SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1994
Commission File No. 0-367
ROANOKE GAS COMPANY
_________________________________________________________________
(Exact Name of Registrant as Specified in its Charter)
VIRGINIA 54-0359895
_________________________________________________________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
No.)
519 Kimball Ave., N.E., Roanoke, VA 24016
_________________________________________________________________
(Address of Principal Executive Offices) (Zip Code)
(703) 983-3800
_________________________________________________________________
(Registrant's Telephone Number, Including Area Code)
None
________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
______ _____
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Common Stock, $5 Par Value 1,391,387 Shares
__________________________ ________________________________
Class Outstanding at December 31, 1994
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND SEPTEMBER 30, 1994
UNAUDITED
December 31, September 30,
1994 1994
____________ _____________
(Unaudited) (Audited)
ASSETS
UTILITY PLANT:
Utility Plant in Service $53,442,811 $52,234,738
Accumulated Depreciation 17,909,907 17,465,598
___________ ___________
Utility Plant in Service, Net 35,532,904 34,769,140
Construction Work-In-Progress 1,011,948 495,234
___________ ___________
Utility Plant, Net 36,544,852 35,264,374
___________ ___________
NONUTILITY PROPERTY:
Propane 3,626,388 3,368,339
Accumulated Depreciation 1,653,898 1,601,137
___________ ___________
Nonutility Property, Propane, Net 1,972,490 1,767,202
___________ ___________
CURRENT ASSETS:
Cash 58,042 177,269
Accounts Receivable - (Less
Allowance for Uncollectibles
of $475,051 and $318,834,
Respectively) 7,636,050 3,179,712
Inventories 5,565,954 6,376,353
Deferred Income Taxes 263,147 160,291
Prepaid Income Taxes - 260,609
Purchased Gas Adjustments 517,440 694,423
Other 684,176 480,957
___________ ___________
Total Current Assets 14,724,809 11,329,614
___________ ___________
OTHER ASSETS 1,213,693 1,218,257
___________ ___________
TOTAL $54,455,844 $49,579,447
___________ ___________
See condensed notes to condensed consolidated financial
statements.
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND SEPTEMBER 30, 1994
UNAUDITED
December 31, September 30,
1994 1994
____________ _____________
(Unaudited) (Audited)
LIABILITIES
CAPITALIZATION:
Stockholders' Equity
Common Stock - Par Value $5;
Authorized, 3,000,000
Shares; Issued and Outstanding
1,391,387 and 1,382,343 Shares,
Respectively $6,956,935 $6,911,715
Capital in Excess of Par Value 3,740,374 3,631,335
Retained Earnings 6,092,273 5,881,869
___________ ___________
Total Stockholders' Equity 16,789,582 16,424,919
Long-Term Debt (Less Current
Maturities) 17,646,375 16,414,900
___________ ___________
Total Capitalization 34,435,957 32,839,819
___________ ___________
CURRENT LIABILITIES:
Current Maturities of Long-Term
Debt 1,120,665 672,146
Notes Payable 7,186,000 5,235,000
Dividends Payable 348,211 346,032
Accounts Payable 5,929,424 5,320,481
Accrued Income Taxes 36,344 -
Customers' Deposits 368,283 336,182
Accrued Expenses 1,716,040 1,316,426
Refunds from Suppliers - Due
Customers 263,977 498,898
___________ ___________
Total Current Liabilities 16,968,944 13,725,165
___________ ___________
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred Income Taxes 2,271,401 2,225,501
Deferred Investment Tax Credits 599,670 609,090
Other 179,872 179,872
___________ ___________
Total Deferred Credits and
Other Liabilities 3,050,943 3,014,463
___________ ___________
TOTAL $54,455,844 $49,579,447
___________ ___________
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE
THREE-MONTH PERIODS ENDED DECEMBER 31, 1994 AND 1993
UNAUDITED
Three-Months Ended
December 31,
____________________________
1994 1993
OPERATING REVENUES:
Gas Utilities $12,786,144 $17,530,506
Propane Operations 1,329,582 1,421,872
___________ ___________
Total Operating Revenues 14,115,726 18,952,378
___________ ___________
COST OF GAS:
Gas Utilities 8,128,187 12,354,998
Propane Operations 628,401 642,510
___________ ___________
Total Cost of Gas 8,756,588 12,997,508
___________ ___________
OPERATING MARGIN 5,359,138 5,954,870
___________ ___________
OTHER OPERATING EXPENSES:
Gas Utilities:
Other operations 2,012,561 1,898,796
Maintenance 382,345 318,812
Taxes - general 589,483 707,759
Taxes - income 229,230 448,296
Depreciation and amortization 525,761 486,740
Propane operations (including
taxes - income of $73,879 and
$85,159, respectively) 573,228 580,525
___________ ___________
Total Operating Expenses 4,312,608 4,440,928
___________ ___________
OPERATING EARNINGS 1,046,530 1,513,942
___________ ___________
OTHER INCOME AND DEDUCTIONS:
Gas Utilities:
Merchandising and Jobbing 63,399 36,281
Other Deductions (69,452) (39,222)
Taxes - Income 2,410 147
Propane operations, net 29,916 23,577
___________ ___________
Total Other Income and Deductions 26,273 20,783
___________ ___________
EARNINGS BEFORE INTEREST CHARGES 1,072,803 1,534,725
___________ ___________
INTEREST CHARGES:
Gas Utilities:
Long-term Debt 412,365 406,356
Other Interest 96,807 77,846
Propane operations, net 5,029 14,058
___________ ___________
Total Interest Charges 514,201 498,260
___________ ___________
NET EARNINGS $558,602 $1,036,465
___________ ___________
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT $0.40 $0.80
___________ ___________
CASH DIVIDENDS PER SHARE $0.25 $0.25
___________ ___________
See condensed notes to condensed consolidated financial
statements.
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE-MONTH PERIODS ENDED DECEMBER 31, 1994 AND 1993
UNAUDITED Three-Months Ended
December 31,
____________________________
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $558,602 $1,036,465
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 630,789 581,487
Loss from disposal of property 3,011 203
Changes in working capital,
operating assets and
liabilities exclusive of
changes shown separately (2,631,284) (2,138,643)
____________ ____________
Net cash used in operating
activities (1,438,882) (520,488)
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction expenditures (2,104,607) (942,426)
Other (42,529) (14,143)
Proceeds from disposal of
equipment 27,570 431
___________ ___________
Net cash used in investing
activities (2,119,566) (956,138)
____________ ____________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-
term debt 1,700,000 2,000,000
Retirement of long-term debt (12,500) (362,500)
Payments on obligation under
capital lease (7,506) (5,293)
Borrowings on line-of-credit
agreements, net 1,951,000 400,000
Cash dividends paid (346,032) (322,325)
Proceeds from issuance of stock 158,709 154,707
Capital stock expense (4,450) (60,843)
____________ ____________
Net cash provided by financing
activities 3,439,221 1,803,746
___________ ___________
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (119,227) 327,120
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 117,269 885,686
___________ ___________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $58,042 $1,212,806
___________ ___________
SUPPLEMENTAL INFORMATION:
Interest Paid $266,199 $681,482
Income taxes paid (refunded), net 75,000 (325,000)
NONCASH TRANSACTIONS:
A capital lease obligation of $7,925 was incurred when the
Company entered into an equipment lease in 1993
A note receivable of $490,000 was received in 1993 upon the sale
of a building, resulting in a deferred gain of $67,556
See condensed notes to condensed consolidated financial
statements.
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring accruals)
necessary to present fairly Roanoke Gas Company's consolidated
financial position as of December 31, 1994 and September 30, 1994
and the results of operations and cash flows for the three months
ended December 31, 1994 and 1993.
The condensed consolidated financial statements and
condensed notes are presented as permitted by Form 10-Q and do
not contain certain information included in the Company's annual
consolidated financial statements and notes.
2. The Company incurred an additional $1,700,000 in
intermediate term debt during the quarter ended December 31, 1994
in the form of two unsecured notes. The $1,000,000 note is due
in full on October 19, 1996 with interest payable monthly at a
fixed rate of 7.64%. The $700,000 note is due in full on
October 18, 1996 with interest payable monthly at a variable rate
based on LIBOR.
3. Quarterly earnings are affected by the highly seasonal
nature of the business as variations in weather conditions
generally result in greater earnings during the winter months.
4. Earnings per share is based on the weighted average number
of common and common equivalent shares outstanding during each
period (1,388,416 and 1,293,718 for the three months ended
December 31, 1994 and 1993, respectively).
5. On May 23, 1994, the Board of Directors of the Company
declared a 100% stock dividend on the Company's common stock,
payable on July 1, 1994 to holders of record on June 15, 1994.
The 100% common stock dividend has been accounted for as a stock
split, effected in the form of a dividend, and thus did not
provide any capitalization of retained earnings. A total of
681,924 whole shares of common stock were issued in connection
with the common stock dividend, and a total of $3,409,625 was
reclassified from the Company's capital in excess of par value
account to the Company's common stock account. All share and per
share amounts have been restated to retroactively reflect the
100% stock dividend.
6. Both Roanoke Gas Company and Bluefield Gas Company operated
manufactured gas plants (MGPs) as a source of fuel for lighting
and heating until the early 1950's. The process involved heating
coal in a low-oxygen environment to produce a manufactured gas
that could be distributed through the Company's pipeline system
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
to customers. The by-product of the process was coal tar, and
the potential exists for on-site tar waste contaminants at both
former plant sites. The extent of contaminants at these sites,
if any, is unknown at this time and the Company has not performed
formal analysis at the Roanoke Gas Company MGP site. A
preliminary analysis at the Bluefield Gas Company site indicates
further evaluation is warranted, and the Company is reviewing
alternative methods and practices for site investigation. The
Company has not received any notices of violation or liabilities
associated with environmental regulations related to the MGP
sites and is not aware of any off-site contamination or pollution
as a result of these prior operations. Additionally, the Company
is in the process of evaluating and remediating petroleum
contamination associated with its present or former ownership of
underground storage tanks in Roanoke and Bluefield. Should
contamination sufficient to warrant remedial action eventually be
identified, the Company will pursue all prudent and reasonable
means to recover any related costs, including insurance claims
and regulatory approval for rate case recognition of expenses
associated with any remediation work required. Based upon prior
orders of the State Corporation Commission of Virginia related to
environmental matters at other companies, the Company believes it
will be able to recover prudently incurred costs. Additionally,
the stipulated rate case agreement between the Company and the
West Virginia Public Service Commission recognizes the Company's
right to defer MGP clean-up costs and seek rate relief for such
costs. If the Company eventually incurs costs associated with a
required clean-up of either MGP site, the Company anticipates
recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in future rates. Based on
anticipated regulatory actions and current practices, management
believes that any costs incurred related to the
previously-mentioned environmental matters will not have a
material effect on the Company's consolidated results of
operations.
7. Roanoke Gas Company and Commonwealth Public Service
Corporation, a subsidiary of Bluefield Gas Company, currently
hold the only franchises and/or certificates of public
convenience and necessity to distribute natural gas in their
respective Virginia service areas. The franchises generally
extend for a period of twenty years and are renewable by the
municipalities. Certificates of public convenience and
necessity, which are issued by the Virginia State Corporation
Commission, are of perpetual duration, subject to compliance with
regulatory standards. The franchise for the City of Roanoke, the
Company's largest service area, expired on August 30, 1993. On
August 23, 1993, the Board of Directors of the Company approved
ROANOKE GAS COMPANY AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
an agreement with the City of Roanoke under which such franchise
agreement was extended for a term of 180 days from August 30,
1993, upon the same terms and conditions, except that a provision
of the existing franchise agreement giving the City the option to
purchase the property of the Company located within the City was
deleted. The 180-day extension period expired February 26, 1994.
The parties have not yet reached an agreement on a new multi-year
franchise agreement; however, negotiations are on-going, and the
Company continues to provide natural gas services to customers in
the City of Roanoke. The Company believes that it ultimately
will secure a new franchise agreement on terms acceptable to the
Company. In addition, the franchise for the City of Salem
expired on July 22, 1994, and the franchise for the Town of
Vinton expired on December 10, 1994. Negotiations between the
Company and the City of Salem and the Town of Vinton are in
process, and the Company continues to provide natural gas
services to customers in the City of Salem and the Town of
Vinton. The Company also believes that it will ultimately secure
new franchise agreements with the City of Salem and the Town of
Vinton on terms acceptable to the Company. Bluefield Gas Company
holds the only franchise to distribute natural gas in its West
Virginia service area. Its franchise extends for a period of
thirty years from August 23, 1979.
Management anticipates that the Company will be able to
renew all of its franchises. There can be no assurance, however,
that a given jurisdiction will not refuse to renew a franchise or
will not in connection with the renewal of a franchise, impose
certain restrictions or conditions that could adversely affect
the Company's business operations or financial condition.
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated net earnings for the three months ended
December 31, 1994 were $558,602 compared to $1,036,465 for the
same period last year.
Operating revenues and operating margin decreased
significantly from last year due to the current quarter having
21% fewer heating degree days than the same period a year ago and
15% fewer than normal. Total billed and unbilled volumes
decreased by more than 277,000 MCFs or almost 9% from the same
period last year. The decrease is even more pronounced in the
higher margin residential and commercial sales which experienced
a 15% decline in volume. Propane deliveries decreased more than
7% in contributing to the lower consolidated margins. Other
operations expenses increased $113,765 due to higher labor costs
and other small expense increases. Maintenance expenses
increased $63,533 primarily due to the annual clearing of brush
from the transmission gas line. Last year these expenses were
incurred in the second quarter. The decrease in general taxes is
attributable to decreases in revenue sensitive taxes offset by
general property tax increases. Depreciation expense increased
due to the increase in gas plant. Propane operations decreased
due to lower income tax expense associated with lower income from
lower sales volumes. Total interest expense increased as the
Company's total debt position increased by more than $1.3
million.
On June 15, 1994, Roanoke Gas Company filed an application
for general rate increase of $1,281,582 in additional gross
revenues. On November 13, 1994, Roanoke Gas Company placed into
effect new rates allowing for additional gross revenues of
$1,281,582 subject to refund. A hearing date has been scheduled
for January 30, 1995.
Both Roanoke Gas Company and Bluefield Gas Company operated
manufactured gas plants (MGPs) as a source of fuel for lighting
and heating until the early 1950's. The process involved heating
coal in a low-oxygen environment to produce a manufactured gas
that could be distributed through the Company's pipeline system
to customers. A by-product of the process was coal tar, and the
potential exists for on-site tar waste contaminants at both
former plant sites. The extent of contaminants at these sites,
if any, is unknown at this time and the Company has not performed
formal analysis at the Roanoke Gas Company MGP site. A
preliminary analysis at the Bluefield Gas Company site indicates
further evaluation is warranted, and the Company is reviewing
alternative methods and practices for site investigation. The
Company has not received any notices of violation or liabilities
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
associated with environmental regulations related to the MGP
sites and is not aware of any off-site contamination or pollution
as a result of these prior operations. Additionally, the Company
is in the process of evaluating and remediating petroleum
contamination associated with its present or former ownership of
underground storage tanks in Roanoke and Bluefield. Should
contamination sufficient to warrant remedial action eventually be
identified, the Company will pursue all prudent and reasonable
means to recover any related costs, including insurance claims
and regulatory approval for rate case recognition of expenses
associated with any remediation work required. Based upon prior
orders of the State Corporation Commission of Virginia related to
environmental matters at other companies, the Company believes it
will be able to recover prudently incurred costs. Additionally,
the stipulated rate case agreement between the Company and the
West Virginia Public Service Commission recognizes the Company's
right to defer MGP clean-up costs and seek rate relief for such
costs. If the Company eventually incurs costs associated with a
required clean-up of either MGP site, the Company anticipates
recording a regulatory asset for such clean-up costs which are
anticipated to be recoverable in future rates. Based on
anticipated regulatory actions and current practices, management
believes that any costs incurred related to the
previously-mentioned environmental matters will not have a
material effect on the Company's consolidated results of
operations.
Roanoke Gas Company and Commonwealth Public Service
Corporation, a subsidiary of Bluefield Gas Company, currently
hold the only franchises and/or certificates of public
convenience and necessity to distribute natural gas in their
respective Virginia service areas. The franchises generally
extend for a period of twenty years and are renewable by the
municipalities. Certificates of public convenience and
necessity, which are issued by the Virginia State Corporation
Commission, are of perpetual duration, subject to compliance with
regulatory standards. The franchise for the City of Roanoke, the
Company's largest service area, expired on August 30, 1993. On
August 23, 1993, the Board of Directors of the Company approved
an agreement with the City of Roanoke under which such franchise
agreement was extended for a term of 180 days from August 30,
1993, upon the same terms and conditions, except that a provision
of the existing franchise agreement giving the City the option to
purchase the property of the Company located within the City was
deleted. The 180-day extension period expired February 26, 1994.
The parties have not yet reached an agreement on a new multi-year
franchise agreement; however, negotiations are on-going, and the
ROANOKE GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Company continues to provide natural gas services to customers in
the City of Roanoke. The Company believes that it ultimately
will secure a new franchise agreement on terms acceptable to the
Company. In addition, the franchise for the City of Salem
expired on July 22, 1994, and the franchise for the Town of
Vinton expired on December 10, 1994. Negotiations between the
Company and the City of Salem and the Town of Vinton are in
process, and the Company continues to provide natural gas
services to customers in the City of Salem and the Town of
Vinton. The Company also believes that it will ultimately secure
new franchise agreements with the City of Salem and the Town of
Vinton on terms acceptable to the Company. Bluefield Gas Company
holds the only franchise to distribute natural gas in its West
Virginia service area. Its franchise extends for a period of
thirty years from August 23, 1979.
Management anticipates that the Company will be able to
renew all of its franchises. There can be no assurance, however,
that a given jurisdiction will not refuse to renew a franchise or
will not in connection with the renewal of a franchise, impose
certain restrictions or conditions that could adversely affect
the Company's business operations or financial condition.
The three month earnings presented herein should not be
considered as reflective of the Company's consolidated financial
results for the fiscal year ending September 30, 1995. The total
revenues during the first three months reflect higher billings
due to the weather sensitive nature of the gas business. Any
improvement or decline in earnings depends primarily on
temperature and weather conditions during the remaining winter
months.
PART II - OTHER INFORMATION
Item 6. (a) Exhibits.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on
Form 8-K filed for the three-months ended
December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant had duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ROANOKE GAS COMPANY
Date: February 10, 1995 By: Roger L. Baumgardner
Vice President/Secretary,
Treasurer and Principal
Accounting Officer