FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 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 1-7924
VALLEY RESOURCES, INC.
(Exact name of Registrant as specified in its charter)
Rhode Island 05-0384723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1595 Mendon Road 02864
Cumberland, Rhode Island (Zip Code)
(Address of principal executive offices)
(401) 334-1188
(Registrant's telephone number, including area code)
Not Applicable
(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, 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.
Outstanding at
Class of Common Stock February 29, 1996
$1 Par Value 4,264,202
VALLEY RESOURCES, INC.
FORM 10-Q
FEBRUARY 29, 1996
Page of
Form 10-Q
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Operations--for
the three- and six-months ended February 29, 1996
and 1995...................................................... 3
Consolidated Condensed Balance Sheets--February 29,
1996 and August 31, 1995....................................4 & 5
Consolidated Condensed Statements of Cash Flows--for
the six-months ended February 29, 1996 and 1995............... 6
Notes to Consolidated Condensed Financial Statements.......... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
Item 6(a) Exhibits...................................................... 9
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 9
PART I: FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
3 Months Ended 6 Months Ended
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
1996 1995 1996 1995
(in thousands except share and per share numbers)
Operating Revenues:
Utility Gas Revenues $ 24,563 $ 21,838 $ 33,962 $ 31,818
Nonutility Revenues 5,687 5,127 10,383 9,921
Total 30,250 26,965 44,345 41,739
Operating Expenses:
Cost of Gas Sold 12,746 12,140 17,798 17,810
Cost of Sales - Nonutility 3,961 3,515 7,277 6,879
Operations 4,713 4,576 8,981 8,831
Maintenance 414 429 803 813
Depreciation and Amortization 750 671 1,462 1,352
Taxes - Other Than Federal Income 1,321 1,276 2,153 2,152
- Federal Income 1,889 1,198 1,409 730
Total 25,794 23,805 39,883 38,567
Operating Income 4,456 3,160 4,462 3,172
Other Income - Net of Tax 233 35 271 39
Total Income 4,689 3,195 4,733 3,211
Interest Charges:
Long-Term Debt 479 490 948 999
Other 355 323 706 565
Total 834 813 1,654 1,564
Net Income $ 3,855 $ 2,382 $ 3,079 $ 1,647
Average Number of Common
Shares Outstanding 4,258,330 4,216,727 4,250,996 4,216,667
Earnings Per Average Common Share
Outstanding $ 0.91 $ 0.56 $ 0.72 $ 0.39
Dividends Declared on Common Stock $ 0.18 $ 0.175 $ 0.36 $ 0.35
The accompanying Notes are an integral part of these statements.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(Unaudited)
Feb. 29, Aug. 31,
1996 1995
(in thousands)
ASSETS
Utility Plant - Net $48,679 $47,411
Leased Property - Net 1,732 2,014
Nonutility Property-Net 3,550 3,547
Other Investments 1,473 1,461
Current Assets:
Cash 1,096 455
Accounts Receivable - Net 16,283 10,686
Deferred Unbilled Gas Costs 1,815 434
Fuel and Other Inventories (Note 3) 3,511 5,385
Prepayments 417 1,159
Common Stock held for Dividend Reinvestment-amounting
to 3,682 and 26,190 shares respectively (Note 4) 41 290
Total 23,163 18,409
Deferred Debits:
Recoverable Postretirement Benefits 726 693
Recoverable Vacations Accrued 758 847
Unamortized Debt Discount and Expense 1,552 1,581
Prepaid Pensions 5,858 5,546
Recoverable Deferred FIT 5,923 5,713
Recoverable Transition Obligation 1,325 1,325
Other 3,652 3,791
19,794 19,496
Total $98,391 $92,338
The accompanying Notes are an integral part of these statements.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheets (Cont'd)
(Unaudited)
Feb. 29, Aug. 31,
1996 1995
(in thousands)
CAPITALIZATION & LIABILITIES
Capitalization:
Common Stock $ 4,268 $ 4,261
Paid In Capital 18,088 18,039
Retained Earnings 8,388 6,835
Less: Accounts Receivable from ESOP (3,142) (3,142)
Total Common Stock Equity 27,602 25,993
Long-Term Debt (Less Current Maturities):
8% First Mortgage Bonds, Series Due 2022 20,247 21,072
9% Notes Payable, Due 1999 2,139 2,139
Notes Payable 3,605 1,405
Total Long-Term Debt 25,991 24,616
Total Capitalization 53,593 50,609
Obligation Under Capital Lease 1,107 1,255
Current Liabilities:
Current Maturities of Long-Term Debt 500 500
Obligation Under Capital Lease 625 759
Notes Payable 13,300 11,900
Accounts Payable 5,786 4,321
Security Deposits & Refund Obligations 1,096 1,162
Taxes Accrued 1,659 508
Deferred Fuel Costs 1,847 3,151
Accrued Interest 577 655
Other 909 976
Total 26,299 23,932
Commitments and Contingencies
Deferred Credits 6,429 6,451
Deferred Federal Income Taxes 10,963 10,091
$ 98,391 $ 92,338
The accompanying Notes are an integral part of these statements.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows (Unaudited)
For the 6 Months
Ended
Feb. 29, Feb.28,
(in thousands)
Cash Flows from Operating Activities:
Net Income $ 3,079 $ 1,647
Adjustments to Reconcile Net Income to Net Cash used in
Operating Activities:
Depreciation and Amortization 1,462 1,352
Provision for Uncollectibles 672 601
Deferred Federal Income Taxes 774 663
Change in Assets and Liabilities:
Accounts Receivable (6,269) (6,981)
Deferred Fuel Costs (1,304) 2,568
Unbilled Gas Costs (1,381) (1,037)
Fuel and Other Inventories 1,874 1,104
Other Current Assets 679 376
Accounts Payable, Accrued Expenses and Current Liabilities 2,550 2,468
Other - Net (54) 233
Net Cash Provided by Operating Activities 2,082 2,994
Cash Flows from Financing Activities:
Utility Capital Expenditures (2,435) (1,840)
Nonutility Capital Expenditures (298) (375)
Other Investments (12) (13)
Net Cash (Used) by Investing Activities (2,745) (2,228)
Cash Flows from Financing Activities:
Dividends Paid (1,527) (1,474)
Capital Stock Transactions 56 71
Issuance of Long Term Debt 2,200 -0-
Retirement of Long-Term Debt (825) (1,180)
Increase in Notes Payable 1,400 3,200
Net Cash Provided by Financing Activities 1,304 617
Net Increase in Cash 641 1,383
Cash - Beginning 455 587
Cash - Ending $ 1,096 $ 1,970
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest $ 1,732 $ 1,656
Federal Income Taxes $ - 0- $ 130
Capital Lease Obligations Incurred $ 99 $ 111
The accompanying Notes are an integral part of these statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1
The Corporation computes earnings per average common share based on the
weighted average number of shares outstanding during the period.
Note 2
In the opinion of the Corporation, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals and matters discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations") necessary to present
fairly the financial position as of February 29, 1996 the results of operations
for the three- and six-months ended February 29, 1996 and 1995 and Statement of
Cash Flows for the six-months ended February 29, 1996 and 1995.
The results of operations for the three- and six-month periods ended
February 29, 1996 and 1995 are not necessarily indicative of the results to be
expected for the full year.
Note 3
Inventories - Fuel and Other Inventories:
(in Thousands)
(Unaudited)
February 29, August 31,
1996 1995
Fuels (at average cost) $1,311 $3,255
Merchandise and Other (at average cost) 1,035 1,052
Merchandise (at LIFO) 1,165 1,078
$3,511 $5,385
Note 4
Pursuant to the dividend reinvestment plan, stockholders can reinvest
dividends and make limited additional investments in shares of Common Stock.
Shares issued through dividend reinvestment can be acquired on the open market
or original issue.
PART I - ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Utility gas revenues for the three months ended February 29, 1996, the
second fiscal quarter, totaled $24,563,300, an increase of 12 percent over the
same period in fiscal 1995. For the six months ended February 29, 1996, utility
gas revenues increased 7 percent when compared to the same period in fiscal 1995
and totaled $33,961,800. The revenue increases for the three and six month
periods were the result of increased gas sales, rate relief and increased
customers, partially offset by a reduction in the revenue generated through the
purchased gas price adjustment clause (PGPA). Six month revenues were also
impacted by a reduction in seasonal revenues.
Gas sales to firm customers in fiscal 1996 totaled 3,678,300 Mcf for the
three month period and 4,858,800 Mcf for the six-months ended February 29,1996.
Gas sales for the three month period represent an increase of 20 percent over
the prior year period and for the six month period were 16 percent greater than
the prior year period. Colder weather, rate relief and increased customers are
responsible for the sales increases. Weather, as measured by degree days, for
the second quarter was 17 percent colder than the prior year period and 6
percent colder than normal. For the six-months ended February 29, 1996, the
weather was 15 percent colder than the prior year period and 2 percent colder
than normal. At February 29, 1996, there were 62,419 utility customers versus
61,609 at February 28, 1995.
In November 1995, the utility subsidiaries were authorized to adjust their
rate tariffs to recover an additional $1.1 million in revenues. The new tariffs
contributed approximately $350,000 to the increase in utility revenues during
the second fiscal quarter.
Seasonal and dual-fuel gas sales decreased for the three- and six-months
ended February 29, 1996, when compared to the prior year periods. Seasonal sales
are dependent on availability of gas and the price of competitive fuels. The
margins on seasonal sales are passed through to firm customers through the PGPA.
Valley Gas transports natural gas owned by customers if delivered to Valley
Gas's gate station. Transportation revenues decreased $26,700 and $13,300 for
the three- and six-month periods, respectively.
Nonutility revenues totaled $5,687,000 and $10,383,600 for the three- and
six-months ended February 29, 1996, respectively. Nonutility revenues for the
second fiscal quarter were 11 percent greater than the 1995 period and for the
six month period nonutility sales were 5 percent greater than the prior year
period. The continuing focus of Vamco on the commercial and industrial market
led to an increase in retail sales volume. This increase was slightly offset by
a reduction in wholesale revenues. Wholesale revenues decreased due to a
reduction in units sold. Service contract and rental revenues increased for both
the three- and six-month periods when compared to the prior year as a result of
new customers and price increases. Propane revenues for the three- and
six-months ended February 29, 1996, increased as a result of increased gallons
sold. The colder weather and sales to the construction heating market were the
primary contributors to the increase in propane sales.
The cost of gas sold increased 5 percent for the three-month period but
remained flat for the six-month period when compared to fiscal 1995. The cost of
gas sold was impacted by higher gas prices and increased usage of natural and
supplemental fuels as a result of increased gas sales brought about by more
customers and colder weather. The increase in the cost of gas sold was partially
offset by the prior fiscal year over-recovery of gas costs that are being
returned to customers through the workings of the PGPA in fiscal 1996.
The nonutility cost of sales increased as a result of the increased level
of retail sales in the commercial and industrial market. Other operation
expenses remained flat for both the three- and six-month periods when compared
to fiscal 1995.
Other income increased $198,500 and $232,200 for the three- and six-months
ended February 29, 1996, respectively, over the prior fiscal periods as a result
of off-system natural gas sales. Off -system sales are natural gas sales
arranged by the utility to customers outside the franchise area at market
clearing prices. Gas is available for sale through acquisition rights available
to the utility and from supplies not required to meet firm customer demand. The
opportunities for off-system sales are dependent upon market demand and the
ability of other suppliers to meet their delivery requirements. As a result, the
ability to effect this market is beyond the Corporation's total control. While
Valley will continue to make excess gas supplies and transportation capacity
available to this new market, there is no assurance that this level of
off-system sales opportunities will continue.
Interest expense increased by 3 percent and 6 percent for the three- and
six-months ended February 29, 1996, respectively, over the prior fiscal periods.
The increase in interest expense was the result of increases in short-term
borrowings.
Liquidity and Capital Resources
During the second fiscal quarter the liquidity position of the Corporation
improved over the first quarter as a result of increased revenues from colder
weather during the winter period, rate relief and the reversal of the first
quarter lag in receivables. The issuance of a revolving credit arrangement and
increased short-term borrowings also favorably impacted liquidity. Management
believes the available financings are sufficient to meet cash requirements for
the foreseeable future. The available borrowings under lines of credit at
February 29, 1996, were $13,700,000.
On November 20, 1995, the Rhode Island Public Utilities Commission
authorized the utilities to adjust their tariffs to collect an additional $1.1
million in revenue annually. This rate increase favorably impacted liquidity
during the second fiscal quarter.
Construction expenditures declined during the second fiscal quarter due to
constraints caused by the weather, thereby adding favorably to liquidity.
The liquidity position of the Corporation is anticipated to remain stable
in the third quarter as winter bills are liquidated. Cash expended on the
construction program will increase; however, this increased cash requirement
should be offset by cash flows from the payment of winter bills.
PART I - ITEM 6(a)
Item 6(a) - Exhibits
27. Financial Data Schedule
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) None.
(b) The Company did not file a Form 8-K.
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.
VALLEY RESOURCES, INC. AND SUBSIDIARIES
____________________________________________
K. W. Hogan
Senior Vice President, Chief Financial Officer
and Secretary
April 12, 1996