-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OSGurDddWsgsVARU1XXKc6r/fLhQxguFZFeMCC3nGgW/RFhJgpAK+i1SxoGAw5aR 7lZNuP5pUdXxFdYg6QY31g== 0000950144-96-002322.txt : 19960515 0000950144-96-002322.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950144-96-002322 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 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: 96563695 BUSINESS ADDRESS: STREET 1: 5300 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6153735310 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 CITIES GAS FORM 10-Q 03-31-96 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, 1996. 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 30, 1996, 12,831,577 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, 1996 Table of Contents
Item Page Number PART I -- FINANCIAL INFORMATION Number - ------ ------ 1 Financial Statements: Consolidated Statements of Income (Unaudited) for the Three and 3 Twelve Months Ended March 31, 1996 and March 31, 1995. Consolidated Statements of Cash Flows (Unaudited) for the Three and 4 Twelve Months Ended March 31, 1996 and March 31, 1995. Consolidated Balance Sheets at March 31, 1996 (Unaudited) and 5 December 31, 1995. Consolidated Statements of Capitalization at March 31, 1996 6 (Unaudited) and December 31, 1995. Notes to Consolidated Financial Statements. 7 2 Management's Discussion and Analysis of Financial Condition 8 and Results of Operations. PART II -- OTHER INFORMATION 1 Legal Proceedings. 12 6 Exhibits and Reports on Form 8-K. 12 List of Exhibits. 13 Signature 14
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) 1996 1995 1996 1995 ---- ---- ---- ---- UTILITY OPERATING REVENUES............................. $143,847 $106,006 $309,701 $262,798 Natural gas cost.................................... 93,267 61,922 190,521 154,888 -------- -------- -------- -------- UTILITY OPERATING MARGIN............................... 50,580 44,084 119,180 107,910 -------- -------- -------- -------- OTHER UTILITY OPERATING EXPENSES: Operations and maintenance.......................... 16,125 15,240 62,713 57,653 Depreciation and amortization....................... 4,220 3,664 15,675 14,170 Federal and state income taxes...................... 8,676 6,878 5,848 3,511 Other taxes......................................... 3,459 3,419 12,339 11,099 -------- -------- -------- -------- Total other utility operating expenses............ 32,480 29,201 96,575 86,433 -------- -------- -------- -------- UTILITY OPERATING INCOME............................... 18,100 14,883 22,605 21,477 OTHER UTILITY INCOME (EXPENSE), NET OF TAX............. 159 (42) 856 (228) -------- -------- -------- -------- 18,259 14,841 23,461 21,249 -------- -------- -------- -------- UTILITY INTEREST EXPENSE: Interest on long-term debt.......................... 3,313 3,037 12,308 12,242 Other interest expense.............................. 422 701 1,988 2,164 -------- -------- -------- -------- Total utility interest expense.................... 3,735 3,738 14,296 14,406 -------- -------- -------- -------- UTILITY INCOME......................................... 14,524 11,103 9,165 6,843 -------- -------- -------- -------- OTHER INCOME: Operations of UCG Energy Corporation- Revenues......................................... 18,672 12,383 40,722 37,024 Operating expenses............................... (14,604) (8,762) (31,467) (27,962) Interest expense................................. (363) (238) (1,317) (826) Depreciation and amortization.................... (914) (984) (4,308) (3,675) Other income, net................................ 1,531 941 2,920 1,506 Federal and state income taxes................... (1,641) (1,267) (2,492) (2,302) -------- -------- -------- -------- 2,681 2,073 4,058 3,765 -------- -------- -------- -------- Operations of United Cities Gas Storage Company- Revenues......................................... 2,989 1,883 8,549 5,994 Operating expenses............................... (2,392) (1,313) (5,984) (3,755) Interest expense................................. (222) (231) (955) (929) Depreciation..................................... (98) (92) (374) (367) Federal and state income taxes................... (108) (96) (477) (367) -------- -------- -------- -------- 169 151 759 576 -------- -------- -------- -------- COMMON STOCK EARNINGS.................................. $ 17,374 $ 13,327 $ 13,982 $ 11,184 ======== ======== ======== ======== COMMON STOCK EARNINGS PER SHARE........................ $ 1.36 $ 1.25 $ 1.14 $ 1.07 ======== ======== ======== ======== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING............ 12,755 10,673 12,306 10,493 ======== ======== ======== ======== COMMON STOCK DIVIDENDS PER SHARE....................... $ 0.255 $ 0.255 $ 1.02 $ 1.01 ======== ======== ======== ========
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) 1996 1995 1996 1995 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Common stock earnings.................................................. $ 17,374 $ 13,327 $ 13,982 $ 11,184 -------- -------- -------- -------- Adjustments to reconcile common stock earnings to net cash provided by (used in) operating activities: Depreciation and amortization........................................ 5,232 4,740 20,357 18,212 Deferred taxes....................................................... (46) 6 1,728 1,379 Investment tax credits, net.......................................... (90) (91) (363) (369) Investment income from Woodward Marketing, L.L.C..................... (1,267) (574) (2,047) (574) Changes in current assets and current liabilities: Receivables........................................................ (6,349) 7,038 (24,574) 10,541 Materials and supplies............................................. (70) (239) 435 (118) Gas in storage..................................................... 9,384 15,738 3,454 (387) Gas costs to be billed in the future............................... 4,432 4,724 (48) (2,115) Prepayments and other.............................................. 871 1,065 (176) 1,110 Accounts payable................................................... 1,610 (8,058) 9,812 (7,893) Customer deposits and advance payments............................. (4,612) (3,214) (3,493) 2,903 Accrued interest................................................... 2,741 2,203 805 (296) Supplier refunds due customers..................................... 2,953 5,622 (1,656) 1,262 Accrued taxes...................................................... 13,004 5,330 5,719 451 Other, net......................................................... 1,623 (1,299) 1,827 (2,233) -------- -------- -------- -------- Total adjustments................................................ 29,416 32,991 11,780 21,873 -------- -------- -------- -------- Net cash provided by operating activities...................... 46,790 46,318 25,762 33,057 -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property - utility........................................ (7,047) (9,713) (32,494) (33,267) Additions to property - non-utility.................................... (1,607) (1,148) (5,385) (4,781) Investment in Woodward Marketing, L.L.C., net.......................... 215 - (617) - -------- -------- -------- -------- Net cash used in investing activities.......................... (8,439) (10,861) (38,496) (38,048) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings - net............................................ (24,010) (28,127) (9,758) 18,061 Proceeds from issuance of long-term debt............................... - - 27,000 4,220 Proceeds from issuance of common stock................................. 583 1,310 22,587 (7,780) Long-term debt retirements............................................. (3,359) (4,498) (5,208) (9,302) Dividends paid......................................................... (2,745) (2,367) (10,584) - -------- -------- -------- -------- Net cash provided by (used in) financing activities............ (29,531) (33,682) 24,037 5,199 -------- -------- -------- -------- NET INCREASE IN CASH AND TEMPORARY INVESTMENTS........................... 8,820 1,775 11,303 208 CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.................... 7,002 2,744 4,519 4,311 -------- -------- -------- -------- CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.......................... $ 15,822 $ 4,519 $ 15,822 $ 4,519 ======== ======== ======== ======== CASH PAID DURING THE PERIOD FOR: Interest, net of amounts capitalized................................... $ 1,414 $ 1,999 $ 15,579 $ 16,478 ======== ======== ======== ======== Income taxes........................................................... $ 278 $ 2,168 $ 6,733 $ 5,525 ======== ======== ======== ======== NONCASH INVESTING AND FINANCING ACTIVITIES: Dividends reinvested................................................... $ 507 $ 360 $ 1,946 $ 1,311 ======== ======== ======== ======== Debt incurred to acquire assets of Harrell Propane, Inc................ - $ 1,250 - $ 1,250 ======== ======== ======== ======== Debt incurred to acquire assets of Duncan Gas Service.................. $ 2,957 - $ 2,957 - ======== ======== ======== ======== Common stock issued in investment in Woodward Marketing, L.L.C......... - - $ 5,000 - ======== ======== ======== ========
4 5 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, (In thousands) 1996 1995 -------- -------- ASSETS (Unaudited) UTILITY PLANT: Plant in service, at cost................................ $451,766 $445,058 Less-accumulated depreciation.......................... 162,407 157,968 -------- -------- 289,359 287,090 -------- -------- NON-UTILITY PROPERTY: Property, plant, and equipment........................... 72,215 67,423 Less-accumulated depreciation.......................... 20,120 19,501 -------- -------- 52,095 47,922 -------- -------- CURRENT ASSETS: Cash and temporary investments........................... 15,822 7,002 Receivables, less allowance for uncollectible accounts of $1,944 in 1996 and $1,352 in 1995................... 60,866 54,517 Materials and supplies................................... 4,984 4,914 Gas in storage........................................... 7,259 16,643 Gas costs to be billed in the future..................... 11,281 15,713 Prepayments and other.................................... 1,157 2,028 -------- -------- 101,369 100,817 -------- -------- DEFERRED CHARGES: Unamortized debt discount and expense, net............... 2,852 2,896 Investment in Woodward Marketing, L.L.C., net............ 7,968 7,012 Non-compete agreements, net.............................. 3,341 3,259 Deferred system improvement costs, net................... 661 814 Other deferred charges................................... 10,865 10,567 -------- -------- 25,687 24,548 -------- -------- $468,510 $460,377 ======== ======== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock equity...................................... $161,283 $146,071 Long-term debt........................................... 162,998 163,160 -------- -------- 324,281 309,231 -------- -------- CURRENT LIABILITIES: Current portion of long-term obligations................. 8,915 9,155 Notes payable............................................ 8,303 32,313 Accounts payable for gas costs........................... 26,391 24,433 Other accounts payable................................... 4,536 4,884 Accrued taxes............................................ 17,424 4,420 Customer deposits and advance payments................... 7,466 12,078 Accrued interest......................................... 6,353 3,612 Supplier refunds due customers........................... 9,407 6,454 Other.................................................... 10,183 8,580 -------- -------- 98,978 105,929 -------- -------- DEFERRED CREDITS: Accumulated deferred income tax.......................... 31,567 31,599 Deferred investment tax credits.......................... 4,191 4,281 Income taxes due customers............................... 5,129 5,190 Other.................................................... 4,364 4,147 -------- -------- 45,251 45,217 -------- -------- $468,510 $460,377 ======== ========
5 6 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION
MARCH 31, DECEMBER 31, (In thousands, except share amounts) 1996 1995 COMMON STOCK EQUITY: (UNAUDITED) -------------------- ------------------- Common stock without par value, authorized 40,000,000 shares, outstanding 12,796,606 in 1996 and 12,727,280 in 1995........................................ $102,825 $101,735 Capital surplus...................................................... 22,462 22,462 Retained earnings.................................................... 35,996 21,874 -------- -------- Total common stock equity.......................................... 161,283 49.7% 146,071 47.2% -------- ------ -------- ------ LONG-TERM DEBT: First mortgage bonds ................................................ 122,000 125,000 Medium term notes, 6.20% through 6.67%, due 2000 through 2025...................................................... 22,000 22,000 Senior secured storage term notes, 7.45%, due in installments through 2007......................................... 9,785 9,926 Rental property adjustable rate term notes due in installments through 1999......................................... 5,573 5,691 Rental property fixed rate term note, 7.90%, due in installments through 2013......................................... 2,292 2,292 Propane term note, 6.99%, due in installments through 2002...................................................... 5,000 5,000 Other long-term obligations due in installments through 2004......... 5,263 2,406 -------- -------- 171,913 172,315 Less-current requirements........................................ 8,915 9,155 -------- -------- Total long-term debt, excluding amounts due within one year...... 162,998 50.3% 163,160 52.8% -------- ------ -------- ------ TOTAL CAPITALIZATION..................................................... $324,281 100.0% $309,231 100.0% ======== ====== ======== ======
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, 1995. 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, 1996, are not necessarily indicative of the results to be expected for the full year. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121 (SFAS 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. Because of the regulatory structure in which the Company operates, the adoption of SFAS 121 did not have a material effect on the results of operations, financial condition or cash flows of the company. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." For fiscal years beginning after December 15, 1995, this statement requires new disclosures in the notes to the financial statements about stock-based compensation plans based on the fair value of equity instruments granted. Companies also may base the recognition of compensation cost for instruments issued under stock-based compensation plans on these fair values. The Company did not change the method of accounting for these plans. Effective January 1, 1996, United Cities Propane Gas of Tennessee, Inc., (UCPT), a subsidiary of UCG Energy Corporation, purchased substantially all of the propane assets of Duncan Gas Service for approximately $4,310,000. In addition, UCPT entered into a ten year non-compete agreement with the prior owners for $250,000, to be paid over a ten year period. This acquisition added approximately 2,000 customers in the Johnson City, Tennessee area. Certain reclassifications were made conforming prior year's financial statements with 1996 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 1996 first quarter common stock earnings were $17,374,000 compared to the first quarter 1995 earnings of $13,327,000. The earnings per common share in the first quarter of 1996 was $1.36 on an additional 2,082,000 average number of share outstanding compared to $1.25 for the first quarter of 1995. Common stock earnings for the twelve month period ended March 31, 1996, were $13,982,000 compared to $11,184,000 for the twelve month period ended March 31, 1995. Common stock earnings per share increased from $1.07 in the twelve month period in 1995 to $1.14 in the twelve month period in 1996. Average shares outstanding increased by 1,813,000 for the twelve month period ended March 31, 1996. The increase in average number of shares outstanding in the three and twelve month periods includes the June 1995 issuance of 1,380,000 shares of common stock in an underwritten public offering. 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) 1996 1995 1996 1995 ---- ---- ---- ---- OPERATING REVENUES: Utility............................. $143,847 $106,006 $309,701 $262,798 -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division................ 16,868 9,018 32,500 20,375 Rental Division................. 1,119 1,531 5,548 6,336 Utility Services Division....... 685 1,834 2,674 10,313 -------- -------- -------- -------- Total UCG Energy Corporation.. 18,672 12,383 40,722 37,024 United Cities Gas Storage Company. 2,989 1,883 8,549 5,994 -------- -------- -------- -------- Total Subsidiaries............ 21,661 14,266 49,271 43,018 -------- -------- -------- -------- Total Operating Revenues............ $165,508 $120,272 $358,972 $305,816 ======== ======== ======== ======== COMMON STOCK EARNINGS: Utility............................. $ 14,524 $ 11,103 $ 9,165 $ 6,843 -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division................ 1,583 1,186 1,521 914 Rental Division................. 359 434 1,617 1,944 Utility Services Division....... 739 453 920 907 -------- -------- -------- -------- Total UCG Energy Corporation.. 2,681 2,073 4,058 3,765 United Cities Gas Storage Company. 169 151 759 576 -------- -------- -------- -------- Total Subsidiaries............ 2,850 2,224 4,817 4,341 -------- -------- -------- -------- Total Common Stock Earnings......... $ 17,374 $ 13,327 $ 13,982 $ 11,184 ======== ======== ======== ========
OPERATING RESULTS-UTILITY The utility earnings increased by $3,421,000 and $2,322,000, respectively, for the three and twelve month periods in 1996 from the comparable 1995 periods due predominantly to the factors mentioned below: The operating margin for the first quarter increased from $44,084,000 in 1995 to $50,580,000 in 1996. The operating margin for the twelve month period ended March 31, 1996, was $119,180,000 compared to $107,910,000 for the twelve month period ended March 31, 1995. The increase in both periods is a result of the colder weather in 1996 as compared to 1995; rate increases in South Carolina, Kansas, Virginia, Missouri and Tennessee; volumes sold to new residential and commercial natural gas customers; and the additional revenues from certain interruptible customers who did not go off the Company's system when curtailed during the first quarter of 1996. Operations and maintenance expenses other than natural gas cost increased $885,000 in the first quarter and $5,060,000 in the twelve month period ended March 31, 1996, as compared to the previous year periods, primarily due to increased payroll and related benefits. In addition, the increase in operations and maintenance expenses in the twelve month period can be 8 9 ITEM 2. CONTINUED attributed to increased outside services expense and additional expenses resulting from the consolidation of operations in the Company's Virginia/East Tennessee Division in the third quarter of 1995. The increase in outside services expense is primarily a result of incremental expenses related to addressing labor and personnel related activities, strategic planning and the 1995 Internal Revenue Service audit. Depreciation and amortization expense and other taxes increased in the first quarter and twelve month period from the previous year periods primarily due to additional plant in service. Federal and state income taxes varied in both periods in relation to changes in income. Other income (expense), net of tax increased in the first quarter and twelve month period from the previous year periods primarily as a result of revenues from the incentive rate program in Tennessee and, as allowed by certain regulatory commissions in the states in which the Company operates, there was an increased amount of revenues recognized by the Company related to the release of its excess firm capacity on the pipelines which serve the Company. In addition, the increase in Other income (expense), net of tax in both periods can be attributed to increased interest income on deferred gas costs that are to be billed in the future. In the twelve month period, the increase can also be attributed to a $171,000 credit made in September 1995 for the capitalization of the equity portion of the allowance for funds used during construction (AFUDC) of a 28 mile main in Middle Tennessee. Interest expense in the first quarter of 1996 varied only slightly from the previous year period. The decrease in interest on short-term debt outstanding was offset by interest on increased long-term debt. Interest expense decreased in the twelve month period because of less interest on short-term debt outstanding and a $349,000 reduction to interest expense related to the capitalization of the debt portion of the AFUDC of a 28 mile main in Middle Tennessee. This increase was somewhat offset by increased interest on miscellaneous liabilities outstanding during the period and interest on increased long-term debt. The table below reflects operating revenues, natural gas through-put and weather data for the periods ended March 31:
OPERATING STATISTICS-UTILITY THREE MONTHS ENDED TWELVE MONTHS ENDED ------------------ ------------------- (Unaudited, in thousands) 1996 1995 1996 1995 ---- ---- ---- ---- UTILITY OPERATING REVENUES: -------------------------- Residential....................... $74,808 $54,666 $147,745 $119,501 Commercial........................ 40,322 29,237 82,053 67,558 Industrial........................ 21,778 19,024 63,529 66,388 Transportation.................... 2,850 2,101 8,851 7,656 Other Revenues.................... 4,089 978 7,523 1,695 -------- -------- -------- -------- Total........................ $143,847 $106,006 $309,701 $262,798 ======== ======== ======== ======== NATURAL GAS THROUGH-PUT (MCF): ----------------------------- Residential....................... 12,526 10,366 25,061 20,749 Commercial........................ 7,200 6,245 16,120 13,922 Industrial- Firm............................ 2,440 2,439 7,371 7,898 Interruptible................... 3,024 3,347 11,551 11,492 -------- -------- -------- -------- 25,190 22,397 60,103 54,061 Transportation.................... 4,358 4,283 17,259 14,190 -------- -------- -------- -------- Total........................ 29,548 26,680 77,362 68,251 ======== ======== ======== ======== WEATHER DATA-COLDER (WARMER) THAN NORMAL*...................... 6.2% (11.7%) 7.3% (14.7%) ======== ======== ======== ========
*Based on system weighted average. Data for 1996 is preliminary. 9 10 ITEM 2. CONTINUED OPERATING RESULTS-NON-UTILITY Revenues of UCG Energy Corporation (UCG Energy) increased from $12,383,000 in the first quarter of 1995 to $18,672,000 in the first quarter of 1996. Revenues increased from $37,024,000 for the twelve months ended March 31, 1995, to $40,722,000 for the twelve months ended March 31, 1996. The propane division's revenues increased in the first quarter and twelve month periods due to increased retail and wholesale volumes sold and increased transport revenues, both due to colder than normal weather and the acquisitions of Harrell Propane, Inc. in January 1995, Transpro South, Inc. in May 1995 and Duncan Gas Service in January 1996. Revenues in the utility services division decreased from 1995 in both periods as a result of decreased gas brokerage sales to certain industrial customers and others primarily because of the transfer of certain gas brokerage contracts to Woodward Marketing, L.L.C. (WMLLC) and the discontinuance of the distribution of energy related products. The rental division's revenues decreased from the first quarter and twelve months ended 1995 due to the elimination of certain revenues as a result of the transfer of certain rental units to the utility company. Expenses of UCG Energy, including cost of sales, increased from $8,762,000 in the first quarter of 1995 to $14,604,000 in the first quarter of 1996 and from $27,962,000 in the twelve month period ended March 31, 1995, to $31,467,000 in the twelve month period ended March 31, 1996. Expenses increased in both periods in the propane division as a result of the cost of increased propane volumes sold and increased administrative and general expenses. These increases were due to colder than normal weather and the acquisitions of Harrell Propane, Inc., Transpro South, Inc. and Duncan Gas Service. 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 increased only slightly in both periods from the previous year in the rental division. Other income, net of UCG Energy increased $590,000 and $1,414,000, respectively, in the first quarter and twelve month periods primarily as a result of increased investment income from WMLLC in the amounts of $693,000 and $1,473,000, respectively, for those periods. UCG Energy's net income increased from $2,073,000 and $3,765,000, respectively, in the first quarter and twelve month periods ended March 31, 1995, to $2,681,000 and $4,058,000, respectively, for those same periods ended March 31, 1996. The increase in net income for the first quarter can be attributed to increased sales in the propane division and increased investment income from WMLLC. The increase in net income for the twelve month period can largely be attributed to increased sales in the propane division, partially offset by decreased rental revenues in the rental division. The increase in investment income from WMLLC for the same twelve month period was partially offset by increased amortization and interest expenses related to that investment. Effective January 1, 1996, United Cities Propane Gas of Tennessee, Inc. (UCPT), a subsidiary of UCG Energy, purchased substantially all of the propane assets of Duncan Gas Service for approximately $4,310,000. In addition, UCPT entered into a ten year non-compete agreement with the prior owners for $250,000, to be paid over a ten year period. This acquisition added approximately 2,000 customers in the Johnson City, Tennessee area. United Cities Gas Storage Company had net income for the three and twelve month periods of $169,000 and $759,000, respectively, as compared to $151,000 and $576,000 for the same periods in 1995. 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, 1996 was $46,790,000 and $25,762,000, respectively. Changes in accounts receivable, gas in storage and accounts payable were primarily a result of the weather sensitive nature of the Company's business. Changes in gas costs to be billed in the future and supplier refunds due customers were primarily a result of the timing of the recoveries from, or refunds to, customers of these costs through the Purchased Gas Adjustment mechanism. 10 11 ITEM 2. CONTINUED The financing activities for 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 financing activities of the twelve month period also included the issuance in June 1995 of 1,380,000 shares of common stock in an underwritten public offering with net proceeds from the sale amounting to approximately $18,900,000. In addition, $22,000,000 of medium-term notes and a $5,000,000 term note in UCPT were issued in the last quarter of 1995. The proceeds of these activities were used to repay short-term borrowings, retire long-term debt, finance the Company's construction program and for other corporate purposes. The Company had authorized as of March 31, 1996, specific purchases and construction projects amounting to $7,805,000 of its 1996 utility capital budget of $29,000,000 and $6,194,000 of its non-utility capital budget of $7,800,000. Total capital expenditures for 1997, 1998 and 1999 are anticipated to be approximately $32,000,000 in each year, based on information currently available, which is subject to change. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121 (SFAS 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. Because of the regulatory structure in which the Company operates, the adoption of SFAS 121 did not have a material effect on the results of operations, financial condition or cash flows of the company. Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation." For fiscal years beginning after December 15, 1995, this statement requires new disclosures in the notes to the financial statements about stock-based compensation plans based on the fair value of equity instruments granted. Companies also may base the recognition of compensation cost for instruments issued under stock-based compensation plans on these fair values. The Company did not change the method of accounting for these plans. As a result of an election held on March 29, 1996, 20 employees in Hannibal, Missouri will be represented by a union. On April 19, 1996, an election was held in Columbus, Georgia for 97 employees to determine whether they would be represented by a union. The results of that election are pending the outcome of an administrative hearing. The Company believes its short-term lines of credit are sufficient to meet anticipated short-term requirements. At March 31, 1996, 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 the prime rate or a negotiated rate during the term of each borrowing. Under these arrangements, $8,303,000 in short-term debt was outstanding at March 31, 1996. 11 12 UNITED CITIES GAS COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. See December 31, 1995 Form 10-K and Part I of this filing. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits-See list of Exhibits on page 13 hereof. (b) The following Form 8-K was filed during the quarter ended March 31, 1996: 1. Form 8-K, Item 5 dated February 16, 1996. 12 13 UNITED CITIES GAS COMPANY AND SUBSIDIARIES LIST OF EXHIBITS 12.01 Computation of Ratio of Consolidated Earnings to Fixed Charges. (Page 15). 27 Financial Data Schedule (for SEC use only). 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 13, 1996 14 EX-12.01 2 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) 3-31-96 12-31-95 12-31-94 12-31-93 12-31-92 12-31-91 ------- -------- -------- -------- -------- -------- Fixed Charges, as defined: Interest on long-term debt...................... $14,038 $13,697 $14,026 $14,553 $12,965 $11,111 Amortization of debt discount................... 237 227 227 220 181 233 ------- ------- ------- ------- ------- ------- Total........................................ $14,275 $13,924 $14,253 $14,773 $13,146 $11,344 ======= ======= ======= ======= ======= ======= Earnings, as defined: Net income...................................... $13,982 $9,935 $12,093 $12,150 $10,218 $7,875 Taxes on income................................. 9,258 6,970 6,503 5,681 5,171 2,564 Fixed charges, as above......................... 14,275 13,924 14,253 14,773 13,146 11,344 ------- ------- ------- ------- ------- ------- Total........................................ $37,515 $30,829 $32,849 $32,604 $28,535 $21,783 ======= ======= ======= ======= ======= ======= Ratio of Consolidated Earnings to Fixed Charges.... 2.63 2.21 2.30 2.21 2.17 1.92 ======= ======= ======= ======= ======= =======
15 EX-27 3 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-31-1996 JAN-01-1996 MAR-31-1996 PER-BOOK 289,359 52,095 101,369 25,687 0 468,510 102,825 22,462 35,996 161,283 0 0 162,998 8,303 0 0 8,915 0 0 0 127,011 468,510 143,847 8,676 117,071 125,747 18,100 3,009 21,109 3,735 17,374 0 17,374 3,252 2,959 46,790 1.36 1.36
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