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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-6196
Piedmont Natural Gas Company, Inc.
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(Exact name of registrant as specified in its charter)
North Carolina 56-0556998
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1915 Rexford Road, Charlotte, North Carolina 28211
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 704-364-3120
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 June 2, 2000
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Common Stock, no par value 31,650,858
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)
---------------------------------------------------
April 30, October 31,
2000 1999
Unaudited Audited
----------- ----------
ASSETS
Utility Plant, at original cost $ 1,470,815 $1,441,322
Less accumulated depreciation 440,310 420,140
----------- ----------
Utility plant, net 1,030,505 1,021,182
----------- ----------
Other Physical Property (net of accumulated
depreciation of $20,031 in 2000 and $18,967 in 1999) 25,200 25,793
----------- ----------
Current Assets:
Cash and cash equivalents 13,162 6,174
Restricted cash 40,923 40,156
Receivables (less allowance for doubtful
accounts of $1,947 in 2000 and $864 in 1999) 67,451 32,106
Receivables from affiliate 20,509 22,354
Gas in storage 35,014 48,685
Deferred cost of gas 12,556 8,267
Refundable income taxes 0 17,670
Other 9,781 22,983
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Total current assets 199,396 198,395
----------- ----------
Deferred Charges and Other Assets 63,935 43,287
----------- ----------
Total $ 1,319,036 $1,288,657
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CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 306,706 $ 297,149
Retained earnings 253,803 194,598
----------- ----------
Total common stock equity 560,509 491,747
Long-term debt 423,000 423,000
----------- ----------
Total capitalization 983,509 914,747
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Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 2,000 2,000
Notes payable 30,000 79,500
Accounts payable 64,745 63,116
Deferred income taxes 1,990 23,002
Income taxes accrued (6,799) 0
General taxes accrued 4,675 11,904
Refunds due customers 54,979 26,204
Other 20,624 20,978
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Total current liabilities 172,214 226,704
----------- ----------
Deferred Credits and Other Liabilities 163,313 147,206
----------- ----------
Total $ 1,319,036 $1,288,657
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See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Income (Unaudited)
(in thousands except per share amounts)
-------------------------------------------------------
Three Months Six Months Twelve Months
Ended Ended Ended
April 30 April 30 April 30
---------------------- ---------------------- ----------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- --------
Operating Revenues $282,955 $239,247 $551,603 $494,989 $743,084 $685,534
Cost of Gas 167,792 125,473 319,367 259,659 425,671 364,422
-------- -------- -------- -------- -------- --------
Margin 115,163 113,774 232,236 235,330 317,413 321,112
-------- -------- -------- -------- -------- --------
Other Operating Expenses:
Operations 28,012 25,829 54,761 50,507 105,516 103,917
Maintenance 4,105 3,932 8,055 7,553 16,065 15,500
Depreciation 12,137 10,803 23,982 21,515 46,598 42,710
General taxes 4,871 8,745 9,900 18,241 21,124 30,574
Income taxes 22,456 22,264 46,196 47,806 36,685 37,476
-------- -------- -------- -------- -------- --------
Total other operating expenses 71,581 71,573 142,894 145,622 225,988 230,177
-------- -------- -------- -------- -------- --------
Operating Income 43,582 42,201 89,342 89,708 91,425 90,935
Other Income, Net 2,908 449 10,535 1,791 7,705 643
-------- -------- -------- -------- -------- --------
Income Before Utility Interest Charges 46,490 42,650 99,877 91,499 99,130 91,578
Utility Interest Charges 9,054 7,983 18,347 16,268 34,624 32,746
-------- -------- -------- -------- -------- --------
Net Income $ 37,436 $ 34,667 $ 81,530 $ 75,231 $ 64,506 $ 58,832
======== ======== ======== ======== ======== ========
Average Shares of Common Stock:
Basic 31,522 30,946 31,451 30,883 31,295 30,740
Diluted 31,700 31,175 31,630 31,113 31,499 30,995
Earnings Per Share of Common Stock:
Basic $ 1.19 $ 1.12 $ 2.59 $ 2.44 $ 2.06 $ 1.91
Diluted $ 1.18 $ 1.11 $ 2.58 $ 2.42 $ 2.05 $ 1.90
Cash Dividends Per Share
of Common Stock $ 0.365 $ 0.345 $ 0.71 $ 0.67 $ 1.40 $ 1.32
See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows (Unaudited)
(in thousands)
-----------------------------------------------------------
Three Months Six Months Twelve Months
Ended Ended Ended
April 30 April 30 April 30
--------------------- --------------------- ----------------------
2000 1999 2000 1999 2000 1999
-------- -------- -------- -------- -------- ---------
Cash Flows from Operating Activities:
Net income $ 37,436 $ 34,667 $ 81,530 $ 75,231 $ 64,506 $ 58,832
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,144 11,895 25,906 23,608 50,214 46,697
Other, net (1,069) (1,997) (353) (114) 1,025 309
Change in operating assets and liabilities 53,693 63,011 5,327 4,048 (74,507) (7,504)
-------- -------- -------- -------- -------- ---------
Net cash provided by operating activities 103,204 107,576 112,410 102,773 41,238 98,334
-------- -------- -------- -------- -------- ---------
Cash Flows from Investing Activities:
Utility construction expenditures (21,441) (23,745) (40,931) (45,223) (94,284) (102,326)
Other (312) (460) (595) (805) (1,433) (1,581)
-------- -------- -------- -------- -------- ---------
Net cash used in investing activities (21,753) (24,205) (41,526) (46,028) (95,717) (103,907)
-------- -------- -------- -------- -------- ---------
Cash Flows from Financing Activities:
Increase (Decrease) in bank loans, net (71,500) (64,000) (49,500) (32,000) 30,000 --
Issuance of long-term debt -- -- -- -- 90,000 --
Retirement of long-term debt -- -- -- -- (46,000) (10,000)
Issuance of common stock through dividend
reinvestment and employee stock plans 4,193 4,091 7,929 7,766 15,903 15,405
Dividends paid (11,502) (10,674) (22,325) (20,688) (43,805) (40,571)
-------- -------- -------- -------- -------- ---------
Net cash provided by (used in) financing activities (78,809) (70,583) (63,896) (44,922) 46,098 (35,166)
-------- -------- -------- -------- -------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 2,642 12,788 6,988 11,823 (8,381) (40,739)
Cash and Cash Equivalents at Beginning of Period 10,520 8,755 6,174 9,720 21,543 62,282
-------- -------- -------- -------- -------- ---------
Cash and Cash Equivalents at End of Period $ 13,162 $ 21,543 $ 13,162 $ 21,543 $ 13,162 $ 21,543
======== ======== ======== ======== ======== =========
Cash Paid During the Period for:
Interest $ 2,978 $ 4,783 $ 16,496 $ 16,126 $ 33,017 $ 32,737
Income taxes $ 51,384 $ 36,327 $ 53,023 $ 38,060 $ 64,800 $ 38,623
See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Independent auditors have not audited the condensed consolidated
financial statements. These financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in our 1999 Annual Report.
2. In our opinion, the unaudited condensed consolidated financial
statements include all normal recurring adjustments necessary for a
fair statement of financial position at April 30, 2000, and October 31,
1999, and the results of operations and cash flows for the three
months, six months and twelve months ended April 30, 2000 and 1999.
We make estimates and assumptions when preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from our estimates.
3. Our business is seasonal in nature. The results of operations for the
three-month and six-month periods ended April 30, 2000, do not
necessarily reflect the results to be expected for the full year.
4. Basic earnings per share are computed by dividing net income by the
weighted average number of shares of common stock outstanding for the
period. Diluted earnings per share reflect the potential dilution that
could occur when common stock equivalents are added to common shares
outstanding. Shares that may be issued under the long-term incentive
plan are our only common stock equivalents. A reconciliation of basic
and diluted earnings per share is shown below:
Three Months Six Months Twelve Months
Ended Ended Ended
April 30 April 30 April 30
-------------------- ------------------- --------------------
(in thousands except per share amounts)
2000 1999 2000 1999 2000 1999
------- ------- ------- ------- ------- -------
Net Income $37,436 $34,667 $81,530 $75,231 $64,506 $58,832
======= ======= ======= ======= ======= =======
Average shares of common stock
outstanding for basic earnings per share 31,522 30,946 31,451 30,883 31,295 30,740
Contingently issuable shares under
the long-term incentive plan 178 229 179 230 204 255
------- ------- ------- ------- ------- -------
Average shares of dilutive stock 31,700 31,175 31,630 31,113 31,499 30,995
======= ======= ======= ======= ======= =======
Earnings Per Share:
Basic $ 1.19 $ 1.12 $ 2.59 $ 2.44 $ 2.06 $ 1.91
Diluted $ 1.18 $ 1.11 $ 2.58 $ 2.42 $ 2.05 $ 1.90
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5. Business Segments
We have one reportable business segment, domestic natural gas
distribution. This business is conducted by the parent company and two
wholly owned subsidiaries, Piedmont Intrastate Pipeline Company and
Piedmont Interstate Pipeline Company. Piedmont Intrastate is a member
of Cardinal Pipeline Company, L.L.C., which owns and operates a natural
gas pipeline. Piedmont Interstate is a member of Pine Needle LNG
Company, L.L.C., which owns a liquified natural gas peak-demand storage
facility.
All of our other activities are conducted by wholly owned subsidiaries,
Piedmont Propane Company and Piedmont Energy Company. Piedmont Propane
markets propane and propane appliances to residential, commercial and
industrial customers. Piedmont Energy has an equity interest in
SouthStar Energy Services LLC which offers a combination of unregulated
energy products and services to industrial, commercial and residential
customers in the southeastern United States.
Performance is evaluated based on margin, operations and maintenance
expenses, operating income and income before taxes. There have been no
changes in the basis of segmentation or in the basis of measurement of
segment profit or loss from that reported in our audited financial
statements for the year ended October 31, 1999.
Continuing operations by segment for the three months and six months
ended April 30, 2000 and 1999, are presented below:
Domestic
Natural Gas
Distribution Other Total
---------------------- --------------------- -----------------------
(in thousands)
Three Months Ended April 30 2000 1999 2000 1999 2000 1999
- --------------------------- -------- -------- ------- -------- -------- ---------
Revenues from external customers $282,955 $239,247 $11,236 $ 7,983 $294,191 $ 247,230
Margin 115,163 113,775 4,485 4,153 119,648 117,928
Operations and maintenance
expenses 32,119 29,761 2,873 2,477 34,992 32,238
Operating income 43,581 42,202 803 900 44,384 43,102
Other income 1,878 799 1,832 (831) 3,710 (32)
Income before income taxes 58,869 57,281 2,933 (50) 61,802 57,231
Capital expenditures 22,312 24,527 250 460 22,562 24,987
Six Months Ended April 30
- -------------------------
Revenues from external customers $551,603 $494,989 $26,458 $ 18,891 $578,061 $ 513,880
Margin 232,235 235,331 11,081 10,073 243,316 245,404
Operations and maintenance
expenses 62,818 58,060 5,238 4,918 68,056 62,978
Operating income 89,315 89,691 4,309 3,584 93,624 93,275
Other income 3,884 1,618 8,739 (1,992) 12,623 (374)
Income before income taxes 121,063 122,848 13,568 1,372 134,631 124,220
Capital expenditures 42,921 46,826 508 805 43,429 47,631
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A reconciliation of net income in the consolidated financial statements for the
three months and six months ended April 30, 2000 and 1999, is presented below:
Three Months Six Months
Ended April 30 Ended April 30
--------------------- ----------------------
2000 1999 2000 1999
------- -------- -------- --------
(in thousands)
Income before income taxes for reportable segments $58,869 $ 57,281 $121,063 $122,848
Income before income taxes for other non-utility activities 2,933 (50) 13,568 1,372
Income taxes 24,366 22,564 53,101 48,989
------- -------- -------- --------
Net income $37,436 $ 34,667 $ 81,530 $ 75,231
======= ======== ======== ========
A reconciliation of consolidated assets in the consolidated financial statements
as of April 30, 2000 and October 31, 1999, is presented below:
2000 1999
----------- -----------
(in thousands)
Domestic natural gas operations $ 1,326,541 $ 1,304,453
Other 68,138 59,997
Eliminations/Adjustments (75,643) (75,793)
----------- -----------
Consolidated assets $ 1,319,036 $ 1,288,657
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
Our discussion contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements concerning plans,
objectives, proposed capital expenditures and future events or performance are
some of the items included in forward-looking statements. Our statements reflect
our current expectations and involve a number of risks and uncertainties.
Although we believe that our expectations are based on reasonable assumptions,
we can give no assurances that these expectations will be achieved. Important
factors that could cause actual results to differ include:
o regulatory issues, including those that affect allowed rates
of return, rate structure and financings,
o industrial, commercial and residential growth in the service
territories,
o deregulation, unanticipated impacts of restructuring and
increased competition in the energy industry,
o the potential loss of large-volume industrial customers due to
bypass or the shift by such customers to special competitive
contracts at lower per unit margins,
o economic and capital market conditions,
o the ability to meet internal performance goals,
o the capital intensive nature of our business, including
development project delays or changes in project costs,
o changes in the availability and price of natural gas,
o changes in demographic patterns and weather conditions and
o changes in environmental requirements and cost of compliance.
Financial Condition
We finance current cash requirements primarily from operating cash flows and
short-term borrowings. Various banks provide lines of credit totaling $75
million for these direct short-term borrowings. We sell common stock and
long-term debt to cover cash requirements when market and other conditions favor
such long-term financing. Our dividend reinvestment and stock purchase plan is
also a source of capital.
The natural gas business is seasonal in nature resulting in fluctuations in
balances in accounts receivable from customers, inventories of stored natural
gas and accounts payable to suppliers. From April 1 to October 31, we build up
natural gas inventories by injecting gas into storage for sale in the colder
months. Inventory of stored gas decreased and accounts payable and accounts
receivable increased from October 31, 1999, to April 30, 2000, due to this
seasonality and the
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demand for gas during the winter season. Most of our annual earnings are
realized in the winter period, which is the first five months of our fiscal
year.
We have a substantial capital expansion program for construction of distribution
facilities, purchase of equipment and other general improvements funded through
sources noted above. The capital expansion program supports our approximately 5%
current annual growth in customer base. Utility construction expenditures for
the three months ended April 30, 2000, were $22.3 million, compared with $24.5
million for the same period in 1999. Utility construction expenditures for the
six months ended April 30, 2000, were $42.9 million, compared with $46.8 million
for the same period in 1999. Utility construction expenditures for the
twelve-month period ended April 30, 2000, were $98.1 million, compared with
$105.6 million for the same period in 1999.
At April 30, 2000, our capitalization consisted of 43% in long-term debt and 57%
in common equity.
Results of Operations
We will discuss the results of operations for the three months, six months and
twelve months ended April 30, 2000, compared with similar periods in 1999.
Margin
Margin (operating revenues less cost of gas) for the three months ended April
30, 2000, increased $1.4 million compared with the same period in 1999 primarily
for the reasons listed below.
o Delivered volumes of natural gas, which we refer to as system
throughput, increased 854,000 dekatherms over the same period
in 1999, primarily due to increased customer growth.
o Regulatory adjustments resulted in margin increases from the
same period in 1999.
o Income from secondary market activity.
Increases in margin for the three-month period were partially offset by the
following decreases.
o Margin was reduced in North Carolina, effective for bills
rendered after August 1, 1999 (which included volumes
delivered in July), due to the elimination of the gross
receipts tax that was previously included in rates billed to
customers. Gross receipts tax expense in the same amount also
acted to reduce general taxes.
o Weather that was warmer than normal generated operating
revenues of $6.7 million from the weather normalization
adjustment (WNA). The WNA is designed to offset the impact of
unusually cold or warm weather on customer billings and
operating margin. The same period in 1999 reflected increased
operating revenues of $8.9 million from the WNA resulting in a
period-to-period decrease of $2.2 million.
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Margin for the six months ended April 30, 2000, decreased $3.1 million compared
with the same period in 1999 primarily for the reasons listed below.
o Margin was reduced due to the elimination of the gross
receipts tax as noted above.
o Weather that was warmer than normal generated operating
revenues of $19.3 million from the WNA. The same period in
1999 reflected increased operating revenues of $19.7 million
from the WNA, a $400,000 decrease between the periods.
o More income from secondary market activity was recognized in
the prior period.
Decreases in margin for the six-month period were partially offset by the
following increases.
o Delivered volumes of natural gas increased 1.9 million
dekatherms over the same period in 1999, primarily due to
increased customer growth.
o Regulatory adjustments resulted in margin increases over the
same period in 1999.
Margin for the twelve months ended April 30, 2000, decreased $3.7 million
compared with the same period in 1999 primarily for the reasons listed below.
o Margin was reduced due to the elimination of the gross
receipts tax as noted above.
o Margin was reduced in South Carolina, effective November 1,
1998, as ordered by the Public Service Commission of South
Carolina (PSCSC), to eliminate the recovery of demand side
management (DSM) costs included in rates. The amortization of
such costs in operations and maintenance expenses was reversed
in the same amount and recorded as a regulatory asset for
recovery in future rates.
o More income from secondary market activity was recognized in
the prior period.
o Weather that was warmer than normal generated operating
revenues of $19.3 million from the WNA. The same period in
1999 reflected operating revenues of $19.7 million from the
WNA, a $400,000 decrease between the periods.
The decreases in margin for the twelve-month period were partially offset by an
increase in system throughput of 1.2 million dekatherms over the same period in
1999, primarily due to increased customer growth and 4% colder weather than the
same period in 1999.
Our rate schedules include provisions permitting the recovery of prudently
incurred gas costs. Regulatory commissions in North Carolina and South Carolina
require annual prudence reviews covering a historical twelve-month period;
however, such review is not required in Tennessee.
We revise rates in all three states periodically without formal rate proceedings
to reflect changes in the cost of gas. Charges to cost of gas are based on the
amount recoverable under approved rate schedules. The net of any over- or
under-recoveries of gas costs are added to or deducted from cost of gas and
included in refunds due customers in the consolidated financial statements.
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Operations and Maintenance Expenses
Operations and maintenance expenses for the three months ended April 30, 2000,
compared with the same period in 1999 increased by $2.4 million primarily for
the reasons listed below.
o Increase in payroll,
o Increase in advertising expense and
o Increase in employee benefits expense.
A decrease in outside labor expense partially offset these increases for the
three months ended April 30, 2000, compared with the same period in 1999.
Operations and maintenance expenses for the six months ended April 30, 2000,
compared with the same period in 1999 increased by $4.8 million primarily for
the reasons listed below.
o Increase in payroll,
o Increase in the provision for uncollectibles,
o Increase in advertising expense and
o Increase in employee benefits expense.
A decrease in outside labor expense partially offset these increases for the six
months ended April 30, 2000, compared with the same period in 1999.
Operations and maintenance expenses for the twelve months ended April 30, 2000,
compared with the same period in 1999 increased by $2.2 million primarily for
the reasons listed below.
o Increase in payroll,
o Increase in outside labor expense,
o Increase in advertising expense and
o Increase in other corporate expenses.
Increases in operations and maintenance expenses for the twelve-month period
were partially offset by the following decreases.
o Decrease in office supplies expense,
o Decrease in risk insurance expense,
o Decrease in employee benefits expense and
o Decrease in materials expense.
General Taxes
General taxes for the three months ended April 30, 2000, compared with the same
period in 1999 decreased by $3.9 million primarily for the reasons listed below.
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o Elimination of the gross receipts tax in North Carolina as
noted above and
o Decrease in property taxes.
An increase in payroll taxes partially offset these decreases for the three
months ended April 30, 2000, compared with the same period in 1999.
General taxes for the six months ended April 30, 2000, compared with the same
period in 1999 decreased by $8.3 million primarily for the reasons listed below.
o Elimination of the gross receipts tax in North Carolina and
o Decrease in property taxes.
An increase in franchise tax expense partially offset these decreases for the
six months ended April 30, 2000, compared with the same period in 1999.
General taxes for the twelve months ended April 30, 2000, compared with the same
period in 1999 decreased by $9.4 million primarily due to the elimination of the
gross receipts tax in North Carolina. Increases in franchise taxes and payroll
taxes partially offset this decrease.
Other Income
Other income for the three months ended April 30, 2000, compared with the same
period in 1999 increased by $2.5 million. The primary reasons for this increase
are listed below.
o Increase in earnings from unregulated retail energy marketing
services,
o Increase in earnings from non-utility LNG operations and
o Increase in earnings from pipeline operations.
Other income for the six months ended April 30, 2000, compared with the same
period in 1999 increased by $8.7 million. The primary reasons for this increase
are listed below.
o Increase in earnings from unregulated retail energy marketing
services,
o Increase in earnings from non-utility LNG operations,
o Increase in earnings from pipeline operations and
o Increase in earnings from propane operations.
Other income for the twelve months ended April 30, 2000, compared with the same
period in 1999 increased by $7.1 million. The primary reasons for this increase
are listed below.
o Increase in earnings from unregulated retail energy marketing
services,
o Increase in earnings from non-utility LNG operations,
o Increase in earnings from pipeline operations and
o Increase in earnings from propane operations.
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Increases in other income for the twelve-month period were partially offset by a
decrease in interest income.
Utility Interest Charges
Utility interest charges for the three months ended April 30, 2000, compared
with the same period in 1999 increased by $1.1 million primarily for the reasons
listed below.
o Increase in interest on long-term debt from higher amounts of
debt outstanding,
o Increase in interest on short-term debt due to higher amounts
of debt outstanding at slightly higher interest rates and
o Increase in interest on refunds due customers from higher
balances outstanding during the periods.
Utility interest charges for the six months ended April 30, 2000, compared with
the same period in 1999 increased by $2.1 million primarily for the reasons
listed below.
o Increase in interest on long-term debt from higher amounts of
debt outstanding and
o Increase in interest on short-term debt due to higher amounts
of debt outstanding at slightly higher interest rates.
Utility interest charges for the twelve months ended April 30, 2000, compared
with the same period in 1999 increased by $1.9 million primarily for the reasons
listed below.
o Increase in interest on long-term debt from higher amounts of
debt outstanding and
o Increase in interest on short-term debt due to higher amounts
of debt outstanding at slightly higher interest rates.
Increases in utility interest charges for the twelve-month period were partially
offset by the following decreases.
o Decrease in interest on refunds due customers from lower
balances outstanding compared with the prior twelve months and
o Increase in the portion of the allowance for funds used during
construction attributable to borrowed funds.
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PART II. OTHER INFORMATION
Item 5. Other Information
Rate Proceedings
In December 1999, we filed an application with the Tennessee Regulatory
Authority (TRA) for a general rate increase of $10.7 million annually. On May
18, 2000, we executed and filed with the TRA a stipulation with the Consumer
Advocate Division of the Attorney General of the State of Tennessee that, if
approved by the TRA, would permit us to increase our rates by $4.9 million
annually. The TRA approved the settlement on June 5, and rates will be effective
July 1, 2000.
On March 31, 2000, we filed with the North Carolina Utilities Commission (NCUC)
for a general rate increase of $19 million annually in margin. A hearing date
has been set for September 5. We have requested that the rates become effective
November 1, 2000.
Propane Joint Venture
We previously reported that we signed an agreement on February 15, 2000, to form
a joint venture which combines our propane operations with the propane
operations of three other companies. The anticipated date for completion of the
joint venture has been delayed, and it is currently anticipated that the
completion will occur in late July.
Environmental Matters
We previously reported that we have owned, leased or operated manufactured gas
plant (MGP) facilities at 12 sites in our three-state service area. In 1997, we
entered into a settlement with a third party with respect to nine of these
sites. As of April 30, 2000, we have recorded an environmental liability of $1.4
million for the three MGP sites not covered by the settlement. This liability is
estimated based on a generic MGP site study as we have not performed
site-specific evaluations.
We have recently learned that a tract of land in North Carolina that was owned
by us during the period 1951 through 1956 has been identified as a possible MGP
site. Based on information available to us and due to the small size of the
tract, we do not believe that the tract ever contained an MGP. A third party is
in the process of evaluating this site. Until the third party completes its
evaluation, we are unable to determine if we may have any potential liability
with respect to this site. However, due to the size of and our limited
connection with this site, we do not expect any such liability to be material.
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Expansion Fund
The NCUC has established an expansion fund consisting of supplier refunds due
customers to be used to extend natural gas service into unserved areas of the
state. As of April 30, 2000, the North Carolina State Treasurer held $31 million
in our expansion fund account. This amount along with other supplier refunds,
including interest earned to date, is included in restricted cash in the
consolidated balance sheet. The NCUC decides the use of these funds as we file
individual project applications for unserved areas.
The NCUC has previously authorized us to use $27.8 million of the expansion
funds to extend natural gas service to the counties of Avery, Mitchell and
Yancey. On May 10, 2000, we filed an application requesting additional expansion
funds of $11.1 million for this project due to additional, unanticipated costs
related to the project. The estimated cost of the project is now $44.5 million.
We are requesting the use of $38.9 million in expansion fund money. A hearing on
our request for additional expansion funds has been set for June 22 with the
NCUC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
12 Computation of Ratio of Earnings to Fixed Charges.
27 Financial Data Schedule (for Securities and Exchange
Commission use only).
(b) Reports on Form 8-K -
None.
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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.
Piedmont Natural Gas Company, Inc.
----------------------------------
(Registrant)
Date June 9, 2000 /s/ David J. Dzuricky
------------ -------------------------------------------------
David J. Dzuricky
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date June 9, 2000 /s/ Barry L. Guy
------------ -------------------------------------------------
Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
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