-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, a2+9yu4m6DbGtdRoXllCfEJQeeCg8IqDElj3KMsSzJoZMZxhfCa7m/r8/xScXKbe Wj2ElC3J4x79qy3giQntKA== 0000950144-95-001309.txt : 19950517 0000950144-95-001309.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950144-95-001309 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED CITIES GAS CO CENTRAL INDEX KEY: 0000101105 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 361801540 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01284 FILM NUMBER: 95537574 BUSINESS ADDRESS: STREET 1: 5300 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6153730104 MAIL ADDRESS: STREET 1: 5300 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHEASTERN ILLINOIS GAS CO DATE OF NAME CHANGE: 19670829 10-Q 1 UNITED STATES GAS COMPANY 10-Q 03-31-95 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 March 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 . -------------- -------------- Commission file number 0-1284-1 UNITED CITIES GAS COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Illinois and Virginia 36-1801540 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 5300 Maryland Way, Brentwood, TN 37027 - -------------------------------------------------------------------------------- (Address of principal (Zip Code) executive offices) (615) 373-5310 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code 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 preceeding 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. /X/ Yes / / No At April 28, 1995, 10,764,001 shares of the common stock of the Registrant were outstanding. ================================================================================ 2 UNITED CITIES GAS COMPANY AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995 TABLE OF CONTENTS
ITEM PAGE NUMBER PART I -- FINANCIAL INFORMATION NUMBER ------ ------ 1 Financial Statements: Consolidated Statements of Income (Unaudited) for the Three and Twelve Months Ended March 31, 1995 and March 31, 1994. 3 Consolidated Statements of Cash Flows (Unaudited) for the Three and Twelve Months Ended March 31, 1995 and March 31, 1994. 4 Consolidated Balance Sheets at March 31, 1995 (Unaudited) and 5 December 31, 1994. Consolidated Statements of Capitalization at March 31, 1995 (Unaudited) and December 31, 1994. 6 Notes to Consolidated Financial Statements. 7 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II -- OTHER INFORMATION 1 Legal Proceedings. 12 6 Exhibits and Reports on Form 8-K. 12 List of Exhibits. 13 Signature 14 11.01 Computation of Common Stock Earnings Per Share. 15 12.01 Computation of Ratio of Consolidated Earnings To Fixed Charges 16
2 3 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, -------------------- ------------------- (Unaudited, in thousands, except per share amounts) 1995 1994 1995 1994 ---- ---- ---- ---- UTILITY OPERATING REVENUES....................................... $106,006 $124,191 $262,798 $295,228 Natural gas cost.............................................. 61,922 80,002 154,888 187,456 -------- -------- -------- -------- UTILITY OPERATING MARGIN......................................... 44,084 44,189 107,910 107,772 -------- -------- -------- -------- UTILITY OTHER OPERATING EXPENSES: Operations and maintenance.................................... 15,240 14,890 57,653 57,179 Depreciation and amortization................................. 3,664 3,428 14,170 13,386 Federal and state income taxes................................ 6,878 7,240 3,511 3,393 Other taxes................................................... 3,419 3,059 11,099 10,361 -------- -------- -------- -------- Total other operating expenses.............................. 29,201 28,617 86,433 84,319 -------- -------- -------- -------- UTILITY OPERATING INCOME......................................... 14,883 15,572 21,477 23,453 UTILITY OTHER INCOME (lOSS), NET................................. (42) (76) (228) 214 -------- -------- -------- -------- 14,841 15,496 21,249 23,667 -------- -------- -------- -------- UTILITY INTEREST CHARGES: Interest on long-term debt.................................... 3,037 3,144 12,242 12,677 Other interest charges........................................ 701 274 2,164 2,331 -------- -------- -------- -------- Total interest charges...................................... 3,738 3,418 14,406 15,008 -------- -------- -------- -------- UTILITY INCOME................................................... 11,103 12,078 6,843 8,659 -------- -------- -------- -------- OTHER INCOME: Operations of UCG Energy Corporation- Revenues................................................... 12,383 13,742 37,024 41,725 Operating expenses......................................... (8,762) (9,503) (27,962) (31,303) Interest expense........................................... (238) (185) (826) (1,023) Depreciation and amortization.............................. (984) (887) (3,675) (3,610) Other income, net.......................................... 941 150 1,506 695 Federal and state income taxes............................. (1,267) (1,259) (2,302) (2,569) -------- -------- -------- -------- 2,073 2,058 3,765 3,915 -------- -------- -------- -------- Operations of United Cities Gas Storage Company- Revenues................................................... 1,883 3,016 5,994 8,943 Operating expenses......................................... (1,313) (2,510) (3,755) (6,746) Interest expense........................................... (231) (251) (929) (989) Depreciation............................................... (92) (91) (367) (373) Federal and state income taxes............................. (96) (64) (367) (365) -------- -------- -------- -------- 151 100 576 470 -------- -------- -------- -------- NET INCOME....................................................... 13,327 14,236 11,184 13,044 PREFERENCE STOCK DIVIDENDS....................................... - - - 12 -------- -------- -------- -------- COMMON STOCK EARNINGS............................................ $ 13,327 $ 14,236 $ 11,184 $ 13,032 ======== ======== ======== ======== COMMON STOCK EARNINGS PER SHARE.................................. $1.25 $1.38 $1.07 $1.27 ======== ======== ======== ======== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING...................... 10,673 10,331 10,493 10,257 ======== ======== ======== ======== COMMON STOCK DIVIDENDS PER SHARE................................. $.255 $.25 $1.01 $.99 ======== ======== ======== ========
3 4 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, -------------------- --------------------- (Unaudited, in thousands) 1995 1994 1995 1994 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................................... $13,327 $14,236 $11,184 $13,044 ------- ------- ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................................... 4,740 4,406 18,212 17,369 Deferred taxes..................................................... 6 (72) 1,379 557 Investment tax credits, net........................................ (91) (92) (369) (373) Investment income from Woodward Marketing, L.L.C................... (574) - (574) - Changes in current assets and current liabilities: Accounts receivable..................................... 7,038 3,529 10,541 (2,140) Materials and supplies.................................. (239) 72 (118) 957 Gas in storage.......................................... 15,738 15,657 (387) (4,427) Gas costs to be billed in the future.................... 4,724 (1,072) (2,115) (4,391) Prepayments............................................. 1,065 962 1,110 1,853 Accounts payable........................................ (8,058) (8,602) (7,893) 3,517 Customer deposits and advance payments.................. (3,214) (3,927) 2,903 1,091 Accrued interest........................................ 2,203 1,387 (296) (87) Supplier refunds due customers.......................... 5,622 5,587 1,262 (4,939) Accrued taxes........................................... 5,330 7,368 451 (1,094) Other - net............................................. (1,299) 1,345 (2,233) (1,894) ------- ------- ------- ------- Total adjustments..................................... 32,991 26,548 21,873 5,999 ------- ------- ------- ------- Net cash provided by operating activities........... 46,318 40,784 33,057 19,043 ------- ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property - utility...................................... (9,713) (7,334) (33,267) (28,378) Additions to property - non-utility.................................. (1,148) (595) (4,781) (4,059) ------- ------- ------- ------- Net cash used in investing activities............... (10,861) (7,929) (38,048) (32,437) ------- ------- ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings - net.......................................... (28,127) (22,863) 18,061 - Proceeds from issuance of common stock............................... 1,310 352 4,220 1,659 Long-term debt retirements........................................... (4,498) (4,551) (7,780) (6,069) Dividends paid....................................................... (2,367) (2,280) (9,302) (9,007) Redemption of preferred and preference stock......................... - - - (106) ------- ------- ------- ------- Net cash provided by (used in) financing activities. (33,682) (29,342) 5,199 (13,523) ------- ------- ------- ------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS................ 1,775 3,513 208 (26,917) CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.................... 2,744 798 4,311 31,228 ------- ------- ------- ------- CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.......................... $ 4,519 $ 4,311 $ 4,519 $ 4,311 ======= ======= ======= ======= CASH PAID DURING THE PERIOD FOR: Interest, net of amounts capitalized................................. $ 1,999 $ 2,467 $16,478 $16,450 ======= ======= ======= ======= Income taxes......................................................... $ 2,168 $ 363 $ 5,525 $ 8,635 ======= ======= ======= ======= NONCASH INVESTING AND FINANCING ACTIVITIES: Dividends reinvested................................................. $ 360 $ 303 $ 1,311 $ 1,161 ======= ======= ======= ======= Liabilities incurred to acquire investment in Woodward Marketing, L.L.C.................................................. $ 5,832 - $ 5,832 - ======= ======= ======= ======= Debt incurred to acquire assets of Harrell Propane, Inc. ............ $ 1,250 - $ 1,250 - ======= ======= ======= =======
4 5 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31, (In thousands) 1995 1994 ----------- ------------ ASSETS (UNAUDITED) UTILITY PLANT: Plant in service, at cost.................................... $412,520 $403,121 Less-accumulated depreciation.............................. 143,017 139,715 -------- -------- 269,503 263,406 -------- -------- NON-UTILITY PROPERTY: Property, plant, and equipment............................... 73,003 71,222 Less-accumulated depreciation.............................. 22,997 22,272 -------- -------- 50,006 48,950 -------- -------- CURRENT ASSETS: Cash and temporary investments............................... 4,519 2,744 Receivables, less allowance for uncollectible accounts of $1,376 in 1995 and $1,017 in 1994....................... 36,292 43,330 Materials and supplies....................................... 5,419 5,180 Gas in storage............................................... 10,713 26,451 Gas costs to be billed in the future......................... 11,233 15,957 Prepayments and other........................................ 981 2,046 -------- -------- 69,157 95,708 -------- -------- DEFERRED CHARGES: Unamortized debt discount and expense, net................... 2,808 2,694 Investment in Woodward Marketing, L.L.C. .................... 6,406 - Non-compete agreements, net.................................. 3,778 3,697 Deferred system improvement costs, net....................... 1,272 1,425 Other deferred charges....................................... 6,338 5,320 -------- -------- 20,602 13,136 -------- -------- $409,268 $421,200 ======== ======== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock equity.......................................... $130,298 $118,028 Long-term debt............................................... 141,829 144,344 -------- -------- 272,127 262,372 -------- -------- CURRENT LIABILITIES: Current portion of long-term obligations..................... 5,335 6,068 Notes payable................................................ 18,061 46,188 Accounts payable for gas costs............................... 19,135 26,185 Other accounts payable....................................... 7,812 2,988 Accrued taxes................................................ 11,705 6,375 Customer deposits and advance payments....................... 10,959 14,173 Accrued interest............................................. 5,548 3,345 Supplier refunds due customers............................... 11,063 5,441 Other........................................................ 8,275 8,993 -------- -------- 97,893 119,756 -------- -------- DEFERRED CREDITS: Accumulated deferred income tax.............................. 24,643 24,572 Deferred investment tax credits.............................. 4,554 4,645 Income taxes due customers................................... 6,257 6,329 Other........................................................ 3,794 3,526 -------- -------- 39,248 39,072 -------- -------- $409,268 $421,200 ======== ========
5 6 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION
MARCH 31 December 31, (In thousands, except share amounts) 1995 1994 ------------------ ------------------ COMMON STOCK EQUITY: (UNAUDITED) Common stock without par value, authorized 40,000,000 shares, outstanding 10,725,674 in 1995 and 10,613,441 in 1994......................................... $ 73,292 $ 71,622 Capital surplus....................................................... 22,462 22,462 Retained earnings..................................................... 34,544 23,944 -------- -------- Total common stock equity........................................... 130,298 47.9% 118,028 45.0% -------- ----- -------- ----- LONG-TERM DEBT: First mortgage bonds ................................................. 125,000 129,000 Senior secured storage term notes, 8.67%, due in installments through 2007.......................................... 10,315 10,436 Rental property adjustable rate term notes due in installments through 1999.......................................... 6,553 6,839 Other long-term obligations due in installments through 2013.......... 5,296 4,137 -------- -------- 147,164 150,412 Less-current requirements......................................... 5,335 6,068 -------- -------- Total long-term debt, excluding amounts due within one year....... 141,829 52.1% 144,344 55.0% -------- ----- -------- ----- TOTAL CAPITALIZATION...................................................... $272,127 100.0% $262,372 100.0% ======== ===== ======== =====
6 7 UNITED CITIES GAS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited financial statements reflect all adjustments (which are of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. The statements should be read in conjunction with the Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements included in the Company's annual report for the year ended December 31, 1994. The Company's business is seasonal in nature resulting in greater earnings during the winter months. The results of operations for the three month period ended March 31, 1995 are not necessarily indicative of the results to be expected for the full year. The Company owns former manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any information which suggests that these sites give rise to a present health or environmental risk as a result of the manufactured gas process or that any response action will be necessary. However, the Company has accrued and deferred for recovery $750,000 associated with the preliminary survey and invasive study of these sites. Management expects that expenditures related to response action at any environmental site will be recovered through rates or insurance, or shared among other potentially responsible parties. Therefore, the costs of responding to these sites are not expected to materially affect the results of operations, financial condition or cash flows of the Company. During the first quarter of 1995, UCG Energy purchased a 45% interest in certain contracts related to the gas marketing business of Woodward Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired interest, the shareholders of WMI will receive $5,000,000 in the Company's common stock and $750,000 in cash in late May, 1995, and may, if certain earnings targets are met, receive an additional payment of $1,000,000 to be paid over a five year period. In exchange for its own gas marketing contracts and the acquired 45% interest in the WMI gas marketing contracts, UCG Energy received a 45% interest in a newly formed limited liability company, Woodward Marketing, L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its remaining 55% interest in the WMI gas marketing contracts. WMLLC will provide gas marketing services to industrial customers, municipalities and local distribution companies. UCG Energy utilized equity accounting, effective January 1, 1995, for the acquisition. At March 31, 1995, a liability of $5,832,000 related to the acquisition is included in "Other accounts payable." On April 6, 1995, the Company signed a letter of intent to acquire all the outstanding common stock of Monarch Gas Company (Monarch). The acquisition will be accounted for as a pooling of interest whereby the number of shares of the Company's common stock issued will be calculated based on the book value of Monarch versus the book value of the Company at December 31, 1994. In addition, the Company will enter into a $250,000, five year non-compete agreement with the owners of Monarch. Monarch serves approximately 3,000 customers in small communities adjacent to the Company's Vandalia, Illinois operation. The Company will not restate prior period consolidated financial statements due to immateriality. In March, 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996 and does not expect that adoption will have a material impact on the results of operations, financial condition or cash flows of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as a result of a change in regulation. Certain reclassifications were made conforming prior year's financial statements with 1995 financial statement presentation. 7 8 UNITED CITIES GAS COMPANY AND SUBSIDIARIES Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview The Company's first quarter common stock earnings were $13,327,000 compared to first quarter 1994 earnings of $14,236,000. The earnings per common share in the first quarter of 1995 was $1.25 on an additional 342,000 average number of common shares outstanding, compared to $1.38 for the first quarter in 1994. Common stock earnings for the twelve month period ended March 31, 1995 were $11,184,000 compared to $13,032,000 for the twelve month period ended March 31, 1994. Common stock earnings per share decreased from $1.27 in the twelve month period in 1994 to $1.07 in the twelve month period in 1995. Average shares outstanding increased by 236,000 for the twelve month period ended March 31, 1995. The following table summarizes certain information regarding the operation of each segment of the Company's business for the periods ended March 31:
THREE MONTHS ENDED TWELVE MONTHS ENDED ------------------ ------------------- (UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 ---- ---- ---- ---- OPERATING REVENUES: Utility....................................... $106,006 $124,191 $262,798 $295,228 -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division.......................... 9,018 9,431 20,375 20,683 Rental Division........................... 1,531 1,644 6,336 6,576 Utility Services Division................. 1,834 2,667 10,313 14,466 -------- -------- -------- -------- Total UCG Energy Corporation............ 12,383 13,742 37,024 41,725 United Cities Gas Storage Company........... 1,883 3,016 5,994 8,943 -------- -------- -------- -------- Total Subsidiaries...................... 14,266 16,758 43,018 50,668 -------- -------- -------- -------- Total Revenues................................ $120,272 $140,949 $305,816 $345,896 ======== ======== ======== ======== COMMON STOCK EARNINGS: Utility....................................... $ 11,103 $ 12,078 $ 6,843 $ 8,647 -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division.......................... 1,186 1,393 914 1,515 Rental Division........................... 434 515 1,944 1,780 Utility Services Division................. 453 150 907 620 -------- -------- -------- -------- Total UCG Energy Corporation............ 2,073 2,058 3,765 3,915 United Cities Gas Storage Company........... 151 100 576 470 -------- -------- -------- -------- Total Subsidiaries...................... 2,224 2,158 4,341 4,385 -------- -------- -------- -------- Total Common Stock Earnings................... $ 13,327 $ 14,236 $ 11,184 $ 13,032 ======== ======== ======== ========
OPERATING RESULTS-UTILITY The utility earnings decreased by $975,000 and $1,804,000, respectively, for the three and twelve month periods in 1995 from the comparable 1994 periods due predominantly to the factors mentioned below: The operating margin for the first quarter decreased from $44,189,000 in 1994 to $44,084,000 in 1995. The operating margin for the twelve month period ended March 31, 1995 was $107,910,000 compared to $107,772,000 for the twelve month period ended March 31, 1994. The negative effect of the warmer weather during the three and twelve month periods ended March 31, 1995 as compared to the same periods in 1994 was offset by the effect of the weather normalization adjustments (WNAs) in Tennessee and Georgia, an increased number of natural gas customers and the Palmyra, Missouri acquisition in March, 1994. In the three and twelve month periods ended March 31, 1995, $1,630,000 and $3,531,000, respectively, in additional revenues were generated by the WNAs. In comparison, the WNAs generated additional revenues of $149,000 in the first quarter of 1994 and resulted in reduced revenues of $393,000 in the twelve month period ended March 31, 1994. 8 9 ITEM 2. CONTINUED Operations and maintenance expenses other than natural gas cost increased $350,000 in the first quarter and $474,000 in the twelve month period ended March 31, 1995 primarily due to increased payroll expenses, somewhat offset by a reduction in medical expenses. Depreciation and amortization expense and other taxes, which includes property taxes, increased in both periods primarily due to additional plant in service. Interest expense increased $320,000 in the first quarter of 1995 as compared to the same period in 1994 primarily due to interest on increased short-term debt outstanding, offset slightly by the retirement of long-term debt. Interest expense decreased $602,000 in the twelve month period primarily due to the retirement of long-term debt and because of the 1993 assessment of interest related to the settlement of the Internal Revenue Service Audit for the years 1986 through 1990, partially offset by interest on increased short-term debt outstanding during the period. The table below reflects operating revenues, gas sales volumes and weather data for the periods ended March 31:
OPERATING STATISTICS-UTILITY THREE MONTHS ENDED TWELVE MONTHS ENDED ------------------ ------------------- (UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 ---- ---- ---- ---- OPERATING REVENUES: Residential................................. $ 54,666 $ 64,684 $119,501 $139,458 Commercial.................................. 29,237 35,055 67,558 77,342 Industrial.................................. 17,526 21,705 64,890 68,910 Transportation.............................. 3,599 1,652 9,154 6,563 Other Revenues.............................. 978 1,095 1,695 2,955 -------- -------- -------- -------- Total Operating Revenues................. $106,006 $124,191 $262,798 $295,228 ======== ======== ======== ======== GAS SALES (Mcf): Residential................................. 10,366 10,968 20,749 23,304 Commercial.................................. 6,245 6,440 13,922 14,732 Industrial- Firm...................................... 2,431 2,675 7,890 7,754 Interruptible............................. 2,924 2,857 11,069 11,247 -------- -------- -------- -------- 21,966 22,940 53,630 57,037 ======== ======== ======== ======== Transported Volumes (Mcf)..................... 4,714 2,667 14,621 11,277 ======== ======== ======== ======== WEATHER DATA-COLDER (WARMER) THAN NORMAL*................................ (11.7%) (3.3%) (14.7%) 1.9% ======== ======== ======== ========
*Based on system weighted average. Data for 1995 is preliminary. OPERATING RESULTS-NON-UTILITY Revenues of UCG Energy Corporation (UCG Energy) decreased from $13,742,000 in the first quarter of 1994 to $12,383,000 in the first quarter of 1995. Revenues decreased from $41,725,000 for the twelve months ended March 31, 1994 to $37,024,000 for the twelve months ended March 31, 1995. The propane division's revenues decreased in the first quarter and twelve month periods due to decreased volumes sold as a result of warmer than normal weather. This decrease was partially offset by the acquisitions of Hurley's Propane Gas in Morristown, Tennessee in April, 1994 and Harrell Propane, Inc., in Murfreesboro, Tennessee in January, 1995. The utility services division's revenues decreased from 1994 for the first quarter and twelve month periods primarily as a result of decreased gas brokerage sales to certain industrial customers and others, and secondarily, the discontinuance of the distribution of energy-related products. The rental division had a moderate decrease in revenues in both periods due to lower rental rates on certain rental units and a reduced number of rental units in service. Expenses of UCG Energy, including cost of sales, decreased from $9,503,000 in the first quarter of 1994 to $8,762,000 in the first quarter of 1995 and from $31,303,000 in the twelve month period ended March 31, 1994 to $27,962,000 in the twelve month period ended March 31, 1995. Expenses decreased in the first quarter in the propane division primarily as a result of the cost of decreased volumes sold, but increased in the twelve month period due to added administrative and general expenses associated with the acquisitions of Hurley's Propane Gas and Harrell Propane, Inc. Expenses of the utility services division decreased in both periods as a result of lower cost of sales from decreased brokerage activities and the discontinuance of the distribution of energy-related products. Expenses of the rental division varied only slightly in both periods from the previous year. 9 10 ITEM 2. CONTINUED Other income, net of UCG Energy increased $791,000 and $811,000, respectively, in the first quarter and twelve month period primarily as a result of $574,000 of investment income in the utility services division from Woodward Marketing, L.L.C. UCG Energy's net income increased from $2,058,000 in the first quarter of 1994 to $2,073,000 in the first quarter of 1995, but decreased from $3,915,000 in the twelve month period ended March 31, 1994 to $3,765,000 in the twelve month period ended March 31, 1995. The increase for the quarter is the result of investment income from Woodward Marketing, L.L.C., partially offset by decreased sales in the propane division and other factors as mentioned above. The decrease in the twelve month period can largely be attributed to decreased sales volume in the propane division due to warmer than normal weather, partially offset by the investment income from Woodward Marketing, L.L.C. United Cities Gas Storage Company had net income for the three and twelve month periods of $151,000 and $576,000, respectively, as compared to $100,000 and $470,000 for the same periods in 1994. The revenues of the subsidiary were primarily derived from natural gas storage services and natural gas provided to United Cities Gas Company. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Total cash provided by operations for the three and twelve month periods ended March 31, 1995 was $46,318,000 and $33,057,000, respectively. Changes in accounts receivable, gas in storage and accounts payable are primarily a result of the seasonal nature of the Company's business. There were no other changes in significant balance sheet accounts which had a material effect on the cash flows of the Company. The financing activities during the three and twelve month periods reflect the retirement of long-term debt, dividend payments, the issuance of stock through the Company's various stock purchase plans and the net activity of short-term borrowings. The Company has authorized as of March 31, 1995, specific purchases and construction projects amounting to $9,421,000 of its 1995 utility capital budget of $36,900,000 and $1,231,000 of its non-utility budget of $4,800,000. Total capital expenditures for 1996, 1997 and 1998 are anticipated to be approximately $28,400,000, $30,400,000 and $31,000,000, respectively. In addition to its ongoing construction program, the Company is constructing a twenty-eight mile main which will connect two of its fastest growing distribution systems located in Middle Tennessee and is designed to provide the Company's current customers with the lowest possible priced gas through increased gas supply flexibility. Included in the 1995 utility capital budget stated above is $5,000,000 related to this project. The Company owns former manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any information which suggests that these sites give rise to a present health or environmental risk as a result of the manufactured gas process or that any response action will be necessary. However, the Company has accrued and deferred for recovery $750,000 associated with the preliminary survey and invasive study of these sites. Management expects that expenditures related to response action at any environmental site will be recovered through rates or insurance, or shared among other potentially responsible parties. Therefore, the costs of responding to these sites are not expected to materially affect the results of operations, financial condition or cash flows of the Company. During the first quarter of 1995, UCG Energy purchased a 45% interest in certain contracts related to the gas marketing business of Woodward Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired interest, the shareholders of WMI will receive $5,000,000 in the Company's common stock and $750,000 in cash in late May, 1995, and may, if certain earnings targets are met, receive an additional payment of $1,000,000 to be paid over a five year period. In exchange for its own gas marketing contracts and the acquired 45% interest in the WMI gas marketing contracts, UCG Energy received a 45% interest in a newly formed limited liability company, Woodward Marketing, L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its remaining 55% interest in the WMI gas marketing contracts. WMLLC will provide gas marketing services to industrial customers, municipalities and local distribution companies. UCG Energy utilized equity accounting, effective January 1, 1995, for the acquisition. At March 31, 1995, a liability of $5,832,000 related to the acquisition is included in "Other accounts payable." 10 11 ITEM 2. CONTINUED On April 6, 1995, the Company signed a letter of intent to acquire all the outstanding common stock of Monarch Gas Company (Monarch). The acquisition will be accounted for as a pooling of interest whereby the number of shares of the Company's common stock issued will be calculated based on the book value of Monarch versus the book value of the Company at December 31, 1994. In addition, the Company will enter into a $250,000, five year non-compete agreement with the owners of Monarch. Monarch serves approximately 3,000 customers in small communities adjacent to the Company's Vandalia, Illinois operation. The Company will not restate prior period consolidated financial statements due to immateriality. In March, 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996 and does not expect that adoption will have a material impact on the results of operations, financial condition or cash flows of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as a result of a change in regulation. On April 28, 1995, the Company filed to increase rates on an annual basis by $810,000 in the state of Virginia. The Company expects that any increase granted will be effective by the fourth quarter of 1995. In an election held on April 7, 1995, 96 employees in Columbus, Georgia voted not to be represented by a union. The Company believes its short-term lines of credit are sufficient to meet anticipated short-term requirements. At March 31, 1995, the Company had $84,000,000 in short-term lines of credit, including master and banker's acceptance notes, bearing interest primarily at the lesser of prime or a negotiated rate during the term of each borrowing. At March 31, 1995, $18,061,000 was outstanding under these arrangements. 11 12 UNITED CITIES GAS COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 ITEM 1. LEGAL PROCEEDINGS. See December 31, 1994 Form 10-K ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits-See list of Exhibits on page 13 hereof. (b) Reports on Form 8-K. None 12 13 UNITED CITIES GAS COMPANY AND SUBSIDIARIES LIST OF EXHIBITS 11.01 Computation of Common Stock Earnings Per Share. (Page 15). 12.01 Computation of Ratio of Consolidated Earnings to Fixed Charges. (Page 16). 27.01 Financial Data Schedule (for SEC use only) (Page 17). 13 14 UNITED CITIES GAS COMPANY AND SUBSIDIARIES SIGNATURE 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. UNITED CITIES GAS COMPANY /s/ ADRIENNE H. BRANDON --------------------------------- ADRIENNE H. BRANDON Vice President and Controller On behalf of the Registrant Date: May 11, 1995 14 EX-11.01 2 COMPUTATION OF COMMON STOCK EARNINGS PER SHARE 1 EXHIBIT 11.01 UNITED CITIES GAS COMPANY AND SUBSIDIARIES COMPUTATION OF COMMON STOCK EARNINGS PER SHARE
THREE MONTHS ENDED TWELVE MONTHS ENDED MARCH 31, MARCH 31, --------------------- -------------------- (Unaudited, in thousands, except per share amounts) 1995 1994 1995 1994 ---- ---- ---- ---- Common Stock Earnings...................................... $13,327 $14,236 $11,184 $13,032 Add: Preference Stock Dividends........................... - - - 12 ------- ------- ------- ------- Common Stock Earnings after Conversion..................... $13,327 $14,236 $11,184 $13,044 ======= ======= ======= ======= Average Number of Common Shares Outstanding During the Period....................................... 10,673 10,331 10,493 10,257 Add: Conversion of 11 1/2% Preference Stock*.............. - - - - ------- ------- ------- ------- Average Number of Common Shares Outstanding after Conversion........................................ 10,673 10,331 10,493 10,257 ======= ======= ======= ======= Common Stock Earnings per Share: Primary................................................. $1.25 $1.38 $1.07 $1.27 ======= ======= ======= ======= Fully Diluted........................................... $1.25 $1.38 $1.07 $1.27 ======= ======= ======= =======
* There was no 11-1/2% Preference Stock outstanding at March 31, 1995 and 1994. 15 EX-12.01 3 COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS 1 EXHIBIT 12.01 UNITED CITIES GAS COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES FOR THE TWELVE MONTHS ENDED
(Unaudited, in thousands, except ratio amounts) 3-31-95 12-31-94 12-31-93 12-31-92 12-31-91 12-31-90 ------- -------- -------- -------- -------- -------- Fixed Charges, as defined: Interest on long-term debt................... $13,926 $14,026 $14,553 $12,965 $11,111 $ 9,009 Amortization of debt discount................ 226 227 220 181 233 231 ------- ------- ------- ------- ------- ------- Total..................................... $14,152 $14,253 $14,773 $13,146 $11,344 $ 9,240 ======= ======= ======= ======= ======= ======= Earnings, as defined: Net income................................... $11,184 $12,093 $12,150 $10,218 $ 7,875 $ 3,373 Taxes on income.............................. 6,062 6,503 5,681 5,171 2,564 532 Fixed charges, as above...................... 14,152 14,253 14,773 13,146 11,344 9,240 ------- ------- ------- ------- ------- ------- Total..................................... $31,398 $32,849 $32,604 $28,535 $21,783 $13,145 ======= ======= ======= ======= ======= ======= Ratio of Consolidated Earnings to Fixed Charges. 2.22 2.30 2.21 2.17 1.92 1.42 ======= ======= ======= ======= ======= =======
16 EX-27 4 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF INCOME, CASH FLOWS AND CAPITALIZATION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 PER-BOOK 269,503 50,006 69,157 20,602 0 409,268 73,292 22,462 34,544 130,298 0 0 141,829 18,061 0 0 5,335 0 0 0 113,745 409,268 106,006 6,878 84,245 91,123 14,883 2,182 17,065 3,738 13,327 0 13,327 2,727 3,037 46,318 1.25 1.25
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