UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(MARK ONE)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended August 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 of Incorporation or Organization) (IRS Employer Identification No.)
1595 Mendon Road, Cumberland, Rhode Island 02864
(Address of principal executive offices)
Registrant's Telephone Number, Including Area Code (401) 334-1188
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [__]
The aggregate market value of the common stock held by non-affiliates,
computed on the basis of $12.50 per share (the closing price of such stock on
October 22, 1996 on the American Stock Exchange) was $53,500,350.
As of October 22, 1996 there were 4,280,028 shares of Valley Resources,
Inc. Common Stock, $1 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Consolidated Financial Statements, Notes to Consolidated Financial
Statements, Report of Independent Certified Public Accountants, Management's
Discussion and Analysis, Summary of Consolidated Operations, Dividends and
Market Data and Stockholder Statistics of the Registrant's Annual Report to
Stockholders for the fiscal year ended August 31, 1996 are incorporated by
reference in Parts I, II and IV.
Portions of the Proxy Statement dated November 5, 1996 as filed with the
Securities and Exchange Commission are incorporated by reference in Part III.
PART I
Item 1 Business
--------
Valley Resources, Inc. (the "Corporation") is a holding company organized
in 1979 and incorporated in the State of Rhode Island. The Corporation has five
wholly-owned active subsidiaries: Valley Gas Company ("Valley Gas") and Bristol
& Warren Gas Company ("Bristol")--regulated natural gas distribution companies;
Valley Appliance and Merchandising Company ("VAMCO")--a merchandising and
appliance rental company; Valley Propane, Inc. ("Valley Propane"); and Morris
Merchants, Inc. (d/b/a "The Walter F. Morris Company")--a wholesale distributor
of franchised lines in plumbing and heating contractor supply and other energy
related business. The Corporation also has an 80 percent interest in Alternate
Energy Corporation ("AEC") which sells, installs and designs natural gas
conversion systems and facilities.
The headquarters for the Corporation and the sales and service offices of
Valley Gas, VAMCO and Valley Propane are located in Cumberland, Rhode Island.
Morris Merchants, Inc.'s sales and warehouse facilities are located in Canton,
Massachusetts. The operation center of Bristol and New England Gas is located in
Bristol, Rhode Island. The administrative offices for AEC are located in
Cumberland, Rhode Island and the service center is located in Johnston, Rhode
Island.
Bristol, acquired by the Corporation on April 1, 1992, was incorporated in
the State of Rhode Island in 1953 to distribute natural gas to customers in
Bristol and Warren, Rhode Island.
In May 1996, the Corporation acquired an 80 percent interest in AEC. AEC
was incorporated in the State of Rhode Island in April 1992 to design and
install equipment for the conversion of vehicular and stationary engines to
natural gas.
Effective September 1995, all propane sales and service were consolidated
into a single operation under the name Valley Propane. The New England Gas
Company became inactive at that time.
Financial information about industry segments appearing on page 28 of the
Annual Report to Stockholders for the year ended August 31, 1996 is incorporated
herein by reference.
The Corporation does not expect any material effects on its business as a
result of compliance with environmental regulations.
The Corporation and its subsidiaries had 249 employees at August 31, 1996,
of which 57 were covered by a collective bargaining agreement with the Utility
Workers Union of America, AFL-CIO, Local No. 472, expiring March 31, 1997, and 7
were covered by a collective bargaining agreement with the Service Employee
International Union, AFL-CIO, Local No. 134, expiring May 31, 1997.
Utility Operations
- ------------------
Gas Sales and Transportation
The Corporation's utility operations are conducted through Valley Gas and
Bristol (the "utilities"). They had an average of 61,300 customers during the
twelve months ended August 31, 1996, of which approximately 91% were residential
and 9% were commercial and industrial.
The utilities provide natural gas service to residential, commercial and
industrial customers and transportation services to industrial customers. Valley
Gas' service territory is approximately 92 square miles located in the
Blackstone Valley region in northeastern Rhode Island with a population of
approximately 250,000. Bristol's service territory is approximately 15 square
miles in eastern Rhode Island with a population of approximately 35,000.
Effective November 1995, the utilities operate under a single rate structure.
The following table shows the distribution of gas sold during the years
since 1992 in millions of cubic feet ("MMcf"):
For the Year Ended August 31,(1)
--------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Residential 4,612 4,078 4,517 4,439 3,965
Commercial 2,252 1,953 2,078 1,978 1,680
Industrial-firm 1,391 1,338 1,299 1,185 1,152
Industrial-seasonal 1,047 1,298 996 818 1,010
----- ----- --- --- -----
TOTAL 9,302 8,667 8,890 8,420 7,807
===== ===== ===== ===== =====
(1) The operations of Bristol are included since April 1992.
Firm customers of the utilities use gas for cooking, heating, water
heating, drying and commercial/industrial processing. Certain industrial
customers use additional gas in the summer months when it is available at lower
prices. These customers are subject to having their service interrupted at the
discretion of the utilities with very little notice. This use is classified as
seasonal use. As discussed further below, the margin on seasonal use is passed
through the Purchased Gas Price Adjustment ("PGPA") to lower the cost of gas to
all categories of firm customers. Bristol retained the margin on seasonal sales
prior to November 1995.
The primary source of utility revenues is firm use customers under tariffs
which are designed to recover a base cost of gas, administrative and operating
expenses and provide sufficient return to cover interest and profit. The
utilities also service dual fuel, interruptible and transportation customers
under rates approved by the Rhode Island Public Utilities Commission ("RIPUC").
Additionally, Valley Gas services cogeneration customers under separate contract
rates that were individually approved by the RIPUC.
The utilities tariffs include a PGPA which allows an adjustment of rates
charged to customers in order to recover all changes in gas costs from
stipulated base gas costs. The PGPA provides for an annual reconciliation of
total gas costs billed with the actual cost of gas incurred. Any excess or
deficiency in amounts collected as compared to costs incurred is deferred and
either reduces the PGPA or is billed to customers over subsequent periods. The
PGPA does not impact operating income as it effectuates a dollar for dollar
recovery of gas costs. All margins from interruptible customers are returned to
firm customers through the workings of the PGPA.
Utility revenues include a surcharge on firm gas consumption to collect a
portion of the costs to fund postretirement medical and life insurance benefits
above the pay-as-you-go costs included in base tariffs. The surcharge was
authorized by the RIPUC in a generic rate proceeding and are being phased in
over a ten-year period which commenced September 1, 1993. Effective November
1995, the current year funding of postretirement medical and life insurance
benefits is included in base tariffs. In September 1996 the RIPUC authorized the
funding shortages from the first two years of the phase-in to be recovered
through a surcharge over the next three fiscal years.
The prices of alternative sources of energy impact the interruptible and
dual fuel markets. The utilities serve these customers in the nonpeak periods of
the year or when competitively priced gas supplies are available. These
customers are subject to service discontinuance on short notice as system firm
requirements may demand. Prices for these customers are based on the price of
the customers' alternative fuel. In order to mitigate the volatility of earnings
from interruptible and dual fuel sales the utilities roll into the PGPA the
margin earned on these interruptible sales and all margins in excess of $1 per
thousand cubic feet ("Mcf") of gas sold to dual fuel customers. This margin
credit reduces rates to firm customers. This means of margin treatment
alleviates the
negative impact that swings in sales can have on earnings in the highly
competitive industrial interruptible market.
Rates and Regulation
- --------------------
The utilities are subject to regulation by the RIPUC with respect to rates,
adequacy of service, issuance of securities, accounting and other matters.
On January 19, 1995, Valley Gas and Bristol filed revised tariffs with the
RIPUC to consolidate their rate structure and to increase their combined annual
revenues. On October 18, 1995, the RIPUC authorized the consolidated rate
structure and allowed the companies to adjust their tariffs to collect $1.2
million or 2.0%. These rates became effective November 21, 1995.
Gas Supply and Storage
- ----------------------
The Federal Energy Regulatory Commission ("FERC") in 1992 issued its order
No. 636, the primary purpose of which was to promote competition in the natural
gas industry by requiring all interstate pipelines to separate or "unbundle"
their all-encompassing firm gas sales service to public utilities into its five
component parts: production, sales, aggregation, storage and transportation.
Tennessee Gas Pipeline Company is the major natural gas transporter for
Valley Gas under long-term contracts. Bristol's principal gas transporters are
Algonquin Gas Transmission Company and Texas Eastern Transmission Corporation.
The utilities purchase natural gas from several suppliers on a long-term firm
basis, as well as on the spot market whenever available.
Year-Round Wellhead Firm Supply
Valley Gas is a charter member of the Mansfield Consortium, which consists
of five local distribution companies joined together to use their combined
market power to secure favorable terms for long-term gas supply. In addition,
Valley Gas is an investor in Boundary Gas, Inc. and a customer of Alberta
Northeast, LTD, both of which were founded by groups of gas distribution
companies in the northeast to import natural gas from Canada.
Valley Gas and Bristol together have 24,402 dekatherms per day of
year-round firm supply under long-term contracts with four domestic and two
Canadian suppliers. Of these contracts, 28.8% (7,035 Dth/day) expires November
1, 1999, and 91.5% (22,335 Dth/day) is due to expire on June 30, 2002. All of
the utilities' gas supply contracts are spot-indexed based. The utilities have
flexible take requirements, with only 1,973 dekatherms categorized as "baseload"
supply which must be taken every day, and that contract expires in 1999.
Winter-Only Firm Supply
The utilities are well-positioned with respect to winter-only firm supply
in that their actual and prospective long-term contracts are with major players
in this market, and contract prices are at competitively favorable terms.
Liquefied Natural Gas ("LNG") - Valley Gas is entitled to 5,300 dekatherms
per day of firm supply from Distrigas, which re-vaporizes LNG at its Everett,
Mass. facility for delivery during the winter months to Valley by Tennessee Gas
Pipeline or to Bristol & Warren via Algonquin Gas Transmission. As an option,
Valley Gas may take this gas in its liquefied state for transportation by truck
to and storage at Valley Gas' on-site LNG tank. A further option allows Valley
Gas to increase its maximum daily quantity from 5,300 to 7,950 dekatherms. There
are no minimum takes, and the contract runs through October 31, 2005.
Energy Plus - This agreement with a PanHandle Eastern affiliate
(EnergyPlus) is for 100,000 dekatherms per year of LNG out of its Providence,
R.I. facility. The contract is scheduled to go into effect November 1, 1997,
pending FERC approval. There are no minimum takes and the expiration date is
October 31, 2007.
Maritimes & Northeast Pipeline - Subject to approval by the FERC and
subsequent construction of the proposed Maritimes & Northeast Pipeline from
Sable Island, Canada into a Massachusetts interconnect with Tennessee Gas
Pipeline, Valley Gas will be entitled to firm winter delivery of 5,000
dekatherms per day to its city gate, with an option to increase its maximum
daily quantity to 7,500 dekatherms. There are no minimum takes. This 10-year
contract is scheduled to go into effect November 1, 1999.
Pawtucket Power Co-Generation Plant - Valley Gas is entitled under
long-term contract to utilize up to 540 dekatherms per hour, with a maximum
annual quantity of 333,000 dekatherms, of natural gas used by Pawtucket Power in
its generation of electricity and steam. This firm gas supply originates in
Alberta, Canada.
Underground Storage - The utilities have 1,543,958 dekatherms of
underground storage capacity with CNG Transmission and National Fuel Gas Supply
Corporation, for a total maximum daily withdrawal quantity of 20,589 dekatherms.
Underground storage gas is injected during the non-winter months by the
utilities into fields located in Pennsylvania and New York, for subsequent
withdrawal during the winter when customer demand is greatest. By November 1,
2000, 49% of these storage contracts will have expired; the remaining 51%
expires March 31, 2012.
Interstate Pipeline Capacity - The utilities utilize firm pipeline capacity
for two basic purposes: 1) daily transportation of firm and spot market gas
supply throughout the year from the gulf coast to their city gates, and 2)
winter-only transportation of underground storage gas to their city gates.
Gas Supply Pipeline Capacity - Total year-round firm capacity is 24,902
dekatherms per day. Of this total, 86% expires by December 1, 2002.
Storage Pipeline Capacity - The utilities storage-related pipeline capacity
totals 11,349 dekatherms per day. About 37% of this capacity expires November 1,
2000, and the remainder extends from 2003 through 2012.
On-Site LNG and Propane Storage - In addition to the gas delivered by the
interstate pipeline, both utilties have on-site storage facilities for liquid
propane gas ("LPG"), with Valley Gas having about 857,000 gallons and Bristol
having about 117,000 gallons of LPG storage. Valley Gas also has on-site storage
facilities for 968,320 gallons (about 85,000 dekatherms) of LNG. Both LPG and
LNG are vaporized into the utilities distribution systems during periods of peak
demand, and utilized as backup in the event of failure of an upstream pipeline
to deliver needed gas supplies.
Competition and Marketing
- -------------------------
The primary competition faced by the utilities is from other energy
sources, primarily heating oil. The principal considerations affecting a
customer's selection among competing energy sources include price, equipment
cost, reliability, ease of delivery and service. In addition, the type of
equipment already installed in businesses and residences significantly affects
the customer's choice of energy. However, where previously installed equipment
is not an issue, households in recent years have consistently preferred the
installation of gas heat. For example, Valley Gas' statistics indicate that
approximately 90% of the new homes built on or near Valley Gas' service mains in
recent years have selected gas as their energy source.
The utilities are pursuing new markets believed to have the potential to
provide both growth and/or lessen sales sensitivity to weather: industrial
processing, cogeneration, natural gas vehicles and conversions from oil to gas.
In the recent utility rate approval, the RIPUC approved rates which will
retain and attract industrial customers. Additionally, the utilities have two
rates which promote economic development in its service territory. These rates
provide incentives for companies that add industrial processing load, make a
substantial investment in new natural gas equipment and hire additional
employees.
The cogeneration market is addressed through sales contacts with customers
who have applications suitable to use waste heat through the cogeneration
process. There are established rate tariffs to specifically address the
requirements of the cogeneration market. In addition, Valley Gas has a 50
kilowatt demonstration facility at its Cumberland location which provides
electricity for computer facilities and hot water requirements.
Valley Gas installed a compressed natural gas ("CNG ") fueling station at
its Cumberland headquarters. The use of natural gas in vehicles will be promoted
through conversion of its own fleet and the CNG rate approved by the RIPUC.
The focus of the residential marketing department to increase conversions
from oil to natural gas is in the installations of conversion burners and a
continuous effort in the replacement market of housing developments that did not
choose natural gas. Additional efforts are spent to convert homes with inactive
natural gas service.
The distribution company unbundling process will add competition from a new
source, natural gas suppliers. The utilities have filed transportation rates
with the RIPUC to allow customers the choice to purchase gas from the utilities
or from natural gas marketers. Since the utilities' profits are derived from
distribution and not natural gas sales, this process should not significantly
impact the profitability of the utilities.
Seasonality
- -----------
The bulk of firm distribution and sales are made during the months of
November through March. As a result, the highest levels of earnings and cash
flow are generated from the quarters ending in February and May. The bulk of the
capital expenditure programs are undertaken during the months of May through
October, causing cash flow to be at its lowest during the quarters ending in
November and August.
Short-term borrowing requirements vary according to the seasonal nature of
sales and expense activities of the utilities, creating greater need for
short-term borrowings during periods when internally generated funds are not
sufficient to cover all capital and operating requirements, particularly in the
summer and fall. Short-term borrowings utilized for construction expenditures
generally are replaced by permanent financing when it becomes economical and
practical to do so and where appropriate to maintain an acceptable relationship
between borrowed and equity resources.
Gas Distribution System
- -----------------------
Valley Gas' distribution system consists of approximately 900 miles of gas
mains and service lines. Bristol's gas distribution system consists of
approximately 100 miles of gas mains. The aggregate maximum daily quantity of
gas that may be distributed through the utilities from their own facilities and
under existing supply and transportation contracts is approximately 100 MMcf,
and the maximum daily gas sendouts for all sales customers of the utilities
during the last five fiscal years were 71 MMcf in 1996, 66 MMcf in 1995, 77 MMcf
in 1994, 69 MMcf in 1993, and 67 MMcf in 1992.
Appliance Contract Sales and Rentals
- ------------------------------------
The Corporation conducts appliance, contract sales and rentals through its
subsidiaries VAMCO and Morris Merchants. VAMCO's revenues are generated through
retail appliance sales, service contract sales and through the rental of
gas-fired appliances. Morris Merchants sells at wholesale gas- and oil-fired
equipment and plumbing and heating supplies.
Morris Merchants has contracts for the distribution of certain lines that
it wholesales. At this time the Corporation has no reason to believe it will
lose any of its existing lines. Morris Merchants is not dependent on any one of
the existing lines.
Propane Operations
- ------------------
The propane operations are conducted through Valley Propane which sells, at
retail, liquid propane gas to residential and commercial customers in Rhode
Island and nearby Massachusetts. At August 31, 1996, Valley Propane had 2,579
customers. Valley Propane also supplies propane to holding customers of the
utilities; these customers are serviced by Valley Propane until the utilities
can connect mains and service lines. Valley Propane is also impacted by weather,
as a large percentage of its customers use propane as a primary source of heat.
Valley Propane increases and decreases the selling price of its gas depending
upon supply and competition.
Natural Gas Conversions
- -----------------------
The Corporation conducts natural gas conversions through AEC. AEC generates
its revenue through the engineering and installation of compressed natural gas
refueling stations, the conversion of gasoline and diesel-powered vehicles to
natural gas and through the implementation of its patented process to co-fire
natural gas and diesel fuel in engines, primarily generators.
The Corporation owns an 80 percent interest in AEC and has the right to
acquire the remaining 20 percent of the company currently held by the management
of AEC. The operations of AEC did not materially impact the operations of the
Corporation in fiscal 1996.
Forward Looking Statements
- --------------------------
Statements contained in this Form 10-K that are not historical facts are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Corporation cautions that,
while it believes such statements to be reasonable and makes them in good faith,
they almost always vary from actual results, and the differences between assumed
facts or basis and actual results can be material depending upon the
circumstances. Investors should be aware of important factors that could have a
material impact on future results. Factors include, but are not limited to, the
regulatory environment, customers' preferences, unforeseen competition and other
uncertainties, all of which are difficult to predict, and many of which are
beyond the control of the Corporation. Results of operations in any past period
should not be considered indicative of results to be expected in future periods.
Fluctuations in operating results may result in fluctuations in the price of the
Corporation's common stock.
Item 2 Properties
----------
1595 Mendon Road, Cumberland, Rhode Island
Office, Sales, and Service Center
This location comprises the headquarters, sales and service operation of
the Corporation, Valley Gas, VAMCO and Valley Propane; and includes accounting,
billing, credit, engineering, garage, maintenance, service, storeroom and
construction. The headquarters and sales office for AEC are located at this
facility. The facilities are considered suitable and adequate for the
Corporation.
425 Turnpike Street
Canton, Massachusetts
Office and Warehouse Facilities
Morris Merchants, Inc. conducts its business at this leased warehouse and
office building in Canton, MA. Its business does not require any special
facilities and, therefore, its leased facilities are not significant to its
operation. The total lease payments are less than 1 percent of corporate assets.
106-B Federal Way
Johnston, Rhode Island
Service Center
AEC conducts its servicing business at this leased garage in Johnston, RI.
The leased facility is not significant to its operations and the total lease
payments are less than 1 percent of the corporate assets.
Scott Road, Cumberland, Rhode Island
LNG Storage Plant
Propane Storage Plant
This facility is used for the storage of LNG and propane used in the
peak-shaving operations of Valley Gas. Its daily delivery capacity of LNG and
LPG is 25,000 Mcf's and 12,000 Mcf's, respectively. Facility improvements which
were completed during the fall of fiscal 1996 doubled the delivery capacity for
LNG.
100 Broad Common Road
Bristol, Rhode Island
Office, Sales and Service Center
This location comprises the office, sales and service operation of Bristol
and includes construction, credit, engineering, garage, maintenance, service,
and storeroom. This facility is considered suitable and adequate for the
Bristol.
Brown Street
Warren, Rhode Island
Propane Storage
This facility is used for the storage of propane used in peak-shaving
operations of Bristol. Its daily delivery capacity of LPG is 1,600 Mcf's.
The Corporation believes its storage facilities are adequate to meet the
needs of the utilities for the foreseeable future.
All of the storage facilities are owned. All Valley Gas properties, except
leased property, are held in fee.
See item 1 for discussion of gas supply.
Item 3 Legal Proceedings
-----------------
There were no material legal proceedings pending to which the Corporation
or any of its subsidiaries is a party, or of which any of their property is the
subject, except two claims that were asserted against Valley Gas as referred to
in Note H, page 27, of the 1996 Annual Report to Stockholders which is
incorporated by reference.
Item 4 Submission of Matters to a
Vote of Security Holders
---------------------------
None
Executive Officers of the Registrant
- ------------------------------------
The names, ages, and position of all the executive officers of the
Corporation on October 15, 1996 are listed below together with their business
experience during the past five years. All officers of the Corporation are
elected or appointed annually by the board of directors at the directors' first
meeting following the Annual Meeting of Stockholders.
Business Experience
Name Age Position During Last Five Years
---- --- -------- ----------------------
Alfred P. Degen 49 President and Chief President since July 1994 and
Executive Officer Chief Executive Officer since
March 1995; Executive Vice
President-Acting President of
Philadelphia Gas Works prior
to July 1994.
Kenneth W. Hogan 51 Senior Vice President, Senior Vice President since July
Chief Financial 1994; Vice President prior
Officer to July 1994; Chief Financial
Officer since December
1994 and Secretary since April
1977.
Charles K. Meunier 54 Vice President, Vice President since December
Operations 1994; Assistant Vice President
Operations and Human Resources
prior to December 1994.
PART II
Item 5 Market for the Registrant's Securities
and Related Stockholder Matters
-------------------------------
Common stock market prices, number of common stockholders, dividends
declared and dividend restrictions appearing on pages 14 and 23 of the Annual
Report to Stockholders for the fiscal year ended August 31, 1996 are
incorporated herein by reference. The common stock of Valley Resources, Inc. is
listed on the American Stock Exchange under the symbol VR.
Item 6 Selected Financial Data
-----------------------
The selected financial data (Summary of Consolidated Operations) appearing
on page 34 of the Annual Report to Stockholders for the fiscal year ended August
31, 1996 is incorporated herein by reference.
Item 7 Management's Discussion and Analysis
------------------------------------
Management's discussion and analysis of the results of operations,
liquidity and capital resources appearing on pages 30 through 33 of the Annual
Report to Stockholders for the fiscal year ended August 31, 1996 are
incorporated herein by reference.
Item 8 Financial Statements and Supplementary Data
-------------------------------------------
The following consolidated financial statements of the registrant and its
subsidiaries appearing on pages 16 through 29 in the Annual Report to
Stockholders for the fiscal year ended August 31, 1996 are incorporated herein
by reference:
Consolidated Statements of Earnings for each of the
three years in the period ended August 31, 1996
Consolidated Statements of Cash Flows for each of the
three years in the period ended August 31, 1996
Consolidated Balance Sheets - August 31, 1996 and 1995
Consolidated Statements of Changes in Common Stock
Equity for each of the three years in the period ended
August 31, 1996
Consolidated Statements of Capitalization - August 31, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
--------------------------------------
None.
PART III
Item 10 Directors and Executive Officers of the Registrant
--------------------------------------------------
For information with respect to the executive officers of the registrant,
see "Executive Officers of the Registrant" at the end of Part I of this report.
Information regarding the directors of the registrant appearing on pages 2
through 6 of the Proxy Statement filed with the Securities and Exchange
Commission on November 5, 1996 is incorporated herein by reference.
Based solely upon a review of copies of Forms 3, 4 and 5 furnished to the
Corporation pursuant to Rule 16a-3(e), the Corporation believes that each of the
Corporation's directors, officers and beneficial owners of more than 10% of any
class of equity securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act") have timely filed all reports required
by Section 16(a) of the Exchange Act during the most recent two fiscal years.
Item 11 Executive Compensation
----------------------
Information regarding management compensation appearing on pages 6 through
11 of the Proxy Statement filed with the Securities and Exchange Commission on
November 5, 1996 is incorporated herein by reference.
Item 12 Security Ownership of Certain
Beneficial Owners and Management
--------------------------------
Information regarding the beneficial owners of more than 5 percent of the
outstanding Common Stock of the Corporation, being the only class of equity
security issued and outstanding, and the security ownership of management
appearing on pages 1 and 2 of the Proxy Statement filed with the Securities and
Exchange Commission on November 5, 1996 is incorporated herein by reference.
Item 13 Certain Relationships and Related Transactions
----------------------------------------------
None.
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on Form 8-K
---------------------------------
(a) 1. The following consolidated financial statements of Valley
Resources, Inc. and subsidiaries appearing on pages 16 through 29 in
the Annual Report to Stockholders for the year ended August 31, 1996
are incorporated by reference in Item 8:
Consolidated Statements of Earnings for each of the
three years in the period ended August 31, 1996
Consolidated Statements of Cash Flows for each of the
three years in the period ended August 31, 1996
Consolidated Balance Sheets - August 31, 1996 and 1995
Consolidated Statements of Changes in Common Stock Equity
for each of the three years in the period ended August 31,
1996
Consolidated Statements of Capitalization - August 31, 1996
and 1995
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
(a) 2. Consolidated Financial Schedule
Schedule VIII - Valuation and Qualifying Accounts
Schedules I, II, III, IV, V, VI, VII, IX, X, XI, XII, XIII and XIV are
either inapplicable or not required or the required information is
shown in the financial statements or notes thereto under the
instructions and have been omitted.
Report of Independent Certified Public Accountants on Consolidated
Financial Schedule
(a) 3. Exhibits
3. Articles of Incorporation and Bylaws (Exhibit 3 to the Corporation's
Annual Report on Form 10-K for the year ended August 31, 1988 is
incorporated herein by reference.)
4. Indenture of First Mortgage dated as of December 15, 1992 between
Valley Gas Company, Valley Resources, Inc. as guarantor and State
Street Bank and Trust Company, Trustee (Exhibit 4 to the
Corporation's Annual Report on Form 10-K for the year-ended
August 31, 1993 is hereby incorporated by reference.)
10. Compensation Contracts or Arrangements
10. (a) Valley Gas Company Supplemental Retirement Plan (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended August
31, 1989 is hereby incorporated by reference.)
10. (b) Valley Resources, Inc. 1988 Executive Incentive Plan (Exhibit 10 to
the Corporation's Annual Report on Form 10-K for the year ended
August 31, 1989 is hereby incorporated by reference.)
10. (c) Termination agreement between Valley Resources, Inc. and Kenneth W.
Hogan (Exhibit 10 to the Corporation's Registration Statement on Form
S-2 (File No. 2-99315) is hereby incorporated by reference.)
10. (d) Valley Resources, Inc. Directors Retirement Plan. (Exhibit 10 to
the Corporation's Annual Report on Form 10-K for the year ended
August 31, 1992 is hereby incorporated by reference.)
10. (e) Termination agreement dated June 21, 1995 between Valley Resources,
Inc. and Alfred P. Degen.
10. Other Material Contracts
10. (f) Firm Storage Service Transportation contract between Valley Gas
and Tennessee Gas Pipeline Company, dated December 15, 1985 (Exhibit
10 to the Corporation's Annual Report on Form 10-K for the year ended
August 31, 1986 is hereby incorporated by reference.)
10. (g) Storage Service Agreement dated July 3, 1985 between Valley Gas
Company and Consolidated Gas Transmission Corporation (Exhibit 10 to
the Corporation's Registration Statement on Form S-2 (File No.
2-99315) is hereby incorporated by reference.)
10. (h) Underground Storage Service Agreement dated October 3, 1984 between
Valley Gas Company and Penn-York Energy Corporation (Exhibit
10 to the Corporation's Registration Statement on Form S-2 (File No.
2-99315) is hereby incorporated by reference.)
10. (i) Underground storage service agreement dated August 19, 1983 between
Valley Gas Company and Penn-York Energy Corporation (Exhibit
10 to the Corporation's Annual Report on Form 10-K for the year ended
August 31, 1983 is hereby incorporated by reference.
10. (j) Service agreement for storage of LNG dated June 30, 1982 between
Valley Gas Company and Algonquin LNG, Inc. (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended August
31, 1982 is hereby incorporated by reference.)
10. (k) Contract for the purchase of natural gas dated March 1, 1981, between
Valley Gas Company and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K for the
year ended August 31, 1981 is hereby incorporated by reference.)
10. (l) Storage Service Transportation contract dated May 15, 1981, between
Valley Gas Company and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K for the
year ended August 31, 1981 is hereby incorporated by reference.)
10. (m) Storage Service Transportation contract dated May 26, 1981, between
Valley Gas Company and Tennessee Gas Pipeline Company
(Exhibit 10 to the Corporation's Annual Report on Form 10-K for the
year ended August 31, 1981 is hereby incorporated by reference.)
10. (n) Storage Service Agreement dated February 18, 1980, between Valley
Gas Company and Consolidated Gas Supply Corporation (Exhibit 10 to
the Corporation's Annual Report on Form 10-K for the year ended
August 31, 1981 is hereby incorporated by reference.)
10. (o) Loan Agreement dated July 18, 1991 between Valley Resources, Inc.
and Fleet National Bank (Exhibit 10 to the Corporation's Annual
Report on Form 10-K for the year ended August 31, 1991 is hereby
incorporated by reference.)
10. (p) Gas Sales Agreement dated June 15, 1992 between Aquila Energy
Marketing Corporation and Valley Gas Company. (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended August
31, 1992 is incorporated herein by reference.)
10. (q) Gas Sales Agreement dated June 8, 1992 between Natural Gas
Clearinghouse and Valley Gas Company. (Exhibit 10 to the
Corporation's Annual Report on Form 10-K for the year ended August
31, 1992 is incorporated herein by reference).
13. Annual Report to Stockholders.
21. Subsidiaries of the Registrant.
23. Consent of Grant Thornton LLP.
27. Financial Data Schedule.
(b) Form 8-K was not required to be filed for the last quarter of the period
covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: November 26, 1996 By S/K. W. Hogan
---------------------------------------
Kenneth W. Hogan
Senior Vice President, Chief Financial
Officer & Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: November 26, 1996 S/A. P. Degen
--------------------------------------------
Alfred P. Degen, President and
Chief Executive Officer
Date: November 26, 1996 S/K. W. Hogan
--------------------------------------------
Kenneth W. Hogan, Senior Vice President,
Chief Financial Officer & Secretary
Date: November 26, 1996 S/E. N. Agresti
--------------------------------------------
Ernest N. Agresti, Director
Date: November 26, 1996 --------------------------------------------
Melvin G. Alperin, Director
Date: November 26, 1996 --------------------------------------------
C. Hamilton Davison, Director
Date: November 26, 1996 S/D. A. DeAngelis
--------------------------------------------
Don A. DeAngelis, Director
Date: November 26, 1996 --------------------------------------------
James M. Dillon, Director
Date: November 26, 1996 S/J. K. Farnum
--------------------------------------------
Jonathan K. Farnum, Director
Date: November 26, 1996 S/J. F. Guthrie, Jr.
--------------------------------------------
John F. Guthrie, Jr., Director
Date: November 26, 1996 --------------------------------------------
Eleanor M. McMahon, Director
VALLEY RESOURCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE VIII
Fiscal Years Ended August 31, 1996, 1995 and 1994
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
Balance at (1) (2) Deductions Balance at
Beginning of Charged to Costs Charged to from End of
Description Period and Expenses Other Accounts Reserves Period
----------- ------ ------------ -------------- -------- ------
1996
Allowance for doubtful accounts $655,951 $1,459,761 $156,755 (a) $1,552,746 (b) $719,721
======== ========== ======== ========== ========
1995
Allowance for doubtful accounts $653,927 $ 1,274,238 $104,176 (a) $1,376,390 (b) $655,951
======== =========== ======== ========== ========
1994
Allowance for doubtful accounts $592,504 $ 959,404 $ 66,073 (a) $964,054 (b) $653,927
======== ========= ======== ======== ========
Notes: (a) Collections on accounts previously charged off.
(b) Accounts charged off.
Report of Independent Certified Public Accountants
on Consolidated Financial Schedule
To the Shareholders of
Valley Resources, Inc.
In connection with our audit of the consolidated financial statements of
Valley Resources, Inc. and subsidiaries referred to in our report dated
September 24, 1996, which is included in the Annual Report to Stockholders and
incorporated by reference in Part II of this form, we have also examined the
schedule listed in the index at Part IV, Item 14(a)2. In our opinion, this
schedule presents fairly, in all material respects, the information required to
be set forth therein.
GRANT THORNTON LLP
Boston, Massachusetts
September 24, 1996