SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1998
Commission File Number 0-367
ROANOKE GAS COMPANY
(Exact name of Registrant as Specified in its Charter)
VIRGINIA 54-0359895
(State or Other Jurisdiction of (IRS) Employer
Incorporation or Organization) Identification No)
519 Kimball Avenue, 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 June 30, 1998
Common Stock, $5 Par Value 1,772,359
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
- --------------------------------------------------------------------------------------------------------------
UNAUDITED
- ---------
June 30, September 30,
ASSETS 1998 1997
- ------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
UTILITY PLANT:
Utility Plant in Service $68,398,270 $65,590,024
Accumulated Depreciation (24,129,104) (22,612,963)
------------- -------------
Utility Plant in Service, Net 44,269,166 42,977,061
Construction Work-In-Progress 1,475,023 1,088,083
------------- -------------
Utility Plant, Net 45,744,189 44,065,144
------------- -------------
NONUTILITY PROPERTY:
Propane 9,143,884 6,634,369
Accumulated Depreciation (2,952,632) (2,540,274)
------------- -------------
Nonutility Property, Net 6,191,252 4,094,095
------------- -------------
CURRENT ASSETS:
Cash and Cash Equivalents 1,437,122 116,045
Accounts Receivable - (Less Allowance
for Uncollectibles of $1,079,500,
and $368,345, Respectively) 4,303,225 4,188,984
Inventories 5,340,528 7,427,581
Prepaid Income Taxes - 7,368
Deferred Income Taxes 2,740,325 1,206,995
Purchased Gas Adjustments - 587,457
Other 487,108 420,674
------------- -------------
Total Current Assets 14,308,308 13,955,104
------------- -------------
OTHER ASSETS 837,571 478,915
------------- -------------
TOTAL $67,081,320 $62,593,258
============= =============
</TABLE>
See condensed notes to condensed consolidated financial statements.
- -------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
ROANOKE GAS COMPANY AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
- --------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- June 30, September 30,
LIABILITIES 1998 1997
- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION:
Stockholders' Equity:
Common Stock - Par Value $5; Authorized,
3,000,000 Shares; Issued and Outstanding
1,772,359, and 1,527,486 Shares, Respectively $8,861,795 $7,637,430
Capital in Excess of Par Value 8,629,787 5,271,667
Retained Earnings 9,719,102 7,687,854
------------- -------------
Total Stockholders' Equity 27,210,684 20,596,951
Long-Term Debt (Less Current Maturities) 20,700,000 17,079,000
------------- -------------
Total Capitalization 47,910,684 37,675,951
------------- -------------
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt 5,313 3,143,124
Notes Payable 1,295,000 7,129,000
Dividends Payable 470,035 397,530
Accounts Payable 4,430,303 5,512,348
Income Taxes Payable 997,872 -
Customers' Deposits 398,714 427,895
Accrued Expenses 4,633,496 4,233,860
Refunds From Suppliers - Due Customers 115,143 425,860
Purchased Gas Adjustments 3,070,878 -
------------- -------------
Total Current Liabilities 15,416,754 21,269,617
------------- -------------
DEFERRED CREDITS AND OTHER
LIABILITIES:
Deferred Income Taxes 3,289,785 3,145,932
Deferred Investment Tax Credits 464,097 492,357
Other Deferred Credits - 9,401
------------- -------------
Total Deferred Credits and Other Liabilities 3,753,882 3,647,690
------------- -------------
TOTAL $67,081,320 $62,593,258
============= =============
</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 NINE-MONTH PERIODS
ENDED JUNE 30, 1998 AND 1997
- ----------------------------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas utilities $8,222,260 $9,029,327 $44,924,911 $50,653,763
Propane operations 760,056 865,115 6,603,759 6,233,886
------------- ---------------- --------------- ---------------
Total operating revenues 8,982,316 9,894,442 51,528,670 56,887,649
------------- ---------------- --------------- ---------------
COST OF GAS:
Gas utilities 4,704,193 5,468,123 28,448,209 34,471,610
Propane operations 369,132 437,404 3,201,665 3,417,846
------------- ---------------- --------------- ---------------
Total cost of gas 5,073,325 5,905,527 31,649,874 37,889,456
------------- ---------------- --------------- ---------------
OPERATING MARGIN 3,908,991 3,988,915 19,878,796 18,998,193
------------- ---------------- --------------- ---------------
OTHER OPERATING EXPENSES:
Gas utilities:
Other operations 1,762,490 1,929,234 5,759,769 6,062,712
Maintenance 382,959 293,126 1,025,672 1,045,741
Taxes - general 449,294 478,658 1,991,737 2,035,542
Taxes - income (67,118) (88,165) 1,417,967 1,227,861
Depreciation and amortization 713,986 631,681 2,139,668 1,921,893
Propane operations (including taxes - income
of $(105,742), $(58,977), $427,414
and $340,502, respectively) 514,188 482,844 2,656,265 2,207,378
------------- ---------------- --------------- ---------------
Total other operating expenses 3,755,799 3,727,378 14,991,078 14,501,127
------------- ---------------- --------------- ---------------
OPERATING EARNINGS 153,192 261,537 4,887,718 4,497,066
------------- ---------------- --------------- ---------------
OTHER INCOME AND DEDUCTIONS:
Gas utilities:
Interest Income 20,530 - 21,449 7,071
Merchandising and jobbing, net 22,818 13,117 94,921 76,446
Other deductions (18,903) (12,266) (70,616) (49,507)
Taxes - income (8,301) (377) (15,566) (12,771)
Propane operations, net 19,334 26,410 87,750 97,184
------------- ---------------- --------------- ---------------
Total other income and deductions 35,478 26,884 117,938 118,423
------------- ---------------- --------------- ---------------
<PAGE>
EARNINGS BEFORE INTEREST CHARGES 188,670 288,421 5,005,656 4,615,489
------------- ---------------- --------------- ---------------
INTEREST CHARGES:
Gas utilities:
Long-term debt 380,588 458,252 1,158,535 1,291,303
Other interest 48,221 60,411 352,836 368,527
Propane operations 41,077 17,492 107,803 40,361
------------- ---------------- --------------- ---------------
Total interest charges 469,886 536,155 1,619,174 1,700,191
------------- ---------------- --------------- ---------------
NET EARNINGS (LOSS) $(281,216) $(247,734) $3,386,482 $2,915,298
============= ================ =============== ==============
BASIC EARNINGS PER COMMON SHARE $(0.16) $(0.16) $2.02 $1.95
============= ================ =============== ==============
DILUTED EARNINGS PER COMMON SHARE $(0.16) $(0.16) $2.02 $1.95
============= ================ =============== ==============
CASH DIVIDENDS PER COMMON SHARE $0.265 $0.260 $0.795 $0.780
============= ================ =============== ==============
</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 NINE-MONTH PERIODS
ENDED JUNE 30, 1998 AND 1997
- ---------------------------------------------------------------------------------------------------------------------------------
UNAUDITED
- --------- Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(281,216) $(247,734) $3,386,482 $2,915,298
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 903,397 811,931 2,679,980 2,424,626
(Gain) loss on disposal of utility and nonutility
property 6,923 (2,321) 15,032 (6,490)
Loss on sale of other asset - - 566 -
Increase (decrease) in Deferred taxes and
investment tax credits 317,576 202,912 (1,417,737) (935,431)
Changes in assets and liabilities which provided
cash, exclusive of changes and noncash
transactions shown separately 1,417,288 3,934,908 5,278,346 5,111,783
----------- ----------- ------------ -----------
Net cash provided by operating activities 2,363,968 4,699,696 9,942,669 9,509,786
----------- ----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant in service and under
construction and nonutility property (2,000,834) (1,577,150) (6,109,106) (6,252,491)
Cost of removal of utility plant, net (18,008) (33,542) (50,426) (126,532)
Proceeds from disposal of equipment 11,750 21,844 33,367 40,788
Proceeds from sale of other asset - - 173,334
----------- ----------- ------------ -----------
Net cash used in investing activities (2,007,092) (1,588,848) (5,952,831) (6,338,235)
----------- ----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,656,000 - 3,356,000 -
Retirement of long-term debt and payments on
obligations under capital leases (8,834) (288,544) (2,872,811) (648,444)
Net repayments under lines of credit (785,000) (2,745,000) (5,834,000) (2,622,500)
Cash dividends paid (467,977) (391,627) (1,282,730) (1,155,168)
Proceeds from issuance of stock 185,865 221,487 4,210,494 695,713
Capital stock expense - - (245,714) -
----------- ----------- ------------ -----------
Net cash used in financing activities 580,054 (3,203,684) (2,668,761) (3,730,399)
----------- ----------- ------------ -----------
<PAGE>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 936,930 (92,836) 1,321,077 (558,848)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 500,192 167,310 116,045 633,322
----------- ----------- ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $1,437,122 $74,474 $1,437,122 $74,474
=========== =========== ============ ===========
SUPPLEMENTAL INFORMATION:
Interest paid 518,824 816,860 1,972,876 1,851,899
Income taxes paid $ 1,012,823 $114,886 $2,273,446 $1,024,786
NONCASH TRANSACTIONS:
The assets of a propane company were acquired in December 1997 in exchange for
34,317 shares of stock for a total value of $617,706.
The Company refinanced the remaining balances of Series K and Series L First
Mortgage Bonds in the amount of $3,344,000 into a First Mortgage Note due July
1, 2008 in June 1998
See condensed notes to condensed consolidated financial statements.
</TABLE>
<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 financial position as of June 30, 1998 and September 30, 1997,
and the results of its operations and its cash flows for the three months
and nine months ended June 30, 1998 and 1997. The results of operations for
the nine months ended June 30, 1998 are not indicative of the results to be
expected for the fiscal year ending September 30, 1998.
2. The condensed consolidated financial statements 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 thereto.
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. The Company refinanced the remaining balances on the Series K and Series
L First Mortgage Bonds in conjunction with an additional borrowing to
create a $5,000,000 First Mortgage Note due in full on July 1, 2008 at a
fixed interest rate of 7.804%. The transaction resulted in net additional
debt of $1,656,000. The additional proceeds are being used to fund capital
expansion in the natural gas system.
5. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(Statement 128). Statement 128 supersedes APB Opinion No. 15, Earnings Per
Share, and specifies the computation, presentation and disclosure
requirements for basic and diluted earnings per share (EPS) for entities
with publicly-held common stock. The dilutive securities had no effect on
the per share amounts for the current reporting period. The weighted
average number of shares outstanding for the three-month period and nine
month period ended June 30, 1998 were 1,769,654 and 1,672,756 shares
compared to 1,512,023 and 1,496,606 shares for the same periods last year.
6. In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, effective for all fiscal
quarters of fiscal years beginning after June 15, 1999. SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
for hedging activities. It requires the recognition of all derivative
instruments as assets or liabilities in the Company's balance sheet and
measurement of those instruments at fair value. The accounting treatment
of changes in fair value is dependent upon whether or not an instrument is
designated as a hedge and, if so, the type of hedge. The Company has not
fully analyzed the provisions of SFAS No. 133. Currently, the Company does
not have a material position in derivative instruments.
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------
UNAUDITED
- ---------
7. 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 is
unknown at this time, and the Company has not performed formal analyses of
any environmental media at the Roanoke Gas Company MGP site. An analysis at
the Bluefield Gas Company site indicates some 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 statutes or 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 eventually 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, 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 or results of
operations, although there can be no assurance this will be the case.
<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 period and nine-month
periods ended June 30, 1998 were ($281,216) and $3,386,482 compared to
($247,734) and $2,915,298 for the same period last year.
Operating margin for the three months ended June 30, 1998 decreased $79,924, or
2 percent, from the same period last year due to declines in delivered gas
volumes offset partially by the effect of rate increases for Bluefield Gas
Company and Commonwealth Public Service Corporation placed into effect earlier
this year. Total natural gas deliveries decreased by 180,928 MCF, or 9 percent,
and propane deliveries declined by 38,897 gallons, or 4 percent, for the
quarter. The decline in volumes of gas delivered is attributable to the current
quarter having 42 percent fewer heating degree-days than the same period last
year. Propane deliveries declined by a lesser rate for the quarter due to the
increase in customers over last year. The customer growth in the propane
operations is attributable to an ongoing aggressive marketing campaign and the
propane acquisition completed in December 1997. Total propane customer base has
increased by 38 percent over last June.
Other operations expenses for the current quarter declined from the same period
last year due to the absence of amortization of regulatory assets included in
last year's expenses, reduced labor and benefit costs and lower bad debt expense
associated with improvements in delinquencies and reductions in billed revenues
for the quarter. Maintenance expenses increased in response to timing of certain
maintenance expenditures including scheduled pipeline leak repairs and meter
repairs. General taxes declined from the same quarter last year as declines in
revenue-sensitive taxes more than offset increases in property and other taxes.
Capital expenditures for adding new customers to the distribution system and
renewing older facilities have increased depreciation expense over last year's
levels. Propane operations increased over the same period last year with
increases in marketing expenses and depreciation expense resulting from the
growth in customers in the Company's propane subsidiary. Interest charges
declined as the proceeds from the stock issue completed in January reduced the
Company's outstanding average total debt position.
For the nine-month period ended June 30, 1998, operating margins increased
$880,603, or 5 percent, over the same period last year. Approximately one third
of the increased margin was generated from a 2 percent increase in natural gas
deliveries for the period resulting from customer growth and greater industrial
usage due to the strength of the economy. Most of the increase in natural gas
volumes was attributable to industrial customers as the temperature sensitive
firm sales were nearly unchanged from last year. A 20 percent increase in
propane deliveries accounted for the remainder of the margin increase. Propane
increases were generated entirely from the growth in new customers as the
propane division continues to be a significant factor in the Company's
performance. The expense fluctuations for the nine-month period ended June 30,
1998, as compared to the same period last year, are consistent with differences
defined for the quarter. Maintenance expenses are consistent with the same
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
period last year, and propane operations included additional costs associated
with delivering 20 percent more gallons.
The nine-month earnings presented herein should not be considered as reflective
of the Company's consolidated financial results for the fiscal year ending
September 30, 1998. The total revenues during the first nine months reflect
higher billings due to the weather sensitive nature of the gas business.
Improvement or decline in earnings depends primarily on temperature and weather
conditions during the remaining months.
The Company currently has one rate case application pending before regulatory
bodies. Roanoke Gas Company filed an application with the Virginia State
Corporation Commission (SCC) in December 1996 with rates placed into effect,
subject to refund, on January 1, 1997. A hearing was held on the application in
June 1997. On April 30, 1998, the Hearing Examiner for the Virginia State
Corporation Commission issued a recommended decision in the rate case. Once a
final order is issued, the approved rates will be implemented and refunds with
interest will be made. The Company has established reserves for an estimated
level of refund in the case, and management believes the reserves are adequate
to cover any refund ordered by the Virginia Commission.
On April 27, 1998, the SCC approved a two-year extension to the Company's gas
cost hedging pilot program. Financial hedging instruments will be employed to
help protect against supply-related price volatility impacting customer billing
rates.
On July 7, 1998, the West Virginia Division of Administrative Law Judges issued
a Recommended Decision approving a two-year pilot gas cost hedging program for
Bluefield Gas. This pilot program will employ financial hedges for up to fifty
percent of its normal winter demand not supplied from storage.
The Company is in the process of evaluating the Year 2000 Issue and implementing
corrective actions. The Company has developed an inventory of major financial,
informational and operational systems that will require modification to ensure
Year 2000 compliance. Both internal and external resources are being used to
make the necessary modifications and test the results. The Company has already
converted many of the accounting, billing and operations systems to Year 2000
compliant. The Company expects to complete the remaining conversions and testing
by the spring of 1999. The total cost of converting all internal information
systems, equipment and operations for Year 2000 has not been fully quantified,
but is not expected to be a material cost to the Company. All costs incurred to
date have been expensed.
In addition, the Company is communicating with all of its significant suppliers
and large customers to determine their Year 2000 readiness and to attempt to
identify potential areas of risk in this regard. There can be no guarantee that
the systems of other companies on which the Company's systems rely will be
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
timely converted, or that a failure to convert by a supplier, customer or
other third party, or a conversion that is incompatible with the Company's
systems, would not have a material adverse effect on the Company and its
operations.
The board of directors has given management approval to pursue a corporate
restructuring to create a holding company intended to facilitate growth and
diversification. As a regulated public utility, the Company is currently
restricted in the types of businesses it can pursue. Under the proposed
structure, Roanoke Gas Company will continue as a public utility but operate as
a subsidiary of the holding company. The structure would provide for unregulated
services such as propane operations to be subsidiaries of the holding company
rather than the utility company.
The Company has made an informal inquiry with the Securities and Exchange
Commission ("SEC") seeking their input before making a formal restructuring
application. The restructuring must be approved by the SEC, as well as the
Company's shareholders, the Virginia State Corporation Commission and the West
Virginia Public Service Commission. There can be no assurance if or when these
approvals will be received.
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 is unknown at this time, and the Company has not
performed formal analyses of any environmental media at the Roanoke Gas Company
MGP site. An analysis at the Bluefield Gas Company site indicates some
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 statutes or 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 eventually 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,
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
<PAGE>
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -----------------------------------------------------------------------------
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 and results of operations, although there can be no assurance this
will be the case.
<PAGE>
Part II - Other Information
Item 2. Changes in Securities.
Pursuant to the Roanoke Gas Company Restricted Stock Plan for Outside
Directors (the "Restricted Stock Plan"), 40% of the monthly retainer
fee of each non-employee director of the Company is paid in shares of
unregistered common stock and is subject to vesting and
transferability restrictions ("restricted stock"). A participant can,
subject to approval of the Board, elect to receive up to 100% of his
retainer fee in restricted stock. The number of shares of restricted
stock is calculated each month based on the closing sales price of
the Company's common stock on the Nasdaq-NMS on the first day of the
month. The shares of restricted stock are issued in reliance on
section 3(a)(11) and section 4(2) exemptions under the Securities Act
of 1993 (the "Act") and will vest only in the case of the
participant's death, disability, retirement or in the event of a
change in control of the Company. Shares of restricted stock will be
forfeited to the Company by the participant's voluntary resignation
during his term on the Board or removal for cause as a director.
During the quarter ended June 30, 1998, the Company issued a total of
408 shares of restricted stock pursuant to the Restricted Stock Plan
as follows:
<TABLE>
<CAPTION>
Investment Date Price Number of Shares
<S> <C> <C> <C> <C> <C> <C>
4-1-98 $22.250 130
5-1-98 $21.750 133
6-1-98 $20.000 145
</TABLE>
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, 1998.
<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: August 11, 1998 By:s/Roger L. Baumgardner
----------------------------------
Roger L. Baumgardner
Vice President/Secretary, Treasurer
And Principal Accounting Officer
<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, 1998, 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-30-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 45,744,189
<OTHER-PROPERTY-AND-INVEST> 6,191,252
<TOTAL-CURRENT-ASSETS> 14,308,308
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 837,571
<TOTAL-ASSETS> 67,081,320
<COMMON> 8,861,795
<CAPITAL-SURPLUS-PAID-IN> 8,629,787
<RETAINED-EARNINGS> 9,719,102
<TOTAL-COMMON-STOCKHOLDERS-EQ> 27,210,684
0
0
<LONG-TERM-DEBT-NET> 20,700,000
<SHORT-TERM-NOTES> 1,295,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 5,313
<OTHER-ITEMS-CAPITAL-AND-LIAB> 17,870,323
<TOT-CAPITALIZATION-AND-LIAB> 67,081,320
<GROSS-OPERATING-REVENUE> 51,528,670
<INCOME-TAX-EXPENSE> 1,845,381
<OTHER-OPERATING-EXPENSES> 44,795,571
<TOTAL-OPERATING-EXPENSES> 46,640,952
<OPERATING-INCOME-LOSS> 4,887,718
<OTHER-INCOME-NET> 117,938
<INCOME-BEFORE-INTEREST-EXPEN> 5,005,656
<TOTAL-INTEREST-EXPENSE> 1,619,174
<NET-INCOME> 3,386,482
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,386,482
<COMMON-STOCK-DIVIDENDS> 1,355,235
<TOTAL-INTEREST-ON-BONDS> 601,799
<CASH-FLOW-OPERATIONS> 9,942,669
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
