THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO
RULE 901(d) OF REGULATION S-T
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report under section 13 or 15(d)
of the Securities Exchange Act of 1934
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File number 0-14183
ENERGY WEST INCORPORATED
(Exact name of registrant as specified in its charter)
Montana 81-0141785
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 First Avenue South, Great Falls, Mt. 59401
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code (406)-791-7500
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 latest practicable date.
Class Outstanding at December 31, 1996
(Common stock, $.15 par value) 2,357,034
ENERGY WEST INCORPORATED
INDEX TO FORM 10-Q
Page No.
Part I - Financial Information
Item 1 - Financial Statements
Condensed consolidated balance sheets as of
December 31, 1996 and June 30, 1996 1
Condensed consolidated statements of income -
three months and six months ended December 31,
1996 and 1995 2
Condensed consolidated statements of cash
flows - six months ended December 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial Statements 4-8
Item 2 - Management's discussion and analysis of
financial condition and results of operations 9-14
Part II Other Information
Item 1 - Legal Proceedings 15
Item 2 - Changes in Securities 15
Item 3 - Defaults upon Senior Securities 15
Item 4 - Submission of Matters to a Vote of Security
Holders 15
Item 5 - Other Information 15
Item 6 - Reports on Form 8-K 15
Signatures
***********************************************************************
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating
results for the six month period ended December 31, 1996 are not
necessarily indicative of the results that may be expected for
the year ended June 30, 1997 due to seasonal factors affecting
gas utility, construction and other operations. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Energy West Incorporated
(the Company) annual report on Form 10-K for the year ended June 30,
1996.
***********************************************************************
Note 2 - Earnings Per Common and Common Equivalent Share
Earnings per common share are computed based on the weighted
average number of common shares issued and outstanding and common
stock equivalents, if dilutive.
***********************************************************************
Note 3 - Principle Accounting Policies
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 121,
"Accounting for the Impairment of Long--Lived Assets and for Long-
Lived Assets to be Disposed Of, " effective for financial statements
for fiscal years beginning after December 15, 1995. SFAS No. 121
requires that long-lived assets and certain identifiable intangibles
to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable and long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower
of carrying amount or fair value less cost to sell. SFAS No. 121
also established the procedures for review of recoverability, and
measurement of impairment if necessary, of long-lived assets and
certain identifiable intangibles to be held and used by an entity.
The financial effect of adopting the new standard are not expected
to be material to the Company's financial position or operations.
SFAS No. 123, Accounting for Stock-Based Compensation, was issued in
October 1995. This standard addresses the timing and measurement of
stock-based compensation expense. The Company has elected to retain
the approach of Accounting Principles Board Opinion ("APB") No. 25,
Accounting for Stock Issued to Employees (the intrinsic value
method), for recognizing stock-based expense in the consolidated
financial statements. The Company will adopt SFAS No. 123 effective
with the year ended June 30, 1997, with respect to the disclosure
requirements set forth therein for companies retaining the intrinsic
value approach of APB No. 25.
***********************************************************************
Note 4 - Gain on Sale of Assets
On June 28, 1996, one of the Company's nonregulated subsidiaries
sold real property, consisting of land and office and warehouse
buildings, for $525,000 in cash. Concurrent with the sale, the
Company leased the property back for a period of ten years at an
annual rental of $51,975. The initial ten-year term of the lease is
extended for two successive five-year periods unless the Company
provides at least six months notice prior to the end of either the
initial term or the first successive five-year term.
***********************************************************************
Note 5 - Financial Instruments and Risk Management
During 1996, the Company was a party to gas financial swap
agreements for its regulated operations. Under these agreements,
the Company is required to pay the counter party (an entity making
a market in gas futures) a cash settlement equal to the excess of
the stated index price over an agreed upon fixed price for gas
purchases. The Company receives cash from the counter party when
the stated index price falls below the fixed price. These swap
agreements are made to minimize exposure to gas price fluctuations.
Any cash settlements or receipts are included in gas purchased. At
June 30, 1996, the Company had one swap agreement in place to hedge
5,000 MMBTU of its daily gas purchases through October 31, 1996.
Beginning on September 1, 1996, the Company is a party to two gas
swap agreements, for its nonregulated operations, to hedge 4,400
MMBTU of its daily gas purchases. This contract represents
approximately 92% of the supply required for the Company's customers
who have selected fixed price service. The hedges were made to
minimize the Company's exposure to price fluctuations and to secure
a known margin for the purchase and resale of gas in marketing
activities.
Beginning on January 1, 1997, the Company has hedged 100% of the
Liquid Natural Gas feedstock required for the load of the West
Yellowstone Gas operation.
***********************************************************************
Note 6 - Income Taxes
Under the liability method prescribed by SFAS No. 109, deferred
income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and amounts used for income tax
purposes. At December 31, 1996, components of the Company's
deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Allowance for doubtful accounts.............................. $44,124
Unamortized Investment Tax Credit............................ 162,343
Contributions in Aid of Construction......................... 134,722
Other nondeductible accruals................................. 164,041
-------
Total deferred tax assets................................. 505,230
-------
Deferred tax liabilities:
Customer refunds payable..................................... 713,061
Property, Plant and Equipment.............................. 2,983,923
Unamortized Debt Issue Costs................................. 194,539
Covenant Not to Compete....................................... 86,920
---------
Total deferred tax liabilities.......................... 3,978,443
----------
Net deferred tax liability.................................. $3,473,213
==========
Income tax expense consists of the following:
Current income taxes (benefits):
Federal................................................... ($256,415)
State....................................................... (39,259)
----------
Total current income taxes (benefits)......................... (295,674)
----------
Deferred income taxes (benefits):
Excess tax depreciation.................................... 138,939
Excess tax (book) amortization............................... (9,217)
Recoverable cost of gas purchases.......................... 313,806
Regulated Assets.............................................. 1,056
Other........................................................ (8,427)
--------
Total deferred income taxes................................... 436,157
Investment tax credit, net..................................... (10,531)
--------
Total income taxes (benefits)................................. $129,952
=========
Income tax expense from operations differs from the amount computed
by applying the federal statutory rate to pre-tax income for the
following reasons:
Tax expense (benefit) at statutory rates - 34%................ $140,087
State income taxes (benefit), net of federal income taxes....... (1,654)
Amortization of deferred investment tax credits................ (10,531)
Other............................................................ 2,050
--------
Total income taxes (benefits)................................. $129,952
=========
***********************************************************************
Note 7 - Commitments and Contingencies
Commitments
The Company has entered into long-term, take or pay natural gas
supply contracts which expire beginning in 1997 and ending in
2005. The contracts generally require the Company to purchase
specified minimum volumes of natural gas at a fixed price
which is subject to renegotiating every two years. Current
prices per Mcf for these contracts range from $1.17 to $1.85.
Based on current prices, the minimum take or pay obligation at
December 31, 1996 for each of the next five years and in total is
as follows:
Fiscal Year
1997 $1,725,000
1998 1,725,000
1999 1,100,000
2000 955,000
2001 955,000
Thereafter 1,750,000
-----------
Total $ 8,210,000
===========
Natural gas purchases under these contracts for the years ended June
30, 1996, 1995 and 1994 approximated $5,520,000, $6,203,000, and
$6,091,000, respectively.
On July 1, 1996, the Company entered into a take or pay propane
contract which expires June 30, 1997. The contract generally
requires the Company to purchase all propane quantities produced by
a propane producer in Wyoming (approximately 182,500 gallons per
month) tied to the Billings, Montana spot price.
Environmental Contingency
The Company owns property on which it operated a manufactured gas
plant from 1909 to 1928. The site is currently used as a service
center and to store certain equipment and materials and supplies.
The coal gasification process utilized in the plant resulted in the
production of certain by-products which have been classified by the
federal government and the state of Montana as hazardous to the
environment. After management became aware of the potential of
contamination on this site, it initiated an assessment of the
property through the assistance of a qualified consulting firm.
That assessment revealed the presence of certain hazardous material
in quantities exceeding tolerances established for such material by
regulatory authorities. After making required notifications of that
condition to federal and state regulatory authorities, a report
summarizing the assessment was filed with the State of Montana
Department of Health and Environmental Science ("MDHES").
Subsequent to that submittal a meeting was held with a
representative of the MDHES wherein a process was agreed upon to
arrive at appropriate remediation of the site. The costs incurred
by the Company to date approximate $347,000 and have been
capitalized as other deferred charges. Until further work is done
regarding remediation alternatives, no further estimate of the costs
of remediation can be made. However, management believes that
regardless of the alternative selected, the costs incurred will not
materially affect the Company's financial position.
The Company received formal approval from the Montana Public Service
Commission to recover certain costs associated with the cleanup of
this site. The Company has begun recovery of costs incurred at June
30, 1995 over two years through a surcharge in billing rates
effective July 1, 1995. Management intends to request, that future
costs be recovered over a similar time period. The total of
recoveries collected through December 31, 1996 is $294,000.
***********************************************************************
Note 8 - Operating Revenues and Expenses,
Regulated utility and non-regulated non-utility operating
revenues and expenses were as follows:
Three Months Six Months
Ended Ended
December 31 December 31
1996 1995 1996 1995
Operating Revenues:,
Regulated utilities $8,891,733 $7,060,020 $11,769,113 $9,717,764
Non-regulated operations 3,064,822 1,140,256 4,107,577 1,812,668
Gas Trading 1,719,415 1,440,204 2,376,761 2,026,974
----------- ----------- ----------- -----------
$13,675,970 $9,640,480 $18,253,451 $13,557,406
=========== =========== =========== ===========
Operating Expenses:
Gas Purchased:
Regulated $5,362,439 $4,071,795 $6,792,383 $5,316,937
Non-regulated 2,272,886 620,045 2,956,905 927,734
Cost of gas trading 1,665,813 1,271,188 2,254,161 1,778,298
----------- ----------- ----------- -----------
$9,301,138 $5,963,028 $12,003,449 $8,022,969
=========== =========== =========== ===========
Distribution, general
and administrative:
Regulated $1,583,982 $1,386,178 $3,130,946 $2,841,839
Non-regulated 407,240 318,316 781,958 635,596
----------- ----------- ----------- -----------
$1,991,222 $1,704,494 $3,912,904 $3,477,435
=========== =========== =========== ===========
Maintenance:
Regulated $99,038 $65,091 $177,000 $140,119
Non-regulated 25,752 16,846 49,243 32,731
----------- ----------- ----------- -----------
$124,790 $81,937 $226,243 $172,850
=========== =========== =========== ===========
Depreciation and
amortization:
Regulated $376,111 $345,651 $749,894 $678,973
Non-regulated 86,314 96,314 177,672 189,192
----------- ----------- ----------- -----------
$462,425 $441,965 $927,566 $868,165
=========== =========== =========== ===========
Taxes other than income:
Regulated $153,540 $113,353 $273,886 $240,859
Non-regulated 31,990 31,575 57,607 69,639
----------- ----------- ----------- -----------
$185,530 $144,928 $331,493 $310,498
=========== =========== =========== ===========
Income taxes:
Regulated $362,164 $316,652 $18,047 $14,375
Non-regulated 143,184 87,953 111,905 73,127
----------- ----------- ----------- -----------
$505,348 $404,605 $129,952 $87,502
=========== =========== =========== ===========
***********************************************************************
FORM 10-Q
ENERGY WEST INCORPORATED
Item 2 -
Management's Discussion and Analysis of Interim Financial Statements
--------------------------------------------------------------------
The following discussion reflects results of operations of the
Company and its consolidated subsidiaries for the periods
indicated. The Company's utility operations are conducted
through its Great Falls division, which includes Great Falls Gas
Company, Cascade Gas Company and West Yellowstone Gas Company in
Montana, its Cody division in Cody, Wyoming and the Broken Bow
division in Payson, Arizona. The Company installed an underground
natural gas system in the town of West Yellowstone, Montana, which
became operational in the Spring of 1995.
The Company conducts certain non-utility operations through its
three wholly-owned subsidiaries: Rocky Mountain Fuels, Inc.
(RMF), a distributor of bulk propane in northwestern Wyoming,
Cascade, Montana and the Payson, Arizona areas; Energy West
Resources, Inc. (formerly Vesta, Inc.), which is engaged in oil
and gas development and gas marketing in Montana and Wyoming, and
Montana Sun, Inc., which owns one commercial property and one parcel
of undeveloped land in Great Falls, Montana.
Liquidity and Capital Resources
-------------------------------
The Company's operating capital needs, as well as dividend payments
and capital expenditures, are generally funded through cash
flow from operating activities, short-term borrowing and
liquidation of temporary cash investments. Historically, to the
extent cash flow has not been sufficient to fund capital
expenditures, the Company has borrowed short-term. To the extend
short-term borrowing is used to finance capital projects it is
refinanced with long-term debt or equity when economically feasible.
The Company's short-term borrowing requirements vary according to
the seasonal nature of its sales and expense activity. The
Company has greater need for short-term borrowing during periods
when internally generated funds are not sufficient to cover all
capital and operating requirements, including costs of gas
purchases and capital expenditures. In general, the Company's
short-term borrowing needs for purchases of gas inventory and
capital expenditures are greatest during the summer and fall.
This past fiscal year and during this first six months of Fiscal
1997, the Company used short-term borrowing for construction of the
natural gas system in West Yellowstone, Montana and expansion of its
natural gas systems in Great Falls, Montana, Cody, Wyoming and
Payson, Arizona as well as increasing its natural gas and propane
inventory. Short-term borrowing utilized for construction or
property acquisitions generally are replaced by permanent
financing when it becomes economical and practical to do so. At
December 31, 1996, the Company had a $13,000,000 bank line of
credit, of which $10,652,000
had been borrowed.
The Company used net cash in operating activities for the six
months ended December 31, 1996 in the amount of $2,236,000 as
compared to $4,199,000 for the six months ended December 31, 1995.
This decrease in cash used in operating activities was primarily due
to lower working capital requirements of approximately $1,600,000 ,
from lower incentives paid out this year, lower income tax deposits
required this year, lower working capital requirements for West
Yellowstone expansion and lower payments to employee benefit plans
and materials and supplies, partially offset by an increase in
utility unrecovered gas costs of approximately $68,000 due to
higher than anticipated gas commodity prices. In addition higher
net income of approximately $95,000 than one year ago and higher
depreciation and amortization of approximately $174,000 reduced cash
used in operating activities. Cash used in investing activities
was approximately $1,542,000 for the six months ended December 31,
1996, as compared to approximately $2,160,000 for the six months
ended December 31, 1995, primarily due to lower construction
expenditures for capital projects. Cash provided by financing
activities was approximately $2,925,000 for the six months ended
December 31, 1996, as compared to approximately $6,235,000 for the
six months ended December 31, 1995. The decrease in cash provided
by financing activities resulted primarily from a decrease in
short-term borrowing of approximately $1,800,000 and an increase in
the repayment of short-term debt of approximately $1,500,000.
Capital expenditures of the Company are primarily for expansion
and improvement of its gas utility properties. To a lesser extent,
funds are also expended to meet the equipment needs of the
Company's operating subsidiaries and to meet the Company's
administrative needs. The Company's capital expenditures were
approximately $4.6 million in fiscal 1996 and approximately $4.7
million for fiscal 1995. During fiscal 1996, approximately $1.3
million has been expended for the construction of the natural gas
system in West Yellowstone, Montana and approximately $1 million had
been expended for gas system expansion projects for new subdivisions
in the Broken Bow division's service area and approximately $350,000
for additions to the office and the east storage site of Petrogas in
Payson, Arizona. Capital expenditures are expected to be
approximately $3.6 million in fiscal 1997, including approximately
$1.4 million for continued expansion in the Broken Bow division,
with the balance for maintenance and other system expansion projects
in the Great Falls and Cody divisions. As of December 31, 1996,
approximately $1,600,000 of that amount had been expended.
***********************************************************************
Results of Consolidated Operations
----------------------------------
Comparison of Second Quarter of Fiscal 1997 Ended December 31, 1996
and Fiscal 1996 Ended December 31, 1995
-------------------------------------------------------------------
The Company's net income for the second quarter ended December 31,
1996 was $916,664 compared to $651,846 for the quarter ended
December 31, 1995.
The increase in the 1997 net income was due primarily to an increase
in gross margins from gas sales and a one time capital gain on the
sale of a temporary cash investment, offset by increases in short-
term interest costs and depreciation costs, due to capital additions
and an increase in distribution, general, administrative and
maintenance expenses, due to inflation and less salaries being
capitalized to major projects than was the case one year ago.
Utility Operations -
--------------------
Utility operating revenues in the second quarter of fiscal 1997
were approximately $8,892,000 compared to $7,060,000 for the second
quarter of fiscal 1996. Gross Margin, which is defined as
operating revenues less gas purchased, was approximately $3,529,000
for the second quarter of fiscal 1997 compared to gross margin of
approximately $2,993,000 for the second quarter of fiscal 1996.
Gross margins increased 18% because of higher margins from natural
gas sales in the Great Falls and Cody divisions and in the West
Yellowstone area and higher margins from propane vapor sales in the
Broken Bow division, due to colder weather than one year ago and
customer growth in all utility operations, as well as a 1.87%
interim rate increase in the Great Falls division, effective
November 4, 1996, which contributed to increased margins by
approximately $112,000.
Operating Expenses -
Utility operating expenses, exclusive of the cost of gas purchased
and federal and state income taxes, were approximately $1,683,000
for the second quarter of fiscal 1997 as compared to $1,450,000 for
the same period in fiscal 1996. The 16% increase in the period is
generally due to normal inflationary trends and less payroll and
expenses capitalized to projects.
Interest Charges -
Interest charges allocable to the Company's utility divisions
were approximately $390,000 for the second quarter of fiscal
1997, as compared to $314,000 in the comparable period in fiscal
1996. Long term debt interest decreased , however, short term
interest increased primarily due to facility expansion and increases
in gas storage, which has been temporarily financed with short term
debt.
Income Taxes -
State and federal income taxes of the Company's utility divisions
were approximately $362,000 for the second quarter of fiscal 1997,
as compared to approximately $317,000 for the same period in fiscal
1996. The increase in income taxes was due to higher pre-tax
income of the utility divisions.
Non-Regulated Operations -
--------------------------
Rocky Mountain Fuels -
For the three months ended December 31, 1996, RMF generated net
income of approximately $150,000 compared to net income of
approximately $48,000 for the three months ended December 31, 1995.
Approximately $128,000 of RMF's net income for the second quarter
of fiscal 1997 was attributable to the Wyo L-P Gas division in
Wyoming, approximately $29,000 to the Petrogas division in Arizona,
with the balance of approximately ($6,000) net loss attributable to
Missouri River Propane in Montana. RMF's gross margins increased
approximately 54% or $262,000 for the three months ended December
31, 1996 compared to the same period last year primarily due to
increased wholesale propane sales in the Wyo L-P Gas division in
Wyoming. Margins this quarter increased in the Wyo L-P division
from approximately $2,000 to $147,000 for wholesale propane sales,
due to customer growth and weather and from approximately $283,000
to $358,000 for retail propane sales, due to colder weather than the
same quarter last year, and margins in the Petrogas division in
Arizona increased from approximately $128,000 to $152,000, while
Missouri River Propane in Montana margins remained relatively
similar to the same quarter one year ago, however RMF experienced
higher operating expenses, due to normal inflationary trends and
increased use of staff, from customer growth, as well as higher
short-term interest costs due to expansion of plant in Montana and
Wyoming, financed by short-term debt. State and federal income
taxes increased to approximately $82,000 for this quarter from
$23,000 last year, due to higher pre-tax income of Rocky Mountain
Fuels, Inc.
Energy West Resources, Inc. - (formerly Vesta, Inc.) -
For the three months ended December 31, 1996, Energy West Resources,
Inc.'s net income was approximately $23,000
compared to $83,000 for the three months ended December 31, 1995,
primarily due to lower gas trading margins. Gas trading margins
decreased approximately $115,000 or 68%due to increased natural gas
prices in Canada and Montana. State and federal income taxes
decreased this quarter to approximately $16,000 from $52,000 the
same quarter one year ago, due to lower pre-tax income of Energy
West Resources, Inc.
Montana Sun, Inc. -
For the three months ended December 31, 1996, Montana Sun, Inc.'s
net income was approximately $75,000 compared to $21,000 for the
three months ended December 31, 1995, due primarily to the sale of
temporary investments at a capital gain.
***********************************************************************
Results of Consolidated Operations
----------------------------------
Comparison of Six Months Ended December 31, 1996 and Fiscal 1996
Ended December 31, 1995
-----------------------------------------------------------------
The Company's net income for the first six months ended December
31, 1996 was $279,853 compared to $184,710 for the six months ended
December 31, 1995.
The increase in the 1997 net income was due primarily to an increase
in gross margins from natural gas and propane sales and a one time
capital gain on the sale of a temporary cash investment, offset by
increases in short-term interest costs and depreciation costs, due
to capital additions and an increase in distribution, general,
administrative and maintenance expenses, due to inflation and less
salaries being capitalized to major projects, than was the case one
year ago.
Utility Operations -
--------------------
Utility operating revenues in the first six months of fiscal 1997
were approximately $11,800,000 compared to approximately
$9,700,000 for the first six months of fiscal 1996. Gross Margin,
which is defined as operating revenues less gas purchased, was
approximately $5,000,000 for the first six months of fiscal 1997
compared to gross margin of approximately $4,400,000 for the first
six months of fiscal 1996. Gross margins increased 14% because of
higher margins from natural gas sales in the Great Falls and Cody
divisions and in the West Yellowstone area and higher margins from
propane vapor sales in the Broken Bow division, due to colder
weather than one year ago and customer growth in all utility
operations as well as a 1.86% interim rate increase in the Great
Falls division, effective November 4, 1996, which contributed to
increased margins by approximately $112,000.
Operating Expenses -
Utility operating expenses, exclusive of the cost of gas purchased
and federal and state income taxes, were approximately $3,300,000
for the first six months of fiscal 1997 as compared to $2,980,000
for the same period in fiscal 1996. The 11% increase in the period
is generally due to normal inflationary trends and less payroll and
other expenses capitalized to projects.
Interest Charges -
Interest charges allocable to the Company's utility divisions
were approximately $715,000 for the first six months of fiscal
1997, as compared to $539,000 in the comparable period in fiscal
1996. Long term debt interest decreased, however, short term
interest increased primarily due to facility expansion and increases
in gas storage, which has been temporarily financed with short term
debt.
Income Taxes -
The state and federal income taxes of the Company's utility
divisions were approximately $18,000 for the first six months of
fiscal 1997, as compared to approximately $14,000 for the same
period in fiscal 1996. The increase in income taxes was due to
higher pre-tax income of the utility divisions.
Non-Regulated Operations -
--------------------------
Rocky Mountain Fuels -
For the six months ended December 31, 1996, RMF generated net
income of approximately $59,000 compared to a net loss of
($15,000) for the six months ended December 31, 1995. About
$80,000 of RMF's net income for the first six months of fiscal
1997 was attributable to the Wyo L-P Gas division in Wyoming,
$2,000 to the Petrogas division in Arizona, with the balance of
($23,000) net loss attributable to Missouri River Propane in
Montana. RMF's gross margins increased approximately 32% or
$260,000 for the six months ended December 31, 1996 compared to the
same period last year, primarily due to increased wholesale propane
sales in the Wyo L-P Gas division in Wyoming. Margins this six
month period increased in the Wyo L-P division approximately
$158,000 or 32% for wholesale propane sales, due to customer growth
and weather and $39,000 or 8% for retail propane sale, due to
colder weather than the same six months last year, and margins in
the Petrogas division in Arizona increased from a year ago by
approximately $29,000 or 16% due to customer growth and weather,
while Missouri River Propane in Montana margins increased from a
year ago by approximately $12,000 or 63% due to weather and customer
growth, however RMF experienced higher operating expenses, due to
normal inflationary trends experienced and increased use of staff,
due to customer growth, as well as higher short-term interest costs
due to expansion of plant in Montana and Wyoming, financed by short-
term debt. State and federal income taxes increased to
approximately $30,000 for this six month period from( $14,000), an
income tax benefit last year, due to pre-tax income this year
versus a pre-tax loss last year in Rocky Mountain Fuels, Inc.
Energy West Resources, Inc. - (formerly Vesta, Inc.) -
For the six months ended December 31, 1996, Energy West Resources,
Inc.'s net income was approximately $49,000 compared to $113,000
for the six months ended December 31, 1995, primarily due to lower
gas trading margins. Gas trading margins decreased approximately
$126,000 or 51%due to increased natural gas prices in Canada and
Montana. State and federal income taxes decreased this six month
period to approximately $31,000 from $69,000 the same six month
period one year ago.
Montana Sun, Inc. -
For the six months ended December 31, 1996, Montana Sun, Inc.'s net
income was approximately $85,000 compared to $31,000 for the six
months ended December 31, 1995, due primarily to the sale of
temporary investments at a capital gain.
***********************************************************************
FORM 10-Q
Part II - Other Information
Item 1. Legal Proceedings - Not Applicable
Item 2. Changes in Securities - Not Applicable
Item 3. Defaults upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders -
Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
A. There are no exhibits to this report.
B. No reports on Form 8-K have been filed during the
quarter ended December 31, 1996.
***********************************************************************
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.
/s/Larry D. Geske
_______________________________
Larry D. Geske, President and
Chief Executive Officer
Dated February 13, 1997
/s/ William J. Quast
__________________________________
William J. Quast, Vice-President, Treasurer,
Controller and Assistant Secretary
I. FINANCIAL INFORMATION
Item 1. Financial Statements
FORM 10Q
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31 June 30
1996 1996
Current Assets:
Cash and Cash Equivalent $39,960 $893,301
Accounts Receivable (net) 7,972,283 3,486,328
Natural Gas and Propane Inventory 2,575,584 2,200,778
Materials and Supplies 458,002 543,316
Prepayments and other 697,515 602,427
Refundable Income Tax Payments 259,234 412,662
Recoverable Cost of Gas Purchases 1,760,338 953,392
Deferred income taxes - current 189,723 0
Total Current Assets 13,952,639 9,092,204
Investments 0 12,476
Notes Receivable Due After One Year 8,261 9,190
Property, Plant and Equipment-Net 26,828,883 26,089,830
Deferred Charges 3,123,152 2,290,973
Total Assets $43,912,935 $37,494,673
CAPITALIZATION AND LIABILITIES
Current Liabilities:
Note payable to bank $10,652,000 $7,175,000
Long-term debt due within one year 358,478 348,044
Accounts Payable - Gas Purchases 3,432,750 1,226,508
Other Current and Accrued Liabilities 2,387,791 2,338,011
Total Current Liabilities 16,831,019 11,087,563
Deferred Credits 5,768,318 4,821,148
Long-term Debt (less amounts due within on 9,685,474 10,045,714
Stockholders' Equity
Preferred Stock 0 0
Common Stock(2,357,034 shares and
2,321,314 shares were outstanding at December
31, 1996 and June 30, 1996 respectively) 353,557 348,198
Capital in Excess of Par Value 2,929,893 2,635,540
Retained Earnings 8,344,674 8,556,510
To Stockholder's Equity 11,628,124 11,540,248
Total Capitalization and Liabilities $43,912,935 $37,494,673
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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FORM 10Q
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
December 31 December 31
1996 1995 1996 1995
Operating revenue:
Regulated utilities $8,891,733 $7,060,020 $11,769,113 $9,717,764
Nonregulated operations 3,064,822 1,140,256 4,107,577 1,812,668
Gas trading 1,719,415 1,440,204 2,376,761 2,026,974
Total Revenue 13,675,970 9,640,480 18,253,451 13,557,406
Operating Expenses
Gas Purchased 7,635,325 4,691,840 9,749,288 6,244,671
Cost of gas trading 1,665,813 1,271,188 2,254,161 1,778,298
Distribution, general and administrative 2,116,012 1,786,431 4,139,147 3,650,285
Depreciation and Amortization 462,425 441,965 927,566 868,165
Taxes other than Income 185,530 144,928 331,493 310,498
Total Operating Expenses 12,065,105 8,336,352 17,401,655 12,851,917
Operating Income 1,610,865 1,304,128 851,796 705,489
Other Income - Net 222,519 93,562 308,014 159,786
Income Before Interest Charges & IncomeTaxe 1,833,384 1,397,690 1,159,810 865,275
Interest Charges:
Long-Term Debt 172,706 165,921 345,409 341,912
Other 238,666 175,318 404,596 251,151
Total Interest Charges 411,372 341,239 750,005 593,063
Net Income Before Income Taxes 1,422,012 1,056,451 409,805 272,212
Income Taxes 505,348 404,605 129,952 87,502
Net Income $916,664 $651,846 $279,853 $184,710
Income Per Share of Common and
Common Equivalent Stock:
Net Income per Common Share $0.39 $0.29 $0.12 $0.08
Dividends per common share $0.1050 $0.1000 $0.2100 $0.2000
Weighted Average Common
Shares Outstanding 2,357,280 2,232,297 2,346,532 2,278,780
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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FORM 10Q
ENERGY WEST INCORPORATED
Condensed Consolidated Statements of Cash Flows
Six Months Ended
December 31
1996 1995
Operating Activities:
Net Income $279,853 $184,710
Adjustments to Reconcile Net Income to Cash Flow
Depreciation and Amortization 1,088,629 914,324
(Gain) Loss on Sale of Assets (11,309) (3,681)
Investment Tax Credit (10,531) (10,531)
Deferred Income Taxes 423,745 360,530
Changes in Operating Assets and Liabilities (4,006,490) (5,644,262)
Net Cash Provided by (Used In) Operating Activities (2,236,103) (4,198,910)
Investing Activities:
Construction Expenditures (1,591,715) (2,191,478)
Restricted Deposits 0 0
Collection of Long-Term Notes Receivable 929 3,483
Proceeds from Contributions in Aid of Construction 29,822 19,586
Proceeds from Sale of Property, Plant & Equipment 18,942 8,028
Net Cash Provided by (Used In) Investing Activitie (1,542,022) (2,160,381)
Financing Activities:
Proceeds from Long-Term Debt 0 11,305
Proceeds from Notes Payable 9,352,000 11,150,000
Repayment of Long-Term Debt (360,240) (353,242)
Repayment of Notes Payable (5,875,000) (4,415,000)
Sale of Common Stock 125,142 127,117
Dividends paid (317,119) (285,033)
Net Cash Provided by (Used In) Financing Activities 2,924,783 6,235,147
Net Increase (Decrease) in Cash and Cash Equivalents (853,342) (124,144)
Cash and Cash Equivalents at Beginning of Year 893,301 507,450
Cash and Cash Equivalents at End of Period $39,959 $383,306
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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