FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File Number 1-6537-3
EMPIRE GAS CORPORATION
________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
MISSOURI 43-1494323
____________________________ ____________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 303, 1700 S. Jefferson Street, Lebanon, Missouri 65536
___________________________________________________________________
(Address of Principal Executive Offices and Zip Code)
(417) 532-3103
______________________________________________________
(Registrant's Telephone Number, Including Area Code)
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
___ ____
Number of Shares of outstanding common stock (one class only) as of
October 31, 1995 was 1,579,225.
<PAGE>
<PAGE> 2 of 14
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
______________________________
EMPIRE GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands, Except Per Share Amounts)
September 30, June 30,
1995 1995
_____________ ____________
(Unaudited)
ASSETS
______
Current Assets
Cash $ 980 $ 821
Trade receivables - Net 5,938 4,571
Inventories 7,399 5,686
Prepaid Expense 1,223 521
Refundable Income Tax 896 1,567
Deferred Income Taxes 1,700 1,350
____________ __________
Total Current Assets 18,136 14,516
____________ __________
Property, Plant and Equipment 95,043 98,217
Less Accumulated Depreciation 26,669 27,111
____________ __________
Fixed Assets -- Net 68,374 71,106
____________ __________
Other Assets
Debt Acquisition Costs - Net 4,699 4,856
Excess of Cost Over Fair Value of Net
Assets Acquired - Net 12,306 12,992
Other 1,810 1,658
____________ __________
Total Other Assets 18,815 19,506
____________ __________
Total Assets $ 105,325 $ 105,128
____________ __________
____________ __________
<PAGE>
<PAGE> 3 of 14
EMPIRE GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
______________________________________________
September 30, June 30,
1995 1995
_____________ ____________
(Unaudited)
Current Liabilities
Current Maturities of Long-Term Debt $ 600 $ 504
Accounts Payable and Accrued Expenses 14,276 12,376
____________ __________
Total Current Liabilities 14,876 12,880
Long-Term Debt (Note 3) 118,708 115,143
Deferred Income Taxes 11,090 13,140
Accrued Self Insurance Liability (Note 2) 822 911
____________ __________
Total Liabilities 145,496 142,074
____________ __________
Stockholders' Equity (Deficit)
Common; $.001 Par Value; Authorized 20,000,000
Shares, Issued September 30, 1995 and June 30,
1995 -- 14,291,020 Shares 14 14
Common Stock Purchase Warrants 1,227 1,227
Additional Paid-In Capital 27,279 27,279
Retained Earnings 19,284 22,509
____________ _________
47,804 51,029
Treasury Stock at Cost
September 30, 1995 and June 30, 1995
12,711,795 Shares (87,975) (87,975)
_____________ ___________
Total Stockholders' Equity (Deficit) (40,171) (36,946)
_____________ ___________
Total Liabilities and Stockholders' Equity
(Deficit) $ 105,325 $ 105,128
_____________ ___________
_____________ ___________
See Notes to Condensed Consolidated Financial Statements
<PAGE>
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EMPIRE GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(In Thousands, Except Per Share Amounts)
1995 1994
__________ __________
Operating Revenue $ 12,483 $ 12,033
Cost of Product Sold 5,657 5,616
__________ _________
Gross Profit 6,826 6,417
__________ _________
Operating Costs and Expenses
General and Administrative 6,269 6,256
Depreciation and Amortization 1,527 1,366
__________ __________
7,796 7,622
__________ _________
Operating Loss (970) (1,205)
___________ __________
Other Expense
Interest Expense, Net (2,625) (2,705)
Amortization of Debt Discount
and Expense (1,330) (1,185)
___________ __________
(3,955) (3,890)
___________ __________
Loss Before Income Taxes (4,925) (5,095)
Credit for Income Taxes (1,700) (1,800)
___________ __________
Net Loss $ (3,225) $ (3,295)
___________ __________
___________ __________
Loss Per Common Share $ (2.04) $ (2.09)
___________ __________
___________ __________
See Notes to Condensed Consolidated Financial Statements<PAGE>
<PAGE> 5 of 14
EMPIRE GAS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(In Thousands)
1995 1994
__________ ___________
Cash Flows From Operating Activities
Net loss $ (3,225) $ (3,295)
Items not requiring (providing) cash
Depreciation 1,268 1,132
Amortization 1,589 1,419
Gain on sale of assets (757) (68)
Deferred income taxes (2,400) (1,000)
Changes In:
Trade receivables (1,344) (667)
Inventories (1,963) (3,664)
Prepaid expense & other (706) (639)
Accounts payable & accrued expenses 2,453 3,963
Checks in process of collection 19 (3,262)
__________ _________
Net cash used in operating activities (5,066) (6,081)
_______ _______
Cash Flows From Investing Activities
Purchase of property & equipment (1,266) (3,960)
Acquisition of retail service centers (349)
Proceeds from sales of property & equipment 254 252
Disposal of retail service centers 4,498
_______ _______
Net cash provided by (used in)
investing activities 3,137 (3,708)
_______ _______
Cash Flows From Financing Activities
Increase in working capital financing 2,155 6,890
Principal payments on other long-term debt (67) (26)
_____ ______
Net cash provided by financing activities 2,088 6,864
_____ _____
INCREASE (DECREASE) IN CASH 159 (2,925)
_______ _____
CASH, BEGINNING OF PERIOD 821 2,927
_____ _____
CASH, END OF PERIOD $ 980 $ 2
_____ _____
_____ _____
See Notes to Condensed Consolidated Financial Statements
<PAGE>
<PAGE> 6 of 14
EMPIRE GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(1) In the opinion of Management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly Empire Gas Corporation's condensed consolidated
financial position as of September 30, 1995, and the condensed
consolidated results of its operations and cash flows for the periods
ended September 30, 1995 and 1994. All such adjustments are of a
normal recurring nature.
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements in the 1995 Annual
Report on Form 10-K.
On August 15, 1995, the Company entered into a joint venture with
Northwestern Growth Corporation, a subsidiary of Northwestern Public
Service Company, to acquire the assets of Synergy Group Incorporated,
the nation's fifth largest LP gas distributor. The Company has
acquired, for $10,000, 10% of the common stock of SYN Inc., the
acquisition entity, and in October 1995 exercised an option to acquire
an additional 20% of the common stock for $20,000. The Company has
entered into a Management Agreement pursuant to which the Company
provides all management of the retail facilities and accounting
services at the central office. In exchange for those services, the
Company receives a $500,000 annual management fee and a $3.25 million
annual overhead cost reimbursement both paid on a monthly basis.
The results of operations for the three-month period ended
September 30, 1995, are not necessarily indicative of the results to be
expected for the full year due to the seasonal nature of the Company's
business.
(2) The Company reports the following contingencies. Except as noted,
there have been no significant changes in these items since reports in
the Company's 1995 Annual Report on Form 10-K.
Under the Company's current insurance program, coverage for
comprehensive general liability, workers' compensation and vehicle
liability is obtained for catastrophic exposures as well as those risks
required to be insured by law or contract. The Company retains a
significant portion of certain losses related primarily to
comprehensive general and vehicle liability. Under the current general
liability insurance program, the Company self-insures the first $1
million of coverage (per incident). For the current vehicle liability
program, the Company self-insures the first $500,000 of coverage (per
incident). The Company obtains excess coverage from insurance carriers
for these programs on claims-made basis policies. The excess coverage
for comprehensive general liability provides a loss limitation that
limits the Company's aggregate of self-insured losses to $1 million per
policy period. After the Company's losses have exceeded the $1 million
aggregate, the Company has a $500,000 deductible per incident.
Provisions for self-insured losses are recorded based upon the
Company's estimates of the aggregate self-insured liability for claims
incurred.
<PAGE> 7 of 14
EMPIRE GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Prior to July 1, 1995, the Company self-insured $500,000 per incident
under its comprehensive general liability insurance program. Also, the
deductible for losses in excess of the $1 million aggregate was
previously $100,000 per incident. Under the Company's previous vehicle
liability insurance program, the self-insured retention was $250,000
per incident.
The Company and its subsidiaries are defendants in various lawsuits
related to the self-insurance program which are not expected to have a
material adverse effect on the Company's financial position or results
of operations.
Interim accruals for the cost of self insurance are based on an
estimate of the related annual costs compared to the estimated total
gallons of propane to be sold during the same period. Presently, the
resulting accrual rate of expense recognizing self insurance is 4.0
cents per gallon sold.
The Company currently self insures health benefits provided to the
employees of the Company and its subsidiaries. Provisions for losses
expected under this program are recorded based upon the Company's
estimate of the aggregate liability for claims incurred.
The Company has no federal income tax audits in process at
September 30, 1995. The Company and its subsidiaries are presently
involved in various state income tax audits and are also defendants in
other business-related lawsuits which are not expected to have a
material adverse effect on the Company's financial position or results
of operations.
In conjunction with the restructuring transaction that occurred in June
1994 between the Company and Empire Energy, the two companies have
agreed to share on a percentage basis the self-insured liabilities and
amounts incurred related to federal and state tax audits prior to
June 30, 1994. Under the agreement, the Company will assume 52.3% of
the liability with Empire Energy assuming the remaining 47.7%. These
liabilities, which are included in the Company's financial statements
at September 30, 1995, represent 52.3% of the total liability as of
that date.
(3) In June 1994 the Company repaid its existing term credit facility and
revolving credit facility with the proceeds from the issuance of
$127,200,000 face value 12 7/8% Senior Secured Notes, due 2004. These
debentures were issued at a discount and bear interest at 7% through
July 15, 1999, and at 12 7/8% thereafter.
The Company entered into a new revolving credit facility with a lender.
All of the Company's receivables and inventories are pledged to the
agreement which contains working capital, capital expenditure, debt and
certain dividend restrictions. These dividend restrictions prohibit
the Company from paying common stock cash dividends.
<PAGE> 8 of 14
The facility provides for borrowings up to $15 million, subject to a
sufficient borrowing base. The borrowing base generally limits the
Company's total borrowings to 85% of eligible accounts receivable and<PAGE>
<PAGE> 9 of 14
EMPIRE GAS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(Unaudited)
55% of eligible inventory. In addition, the Company can borrow an
additional $1.5 million during the period August 1, 1995, to
January 31, 1996 (overadvance option). The facility bears interest at
either 1% over prime or 2.5% over the LIBOR rate. The agreement
provides for a commitment fee of .375% per annum of the unadvanced
portion of the commitment. The Company's available borrowings under
the revolving credit line amounted to $1.5 million at September 30,
1995, after considering $1,142,795 of outstanding net letters of
credit.
(4) Additional Cash Flow Information (In Thousands)
Additional Cash Payment Information 1995 1994
___________________________________ ____ ____
Interest paid $ 4,552 $ 741
Income taxes paid (net of refunds) $ 29 $(1,395)
Noncash Investing and Financing Activities
__________________________________________
Mortgage obligations incurred on the
acquisition of retail service centers $ 400 $ 315
Note receivable generated by the
disposal of retail service center $ 148 $ --
<PAGE>
<PAGE> 10 of 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition and Liquidity
_________________________________
The following table is presented as a measure of the Company's liquidity and
financial condition.
September 30, June 30,
____________________ ________________
1995 1994 1995 1994
__________ _________ _________ ______
(In thousands except ratio)
Total long-term debt $119,308 $113,820 $115,647 $105,612
(including current
maturities)
Working capital $ 3,260 $7,911 $1,636 $6,313
Current ratio 1.22 1.72 1.13 1.59
During the three months ended September 30, 1995, the Company's working
capital increased approximately $1.6 million. The increase was due
primarily to increases in inventories, accounts receivable, and prepaid
expenses which were financed with borrowing on the Company's revolving
credit facility which is classified as long-term debt in the amount of $2.3
million. This increase was offset by approximately $700,000 due to the
accrual of income taxes payable and sales of current assets related to the
sale of retail service centers described below and the reclassification of
additional long-term debt to current maturities.
The increase in long-term debt of approximately $3.7 million from June 30,
1995, to September 30, 1995, was attributable to $2.3 million of increased
working capital described above plus the Company financed its approximate
$3.0 million loss before income taxes (after adjustment for non-cash
expenses and gains) with borrowings on its revolving credit facility. In
addition the Company increased long-term debt by $1.2 million due to the
amortization of original issue discount on the Company's Senior Secured
Notes.
The above increases in long-term debt were offset by the sale of 12 retail
service centers and other assets generating cash of $4.8 million offset by
the purchase of one retail service center and other purchases of property
and equipment which used cash and increased long-term debt by $2.0 million.
Pursuant to the 12 7/8% Senior Secured Notes, the Company is required to
make a $4.5 million interest payment on January 15, 1996. The Company
intends to meet the interest payment requirement through operating cash
flows and borrowings on its revolving credit facility. Historically,
operating income increases during the second quarter as the winter selling
season begins. Cash flow does not necessarily increase proportionally as
increased investment in inventory and accounts receivable is generally
required. However, these increases in inventory and accounts receivable
increase the Company's borrowing base for the revolving credit facility.
<PAGE>
<PAGE> 11 of 14
Results of Operations
_____________________
Due to the seasonal nature of the Company's business, the Company usually
realizes a net operating loss the first quarter. Operating revenues are not
indicative of a full fiscal year's operations because of the seasonal
element. Other expense items such as depreciation and general and
administrative expenses, however, generally continue on a more annualized
basis. Interest expense also continues on a more level basis although
interest expense is generally higher during the summer and fall months due
to increased working capital borrowings used to finance inventory purchases
in preparation for the Company's principal sales months.
During the first quarter of fiscal 1996, the Company completed the
acquisition of one retail service center located in Michigan. This service
center was purchased for $349,000 in cash and $400,000 in new mortgages.
During the first quarter of fiscal 1996, the Company divested itself of 12
marginally profitable retail service centers for approximately $4.5 million
in cash and $148,000 in promissory notes with $160,000 held in escrow until
the completion of certain contract requirements.
Operating revenues for the first quarter of fiscal 1996 increased
approximately $500,000 as compared to the same period of the prior year.
The increase was due to an increase of approximately $700,000 in other
revenues from gains realized on the sales of marginally profitable retail
service centers described above. This increase was partially offset by
approximate decreases of $100,000 in both propane sales and other sales.
The decrease in propane sales is due to a 5% decrease in gallons sold
resulting from the divestiture of retail centers noted above and slightly
warmer weather partially offset by a $.02 per gallon increase in the average
net sales price. The decrease in other sales is due to reduced sales of
parts and appliances.
The gross profit for the quarter increased by approximately $400,000, as
compared to the same period of the prior year. The increase is due to an
approximately $700,000 increase in other revenues described above. This
increase was partially offset by an approximate $300,000 decrease in propane
sales margin. The decrease in propane sales margin is due to the 5%
decrease in gallons sold noted above, combined with an approximate $.01 per
gallon decrease in the average net margin per gallon.
General and administrative expenses were similar when compared to the same
period of the prior year. The increases of $400,000 in salaries and
commissions, $100,000 in rent and maintenance, and $200,000 in travel and
entertainment were offset by overhead reimbursement income of approximately
$700,000. The increases of these expenses are due to the additional costs
incurred and personnel hired necessary to manage SYN Inc.
Interest expense decreased approximately $100,000 during the first quarter
of fiscal year 1996, as compared to the same period of the prior year. The
decrease is due to reduced other interest expense related to the retirement
of debt in conjunction with the restructuring transaction of June 1994.
<PAGE>
<PAGE> 12 of 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
___________________________
Reference is made to Note 2 of the Condensed Consolidated Financial
Statements.
Items 2, 3, 4 and 5.
____________________
No information is reportable under these sections.
Item 6. Exhibits and Reports on Form 8-K
__________________________________________
(a) Exhibits
Exhibit
No. Description
_______ ______________________________
(10) Amendment No. 1 to Loan and Security
Agreement and Amendment No. 2 to Supplement
A to Loan and Security Agreement dated
September 28, 1995
(27) Financial Data Schedule
(b) Reports on Form 8-K.
None
<PAGE>
<PAGE> 13 of 14
Reviewed by Independent Certified Public Accountants
____________________________________________________
The September 30, 1995, financial statements included in this filing on
Form 10-Q have been reviewed by Baird, Kurtz & Dobson, Independent Certified
Public Accountants, in accordance with established professional standards
and procedures for such a review. The report of Baird, Kurtz & Dobson
commenting upon their review is appended hereto.
SIGNATURE
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.
EMPIRE GAS CORPORATION
Registrant
/s/ Willis D. Green
____________________________________
WILLIS D. GREEN
VICE PRESIDENT/CONTROLLER
DATE: November 14, 1995
<PAGE>
<PAGE> 14 of 14
Independent Accountants' Report
_______________________________
Board of Directors and Stockholders
Empire Gas Corporation
Lebanon, Missouri
We have reviewed the accompanying condensed consolidated balance sheet
of EMPIRE GAS CORPORATION AND SUBSIDIARIES as of September 30, 1995, and the
related condensed consolidated statements of operations and cash flows for
the three-month periods ended September 30, 1995 and 1994. These condensed
consolidated financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the condensed
consolidated financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of June 30, 1995, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the year then ended (not presented herein); and
in our report dated August 25, 1995, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet as of
June 30, 1995, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
BAIRD, KURTZ & DOBSON
Springfield, Missouri
November 10, 1995
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
AND AMENDMENT NO. 2 TO SUPPLEMENT A TO
LOAN AND SECURITY AGREEMENT
September 28, 1995
Empire Gas Corporation
1700 South Jefferson Street
Lebanon, Missouri 65536
Attn: Valeria Schall
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement (as
amended and supplemented, the "Loan Agreement"), dated as of June 29, 1994
among Empire Gas Corporation ("Borrower"), the Lenders party thereto (the
"Lenders") and Bank of America Illinois, f/k/a Continental Bank, f/k/a
Continental Bank N.A., as a Lender and as Agent for the Lenders ("BAI").
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings ascribed to such terms in the Loan Agreement.
Borrower has requested that Lenders agree to retroactively
(i) amend Section 5.18(a) of the Loan Agreement to permit advances to
certain employees, which advances will be reduced to be in compliance with
Section 5.18, as amended hereby, prior to October 31, 1995, (ii) increase
the amount of capital expenditures permitted to be made by Borrower during
the 1995 Fiscal Year pursuant to Section 6.2 of Supplement A to the Loan
Agreement ("Supplement A"), and (iii) amend the Interest Coverage Ratio
contained in Section 6.3 of Supplement A. Lenders have agreed to the
foregoing on the terms, and pursuant to the conditions, contained herein,
including without limitation the condition that Borrower agrees to amend the
Loan Agreement to require Borrower to obtain the prior written consent of
requisite Lenders before consummating any Acquisition.
Therefore, the parties hereto agree as follows:
1. Amendment to Loan Agreement. The Loan Agreement is
hereby amended, retroactively effective as of June 30, 1995, as follows:
(a) Section 5.12. Section 5.12 of the Loan Agreement
is hereby amended to add a new subsection (d) thereto, which shall
be inserted immediately following IS subsection (c) therein and
immediately prior to the semicolon therein, and shall read as
follows:
"or (d) purchase or otherwise acquire, or agree to purchase
or otherwise acquire, any of the stock, assets or business
of any Person (including without limitation by means of an
Acquisition)"
<PAGE> 2 of 4
(b) Section 5.15. Subsection (h) of Section 5.15 of
the Loan Agreement is hereby amended and restated in its entirety to
read as follows:
"(h) 'Acquisition Indebtedness' as that term is defined in
the Senior Loan Documents in the aggregate principal amount
outstanding as of September 28, 1995,"
(c) Section 5.18. Subsection (a) of Section 5.18 of
the Loan Agreement is amended and restated in its entirety to read
as follows:
"(a) advances not exceeding $72,000 to each of Jerry
Mulligan, Daniel Binning and Kenneth DePrinzio which do not
remain outstanding in an amount which exceeds the limits set
forth below after October 31, 1995 (the "Agreed Loans") and
advances to other employees of Borrower or employees of any
of the Subsidiaries for travel or other ordinary business
expenses, provided that, the aggregate amount of such
advances (other than the Agreed Loans prior to October 31,
1995) outstanding at any one time shall not exceed $25,000
for any single employee and $75,000 in the aggregate for all
employees;"
2. Amendment to Supplement A. Supplement A is hereby
amended, retroactively effective as of June 30, 1995, as follows:
(a) Section 6.2. Section 6.2 of Supplement A is hereby
amended and restated in its entirety as follows:
"6.2 Capital Expenditures. Borrower will not purchase or
otherwise acquire (including, without limitation,
acquisition by way of Capitalized Lease), or commit to
purchase or otherwise acquire or permit its Subsidiaries to
purchase or otherwise acquire or commit to purchase or
otherwise acquire, any fixed asset if, after giving effect
to such purchase or other acquisition, the aggregate cost of
all fixed assets purchased or otherwise acquired by Borrower
or its Subsidiaries in any Fiscal Year period set forth
below, other than in connection with a startup or an
Acquisition permitted under the Agreement, would exceed the
following amounts during the corresponding periods:
Period Capital Expenditures
1995 Fiscal Year $4,200,000
1996 Fiscal Year 3,000,000
1997 Fiscal Year 3,000,000"
(b) Section 6.3. The first paragraph of Section 6.3 of
Supplement A to the Loan and Security Agreement is hereby amended
and restated in its entirety, as follows:
<PAGE> 3 of 4
"6.3 Interest Coverage Ratio. Borrower will not
permit the ratio ("Interest Coverage Ratio") of (a) net
earnings before interest expense, income tax expense,
depreciation and amortization to (b) cash interest expense
in respect of Indebtedness under the Agreement, in respect
of the Senior Notes, in respect of Subordinated Debt and in
respect of Acquisition Indebtedness, in each case measured
on the last day of any calendar month in any period set
forth below, calculated for the 12 months ending on such
date, and determined for Borrower and its Subsidiaries on a
consolidated basis, and in accordance with GAAP, to be less
than the ratio set forth below opposite such period:
Interest Coverage
Period Ratio
June 1, 1995 through and 0.8:1.0
including September 30, 1995
October 1, 1995 through and 0.9:1.0
including October 31, 1995
November 1, 1995 through and 1.0:1.0
including December 31, 1995
January 1, 1996 through and 1.1:1.0
including February 29, 1996
March 1, 1996 through and 1.2:1.0
including May 31, 1996
June 1, 1996 and thereafter 1.4:1.0"
3. Scope. This Amendment No. 1 to Loan and Security
Agreement and Amendment No. 2 to Supplement A to Loan and Security Agreement
("Amendment") shall have the effect of amending the Loan Agreement,
Supplement A and the Related Agreements as appropriate to express the
agreements contained herein. In all other respects, the Loan Agreement,
Supplement A and the Related Agreements shall remain in full force and
effect in accordance with their respective terms.
4. Condition to Effectiveness. This Amendment shall
be effective immediately upon (i) receipt by BAI of an amendment fee of
$10,000, which fee is fully earned and payable as of the date hereof and
(ii) the execution of this Amendment by BAI, on behalf of the Lenders,
acceptance hereof by Borrower and each other Obligor, and delivery hereof to
BAI at 231 South LaSalle Street, Chicago, Illinois 60690, Attention: Mark
Cordes, on or prior to September 28, 1995.
Very truly yours,
BANK OF AMERICA ILLINOIS,
f/k/a CONTINENTAL BANK,
f/k/a CONTINENTAL BANK, N.A.,
ON BEHALF OF THE LENDERS
By /s/ John P. Hasselmann
_____________________________
Its Sr. Vice President
_______________________
<PAGE> 4 of 4
Acknowledged and agreed to this
28th day of September, 1995.
EMPIRE GAS CORPORATION
By /s/ Paul S. Lindsey, Jr.
__________________________
Its President
______________________
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000922404
<NAME> EMPIRE GAS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 980
<SECURITIES> 0
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0
0
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</TABLE>
