315,000 will be
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 to be expensed during
the quarter ending June 30, 1995 relate to the portion of the
Plan costs that would be amortized during the period between
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
----------------------------------------------------------------
the recognition of the one-time Plan costs and the implementation
of new rates, which provide for cost recovery, from the next rate
filing.
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,
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------------
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.
The three-month and six-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 six months reflect higher
billings due to the weather sensitive nature of the gas business.
As warmer weather dominates the remaining six months of the
Company's fiscal year, net operating losses are normally expected
for the two quarters 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
March 31, 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
its behalf by the undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: May 11, 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 STATEMENTS FOR THE QUARTER
ENDED MARCH 31, 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 37,639,815
<OTHER-PROPERTY-AND-INVEST> 2,077,298
<TOTAL-CURRENT-ASSETS> 11,662,480
<TOTAL-DEFERRED-CHARGES> 1,253,968
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 52,633,561
<COMMON> 7,024,070
<CAPITAL-SURPLUS-PAID-IN> 3,888,259
<RETAINED-EARNINGS> 7,534,965
<TOTAL-COMMON-STOCKHOLDERS-EQ> 18,447,294
0
0
<LONG-TERM-DEBT-NET> 17,300,990
<SHORT-TERM-NOTES> 2,165,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,125,485
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 13,594,792
<TOT-CAPITALIZATION-AND-LIAB> 52,633,561
<GROSS-OPERATING-REVENUE> 33,065,353
<INCOME-TAX-EXPENSE> 983,881
<OTHER-OPERATING-EXPENSES> 28,767,424
<TOTAL-OPERATING-EXPENSES> 29,751,305
<OPERATING-INCOME-LOSS> 3,314,048
<OTHER-INCOME-NET> 72,035
<INCOME-BEFORE-INTEREST-EXPEN> 3,386,083
<TOTAL-INTEREST-EXPENSE> 1,031,744
<NET-INCOME> 2,354,339
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,354,339
<COMMON-STOCK-DIVIDENDS> 701,243
<TOTAL-INTEREST-ON-BONDS> 685,775
<CASH-FLOW-OPERATIONS> 6,482,553
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.69
</TABLE>
