FORM 10-QA
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 March 31, 1997
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 March 31, 1997
- ------------------------------------
(Common Stock, $.15 par value) 2,357,471
- ----------------------------------------
ENERGY WEST INCORPORATED
INDEX TO FORM 10-Q
Page No.
Part I - Financial Information
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1997 and June 30, 1996 - REVISED 1
Condensed Consolidated Statements of Income - REVISED
three months and nine months ended March 31, 1997 and 1996 2
Condensed Consolidated Statements of Income - REVISED
three months ended September 30, 1996 and 1995 and
three months and six months ended December 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash
Flows - nine months ended March 31, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements 5-10
Item 2 - Management's discussion and analysis of
financial condition and results of operations 11-16
Part II Other Information
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities 18
Item 3 - Defaults upon Senior Securities 18
Item 4 - Submission of Matters to a Vote of Security Holders 18
Item 5 - Other Information 18
Item 6 - Reports on Form 8-K 18
Signatures
I. FINANCIAL INFORMATION
Item 1. Financial Statements
FORM 10-QA
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
[RESTATED]
ASSETS
March 31 June 30
1997 1996
----------- -----------
Current Assets:
Cash and Cash Equivalents $ 79,630 $ 721,093
Marketable Equity Securities 0 172,208
Accounts Receivable (net) 6,348,364 3,486,328
Natural Gas and Propane Inventory 4,859,758 2,200,778
Materials and Supplies 441,621 543,316
Prepayments and Other 590,888 602,427
Refundable Income Tax Payments 0 412,662
Recoverable Cost of Gas Purchases 1,455,388 953,392
Deferred Income Taxes - current 189,723 0
----------- -----------
Total Current Assets 13,965,372 9,092,204
----------- -----------
Investments 0 12,476
Notes Receivable Due After One Year 8,261 9,190
Property, Plant and Equipment - Net 26,926,402 26,089,830
Deferred Charges 3,231,740 2,290,973
----------- -----------
Total Assets $44,131,775 $37,494,673
----------- -----------
----------- -----------
CAPITALIZATION AND LIABILITIES
Capitalization and Liabilities:
Current Liabilities:
Note Payable to bank $10,050,000 $ 7,175,000
Long-term Debt due within one year 356,968 348,044
Accounts Payable - Gas Purchases 2,256,538 1,226,508
Other Current and Accrued Liabilities 3,333,455 2,338,011
----------- -----------
Total Current Liabilities 15,996,961 11,087,563
----------- -----------
Deferred Credits 6,108,851 4,961,539
Long-term Debt (less amounts due
within one year) 9,685,474 10,045,714
Stockholders' Equity
Preferred Stock 0 0
Common Stock ( 2,357,471 and
2,321,314 shares were outstanding at March
31, 1997 and June 30, 1996, respectively) 353,623 348,198
Capital in Excess of Par Value 2,932,962 2,635,540
Retained Earnings 9,053,905 8,416,119
----------- -----------
Total Stockholders' Equity 12,340,490 11,399,857
----------- -----------
Total Capitalization and Liabilities $44,131,775 $37,494,673
----------- -----------
----------- -----------
The accompanying notes are an integral part of these condensed
financial statements.
-1-
FORM 10-QA
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
[RESTATED]
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
---------------------------------------------------------
Operating revenue:
Regulated utilities $ 10,225,740 $ 9,752,152 $21,994,853 $19,469,916
Nonregulated operations 3,655,501 1,220,371 7,763,078 3,033,039
Gas trading 2,040,786 1,157,509 4,417,547 3,184,483
---------------------------------------------------------
Total Revenue 15,922,027 12,130,032 34,175,478 25,687,438
---------------------------------------------------------
Operating Expenses
Gas Purchased 9,335,727 6,519,567 19,085,015 12,764,238
Cost of gas trading 1,841,406 982,986 4,095,567 2,761,284
Distribution, general and administrative 2,020,640 2,052,668 6,159,787 5,702,953
Depreciation and Amortization 450,127 424,023 1,377,693 1,292,188
Other Taxes 170,480 195,544 501,973 506,042
---------------------------------------------------------
Total Operating Expenses 13,818,380 10,174,788 31,220,035 23,026,705
---------------------------------------------------------
Operating Income 2,103,647 1,955,244 2,955,443 2,660,733
Other Income (Loss) - Net 11,582 (17,360) 331,410 142,425
---------------------------------------------------------
Income Before Interest Charges & Taxes 2,115,229 1,937,884 3,286,853 2,803,158
---------------------------------------------------------
Interest Charges:
Long-Term Debt 172,704 173,316 518,113 515,228
Other 228,260 181,560 632,856 432,711
---------------------------------------------------------
Total Interest Charges 400,964 354,876 1,150,969 947,939
---------------------------------------------------------
Net Income Before Income Taxes 1,714,265 1,583,008 2,135,884 1,855,219
Income Taxes 624,209 569,279 758,875 656,781
---------------------------------------------------------
Net Income $ 1,090,056 $ 1,013,729 $ 1,377,009 $ 1,198,438
---------------------------------------------------------
---------------------------------------------------------
Earnings Per Share of Common and
Common Equivalent Stock:
Earnings per Share $ 0.46 $ 0.44 $ 0.59 $ 0.52
---------------------------------------------------------
---------------------------------------------------------
Dividends per common share $ 0.1050 $ 0.1000 $ 0.3150 $ 0.3000
Weighted Average Common
Shares Outstanding 2,353,541 2,288,870 2,353,541 2,288,870
The accompanying notes are an integral part of these condensed
financial statements.
-2-
FORM 10-QA
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
[RESTATED]
Three Months and
Year-To-Date Three Months Ended Six Months Ended
September 30 December 31 December 31
1996 1995 1996 1995 1996 1995
----------------------------------------------------------------------------
`
Operating revenue:
Regulated utilities $2,877,380 $2,657,744 $8,891,733 $7,060,020 $11,769,113 $9,717,764
Nonregulated operations 1,042,755 672,412 3,064,822 1,140,256 4,107,577 1,812,668
Gas trading 657,346 586,770 1,719,415 1,440,204 2,376,761 2,026,974
----------------------------------------------------------------------------
Total Revenue 4,577,481 3,916,926 13,675,970 9,640,480 18,253,451 13,557,406
----------------------------------------------------------------------------
Operating Expenses
Gas Purchased 2,113,963 1,552,831 7,635,325 4,691,840 9,749,288 6,244,671
Cost of gas trading 588,348 507,110 1,665,813 1,271,188 2,254,161 1,778,298
Distribution, general and administrative 2,023,135 1,863,854 2,116,012 1,786,431 4,139,147 3,650,285
Depreciation and Amortization 465,141 426,200 462,425 441,965 927,566 868,165
Other Taxes 145,963 165,570 185,530 144,928 331,493 310,498
----------------------------------------------------------------------------
Total Operating Expenses 5,336,550 4,515,565 12,065,105 8,336,352 17,401,655 12,851,917
----------------------------------------------------------------------------
Operating Income (Loss) (759,069) (598,639) 1,610,865 1,304,128 851,796 705,489
Other Income (Loss) - Net 91,402 66,223 228,426 93,562 319,828 159,786
----------------------------------------------------------------------------
Income (Loss) before interest charges
and income tax benefit (667,667) (532,416) 1,839,291 1,397,690 1,171,624 865,275
----------------------------------------------------------------------------
Interest Charges:
Long-Term Debt 172,703 175,991 172,706 165,921 345,409 341,912
Other 165,930 75,833 238,666 175,318 404,596 251,151
----------------------------------------------------------------------------
Total Interest Charges 338,633 251,824 411,372 341,239 750,005 593,063
----------------------------------------------------------------------------
Net Income (Loss) before income taxes (1,006,300) (784,240) 1,427,919 1,056,451 421,619 272,212
Provision for income taxes (benefit) (373,039) (317,103) 507,705 404,605 134,666 87,502
----------------------------------------------------------------------------
Net Income (Loss) ($633,261) ($467,137) $920,214 $651,846 $286,953 $184,710
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (Loss) Per Share of Common
and Common Equivalent Stock:
Earnings (Loss) per share ($0.27) ($0.21) $0.39 $0.29 $0.12 $0.08
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dividends per common share $0.1050 $0.1000 $0.1050 $0.1000 $0.2100 $0.2000
Weighted Average Common
Shares Outstanding 2,335,652 2,265,050 2,357,280 2,232,297 2,346,532 2,278,780
The accompanying notes are an integral part of these condensed
financial statements.
-3-
FORM 10-QA
ENERGY WEST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[RESTATED]
MARCH MARCH
1997 1996
--------------------------------
Operating Activities:
Net Income $ 1,377,009 $ 1,198,438
Adjustments to Reconcile Net Income to Cash Flow
Depreciation and Amortization 1,610,111 1,578,477
(Gain) Loss on Sale of Marketable Equity Securities (100,526) 0
(Gain) Loss on Sale of Property, Plant & Equipment (18,026) 28,284
Deferred Gain on Sale of Assets (17,721)
Investment Tax Credit - Net (15,797) (15,797)
Deferred Income Taxes - Net 346,614 111,872
Changes in Operating Assets and Liabilities (4,133,914) (2,112,446)
--------------------------------
Net Cash Provided by (Used In) Operating Activities (952,250) 756,060
Investing Activities:
Construction Expenditures (2,174,185) (3,506,545)
Collection of Long-Term Notes Receivable 929 4,179
Proceeds from Contributions in Aid of Construction 98,790 32,905
Proceeds from Sale of Marketable Equity Securities 273,572 0
Proceeds from Sale of Property, Plant & Equipment 33,297 24,089
--------------------------------
Net Cash Provided by (Used In) Investing Activities (1,767,597) (3,445,372)
Financing Activities:
Proceeds from Notes Payable 24,977,000 15,255,000
Repayment of Long-Term Debt (360,240) (405,852)
Repayment of Notes Payable (22,102,000) (12,385,000)
Sale of Common Stock 6,922 59,295
Dividends Paid (443,298) (317,838)
--------------------------------
Net Cash Provided by (Used In) Financing Activities 2,078,384 2,205,605
--------------------------------
Net Increase (Decrease) in Cash and Cash Equivalents (641,463) (483,707)
Cash and Cash Equivalents at Beginning of Year 721,093 356,200
--------------------------------
Cash and Cash Equivalents at End of Period $79,630 ($127,507)
--------------------------------
--------------------------------
The accompanying notes are an integral part of these condensed
financial statements.
-4-
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1997
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 nine month period ended March 31, 1997 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-KA for the year ended June 30, 1996 filed March 24,
1997.
Prior Period Adjustment
The Company has restated its previously issued fiscal 1997 Condensed
Consolidated Statements of income for the three months ended September 30, 1996,
the three and six months ended December 31, 1996 and the three and nine months
ended March 31, 1997 to reflect the deferral of the gain on sale-leaseback of
assets totalling $236,000, which occurred in June 1996. The gain is being
amortized ratably into income over the initial ten-year lease term. The effect
of the amortization on results of operations for the above mentioned Condensed
Consolidated Statements of Income is as follows:
September 30, 1996 December 31, 1996 March 31, 1997
Net Income (loss): three months ended three months six months three months nine months
------------------ ------------- ---------- ------------ -----------
As previously reported ($636,811) $916,664 $279,853 $1,086,506 $1,366,359
As restated ($633,261) $920,214 $286,953 $1,090,056 $1,377,009
Net income per common share:
As previously reported ($.27) $.39 $.12 $.46 $.58
As restated ($.27) $.39 $.12 $.46 $.59
5
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. In February 1997, the Financial Accounting Standards Board (SFAS)
issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE.
The overall objective of Statement 128 is to simplify the calculation of
earnings per share (EPS) and achieve comparability with the recently issued
International Accounting Standard No. 33, EARNINGS PER SHARE. Statement 128 is
effective for both interim and annual financial statements for periods ending
after December 15, 1997. Earlier application is not permitted. As a result,
calendar year end companies will first report on the new EPS basis in the fourth
quarter ended December, 1997. Subsequent to the effective date, all
prior-period EPS amounts (including EPS information in interim financial
statements, earnings summaries, and selected financial data) are required to be
restated to conform to the provisions of Statement 128. Under Statement 128,
primary EPS will be replaced with a new simpler calculation called BASIC EPS.
Basic EPS will be calculated by dividing income available to common stockholders
(i.e., net income less preferred stock dividends) by the weighted average common
shares outstanding. Thus, in the most significant change in current practice,
options, warrants, and convertible securities will be excluded from the
calculation. Further, contingently issuable shares will be included in basic
EPS only if all the necessary conditions have been satisfied by the end of the
period and it is only a matter of time before they are issued. Basic EPS under
Statement 128 will result in higher earnings per share because common stock
equivalents will not be included. Thus, the basic EPS calculation will be less
complex and easier to prepare. The Company has not calculated Basic Earnings
per Share at the end of March 31, 1997, but will adopt this standard in the
second quarter of Fiscal 1998.
6
Note 3 - Principal 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 - Deferred 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 extends automatically for two successive five-year periods unless
the Company provides at least six months notice of non-renewal prior to the end
of either the initial term or the first successive five-year term.
Note 5 - Financial Instruments and Risk Management
The Company realized a gain of approximately $100,526 pre-tax on the sale of
marketable equity securities in the first quarter of 1997.
Effective September 1, 1996, the Company was a party to two gas swap agreements
expiring August 31, 1997, for its nonregulated operations, to hedge 4,400 MMBTU
of its daily gas purchases at $1.05 per MMBTU. The index price for these two
swap agreements ranged from $.88 to $2.10 per MMBTU for the time period
September 1, 1996 to March 31, 1997. The index price at March 31, 1997 was
$1.30 resulting in an unrealized gain of $168,000. These contracts represent
approximately 92% of the supply required for the Company's customers who have
selected fixed price service. Also, beginning on January 1, 1997, the Company
has hedged 500 MMBTU per day at $2.08 per MMBTU expiring June 30, 1998, which is
100% of the Liquid Natural Gas feedstock required for the supply of the West
Yellowstone Gas operation. The index price for this swap agreement ranged from
$1.39 to $4.18 per MMBTU for the time period January 1, 1997 to March 31, 1997.
The index price at March 31, 1997 was $1.39 resulting in an unrealized loss of
$157,000. 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.
7
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 March 31, 1997, components of the
Company's deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Allowance for doubtful accounts................................. $28,428
Unamortized Investment Tax Credit............................... 162,343
Contributions in Aid of Construction............................ 135,743
Deferred Gain on Sale of Assets................................. 88,829
Other nondeductible accruals.................................... 136,571
----------
Total deferred tax assets...................................... 551,914
----------
Deferred tax liabilities:
Customer refunds payable........................................ 567,056
Property, Plant and Equipment................................... 3,008,189
Unamortized Debt Issue Costs.................................... 190,991
Covenant Not to Compete......................................... 85,859
----------
Total deferred tax liabilities................................. 3,852,095
----------
Net deferred tax liability.......................................$3,300,181
----------
----------
Income tax expense consists of the following:
Current income taxes (benefits):
Federal......................................................... $367,328
State........................................................... 58,849
----------
Total current income taxes (benefits) .......................... 426,177
----------
Deferred income taxes (benefits):
Excess tax depreciation......................................... 212,271
Excess tax (book) amortization.................................. (13,826)
Recoverable cost of gas purchases............................... 167,801
Regulatory Assets .............................................. (21,029)
Other........................................................... 3,278
----------
Total deferred income taxes..................................... 348,495
----------
Investment tax credit, net....................................... (15,797)
----------
Total income taxes (benefits).................................... $758,875
----------
----------
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%................... $727,254
State income taxes (benefit), net of federal income taxes........ 51,249
Amortization of deferred investment tax credits.................. (15,797)
Other............................................................ (3,831)
----------
Total income taxes (benefits).................................... $758,875
----------
8
NOTE 7 - COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company has entered into long-term, take or pay natural gas supply contracts
which expire at various times from 1999 to 2005. The contracts generally
require the Company to purchase specified minimum volumes of natural gas at a
fixed price which is subject to renegotiation every two years. Current prices
per Mcf for these contracts range from $1.17 to $1.75. Based on current
prices, the minimum take or pay obligation at March 31, 1997 for each of the
next five years and in total is as follows:
Fiscal Year
- -----------
1997 $1,250,000
1998 1,510,000
1999 1,510,000
2000 810,000
2001 810,000
Thereafter 1,285,000
----------
Total $7,175,000
----------
----------
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 where certain
equipment and materials are stored. 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. Several years ago the Company initiated an
assessment of the site to determine if remediation of the site was required.
That assessment resulted in a submission of a report to the Montana
Department of Environmental Quality (MDEQ) in 1994. The Company has worked
with the MDEQ since that time obtain the data that would lead to a
remediation acceptable to MDEQ. The Company's environmental consultant
advises the Company that it expects to have a report, which will include
remediation recommendations, filed with the MDEQ by approximately mid-summer
of 1997. MDEQ would then provide an opportunity for public comment on the
remediation plan. Once the comment period has ended and due consideration of
any comments occurs, the plan can be finalized. Assuming acceptance of the
plan, remediation could be underway by the fall of 1998.
Through March 31, 1997 the Company's costs incurred in evaluating this site
have totalled approximately $400,000. On May 30, 1995 the Company
received an order from the Montana Public Service Commission allowing for a
surcharge on customer bills in connection with the costs associated with
evaluation of the site. As of March 31, 1997 the surcharge had generated
approximately $400,000. The Commission's order calls for ongoing review by
the Commission of the costs incurred for this matter by periodic approvals of
the costs incurred for this matter.
LEGAL PROCEEDINGS
From time to time the Company is involved in litigation relating to claims
arising from its operations in the normal course of business. Neither the
Company nor any of its subsidiaries is a party to any legal proceedings, other
than as described in Part II- Other Information, Item 1., the adverse outcome of
which individually or in the aggregate, in the Company's view, would have a
material adverse effect on the Company's results of operations, financial
position or liquidity.
9
Note 8 - Operating Revenues and Expenses,
Regulated utility and non-regulated non-utility operating revenues and
expenses were as follows:
THREE MONTHS NINE MONTHS
------------ -----------
ENDED ENDED
----- -----
MARCH 31 MARCH 31
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Operating Revenues:
Regulated utilities $10,225,740 $ 9,752,152 $21,994,853 $19,469,916
Non-regulated operations 3,655,501 1,220,371 7,763,078 3,033,039
Gas trading 2,040,786 1,157,509 4,417,547 3,184,483
----------- ----------- ----------- -----------
$15,922,027 $12,130,032 $34,175,478 $25,687,438
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Operating Expenses:
Gas Purchased:
Regulated $ 6,512,236 $ 6,007,311 $13,304,619 $11,324,248
Non-regulated 2,823,491 512,256 5,780,396 1,439,990
Cost of gas trading 1,841,406 982,986 4,095,567 2,761,284
----------- ----------- ----------- -----------
$11,177,133 $ 7,502,553 $23,180,582 $15,525,522
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Distribution, general and administrative:
Regulated $ 1,470,698 $ 1,560,305 $ 4,601,642 $4,402,144
Non-regulated 409,233 343,871 1,191,193 979,467
----------- ----------- ----------- -----------
$ 1,879,931 $ 1,904,176 $ 5,792,835 $ 5,381,611
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Maintenance:
Regulated $ 118,843 $ 130,587 $ 295,843 $ 270,706
Non-regulated 21,866 17,905 71,109 50,636
----------- ----------- ----------- -----------
$ 140,709 $ 148,492 $ 366,952 $ 321,342
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Depreciation and amortization:
Regulated $ 372,832 $ 325,483 $ 1,122,726 $ 1,004,456
Non-regulated 77,295 98,540 254,967 287,732
----------- ----------- ----------- -----------
$ 450,127 $ 424,023 $ 1,377,693 $ 1,292,188
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Taxes other than income:
Regulated $ 143,760 $ 168,489 $ 417,646 $ 400,352
Non-regulated 26,720 27,055 84,327 105,690
----------- ----------- ----------- -----------
$ 170,480 $ 195,544 $ 501,973 $506,042
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income taxes:
Regulated $ 430,087 $ 432,546 $ 448,134 $446,921
Non-regulated 194,122 136,733 310,741 209,860
----------- ----------- ----------- -----------
$ 624,209 $ 569,279 $ 758,875 $656,781
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
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
regulated utility operations primarily involve the distribution and sale of
natural gas to the public in the Great Falls, Montana and Cody, Wyoming areas
and the distribution of propane to the public through underground propane vapor
systems in the Payson, Arizona and Cascade, Montana areas. Since 1995, the
Company's regulated utility operations have also included the distribution of
natural gas through an underground system in West Yellowstone, Montana that is
supplied by liquified natural gas.
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 area; Energy West Resources, Inc. which is involved in the
marketing of natural gas in Montana and Wyoming, gas storage and a small amount
of oil and gas production; Montana Sun, Inc., which owns two real estate
properties in Great Falls, Montana, along with certain other investments.
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 extent
short-term borrowing has been used to finance capital projects, it has been
refinanced with long-term debt or equity.
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, during the construction season and when the
heating season begins. This past fiscal year and during this first nine months
of fiscal 1997, the Company used short-term borrowing for construction of its
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
to increase its natural gas and propane inventory. Short-term borrowing
utilized for construction or property acquisitions generally is replaced by
permanent financing when it becomes economical and practical to do so. At
March 31, 1997, the Company had a $16,000,000 bank line of credit, of which
$10,050,000 had been borrowed.
11
The Company used net cash in operating activities for the nine months ended
March 31, 1997 was $952,250 as compared to net cash provided by operating
activities of $756,060 for the nine months ended March 31, 1996. This
increase in cash used in operating activities of approximately $1,700,000 was
primarily due to higher working capital requirements of approximately
$2,000,000 due to the following: 1] increased purchases of natural gas
inventory of approximately $2,500,000, 2] an increase in utility unrecovered
gas costs of approximately $375,000 due to higher than anticipated gas
commodity prices, 3] higher accounts receivable of approximately $527,000 due
to increased natural gas and propane sales, partially offset by an increase
in accounts payable of approximately $778,000, primarily due to increased gas
purchases and reduced prepaid items of approximately $620,000, primarily
related to a $500,000 prepaid gas contract commitment made in fiscal 1996.
Higher net income of approximately $179,000 and higher deferred income taxes
of approximately $234,000 reduced cash used in operating activities, offset
partially by the gain on sale of marketable equity securities of
approximately $100,000.
Cash used in investing activities was approximately $1,768,000 for the nine
months ended March 31, 1997, as compared to approximately $3,400,000 for the
nine months ended March 31, 1996, a decrease of approximately $1,600,000
primarily due to lower construction expenditures for capital projects of
approximately $1,300,000 and the proceeds from the sale of marketable equity
securities of approximately $274,000. Cash provided by financing activities
was approximately $2,100,000 for the nine months ended March 31, 1997, as
compared to approximately $2,200,000 for the nine months ended March 31,
1996. The decrease in cash provided by financing activities resulted
primarily from an increase in dividends paid of approximately $125,000,
partially offset by reduced principal payments on long-term debt and reduced
sale of common stock through the Company's Dividend Reinvestment Plan and the
Company's Incentive Stock Option Plan.
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
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 was expended for the construction of a natural gas
system in West Yellowstone, Montana, approximately $1 million was expended
for gas system expansion projects for new subdivisions in the Broken Bow
division's service area and approximately $350,000 was expended for additions
to the office and the east storage site of Petrogas in Payson, Arizona.
Capital expenditures are expected to be approximately $3.7 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 March 31,
1997, approximately $2,200,000 of that amount had been expended.
12
RESULTS OF CONSOLIDATED OPERATIONS
COMPARISON OF THIRD QUARTER OF FISCAL 1997 ENDED MARCH 31, 1997 AND THIRD
QUARTER OF FISCAL 1996 ENDED MARCH 31, 1996
The Company's net income for the third quarter ended March 31, 1997 was
$1,090,056 compared to $1,013,729 for the quarter ended March 31, 1996. The
increased net income in the third quarter of fiscal 1997 was due primarily to
an increase in gross margins from propane sales in the Company's non-regulated
operations, offset by increases in short-term interest costs and depreciation
costs, due to capital additions.
UTILITY OPERATIONS -
Utility operating revenues in the third quarter of fiscal 1997 were
approximately $10,225,000 compared to $9,750,000 for the third quarter of
fiscal 1996. Gross Margin, which is defined as operating revenues less gas
purchased, was approximately $3,700,000 for the third quarter of fiscal
1997, approximately the same as the gross margin for the third quarter of
fiscal 1996. Utility operating revenues were up for this quarter primarily
due to a gas tracker increase in the Cody division, which does not increase
margins. Operating income, which is defined as operating revenues less gas
purchased, distribution, general, administrative, maintenance, depreciation,
amortization and taxes other than income, increased approximately 3% or
$53,000 from fiscal 1996 and was approximately $1,607,000 for the third
quarter of fiscal 1997 compared to operating income of approximately
$1,560,000. This increase in operating income was due to lower distribution,
general, administrative and maintenance expenses and taxes other than income
this quarter, primarily due to more payroll, payroll taxes and expenses
capitalized to increased construction of utility projects, from the same
quarter one year ago.
OPERATING EXPENSES -
Utility operating expenses, excluding the cost of gas purchased and federal
and state income taxes, were approximately $1,590,000 for the third quarter of
fiscal 1997 as compared to $1,690,000 for the same period in fiscal 1996. The
5% decrease in the period is generally due to more payroll and expenses
capitalized to increased construction of utility projects, from the same
quarter one year ago.
INTEREST CHARGES -
Interest charges allocable to the Company's utility divisions were
approximately $393,000 for the third quarter of fiscal 1997, as compared to
$324,000 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 $430,000 for the third quarter of fiscal 1997, approximately the
same for the third quarter in fiscal 1996. Pre-tax income of the utility
divisions was approximately the same for the third quarter of fiscal 1997 and
1996.
13
NON-REGULATED OPERATIONS -
Non-regulated operating revenues for the third quarter ended March 31, 1997
were approximately $5,696,000 compared to $2,378,000 for the third quarter of
fiscal 1996. Non-regulated operating revenues for fiscal 1997 consisted of
$3,630,000 for Rocky Mountain Fuels, $2,042,000 for Energy West Resources,
Inc. and $24,000 for Montana Sun, Inc. Operating income, which is defined as
operating revenues less gas purchased, distribution, general, administrative,
maintenance, depreciation, amortization and taxes other than income,
increased approximately 26% or $103,000 from fiscal 1996 and was
approximately $497,000 for the third quarter of fiscal 1997 compared to
operating income of approximately $394,000. Operating income for the third
quarter of fiscal 1997 was up $84,000 in Rocky Mountain Fuels due to
increased wholesale propane sales margins, offset by higher general,
administrative and maintenance expenses and operating income in Energy West
Resources, Inc. was up approximately $21,000, due to higher gas marketing
margins because of decreased natural gas prices for purchases and lower
amortization costs.
ROCKY MOUNTAIN FUELS -
For the three months ended March 31, 1997, RMF generated net income of
approximately $183,000 compared to net income of approximately $139,000 for
the three months ended March 31, 1996. Approximately $83,000 of RMF's net
income for the third quarter of fiscal 1997 was attributable to the Wyo L-P Gas
division in Wyoming, approximately $101,000 to the Petrogas division in Arizona,
with the balance of approximately ($1,000) net loss attributable to Missouri
River Propane in Montana. RMF's gross margins increased approximately 21%,
or $142,000, for the three months ended March 31, 1997 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 the same quarter last year of approximately $428,000 to $497,000
due to increased wholesale propane sales, customer growth and colder weather.
Margins in the Petrogas division in Arizona increased this quarter from
approximately $205,000 to $278,000, 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 personnel expense due to customer growth, as well as higher
short-term interest costs due to expansion of plant in Montana and Wyoming.
State and federal income taxes increased to approximately $111,000 for this
quarter from $77,000 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 March 31, 1997, Energy West Resources, Inc.'s net
income was approximately $122,000 compared to $93,000 for the three months ended
March 31, 1996, primarily due to higher natural gas sales than in the same
period last year. Gas trading margins increased approximately $25,000, or
14%due to decreased natural gas prices in Canada and Montana. State and federal
income taxes increased this quarter to approximately $73,000 from $53,000 the
same quarter one year ago, due to higher pre-tax income of Energy West
Resources, Inc.
MONTANA SUN, INC. -
For the three months ended March 31, 1997, Montana Sun, Inc.'s net income was
approximately $11,000 compared to $10,000 for the three months ended March 31,
1996,
14
RESULTS OF CONSOLIDATED OPERATIONS
COMPARISON OF NINE MONTHS ENDED MARCH 31, 1997 AND NINE MONTHS ENDED MARCH 31,
1996
The Company's net income for the first nine months ended March 31, 1997 was
$1,377,009 compared to $1,198,438 for the nine months ended March 31, 1996. The
increase in net income in the first nine months of 1997 was due primarily to an
increase in gross margins from natural gas and propane sales due to an interim
rate increase effective November, 1996 approved by the Montana Public Service
Commission in a rate relief filing by the Great Falls division and colder
weather than one year ago, as well as a one time pre-tax capital gain of
$100,526 and approximately $63,000 after-tax on the sale of marketable equity
securities, offset by increases in short-term interest costs and depreciation
costs relating 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 (see below under
utility operations and non-regulated operations).
UTILITY OPERATIONS -
Utility operating revenues in the first nine months of fiscal 1997 were
approximately $22,000,000 compared to approximately $19,000,000 for the first
nine months of fiscal 1996. Operating income increased approximately 9% or
$184,000 from fiscal 1996 and was approximately $2,252,000 for the first nine
months of fiscal 1997 compared to operating income of approximately
$2,068,000. This increase in operating income was primarily due to higher
gross margins of approximately 7% or $544,000, partially offset by higher
utility operating expenses and taxes other than income of approximately
$243,000, due to normal inflationary trends and less payroll, payroll taxes
and other expenses capitalized to projects and higher depreciation and
amortization expenses of approximately $119,000, due to additions to utility
plant. Gross Margin, which is defined as operating revenues less gas
purchased, was approximately $8,700,000 for the first nine months of fiscal
1997 compared to gross margin of approximately $8,146,000 for the first nine
months of fiscal 1996. Gross margins increased 7% 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, excluding the cost of gas purchased and federal
and state income taxes, were approximately $4,900,000 for the first nine
months of fiscal 1997 as compared to $4,700,000 for the same period in fiscal
1996. The 4% increase in the period was 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 $1,108,000 for the first nine months of fiscal 1997, as
compared to $862,000 in the comparable period in fiscal 1996. Long term debt
interest decreased, however and 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 $448,000 for the first nine months of fiscal 1997, as compared to
approximately $447,000 for the same period in fiscal 1996. Pre-tax income of
the utility divisions was approximately the same for the nine month period of
fiscal 1997 and 1996.
15
NON-REGULATED OPERATIONS -
Non-regulated operating revenues for the first nine months ended March 31,
1997 were approximately $12,181,000 compared to $6,217,522 for the first nine
months of fiscal 1996. Non-regulated operating revenues for fiscal 1997
consisted of $7,648,000 for Rocky Mountain Fuels, $4,460,000 for Energy West
Resources, Inc. and $73,000 for Montana Sun, Inc. Operating income, which is
defined as operating revenues less gas purchased, distribution, general,
administrative, maintenance, depreciation, amortization and taxes other than
income, increased approximately 18% or $106,000 from fiscal 1996 and was
approximately $706,000 for the first nine months of fiscal 1997 compared to
operating income of approximately $600,000. Operating income for the first
nine months of fiscal 1997 was up $240,000 in Rocky Mountain Fuels due to
increased wholesale propane sales margins, offset by higher general,
administrative and maintenance expenses. This increase in operating income
was partially offset by lower operating income in Energy West Resources, Inc.
of approximately $132,000, due to lower gas marketing margins because of
increased natural gas prices for purchases.
ROCKY MOUNTAIN FUELS -
For the nine months ended March 31, 1997, RMF generated net income of
approximately $242,000 compared to net income of $125,000 for the nine months
ended March 31, 1996. Approximately $163,000 of RMF's net income for the
first nine months of fiscal 1997 was attributable to the Wyo L-P Gas division
in Wyoming, $103,000 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 27%, or $329,000, for the nine months
ended March 31, 1997 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 nine month period increased in the Wyo L-P division approximately
$329,000 for wholesale propane sales, due to customer growth and colder weather
and decreased approximately $23,000, or 3%, for retail propane sales due to
higher propane prices and competitive market conditions, while margins in the
Petrogas division in Arizona increased from a year ago by approximately
$100,000, or 27%, due to customer growth and weather, while Missouri River
Propane in Montana margins increased from a year ago by approximately $12,000,
or 24%, due to weather and customer growth. 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, which was financed by short-term
debt. State and federal income taxes increased to approximately $142,000 for
this nine month period from $64,000 due to higher pre-tax income in Rocky
Mountain Fuels, Inc. this year of approximately $190,000.
ENERGY WEST RESOURCES, INC. - (FORMERLY VESTA, INC.) -
For the nine months ended March 31, 1997, Energy West Resources, Inc.'s net
income was approximately $172,000 compared to $206,000 for the nine months
ended March 31, 1996, primarily due to lower gas trading margins. Gas trading
margins decreased approximately $102,000, or 24%. Although gas trading revenues
are up approximately $1,200,000 this nine month period from one year ago, cost
of gas trading was up approximately $1,300,000, due to increased natural gas
prices in Canada and Montana and increased competition, requiring lower margins
in order to retain or secure new Energy West Resource customers. State and
federal income taxes decreased this nine month period to approximately $104,000
from $123,000 the same nine month period one year ago, due to lower pre-tax
income.
MONTANA SUN, INC. -
For the nine months ended March 31, 1997, Montana Sun, Inc.'s net income was
approximately $97,000 compared to $42,000 for the nine months ended March 31,
1996, due primarily to the sale of mutual fund investments at a capital gain.
16
FORM 10-Q
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS
From time to time the Company is involved in litigation relating to claims
arising from its operations in the normal course of business. Neither the
Company nor any of its subsidiaries is a party to any legal proceedings, other
than as described below, the adverse outcome of which individually or in the
aggregate, in the Company's view, would have a material adverse effect on the
Company's results of operations, financial position or liquidity.
On December 20, 1996, an action was filed against the Company by Randy Hynes
and Melissa Hynes in Federal District Court in Wyoming. The action arises
from a natural gas explosion involving a four-plex apartment building which
was damaged after natural gas from a gas line leaked into the building on
February 3, 1996 (which was not serviced by natural gas). The plaintiffs,
who were tenants in the building, sustained burns and other injuries as well
as property damage. The plaintiffs allege that the Company was negligent in
that it failed to maintain the natural gas line consistent with its duty to
do so and failed to properly odorize the gas which caused the explosion. The
action also asserts claims of product liability, willful and wanton conduct
and breach of warranty. The plaintiffs are seeking damages for personal
injury, pain and suffering, emotional distress, loss of earnings, medical
expenses, physical disability and property damage as well as punitive
damages. A dollar amount has not been set forth in the pleadings. The
Company denies responsibility for the damages and is vigorously contesting
the matter. The Company believes the gas leak resulted from damage caused to
the pipeline by an unknown third party. Discovery is proceeding at this
time. A trial has been scheduled for the fall of 1997.
A similar lawsuit involving the same explosion was filed by five other
plaintiffs Wyoming District court, Park County, Wyoming on April 3, 1997. The
allegations are substantially the same as the allegations in the Federal
District Court case. The Company has filed an answer denying liability and
is contesting the matter vigorously. Only limited discovery has occurred to
date. The plaintiffs, Heidi Woodward, et al., were also tenants in the
apartment building.
On October 24, 1996, an action was filed against the Company by Colten and
Julie White and their three children in Superior Court in Gila County,
Arizona. The action arises from an explosion that occurred on May 3, 1995 in
the plaintiffs' new home which was serviced by the Company's propane
business. The explosion occurred in the course of the plaintiffs' attempt to
light their appliances for the first time. The plaintiffs sustained injuries
and property damage in the explosion and the fire that occurred after the
explosion. The claims are for personal injury, mental suffering and anguish,
medical expenses, lost income, property damages and punitive damages.
Plaintiffs' claims are based on a strict liability claim that the propane
was defective, breach of warranty in that the propane was not fit for the
purpose for which it was intended and negligence for failure to assure that
the propane was properly odorized. The dollar value of the claims has not
been set forth in the pleadings of the plaintiffs.
The Company carries commercial general liability insurance for bodily injury
and property damages of $1,000,000 per occurrence and $5,000,000 in the
aggregate, and has an additional $30,000,000 umbrella policy for excess
claims. The Company's general liability carrier has assumed the defense of
both Wyoming actions and the Arizona action. The Company believes it has
insurance coverage for these matters. However, no assurance can be given
that insurance will cover these matters in the event that the Company is held
liable. In the event of an adverse result for the Company, and if the
Company's insurance does not cover the matters or is not sufficient to cover
the matters, such result could have a material adverse effect on the
Company's results of operations, financial position and liquidity (depending
on the amount of the judgment or judgments).
17
FORM 10-Q
Part II - Other Information (continued)
Item 2. Changes in Securities
Effective as of January 4, 1997 the Company issued 8,111.5857 shares of
Common Stock to Ian B. Davidson ("Davidson"), a director of the Company, and
101.7134 shares of Common Stock to William Quast ("Quast") an officer of the
Company, and 26.2101 shares of Common Stock to Quast in joint tenancy with
his wife, all at a price of $8.375 per share. Such shares were issued to
Davidson and Quast in consideration of the reinvestment of their quarterly
dividend for the quarter ended December 31, 1996. Such reinvestment was made
outside of the Company's dividend reinvestment plan ("DRIP") but otherwise on
the same terms as shares issued to participants in the DRIP. Thus, the price
per share was determined according to the method used under the DRIP,
pursuant to which the price of shares purchased is 100% of the "average
price" for such shares determined by averaging the high and low sales prices
as reported on the Nasdaq Stock Market on such dividend payment date. The
shares were issued to Davidson and Quast in a sale not involving any public
offering in accordance with Section 4(2) of the Securities Act of 1933, as
amended, and are subject to restrictions on resale and transfer in accordance
with applicable securities laws.
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
Recent Event
On June 23, 1997 the Company announced that it had entered into a
memorandum of understanding ("MOU") with Avista Energy, a subsidiary of
Washington Water Power, regarding a joint marketing venture relating to the
creation of a direct access, retail electric power marketing business in the
state of Montana. The Company is in the process of negotiating a definitive
agreement consistent with the terms of the MOU. If no such definitive
agreement has been reached and executed by December 31, 1997, then either
party may terminate the MOU. In addition, absent the execution of such an
agreement, the MOU will not bind either party.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits (See Exhibit Index on Page E-1)
B. No reports on Form 8-K have been filed during the quarter ended
March 31, 1997.
18
EXHIBIT INDEX
3.1 Restated Articles of Incorporation of the Company, as amended to date
(incorporated by reference to Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K/A1 for the fiscal year ended June 30, 1996, File No.
0-14183).
3.2 Bylaws of the Company, as amended to date (incorporated by reference to
Exhibit 3.2 to the Registrant's Annual Report on Form 10-K/A1 for the
fiscal year ended June 30, 1996, File No. 0-14183).
4.1 Loan Agreement, dated as of September 1, 1992, relating to the Company's
Series 1992A and Series 1992B Industrial Development Revenue Bonds
(incorporated by reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-2, File No. 33-62680).
4.2 Form of Indenture (including form of Note) relating to the Company's Series
1993 Notes (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-2, File No. 33-62680).
10.1 Credit Agreement dated as of February 12, 1997, by and between the Company
and First Bank Montana, National Association (incorporated by reference
to Exhibit 10.5 to Registrant's Annual Report on Form 10-K/A1, File
No. 0-14183).
10.2 Second Amendment, dated April 14, 1997, to Credit Agreement dated as of
January 18, 1995, by and between the Company and Norwest Bank Montana,
National Association (filed herewith).
10.3 Promissory Note, dated April 14, 1997, issued to Norwest Bank Montana,
National Association (filed herewith).
E-1
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 July 8, 1997
/s/ William J. Quast
__________________________________
William J. Quast, Vice-President, Treasurer,
Controller and Assistant Secretary