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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, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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, 1995
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Common Stock, no par value 28,742,145
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Page 1 of 11 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,
ASSETS 1995 1994
------ ---- ----
Utility Plant, at original cost $1,036,554 $978,218
Less accumulated depreciation 265,451 243,325
---------- --------
Utility plant, net 771,103 734,893
---------- --------
Other Physical Property (net of accumulated
depreciation of $12,605 in 1995 and $11,753
in 1994) 25,608 25,188
---------- --------
Current Assets:
Cash and cash equivalents 7,212 6,523
Restricted cash 17,776 14,961
Receivables (less allowance for doubtful
accounts of $3,170 in 1995 and $947
in 1994) 28,993 22,597
Gas in storage 32,325 44,725
Deferred cost of gas 2,551 5,162
Refundable income taxes - 10,194
Other 10,457 13,231
---------- --------
Total current assets 99,314 117,393
---------- --------
Deferred Charges and Other Assets 24,640 10,296
---------- --------
Total $ 920,665 $887,770
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CAPITALIZATION AND LIABILITIES
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Capitalization:
Common stock equity:
Common stock $ 228,864 $187,592
Retained earnings 137,176 114,400
---------- --------
Total common stock equity 366,040 301,992
Long-term debt 312,000 313,000
---------- --------
Total capitalization 678,040 614,992
---------- --------
Current Liabilities:
Current maturities of long-term debt and
sinking fund requirements 5,000 5,000
Notes payable 17,000 63,500
Accounts payable 35,776 35,903
Deferred income taxes 9,388 11,314
Taxes accrued (1,312) 8,019
Refunds due customers 36,385 22,124
Other 15,729 18,183
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Total current liabilities 117,966 164,043
---------- ---------
Deferred Credits and Other Liabilities 124,659 108,735
---------- --------
Total $ 920,665 $887,770
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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
(in thousands)
---------------------------------------------------
Three Months Nine Months Twelve Months
Ended Ended Ended
July 31 July 31 July 31
------------ ----------- -------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Operating Revenues $61,649 $70,641 $443,516 $508,559 $510,310 $578,994
Cost of Gas 26,447 38,169 222,705 306,611 256,669 346,124
------- ------- -------- -------- -------- --------
Margin 35,202 32,472 220,811 201,948 253,641 232,870
------- ------- -------- -------- -------- --------
Other Operating Expenses:
Operations 23,667 22,262 71,266 67,926 96,025 90,387
Maintenance 4,376 4,026 12,100 11,387 16,239 15,641
Depreciation 7,982 6,031 23,727 18,093 30,205 23,611
General Taxes 5,361 5,183 21,923 21,383 27,105 26,062
Income Taxes (5,481) (4,562) 26,848 25,022 20,884 20,692
------- ------- -------- -------- -------- --------
Total other operating expenses 35,905 32,940 155,864 143,811 190,458 176,393
------- ------- -------- -------- -------- --------
Operating Income (703) (468) 64,947 58,137 63,183 56,477
Other Income, Net (801) (623) 3,332 4,173 4,104 4,827
-------- -------- -------- -------- -------- --------
Income Before Utility Interest Charges (1,504) (1,091) 68,279 62,310 67,287 61,304
Utility Interest Charges 7,321 6,148 22,845 18,818 29,839 24,779
------- ------- -------- -------- -------- --------
Net Income $(8,825) $(7,239) $ 45,434 $ 43,492 $ 37,448 $ 36,525
======== ======== ======== ======== ======== ========
Average Shares of Common Stock
Outstanding 28,644 26,398 27,596 26,291 27,322 26,242
Earnings Per Share of Common Stock $ (0.31) $ (0.27) $ 1.65 $ 1.65 $ 1.37 $ 1.39
Cash Dividends Declared Per Share
of Common Stock $ 0.275 $ 0.260 $ 0.810 $ 0.765 $ 1.07 $ 1.01
See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Condensed Statements of Consolidated Cash Flows
(in thousands)
--------------------------------------------------------------
Three Months Nine Months Twelve Months
Ended Ended Ended
July 31 July 31 July 31
------------ ----------- -------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
Cash Flows from Operating Activities:
Net income $ (8,825) $ (7,239) $ 45,434 $ 43,492 $ 37,448 $ 36,525
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, amortization and other 8,980 6,936 26,705 20,696 34,147 27,016
Other, net 3,657 1,157 7,888 (10,945) 8,917 (16,919)
Change in operating assets and
liabilities (13,554) (14,463) 23,219 37,604 4,290 21,441
--------- --------- -------- -------- --------- --------
Net cash provided by (used in) operating activities (9,742) (13,609) 103,246 90,847 84,802 68,063
--------- --------- -------- -------- --------- --------
Cash Flows from Investing Activities:
Utility construction expenditures (23,737) (26,785) (69,924) (67,739) (105,718) (92,571)
Other (711) (657) (1,964) (2,966) (2,866) (3,858)
--------- -------- -------- -------- --------- --------
Net cash used in investing activities (24,448) (27,442) (71,888) (70,705) (108,584) (96,429)
-------- -------- -------- -------- --------- --------
Cash Flows from Financing Activities:
Increase (Decrease) in bank loans, net 17,000 35,000 (46,500) (7,000) (18,000) 6,000
Issuance of long-term debt - - - - 40,000 45,000
Retirement of long-term debt (1,000) (1,000) (1,000) (1,000) (5,000) (5,000)
Sale of common stock, net of expenses - - 33,155 - 33,155 -
Issuance of common stock through dividend
reinvestment and employee stock plans 2,290 2,268 6,335 6,507 8,289 8,353
Dividends paid (7,873) (6,861) (22,659) (20,106) (29,548) (26,498)
-------- -------- -------- -------- --------- --------
Net cash provided by (used in) financing activities 10,417 29,407 (30,669) (21,599) 28,896 27,855
-------- -------- --------- --------- --------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents (23,773) (11,644) 689 (1,457) 5,114 (511)
Cash and Cash Equivalents at Beginning
of Period 30,985 13,742 6,523 3,555 2,098 2,609
-------- -------- -------- -------- --------- --------
Cash and Cash Equivalents at End of
Period $ 7,212 $ 2,098 $ 7,212 $ 2,098 $ 7,212 $2,098
======== ======== ======== ======== ========= ========
Cash Paid During the Period for:
Interest $ 8,034 $ 6,337 $ 21,236 $ 18,088 $ 27,476 $ 24,495
Income taxes $ 950 $ 3,075 $ 30,001 $ 26,414 $ 30,701 $ 26,471
See notes to condensed consolidated financial statements.
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PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
1. The condensed consolidated financial statements have not been audited by
independent auditors. These financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements included
in the Company's 1994 Annual Report.
2. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting
only of normal recurring accruals) necessary to present fairly the
financial position of the Company at July 31, 1995, and October 31,
1994, and the results of its operations and its cash flows for the three
months, nine months and twelve months ended July 31, 1995 and 1994.
3. The Company's business is seasonal in nature. The results of operations
for the three- and nine-month periods ended July 31, 1995, are not
necessarily indicative of the results to be expected for the full year.
4. Certain financial statement items for 1994 have been reclassified in
order to conform with the 1995 presentation.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The Company finances its current cash requirements through internally generated
cash, the issuance of new common stock through dividend reinvestment and
employee stock purchase plans and committed bank lines of credit totaling $57
million. In addition, the Company sells common stock and long-term debt to
cover cash requirements when market or other conditions warrant such long-term
financing.
Because of the seasonal nature of the natural gas business, a substantial
portion of the Company's earnings are realized in the winter period which is
the first six months of the fiscal year. Injections of natural gas into
storage occur during periods of warm weather (principally April 1 through
October 31) for withdrawal from storage during periods of cold weather
(principally November 1 through March 31). Due to this seasonality, the
inventory of stored gas was reduced due to the demand for gas during the winter
season and receivables increased from October 31, 1994, to July 31, 1995.
On May 16, 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission for $150 million of debt securities,
including $20 million from a previously filed shelf registration. The
registration statement became effective on August 14. The Company anticipates
drawing from this shelf registration in the fall of 1995; however, the amount
and timing will depend on capital requirements and financial market conditions.
It is anticipated that the net proceeds from the sale of the debt securities
will be used for general corporate purposes, including construction of
additional facilities, the repayment of short-term debt and working capital
needs.
In order to sustain its approximately 6% current annual growth in customer
base, the Company has a substantial capital expansion program. The capital
expansion program is dependent on the Company's continuing ability to generate
the necessary funds required for this growth. Utility construction
expenditures for the nine and twelve months ended July 31, 1995, were $71.1
million and $107.9 million, respectively, as compared with $69 million and
$94.1 million, respectively, for similar prior periods.
At July 31, 1995, the Company's capital structure consisted of long-term debt
of 46% and common equity of 54%.
Results of Operations
Margin for the three months ended July 31, 1995, increased $2.7 million
compared with the same period last year due to regulatory rate changes which
increased rates and updated gas cost components. Although not a significant
factor for third quarter operations, degree days for the three months ended
July 31, 1995,
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were 51% less than degree days in the similar prior period. Delivered volumes
of natural gas for the current three-month period increased over the similar
prior period by 187,000 dekatherms, less than 1%. Margin earned per dekatherm
of gas delivered for the three months ended July 31, 1995, increased over the
similar prior period by $.12.
Margin for the nine months ended July 31, 1995, increased $18.9 million
compared with the same period last year due to regulatory rate changes which
increased rates and updated gas cost components. Weather for the nine months
ended July 31, 1995, was 12% warmer than the similar prior period. As a result,
the weather normalization adjustment (WNA), in effect from November 1 through
March 31, increased operating revenues by $10.4 million for the nine months
ended July 31, 1995, as compared with an increase of $112,000 for the similar
prior period. Delivered volumes of natural gas for the current nine months
decreased from the similar prior period by 1.4 million dekatherms,
approximately 1%. Margin earned per dekatherm of gas delivered for the nine
months ended July 31, 1995, increased over the similar prior period by $.21.
Margin for the twelve months ended July 31, 1995, increased $20.8 million
compared with the similar prior period due to regulatory rate changes and the
impact of the WNA. Weather for the twelve months ended July 31, 1995, was 12%
warmer than the similar prior period. The WNA increased operating revenues by
$10.4 million in the current period and $107,000 in the similar prior period.
Delivered volumes of natural gas for the current twelve months increased over
the similar prior period by 86,000 dekatherms, less than 1%. Margin earned per
dekatherm of gas delivered for the twelve months ended July 31, 1995, increased
over the similar prior period by $.17.
Cost of gas per dekatherm of gas sold for the three months, nine months and
twelve months ended July 31, 1995, decreased by $.52, $.27 and $.22,
respectively, compared with similar prior periods. Changes in purchased gas
costs from suppliers have no significant impact on margin as the Company
recovers 100% of its prudently incurred gas costs through various regulatory
mechanisms. The above decreases were primarily due to reduced commodity gas
costs and a lower demand cost component. The cost of gas per dekatherm of gas
sold is also impacted by changes in the mix between industrial sales and
industrial transportation. Certain large-volume customers purchase gas
directly from gas producers or third-party gas marketers and transport it
through the Company's distribution system. The Company does not include in its
operating revenues and cost of gas the commodity cost of this transported gas.
Transportation volumes as a percentage of total industrial volumes were 64% for
the three months, 60% for the nine months and 61% for the twelve months ended
July 31, 1995, as compared with 50%, 27% and 30%, respectively, for similar
prior periods.
Operations and maintenance expenses for the three months, nine months and
twelve months ended July 31, 1995, increased over
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similar prior periods primarily due to increases in maintenance and repairs of
mains, rents and leases, outside labor, payroll and employee benefit costs.
Depreciation expense for the three months, nine months and twelve months ended
July 31, 1995, increased over similar prior periods due to the growth of plant
in service and to increases in depreciation rates for North Carolina operations
effective November 1, 1994.
General taxes for the three months, nine months and twelve months ended July
31, 1995, increased over similar prior periods primarily due to increases in
property taxes from rate increases and additions to taxable property and to
increases in payroll taxes. These increases were partially offset by decreases
in gross receipts taxes resulting from decreased revenues.
Other income for the three months, nine months and twelve months ended July 31,
1995, decreased from similar prior periods primarily due to decreases in
earnings from merchandise and propane operations. Propane operations were
negatively impacted by the warmer-than-normal weather noted above. Compared
with similar prior periods, the allowance for funds used during construction
(AFUDC) for the three-month and nine-month periods ended July 31, 1995, was
down due to changes in rates and decreases in the balances on which AFUDC is
computed. These decreases in other income were partially offset by increases in
earnings from energy marketing services and interest earned on temporary cash
investments.
Utility interest charges for the three months, nine months and twelve months
ended July 31, 1995, increased over similar prior periods due to increases in
the amounts of debt and refunds due customers outstanding and to increases in
short-term interest rates.
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PART II. OTHER INFORMATION
Item 5. Other Information
Expansion of Services
As previously reported, the Company filed a petition in September 1994 with the
North Carolina Utilities Commission (NCUC) for a certificate of public
convenience and necessity to serve four counties in North Carolina not
presently receiving natural gas service. The Company estimated that the
expansion would require capital expenditures of $57.7 million over a period of
five years. The Company also filed applications to establish an expansion fund
and place $14.8 million of supplier refunds into this fund. The Company
requested permission to use the fund to offset a portion of the cost of the
construction in the four counties. Another company, not currently providing
natural gas service in North Carolina or elsewhere, also filed an application
to serve the four counties; however, this company did not request permission to
use expansion funds.
On June 19, 1995, the NCUC granted a conditional certificate to the Company to
serve the four-county area which would prohibit the Company from utilizing
available expansion funds. On July 10, the Company filed its exceptions to the
order declining the conditional certificate and requesting that a final order
be granted which would not prohibit the Company from using expansion funds. On
July 20, the NCUC conditionally granted a certificate to the competing
applicant. On August 17, the Company gave notice of appeal and filed its
exceptions to the July 20 order. The outcome of these proceedings cannot be
determined at this time.
LNG Project
As previously reported, the Company and Transcontinental Gas Pipe Line
Corporation signed a letter of intent to form Pine Needle LNG Company, LLC
(Pine Needle). Pine Needle has entered into letters of intent to admit other
members for 25% of the interest in Pine Needle. Subject to the execution of
definitive agreements, the admission of these members will result in the
Company's interest in Pine Needle being reduced from 50% to 37 1/2%.
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.
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(Registrant)
Date September 11, 1995 /s/ David J. Dzuricky
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David J. Dzuricky
Senior Vice President-Finance
(Principal Financial Officer)
Date September 11, 1995 /s/ Barry L. Guy
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Barry L. Guy
Vice President and Controller
(Principal Accounting Officer)
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