1
===============================================================================
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, 2001
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.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-0556998
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1915 Rexford Road, Charlotte, North Carolina 28211
- --------------------------------------------------------------------------------
(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 1, 2001
- --------------------------- ---------------------------
Common Stock, no par value 32,219,385
===============================================================================
Page 1 of 16 pages
2
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,
2001 2000
Unaudited Audited
---------- ----------
ASSETS
Utility Plant, at original cost $1,583,580 $1,533,962
Less accumulated depreciation 488,362 462,955
---------- ----------
Utility plant, net 1,095,218 1,071,007
---------- ----------
Other Physical Property (net of accumulated
depreciation of $1,270 in 2001 and $1,187 in 2000) 958 976
---------- ----------
Current Assets:
Cash and cash equivalents 14,605 8,747
Restricted cash 16,903 39,796
Receivables (less allowance for doubtful
accounts of $3,493 in 2001 and $482 in 2000) 131,472 55,145
Gas in storage 47,559 67,709
Deferred cost of gas 24,717 13,228
Deferred income taxes 11,996 --
Refundable income taxes 708 69,118
Other 14,328 30,492
---------- ----------
Total current assets 262,288 284,235
---------- ----------
Deferred Charges and Other Assets 120,075 88,785
---------- ----------
Total $1,478,539 $1,445,003
---------- ----------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity:
Common stock $ 323,552 $ 314,230
Retained earnings 279,268 213,142
---------- ----------
Total common stock equity 602,820 527,372
Long-term debt 451,000 451,000
---------- ----------
Total capitalization 1,053,820 978,372
---------- ----------
Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 32,000 32,000
Notes payable 33,985 99,500
Accounts payable 98,712 87,604
Deferred income taxes -- 8,678
Income taxes accrued 9,388 --
General taxes accrued 5,328 11,205
Refunds due customers 42,558 32,889
Other 23,945 25,121
---------- ----------
Total current liabilities 245,916 296,997
---------- ----------
Deferred Credits and Other Liabilities 178,803 169,634
---------- ----------
Total $1,478,539 $1,445,003
---------- ----------
See notes to condensed consolidated financial statements.
-2-
3
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
------------------------- ------------------------- -------------------------
2001 2000 2001 2000 2001 2000
---------- ---------- ---------- ---------- ---------- ----------
Operating Revenues $ 408,012 $ 282,955 $ 875,585 $ 551,603 $1,154,360 $ 743,084
Cost of Gas 288,382 167,792 627,353 319,367 820,032 425,671
---------- ---------- ---------- ---------- ---------- ----------
Margin 119,630 115,163 248,232 232,236 334,328 317,413
---------- ---------- ---------- ---------- ---------- ----------
Other Operating Expenses:
Operations 27,915 28,012 58,158 54,761 113,340 105,516
Maintenance 4,975 4,105 9,295 8,055 18,298 16,065
Depreciation 12,803 12,137 25,552 23,982 50,463 46,598
General taxes 5,546 4,871 11,152 9,900 20,013 21,124
Income taxes 23,210 22,456 49,249 46,196 36,742 36,685
---------- ---------- ---------- ---------- ---------- ----------
Total other operating expenses 74,449 71,581 153,406 142,894 238,856 225,988
---------- ---------- ---------- ---------- ---------- ----------
Operating Income 45,181 43,582 94,826 89,342 95,472 91,425
Other Income, Net 4,271 2,908 14,654 10,535 15,840 7,705
---------- ---------- ---------- ---------- ---------- ----------
Income Before Utility Interest Charges 49,452 46,490 109,480 99,877 111,312 99,130
Utility Interest Charges 9,583 9,054 19,309 18,347 38,640 34,624
---------- ---------- ---------- ---------- ---------- ----------
Net Income $ 39,869 $ 37,436 $ 90,171 $ 81,530 $ 72,672 $ 64,506
========== ========== ========== ========== ========== ==========
Average Shares of Common Stock:
Basic 32,126 31,526 32,056 31,453 31,900 31,296
Diluted 32,357 31,704 32,302 31,632 32,174 31,500
Earnings Per Share of Common Stock:
Basic $ 1.24 $ 1.19 $ 2.81 $ 2.59 $ 2.28 $ 2.06
Diluted $ 1.23 $ 1.18 $ 2.79 $ 2.58 $ 2.26 $ 2.05
Cash Dividends Per Share
of Common Stock $ 0.385 $ 0.365 $ 0.75 $ 0.71 $ 1.48 $ 1.40
See notes to condensed consolidated financial statements.
-3-
4
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
---------------------- ---------------------- ----------------------
2001 2000 2001 2000 2001 2000
--------- --------- --------- --------- --------- ---------
Cash Flows from Operating Activities:
Net income $ 39,869 $ 37,436 $ 90,171 $ 81,530 $ 72,672 $ 64,506
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,079 13,144 26,161 25,906 52,346 50,214
Other, net 20,719 (1,069) (9,238) (353) 16,172 1,025
Net gain on propane business combination, net
of tax -- -- -- -- (5,063) --
Change in operating assets and liabilities (19,761) 53,693 28,118 5,327 (58,675) (74,507)
--------- --------- --------- --------- --------- ---------
Net cash provided by operating activities 53,906 103,204 135,212 112,410 77,452 41,238
--------- --------- --------- --------- --------- ---------
Cash Flows from Investing Activities:
Utility construction expenditures (14,035) (21,441) (40,522) (40,931) (104,920) (94,284)
Investment in propane partnership -- -- -- -- (30,552) --
Proceeds from propane business combination -- -- -- -- 36,748 --
Other (59) (312) (6,691) (595) (7,005) (1,433)
--------- --------- --------- --------- --------- ---------
Net cash used in investing activities (14,094) (21,753) (47,213) (41,526) (105,729) (95,717)
--------- --------- --------- --------- --------- ---------
Cash Flows from Financing Activities:
Increase (Decrease) in bank loans, net (31,015) (71,500) (65,515) (49,500) 3,985 30,000
Issuance of long-term debt -- -- -- -- 60,000 90,000
Retirement of long-term debt -- -- -- -- (2,000) (46,000)
Issuance of common stock through dividend
reinvestment and employee stock plans 3,871 4,193 7,418 7,929 14,941 15,903
Dividends paid (12,363) (11,502) (24,044) (22,325) (47,206) (43,805)
--------- --------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities (39,507) (78,809) (82,141) (63,896) 29,720 46,098
--------- --------- --------- --------- --------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 305 2,642 5,858 6,988 1,443 (8,381)
Cash and Cash Equivalents at Beginning of Period 14,300 10,520 8,747 6,174 13,162 21,543
--------- --------- --------- --------- --------- ---------
Cash and Cash Equivalents at End of Period $ 14,605 $ 13,162 $ 14,605 $ 13,162 $ 14,605 $ 13,162
========= ========= ========= ========= ========= =========
Cash Paid During the Period for:
Interest $ 2,720 $ 2,978 $ 19,628 $ 16,496 $ 38,103 $ 33,017
Income taxes $ 48,685 $ 51,384 $ 48,745 $ 53,023 $ 81,570 $ 64,800
See notes to condensed consolidated financial statements.
-4-
5
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 2000 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, 2001, and October 31,
2000, and the results of operations and cash flows for the three
months, six months and twelve months ended April 30, 2001 and 2000.
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, 2001, 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)
2001 2000 2001 2000 2001 2000
------- ------- ------- ------- ------- -------
Net Income $39,869 $37,436 $90,171 $81,530 $72,672 $64,506
======= ======= ======= ======= ======= =======
Average shares of common stock
outstanding for basic earnings per share 32,126 31,526 32,056 31,453 31,900 31,296
Contingently issuable shares under
the long-term incentive plan 231 178 246 179 274 204
------- ------- ------- ------- ------- -------
Average shares of dilutive stock 32,357 31,704 32,302 31,632 32,174 31,500
======= ======= ======= ======= ======= =======
Earnings Per Share:
Basic $ 1.24 $ 1.19 $ 2.81 $ 2.59 $ 2.28 $ 2.06
Diluted $ 1.23 $ 1.18 $ 2.79 $ 2.58 $ 2.26 $ 2.05
-5-
6
5. Business Segments
We have two reportable business segments, domestic natural gas
distribution and retail energy marketing services. Operations of our
domestic natural gas distribution segment are conducted by the parent
company and by limited liability companies of which two wholly owned
subsidiaries of our wholly owned subsidiary, Piedmont Energy Partners,
are members. Operations of our retail energy marketing services segment
are conducted by a limited liability company of which a wholly owned
subsidiary of Piedmont Energy Partners is a member.
All of our other activities included in Other in the segment tables
consist primarily of propane operations conducted by a master limited
partnership of which a wholly owned subsidiary of Piedmont Energy
Partners has an equity interest.
We evaluate performance based on margin, operations and maintenance
expenses, operating income and income before taxes. The basis of
segmentation and the basis of the measurement of segment profit or loss
have not changed from that reported in our audited financial statements
for the year ended October 31, 2000.
Continuing operations by segment for the three months and six months
ended April 30, 2001 and 2000, are presented below:
Domestic Retail
Natural Gas Energy
Distribution Marketing Other Total
-------------------- --------------------- --------------------- --------------------
(in thousands)
Three Months Ended April 30 2001 2000 2001 2000 2001 2000 2001 2000
- --------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Revenues from external customers $408,012 $282,955 $ -- $ -- $ -- $ 11,236 $408,012 $294,191
Margin 119,630 115,163 -- -- (264) 4,485 119,366 119,648
Operations and maintenance
expenses 32,890 32,119 -- 2 589 2,871 33,479 34,992
Operating income 45,181 43,581 (1) (3) (857) 806 44,323 44,384
Other income 1,956 1,878 4,883 1,817 1,221 15 8,060 3,710
Income before income taxes 60,773 58,869 4,732 2,154 368 779 65,873 61,802
Capital expenditures 15,323 22,312 -- -- -- 250 15,323 22,562
Six Months Ended April 30
- -------------------------
Revenues from external customers $875,585 $551,603 $ -- $ -- $ -- $ 26,458 $875,585 $578,061
Margin 248,232 232,236 -- -- (264) 11,080 247,968 243,316
Operations and maintenance
expenses 67,453 62,818 1 2 564 5,236 68,018 68,056
Operating income 94,816 89,315 1 (19) (833) 4,328 93,984 93,624
Other income 3,711 3,884 18,439 8,704 3,316 35 25,466 12,623
Income before income taxes 128,486 121,063 18,032 9,351 2,490 4,217 149,008 134,631
Capital expenditures 44,109 42,921 -- -- -- 508 44,109 43,429
-6-
7
A reconciliation of net income in the consolidated financial statements
for the three months and six months ended April 30, 2001 and 2000, is
presented below:
Three Months Six Months
Ended April 30 Ended April 30
---------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
(in thousands)
Income before income taxes for reportable segments $ 65,505 $ 61,023 $146,518 $130,414
Income before income taxes for other non-utility activities 368 779 2,490 4,217
Income taxes 26,004 24,366 58,837 53,101
-------- -------- -------- --------
Net income $ 39,869 $ 37,436 $ 90,171 $ 81,530
======== ======== ======== ========
A reconciliation of consolidated assets in the consolidated financial
statements as of April 30, 2001 and October 31, 2000, is presented
below:
2001 2000
----------- -----------
(in thousands)
Domestic natural gas operations $ 1,456,674 $ 1,437,950
Retail energy marketing services 41,294 9,055
Other 36,971 34,959
Eliminations/Adjustments (56,400) (36,961)
----------- -----------
Consolidated assets $ 1,478,539 $ 1,445,003
=========== ===========
6. Derivatives and Hedging Activities
Effective November 1, 2000, we adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and SFAS No. 138, "Accounting for
Certain Derivative Instruments and Hedging Activities." Implementation
did not have a material impact on our financial condition or results of
operations.
We purchase natural gas for our regulated operations. We purchase gas
primarily for resale under tariffs approved by the state commissions
having jurisdiction over the service territory where the customer is
located. We recover the cost of gas purchased for regulated operations
through purchased gas adjustment mechanisms. We structure the pricing
and performance of gas supply contracts to maximize flexibility and
minimize cost and risk for the ratepayer. Our risk management policies
allow us to use financial instruments for trading purposes and to hedge
risks; however, currently, we do not engage in such activities.
In the quarter ended April 30, 2001, we purchased financial call
options for natural gas for delivery in January 2002 under the
guidelines of the Tennessee Incentive Plan. This plan establishes an
incentive sharing mechanism based on differences in the actual cost of
gas purchased and benchmark rates, together with income from marketing
transportation and storage capacity in the secondary market, subject to
an overall cap of $1.6 million on gains or losses. Gains or losses
inside of the cap are part of a regulatory asset that will be recovered
from ratepayers. Any gains or losses outside of the overall cap will be
shared between the ratepayer and the shareholder. At the end of the
quarter, these options were marked to their fair value. The portion of
the fair value
-7-
8
subject to recovery under the incentive plan was deferred under
regulatory accounting. The portion of the fair value that was outside
the provisions of the incentive plan was included in other gas
revenues.
-8-
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward-Looking Statements
Our discussion contains forward-looking statements concerning, among others,
plans, objectives, proposed capital expenditures and future events or
performance. 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 our 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.
All of these factors are difficult to predict and many are beyond our control.
Accordingly, while we believe these forward-looking statements to be reasonable,
there can be no assurance that they will approximate actual experience or that
the expectations derived from them will be realized. When used in our documents
or oral presentations, the words "anticipate," "believe," "estimate," "expect,"
"objective," "projection," "forecast," "goal" or similar words are intended to
identify forward-looking statements.
Financial Condition
We finance current cash requirements primarily from operating cash flows and
short-term borrowings. Outstanding short-term borrowings under our bank lines of
credit ranged from zero to $127 million during the quarter ended April 30, 2001,
and from zero to $148.5 million during the six months ended April 30, 2001. The
level of our short-term borrowings can vary significantly over the year due to
changes in the wholesale prices for natural gas that we are charged by our
suppliers and to increased gas supplies required to meet our customers' needs
during cold weather. Short-term debt increases when wholesale prices for natural
gas increase because we must pay our suppliers for the gas before we can recover
our gas costs from our
-9-
10
customers through their monthly bills. In addition to 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 in addition to short-term borrowings
discussed above. 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, 2000, to April 30, 2001, 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. Due to
increased wholesale gas costs, our accounts receivable are higher than
historical levels as of April 30, 2001, as such gas costs are passed through to
our customers through purchased gas adjustment (PGA) mechanisms. This balance in
accounts receivable is likely to remain at higher levels since some customers
may be slow to pay their gas bills that were higher than normal due to the
increased wholesale gas costs and colder-than-normal weather. We may also incur
more short-term debt to pay gas commodity and other bills if collections from
customers are significantly slower. It is also likely that some customers will
be unable to pay their gas bills, thereby increasing our bad debt expense. In
response to this possibility, we increased our reserve for uncollectibles in
January.
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, 2001, were $15.3 million, compared with $22.3
million for the same period in 2000. Utility construction expenditures for the
six months ended April 30, 2001, were $44 million, compared with $42.9 million
for the same period in 2000. Utility construction expenditures for the
twelve-month period ended April 30, 2001, were $109.8 million, compared with
$98.1 million for the same period in 2000.
On June 4, 2001, we filed a combined debt and equity shelf registration
statement for $250 million of securities with the Securities and Exchange
Commission. Unless otherwise specified at the time such securities are offered
for sale, the net proceeds from the sale of the securities will be used for
general corporate purposes, including construction of additional facilities, the
repayment of short-term debt and working capital needs. Pending such use, we may
temporarily invest the net proceeds in investment grade securities.
At April 30, 2001, our capitalization consisted of 43% in long-term debt and 57%
in common equity.
-10-
11
Results of Operations
We will discuss the results of operations for the three months, six months and
twelve months ended April 30, 2001, compared with similar periods in 2000.
Margin
Margin (operating revenues less cost of gas) for the three months ended April
30, 2001, increased $4.5 million compared with the same period in 2000 primarily
for the reasons listed below.
o Even though delivered volumes of natural gas, which we refer
to as system throughput, decreased 3.4 million dekatherms from
the same period in 2000, increased customer growth and 11%
colder weather contributed to margin. Higher-margin
residential customers consumed 2.7 million more dekatherms
than the same period in 2000.
o Rates charged to customers were increased due to general rate
increases in Tennessee effective July 1, 2000, and in North
Carolina effective November 1, 2000.
o Secondary market wholesale transactions increased margin as
compared with the same period in 2000.
o Margin for the current three-month period reflects revenues
from customers of $5.9 million from the weather normalization
adjustment (WNA) due to weather that was 5% warmer than
normal. The WNA is designed to offset the impact of unusually
cold or warm weather on customer billings and operating
margin. The same period in 2000 reflected increased margin of
$6.7 million from the WNA due to weather that was 15% warmer
than normal.
Margin for the six months ended April 30, 2001, increased $16 million compared
with the same period in 2000 primarily for the reasons listed below.
o System throughput increased 5.6 million dekatherms over the
same period in 2000, primarily due to customer growth and 22%
colder weather.
o Rates charged to customers were increased due to general rate
increases as noted above.
o Secondary market wholesale transactions increased margin as
compared with the same period in 2000.
Margin for the current six-month period reflects WNA refunds of $8.5 million,
compared with WNA charges of $19.3 million for the same period in 2000.
Margin for the twelve months ended April 30, 2001, increased $16.9 million
compared with the same period in 2000 primarily for the reasons listed below.
-11-
12
o System throughput increased 2.8 million dekatherms over the
same period in 2000, primarily due to customer growth and 19%
colder weather.
o Rates charged to customers were increased due to general rate
increases as noted above.
o Secondary market wholesale transactions increased margin as
compared with the same period in 2000.
Margin for the current twelve-month period reflects WNA refunds of $8.5 million,
compared with WNA charges of $19.3 million for the same period in 2000.
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 reduced general
taxes.
Under PGA mechanisms in all three states, we revise rates periodically without
formal rate proceedings to reflect changes in the wholesale 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 condensed
consolidated financial statements.
Operations and Maintenance Expenses
Operations and maintenance expenses for the three months ended April 30, 2001,
increased $773,000 compared with the same period in 2000 primarily for the
reasons listed below.
o Increase in transportation,
o Increase in utilities,
o Increase in the provision for uncollectibles,
o Increase in outside consultants fees and
o Increase in employee benefits.
A decrease in payroll partially offset these increases for the three months
ended April 30, 2001, compared with the same period in 2000.
Operations and maintenance expenses for the six months ended April 30, 2001,
increased $4.6 million compared with the same period in 2000 primarily for the
reasons listed below.
o Increase in payroll,
o Increase in utilities,
o Increase in the provision for uncollectibles and
o Increase in outside consultants fees.
A decrease in advertising expense partially offset these increases for the six
months ended April 30, 2001, compared with the same period in 2000.
-12-
13
Operations and maintenance expenses for the twelve months ended April 30, 2001,
increased $10.1 million compared with the same period in 2000 primarily for the
reasons listed below.
o Increase in payroll,
o Increase in utilities,
o Increase in employee expenses,
o Increase in the provision for uncollectibles,
o Increase in risk insurance,
o Increase in outside consultants fees and
o Increase in employee benefits.
Decreases in outside labor expense and advertising expense partially offset
these increases for the twelve months ended April 30, 2001, compared with the
same period in 2000.
General Taxes
General taxes for the three months ended April 30, 2001, increased $675,000
compared with the same period in 2000 primarily due to an increase in property
taxes.
General taxes for the six months ended April 30, 2001, increased $1.3 million
compared with the same period in 2000 primarily due to an increase in property
taxes, partially offset by a decrease in franchise taxes.
General taxes for the twelve months ended April 30, 2001, decreased $1.1 million
compared with the same period in 2000 primarily for the reasons listed below.
o Elimination of the gross receipts tax in North Carolina as
noted above and
o Decrease in franchise taxes.
An increase in property taxes partially offset these decreases for the twelve
months ended April 30, 2001, compared with the same period in 2000.
Other Income
Other income for the three months and six months ended April 30, 2001, increased
$1.4 million and $4.1 million, respectively, compared with the same periods in
2000 primarily for the reasons listed below.
o Increase in earnings from unregulated retail energy marketing
services and
o Increase in earnings from non-utility interstate LNG
operations.
These increases were partially offset by the following decreases.
o Decrease in earnings from jobbing operations,
o Decrease in earnings from propane operations,
-13-
14
o Decrease in the portion of the allowance for funds used during
construction (AFUDC) attributable to equity funds.
Other income for the twelve months ended April 30, 2001, increased $8.1 million
compared with the same period in 2000 primarily for the reasons listed below.
o Increase in earnings from unregulated retail energy marketing
services,
o Increase in earnings from non-utility interstate LNG
operations,
o Increase in earnings from intrastate pipeline operations and
o Gain on sale of propane assets in connection with a business
combination in August 2000.
These increases in other income were partially offset by a decrease in the
portion of the AFUDC attributable to equity funds and a decrease in earnings
from jobbing operations.
Utility Interest Charges
Utility interest charges for the three months ended April 30, 2001, increased
$529,000 compared with the same period in 2000 primarily due to an increase in
interest on long-term debt from higher amounts of debt outstanding. An increase
in the portion of the AFUDC attributable to borrowed funds partially offset this
increase.
Utility interest charges for the six months and twelve months ended April 30,
2001, increased $962,000 and $4 million, respectively, compared with the same
periods in 2000 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 (primarily due to the increases in the
wholesale commodity prices of natural gas) at slightly higher
interest rates and
o Increase in interest on refunds due customers from larger
balances outstanding in the current periods.
These increases in utility interest charges were partially offset by an increase
in the portion of the AFUDC attributable to borrowed funds.
-14-
15
PART II. OTHER INFORMATION
Item 5. Other Information
Expansion Fund
As previously reported, the North Carolina Utilities Commission (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. The NCUC
decides the use of these funds as we file individual project applications for
unserved areas. The NCUC has authorized us to use $38.5 million of the expansion
funds to extend natural gas service to the counties of Avery, Mitchell and
Yancey, of which $26.6 million has been used as of April 30, 2001. The total
cost of the project is estimated to be $44.2 million. As of April 30, 2001, the
North Carolina State Treasurer held $17.1 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 condensed consolidated balance sheet
as of April 30, 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
12 Computation of Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K -
None.
-15-
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 June 8, 2001 /s/ David J. Dzuricky
-------------- ---------------------------------------------
David J. Dzuricky
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date June 8, 2001 /s/ Barry L. Guy
-------------- ---------------------------------------------
Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
-16-