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 December 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)
(540) 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 December 31, 1995
__________________________ ________________________________
Common Stock, $5 Par Value 1,442,747 Shares
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
- ------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1995
- -------------------------------------------------------------
UNAUDITED
- ---------
December 31, September 30,
1995 1995
---- ----
<S> <C> <C>
ASSETS
- ------
UTILITY PLANT:
In service $57,687,165 $56,834,174
Accumulated depreciation 19,827,111 19,262,416
----------- -----------
In service, net 37,860,054 37,571,758
Construction work-in-progress 667,691 535,107
----------- -----------
Utility plant, net 38,527,745 38,106,865
----------- -----------
NONUTILITY PROPERTY:
Propane 3,933,925 3,781,633
Accumulated depreciation 1,826,200 1,742,342
----------- -----------
Nonutility property, net 2,107,725 2,039,291
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 719,662 502,895
Accounts receivable - (less allowance
for doubtful accounts of $379,705 and
$171,947 respectively) 11,064,899 3,463,104
Inventories 4,399,433 5,347,994
Deferred income taxes 1,381,016 967,732
Other 433,953 181,190
----------- -----------
Total current assets 17,998,963 10,462,915
----------- -----------
OTHER ASSETS 894,266 1,005,596
----------- -----------
TOTAL $59,528,699 $51,614,667
=========== ===========
</TABLE>
See condensed notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND SUBSIDIARIES
- ------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND SEPTEMBER 30, 1995
- -------------------------------------------------------------
UNAUDITED
- ---------
December 31, September 30,
1995 1995
---- ----
<S> <C> <C>
LIABILITIES
- -----------
CAPITALIZATION:
Stockholders' equity
Common stock, $5 par value. Authorized,
3,000,000 shares; issued and
outstanding 1,442,747 and 1,432,512
Shares, respectively $ 7,213,735 $ 7,162,560
Capital in excess of par value 4,253,834 4,149,584
Retained earnings 7,309,080 6,243,028
----------- -----------
Total stockholders' equity 18,776,649 17,555,172
Long-term debt, excluding current
maturities 11,583,560 17,504,047
----------- -----------
Total capitalization 30,360,209 35,059,219
----------- -----------
CURRENT LIABILITIES:
Current maturities of long-term debt 7,080,020 1,179,415
Borrowings under lines of credit 4,181,000 1,442,000
Dividends payable 368,721 358,743
Accounts payable 7,947,277 5,544,647
Accrued income taxes 1,302,248 476,410
Customers' deposits 415,356 314,647
Accrued expenses 2,480,211 3,027,825
Refunds from suppliers - due customers 597,036 682,851
Purchased gas adjustments 1,467,009 236,999
----------- -----------
Total current liabilities 25,838,878 13,263,537
----------- -----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes 2,768,591 2,721,470
Deferred investment tax credits 561,021 570,441
----------- -----------
Total deferred credits and other
liabilities 3,329,612 3,291,911
----------- -----------
TOTAL $59,528,699 $51,614,667
=========== ===========
</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 PERIODS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------
UNAUDITED Three Months Ended
- --------- December 31,
1995 1994
---- ----
<S> <C> <C>
OPERATING REVENUES:
Gas utilities $16,283,931 $12,786,144
Propane operations 1,709,828 1,329,582
----------- ----------
Total operating revenues 17,993,759 14,115,726
----------- -----------
COST OF GAS:
Gas utilities 10,382,425 8,128,187
Propane operations 816,143 628,401
----------- -----------
Total cost of gas 11,198,568 8,756,588
----------- -----------
OPERATING MARGIN 6,795,191 5,359,138
----------- -----------
OTHER OPERATING EXPENSES:
Gas Utilites:
Other operations 1,899,760 2,012,561
Maintenance 431,149 382,345
Taxes - general 676,163 589,483
Taxes - income 647,764 229,230
Depreciation and amortization 584,311 525,761
Propane operations (including
taxes - income of $129,982
and $78,758 respectively) 690,543 573,228
----------- -----------
Total other operating expenses 4,929,690 4,312,608
----------- -----------
OPERATING EARNINGS (LOSS) 1,865,501 1,046,530
----------- -----------
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Merchandising and jobbing 23,645 63,399
Other deductions (19,774) (69,452)
Taxes - income (1,518) 2,410
Propane operations, net 40,842 29,916
----------- -----------
Total other income and deductions 43,195 26,273
----------- -----------
EARNINGS BEFORE INTEREST CHARGES 1,908,696 1,072,803
----------- -----------
INTEREST CHARGES:
Gas utilities:
Long-term debt 413,795 412,365
Other interest 59,474 96,807
Propane operations, net 655 5,029
----------- -----------
Total interest charges 473,924 514,201
----------- -----------
NET EARNINGS $ 1,434,772 $ 558,602
=========== ===========
EARNINGS PER COMMON SHARE $ 1.00 $ 0.40
=========== ===========
CASH DIVIDENDS PER SHARE $ 0.255 $ 0.250
=========== ===========
</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 PERIODS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------
UNAUDITED Three Months Ended
- --------- December 31,
1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,434,772 $ 558,602
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 709,021 630,789
Loss from disposal of property 245 3,011
Changes in working capital, operating
assets and liabilities exclusive of
changes shown separately (3,244,495) (2,631,284)
---------- ----------
Net cash used in operating activities (1,100,457) (1,438,882)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (1,177,581) (2,104,607)
Other (27,750) (42,529)
Proceeds from disposal of equipment 6,752 27,570
---------- ----------
Net cash used in investing activities (1,198,579) (2,119,566)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 1,700,000
Retirement of long-term debt (19,880) (20,006)
Net borrowings under lines of credit 2,739,000 1,951,000
Cash dividends paid (358,743) (346,032)
Proceeds from issuance of stock 155,426 158,709
Capital stock expense - (4,450)
---------- ----------
Net cash provided by financing activities 2,515,803 3,439,221
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 216,767 (119,227)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 502,895 177,269
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 719,662 $ 58,042
========== ==========
SUPPLEMENTAL INFORMATION:
Interest paid $ 258,710 $ 266,199
Income taxes paid, net $ 330,700 $ 75,000
</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 December 31, 1995 and
September 30, 1995 and the results of operations and cash flows for the
three months ended December 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. 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.
3. Earnings per share is based on the weighted average number of common
and common equivalent shares outstanding during each period (1,439,633 and
1,388,416 for the three months ended December 31, 1995 and 1994,
respectively.).
4. 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. An analysis at the Bluefield
Gas Company site indicates some soil contamination. The Company, with
concurrence of legal counsel, does not believe any events have occurred
requiring regulatory reporting. Further, 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.
Therefore, the Company has no plans for subsurface remediation at either of
the MGP sites. Should the Company be required to remediate either of the
MGP sites, 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 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, a 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
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
- ------------------------------------
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
- ------------------------------------------------------------------------
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 financial position.
5. 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 for the three months ended December 31,
1995 were $1,434,772 compared to $558,602 for the same period last year.
Operating revenue and operating margin increased significantly over
last year as the current quarter had 34% more heating degree days than the
same period a year ago and 12% more than normal. The colder weather
increased the Company's natural gas and propane deliveries resulting in an
operating margin increase of $1,436,053 or 27% above last year. Total
billed and unbilled natural gas volumes increased by more than 647,000 MCFs
or almost 22% over the same period last year. Propane deliveries increased
by more than 432,000 gallons representing a 31% increase in volume.
Other operations expenses declined $112,801 due to reduced labor and
benefit costs associated with the early retirement program enacted last
year. Total full time employees are down 14%. Maintenance expense
increased $48,804 over last year due to additional right of way clearing
for the Company's natural gas transmission lines and renovation of
corporate offices. Last year, the transmission line clearing program was
reduced in an effort to control expenses during the warmer than normal
winter. The increase in general taxes is attributable to increases in
revenue sensitive taxes. Natural gas revenues increased 27% while general
taxes increased 15%. Depreciation expense increased as the Company
continues to add plant facilities for new customers and renew existing
facilities. Propane operations increased due to greater expenses
associated with delivering 31% more propane, customer growth and higher
income taxes on greater net income. Total interest expense declined as the
Company's total debt position decreased by more than $3.1 million.
On December 4, 1995, Roanoke Gas Company completed the rate refund
associated with the final order dated September 28, 1995 on the rate
application filed June 15, 1994. The Company refunded $522,254 in excess
rates and $28,067 in accrued interest. The Company had properly reserved
for the anticipated refund and the Commission's final order had no effect
on the results of operations for the quarter.
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. An analysis at the Bluefield
Gas Company site indicates some soil contamination. The Company, with
concurrence of legal counsel, does not believe any events have occurred
requiring regulatory reporting. Further, 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.
Therefore, the Company has no plans for subsurface remediation at either of
the MGP sites. Should the Company be required to remediate either of the
MGP sites, the Company will pursue all prudent and reasonable means to
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
- ------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
recover any related costs, including insurance claims and regulatory
approval for rate case recognition of expenses associated with any 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, a 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, should any be incurred, and to 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 financial position.
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 ongoing, 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
- ---------------------------------------------
The three month earnings presented herein should not be considered as
reflective of the Company's consolidated financial results for the fiscal
year ending September 30, 1996. The total revenues during the first three
months reflect higher billings due to the weather sensitive nature of the
gas business. Any improvement or decline in earnings depends primarily on
temperature and weather conditions during the remaining winter months.
<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 December 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 ts behalf by the
undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: January 20, 1996 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 DECEMBER 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 38,527,745
<OTHER-PROPERTY-AND-INVEST> 2,107,725
<TOTAL-CURRENT-ASSETS> 17,998,963
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 894,266
<TOTAL-ASSETS> 59,528,699
<COMMON> 7,213,735
<CAPITAL-SURPLUS-PAID-IN> 4,253,834
<RETAINED-EARNINGS> 7,309,080
<TOTAL-COMMON-STOCKHOLDERS-EQ> 18,776,649
0
0
<LONG-TERM-DEBT-NET> 11,583,560
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 7,080,020
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 22,088,470
<TOT-CAPITALIZATION-AND-LIAB> 59,528,699
<GROSS-OPERATING-REVENUE> 17,993,759
<INCOME-TAX-EXPENSE> 647,764
<OTHER-OPERATING-EXPENSES> 15,480,494
<TOTAL-OPERATING-EXPENSES> 16,128,258
<OPERATING-INCOME-LOSS> 1,865,501
<OTHER-INCOME-NET> 43,195
<INCOME-BEFORE-INTEREST-EXPEN> 1,908,696
<TOTAL-INTEREST-EXPENSE> 473,924
<NET-INCOME> 1,434,772
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,434,772
<COMMON-STOCK-DIVIDENDS> 368,721
<TOTAL-INTEREST-ON-BONDS> 319,021
<CASH-FLOW-OPERATIONS> (1,100,457)
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
