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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 July 31, 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
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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
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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 September 5, 2000
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Common Stock, no par value 31,790,993
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Page 1 of 16 pages
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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)
---------------------------------------------------
July 31, October 31,
2000 1999
Unaudited Audited
---------- ----------
ASSETS
Utility Plant, at original cost $1,495,328 $1,441,322
Less accumulated depreciation 451,428 420,140
---------- ----------
Utility plant, net 1,043,900 1,021,182
---------- ----------
Other Physical Property (net of accumulated
depreciation of $20,566 in 2000 and $18,967
in 1999) 24,871 25,793
---------- ----------
Current Assets:
Cash and cash equivalents 3,752 6,174
Restricted cash 41,454 40,156
Receivables (less allowance for doubtful
accounts of $740 in 2000 and $864 in 1999) 52,876 32,106
Receivables from affiliate 22,827 22,354
Gas in storage 68,783 48,685
Deferred cost of gas 8,235 8,267
Refundable income taxes 0 17,670
Other 56,055 22,983
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Total current assets 253,982 198,395
---------- ----------
Deferred Charges and Other Assets 63,496 43,287
---------- ----------
Total $1,386,249 $1,288,657
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 310,489 $ 297,149
Retained earnings 232,002 194,598
---------- ----------
Total common stock equity 542,491 491,747
Long-term debt 391,000 423,000
---------- ----------
Total capitalization 933,491 914,747
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Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 32,000 2,000
Notes payable 127,000 79,500
Accounts payable 65,288 63,116
Deferred income taxes 11,674 23,002
Income taxes accrued 2,159 0
General taxes accrued 7,387 11,904
Refunds due customers 44,867 26,204
Other 13,572 20,978
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Total current liabilities 303,947 226,704
---------- ----------
Deferred Credits and Other Liabilities 148,811 147,206
---------- ----------
Total $1,386,249 $1,288,657
========== ==========
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 Nine Months Twelve Months
Ended Ended Ended
July 31 July 31 July 31
------------------- -------------------- --------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Operating Revenues $131,211 $96,728 $682,814 $591,717 $777,568 $679,235
Cost of Gas 87,740 52,303 407,107 311,962 461,107 359,198
-------- ------- -------- -------- -------- --------
Margin 43,471 44,425 275,707 279,755 316,461 320,037
-------- ------- -------- -------- -------- --------
Other Operating Expenses:
Operations 26,779 25,520 81,539 76,027 106,775 103,724
Maintenance 4,367 3,846 12,423 11,399 16,586 15,643
Depreciation 12,318 11,100 36,300 32,615 47,816 43,318
General taxes 4,428 6,276 14,328 24,517 19,277 30,684
Income taxes (5,495) (4,177) 40,701 43,630 35,330 36,958
-------- ------- -------- -------- -------- --------
Total other operating expenses 42,397 42,565 185,291 188,188 225,784 230,327
-------- ------- -------- -------- -------- --------
Operating Income 1,074 1,860 90,416 91,567 90,677 89,710
Other Income, Net (2,087) (2,036) 8,448 (243) 7,711 (483)
-------- ------- -------- -------- -------- --------
Income Before Utility Interest Charges (1,013) (176) 98,864 91,324 98,388 89,227
Utility Interest Charges 9,233 8,040 27,580 24,309 35,912 32,357
-------- ------- -------- -------- -------- --------
Net Income ($10,246) ($8,216) $ 71,284 $ 67,015 $ 62,476 $ 56,870
======== ======= ======== ======== ======== ========
Average Shares of Common Stock:
Basic 31,676 31,076 31,528 30,948 31,446 30,876
Diluted 31,676 31,076 31,707 31,178 31,638 31,118
Earnings Per Share of Common Stock:
Basic ($0.32) ($0.26) $2.26 $2.17 $1.99 $1.84
Diluted ($0.32) ($0.26) $2.25 $2.15 $1.97 $1.83
Cash Dividends Per Share
of Common Stock $0.365 $0.345 $1.075 $1.015 $1.42 $1.34
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 Nine Months Twelve Months
Ended Ended Ended
July 31 July 31 July 31
------------------- ------------------- ---------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Cash Flows from Operating Activities:
Net income ($10,246) ($8,216) $ 71,284 $ 67,015 $ 62,476 $ 56,870
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 13,255 12,077 39,160 35,685 51,392 47,255
Other, net 2,741 134 2,389 20 3,631 929
Change in operating assets and liabilities (76,995) (40,892) (71,668) (36,844) (110,232) (31,148)
-------- -------- -------- -------- --------- ---------
Net cash provided by (used in) operating activities (71,245) (36,897) 41,165 65,876 7,267 73,906
-------- -------- -------- -------- --------- ---------
Cash Flows from Investing Activities:
Utility construction expenditures (25,118) (25,011) (66,049) (70,234) (94,767) (103,266)
Other (275) (322) (870) (1,127) (1,386) (1,737)
-------- -------- -------- -------- --------- ---------
Net cash used in investing activities (25,393) (25,333) (66,919) (71,361) (96,153) (105,003)
-------- -------- -------- -------- --------- ---------
Cash Flows from Financing Activities:
Increase in bank loans, net 97,000 59,000 47,500 27,000 68,000 59,000
Issuance of long-term debt -- -- -- -- 90,000 --
Retirement of long-term debt (2,000) (2,000) (2,000) (2,000) (46,000) (10,000)
Issuance of common stock through dividend
reinvestment and employee stock plans 3,783 4,111 11,712 11,877 15,575 15,513
Dividends paid (11,555) (10,719) (33,880) (31,407) (44,642) (41,370)
-------- -------- -------- -------- --------- ---------
Net cash provided by financing activities 87,228 50,392 23,332 5,470 82,933 23,143
-------- -------- -------- -------- --------- ---------
Net Decrease in Cash and Cash Equivalents (9,410) (11,838) (2,422) (15) (5,953) (7,954)
Cash and Cash Equivalents at Beginning of Period 13,162 21,543 6,174 9,720 9,705 17,659
-------- -------- -------- -------- --------- ---------
Cash and Cash Equivalents at End of Period $ 3,752 $ 9,705 $ 3,752 $ 9,705 $ 3,752 $ 9,705
======== ======== ======== ======== ========= =========
Cash Paid During the Period for:
Interest $ 14,878 $ 11,314 $ 31,374 $ 27,441 $ 36,580 $ 32,625
Income taxes $ 34,062 $ 199 $ 87,085 $ 38,259 $ 87,326 $ 38,525
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 July 31, 2000, and October 31,
1999, and the results of operations and cash flows for the three
months, nine months and twelve months ended July 31, 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 nine-month periods ended July 31, 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 Nine Months Twelve Months
Ended Ended Ended
July 31 July 31 July 31
------------------- ------------------- -------------------
(in thousands except per share amounts)
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Net Income $(10,246) $(8,216) $71,284 $67,015 $62,476 $56,870
======== ======= ======= ======= ======= =======
Average shares of common stock
outstanding for basic earnings per share 31,676 31,076 31,528 30,948 31,446 30,876
Contingently issuable shares under
the long-term incentive plan -- -- 179 230 192 242
-------- ------- ------- ------- ------- -------
Average shares of dilutive stock 31,676 31,076 31,707 31,178 31,638 31,118
======== ======= ======= ======= ======= =======
Earnings Per Share:
Basic $(.32) $(.26) $2.26 $2.17 $1.99 $1.84
Diluted $(.32) $(.26) $2.25 $2.15 $1.97 $1.83
(a) For the three months ended July 31, 2000 and 1999, the inclusion of 178
and 229 contingently issuable shares, respectively, would be
antidilutive.
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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 nine months
ended July 31, 2000 and 1999, are presented below:
Domestic
Natural Gas
Distribution Other Total
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(in thousands)
Three Months Ended July 31 2000 1999 2000 1999 2000 1999
- -------------------------- ---- ---- ---- ---- ---- ----
Revenues from external customers $ 131,211 $ 96,728 $ 3,510 $ 2,245 $ 134,721 $ 98,973
Margin 43,471 44,425 453 787 43,924 45,212
Operations and maintenance expenses 31,146 29,366 2,574 2,249 33,720 31,615
Operating income 1,075 1,860 (2,858) (2,247) (1,783) (387)
Other income 1,932 1,745 (3,075) (2,778) (1,143) (1,033)
Income before income taxes (11,714) (8,612) (5,386) (5,105) (17,100) (13,717)
Capital expenditures 25,860 25,908 247 322 26,107 26,230
Nine Months Ended July 31
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Revenues from external customers $ 682,814 $ 591,717 $ 29,968 $ 21,136 $ 712,782 $ 612,853
Margin 275,707 279,755 11,534 10,861 287,241 290,616
Operations and maintenance expenses 93,964 87,426 7,812 7,167 101,776 94,593
Operating income 90,390 91,551 1,451 1,337 91,841 92,888
Other income 5,816 3,364 5,664 (4,771) 11,480 (1,407)
Income before income taxes 109,350 114,236 8,181 (3,733) 117,531 110,503
Capital expenditures 68,781 72,734 755 1,127 69,536 73,861
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A reconciliation of net income in the consolidated financial statements for the
three months and nine months ended July 31, 2000 and 1999, is presented below:
Three Months Nine Months
Ended July 31 Ended July 31
--------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
(in thousands)
Income before income taxes for reportable segments $(11,714) $(8,612) $109,350 $114,236
Income before income taxes for other non-utility activities (5,386) (5,105) 8,181 (3,733)
Income taxes (6,854) (5,501) 46,247 43,488
-------- ------- -------- --------
Net income $(10,246) $(8,216) $ 71,284 $ 67,015
======== ======= ======== ========
A reconciliation of consolidated assets in the consolidated financial statements
as of July 31, 2000 and October 31, 1999, is presented below:
2000 1999
---- ----
(in thousands)
Domestic natural gas operations $1,349,836 $1,304,453
Other 64,689 59,997
Eliminations/Adjustments (28,276) (75,793)
---------- ----------
Consolidated assets $1,386,249 $1,288,657
========== ==========
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
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Our discussion contains forward-looking statements that include but are not
limited to 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.
Our 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, accounts payable and accounts receivable
increased from October 31, 1999, to July 31, 2000, due to this seasonality and
the 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.
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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 July 31, 2000 and July 31, 1999, were $25.9 million.
Utility construction expenditures for the nine months ended July 31, 2000, were
$68.8 million, compared with $72.7 million for the same period in 1999. Utility
construction expenditures for the twelve-month period ended July 31, 2000, were
$98.1 million, compared with $107 million for the same period in 1999.
The Company intends to issue $60 million of long-term debt in the fourth quarter
of the fiscal year. Proceeds from the issuance of debt will be used to reduce
short-term debt. Pro forma capital structure after this activity would be
long-term debt of 45% and common equity of 55%.
At July 31, 2000, our capitalization consisted of 42% in long-term debt and 58%
in common equity.
Results of Operations
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We will discuss the results of operations for the three months, nine months and
twelve months ended July 31, 2000, compared with similar periods in 1999.
Margin
Margin (operating revenues less cost of gas) for the three months ended July 31,
2000, decreased $1 million compared with the same period in 1999 primarily for
the reasons listed below.
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 which was previously
included in rates billed to customers. Gross receipts tax expense in
the same amount was also included in general taxes.
o Delivered volumes of natural gas, which we refer to as system
throughput, decreased from the same period in 1999 by 1.4 million
dekatherms primarily due to a decrease in volumes sold to power
generation customers.
o Income from secondary market activity decreased.
Margin for the nine months ended July 31, 2000, decreased $4 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 Income from secondary market activity decreased.
o Weather which was 13% warmer than normal generated operating revenues
of $19.3 million from the weather normalization adjustment (WNA). The
same period in 1999
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reflected operating revenues of $19.7 million from the WNA from 14%
warmer-than-normal weather.
An increase of 583,000 dekatherms in delivered volumes of natural gas partially
offset these decreases from the same period in 1999.
Margin for the twelve months ended July 31, 2000, decreased $3.6 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, 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 Delivered volumes decreased by 273,000 dekatherms. This decrease was
primarily due to a decrease of 11 million dekatherms transported to
industrial customers which was almost entirely offset by increases in
sales to all customer classes.
o Income from secondary market activity decreased.
o Weather which was 12% 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 from 16%
warmer-than-normal weather.
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.
Operations and Maintenance Expenses
Operations and maintenance expenses for the three months ended July 31, 2000,
compared with the same period in 1999 increased $1.8 million primarily for the
reasons listed below.
o Increase in payroll,
o Increase in the provision for uncollectibles and
o Increase in outside consultants expense.
These increases in operations and maintenance expenses for the three-month
period were partially offset by the following decreases.
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o Decrease in rents and leases,
o Decrease in outside labor expense,
o Decrease in advertising and
o Decrease in employee benefits expense.
Operations and maintenance expenses for the nine months ended July 31, 2000,
compared with the same period in 1999 increased $6.5 million primarily for the
reasons listed below.
o Increase in payroll,
o Increase in transportation expenses,
o Increase in the provision for uncollectibles,
o Increase in advertising expense and
o Increase in outside consultants expenses.
A decrease in outside labor expense partially offset these increases for the
nine months ended July 31, 2000, compared with the same period in 1999.
Operations and maintenance expenses for the twelve months ended July 31, 2000,
compared with the same period in 1999 increased by $4 million primarily for the
reasons listed below.
o Increase in payroll expense,
o Increase in the provision for uncollectibles and
o Increase in advertising expense.
These increases in operations and maintenance expenses were partially offset by
the following decreases in the twelve-month period.
o Decrease in risk insurance expense and
o Decrease in employee benefits expense.
General Taxes
General taxes for the three months ended July 31, 2000, compared with the same
period in 1999 decreased by $1.8 million primarily for the reasons listed below.
o Elimination of the gross receipts tax in North Carolina as noted in
margin analysis,
o Decrease in property taxes and
o Decrease in payroll taxes.
General taxes for the nine months ended July 31, 2000, compared with the same
period in 1999 decreased by $10.2 million primarily for the reasons listed
below.
o Elimination of the gross receipts tax in North Carolina as noted
above,
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o Decrease in property taxes and
o Decrease in payroll taxes.
An increase in franchise tax expense partially offset these decreases for the
nine months ended July 31, 2000, compared with the same period in 1999.
General taxes for the twelve months ended July 31, 2000, compared with the same
period in 1999 decreased by $11.4 million primarily for the reasons listed
below.
o Elimination of the gross receipts tax in North Carolina as noted above
and
o Decrease in property taxes.
Increases in payroll taxes and franchise taxes partially offset these decreases
for the twelve months ended July 31, 2000, compared with the same period in
1999.
Other Income
Other income for the three months ended July 31, 2000, compared with the same
period in 1999 decreased by $51,000. The primary reasons for this decrease are
listed below.
o Decrease in the allowance for funds used during construction,
o Decrease in earnings from merchandise operations and
o Decrease in earnings from propane operations.
These decreases in other income for the three-month period were partially offset
by the following increases.
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 nine months ended July 31, 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 and
o Increase in earnings from pipeline operations.
These increases in other income for the nine-month period were partially offset
by the following.
o Decrease in earnings from merchandise operations,
o Decrease in the allowance for funds used during construction and
o Increase in charitable contributions.
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Other income for the twelve months ended July 31, 2000, compared with the
similar period in 1999, increased by $8.2 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.
These increases in other income for the twelve-month period were partially
offset by the following.
o Decrease in earnings from merchandise operations,
o Decrease in interest income,
o Decrease in the allowance for funds used during construction and
o Increase in charitable contributions.
Utility Interest Charges
Utility interest charges for the three months, nine months and twelve months
ended July 31, 2000, compared with the same periods in 1999 increased by $1.2
million, $3.3 million and $3.6 million, respectively. The primary reasons for
these increases are 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.
In the twelve-month period only, a decrease in interest on refunds due customers
partially offset the above increases.
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PART II. OTHER INFORMATION
Item 5. Other Information
Rate Proceeding
On March 31, 2000, we filed a general rate case with the North Carolina
Utilities Commission (NCUC) requesting a margin increase of $19 million
annually, including an increase in customers' rates of $14.5 million. Piedmont,
the Public Staff of the NCUC and Carolina Utility Customers Association, Inc.
(an association of industrial users), presented a stipulated agreement on all
issues in the case to the NCUC at a hearing on September 5. Among other things,
the stipulation calls for a margin increase of $9.7 million, including a rate
increase to customers of $6 million. If approved by the NCUC, the rate and
margin increases will be effective November 1.
Propane Joint Venture
We previously reported that we signed an agreement on February 15, 2000, to form
a joint venture, US Propane, L.P., which combines our propane operations with
the propane operations of three other companies. On June 15, 2000, US Propane
announced that it would combine with Heritage Holdings, Inc., the general
partner of Heritage Propane Partners, L.P. The merger was complete on August 10,
2000, with US Propane contributing all of its assets to Heritage in exchange for
a combination of cash and partnership interests.
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. This account balance 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 with the estimated cost of the project being $44.5
million. We requested the use of $38.9 million in expansion fund money. We filed
a letter on June 7 to reduce the additional amount requested to $10.8 million
for a revised request of $38.5 million in expansion fund money. On July 13, the
NCUC approved this request. As of July 31, 2000, the North Carolina State
Treasurer held $41.9 million in our expansion fund account.
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Proposed Operating System Purchase
We have signed a letter of intent to purchase the assets and business of the
South Carolina operations of the United Cities Gas Company Division of Atmos
Energy Corporation located within the city of Gaffney and portions of Cherokee
County. A definitive purchase agreement has not yet been finalized but the
acquisition is expected to be at net book value of approximately $6 million and
will add approximately 5,300 customers and $2.2 million of margin to our
operations. The transaction is subject to the approval of the Public Service
Commission of South Carolina.
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 -
We filed a Form 8-K on June 20, 2000, to announce the election of D.
Hayes Clement to the Board of Directors, effective July 1, 2000.
This Form 8-K also included an update on the formation of a joint
venture to be named US Propane, L.P., to combine our propane operations
with the propane operations of three other companies. US Propane
announced that it would combine with Heritage Holdings, Inc., the
general partner of Heritage Propane Partners, L.P., subject to various
approvals.
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16
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 September 8, 2000 /s/ David J. Dzuricky
-------------------------------------------------
David J. Dzuricky
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date September 8, 2000 /s/ Barry L. Guy
-------------------------------------------------
Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
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