-----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, VYWFymklukv4MloNi36YkZ7eKoTQWqQunZiu160ptFW5D/NTrhGIRZAQ5vOD1akX H8LsZ3qcm0KWgu0O31PGjg== 0000102710-98-000021.txt : 19980415 0000102710-98-000021.hdr.sgml : 19980415 ACCESSION NUMBER: 0000102710-98-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALLEY RESOURCES INC /RI/ CENTRAL INDEX KEY: 0000102710 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 050384723 STATE OF INCORPORATION: RI FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07924 FILM NUMBER: 98593217 BUSINESS ADDRESS: STREET 1: 1595 MENDON RD CITY: CUMBERLAND STATE: RI ZIP: 02864 BUSINESS PHONE: 4013341188 MAIL ADDRESS: STREET 1: PO BOX 7900 CITY: CUMBERLAND STATE: RI ZIP: 02864-7900 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________to ____________ Commission File number 1-7924 VALLEY RESOURCES, INC. (Exact name of Registrant as specified in its charter) Rhode Island 05-0384723 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1595 Mendon Road 02864 Cumberland, Rhode Island (Zip Code) (Address of principal executive offices) (401) 334-1188 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) 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, 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. Outstanding at Class of Common Stock February 28, 1998 --------------------- ----------------- $1 Par Value 4,972,822 VALLEY RESOURCES, INC. FORM 10-Q FEBRUARY 28, 1998 Page of Form 10-Q --------- PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations--for the three- and six-months ended February 28, 1998 and 1997...................................................... 3 Consolidated Condensed Balance Sheets--February 28, 1998 and August 31, 1997...................................... 4 & 5 Consolidated Condensed Statements of Cash Flows--for the six-months ended February 28, 1998 and 1997............... 6 Notes to Consolidated Condensed Financial Statements.......... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 8 Item 6(a) Exhibits...................................................... 10 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................. 10 - 2 - PART I: FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited)
3 Months Ended 6 Months Ended Feb. 28, Feb. 28, Feb. 28, Feb. 28, 1998 1997 1998 1997 (in thousands except share and per share numbers) Operating Revenues: Utility Gas Revenues $ 24,830 $ 25,177 $ 34,913 $ 36,123 Nonutility Revenues 5,598 5,755 11,339 11,149 --------- --------- --------- --------- Total 30,428 30,932 46,252 47,272 --------- --------- --------- --------- Operating Expenses: Cost of Gas Sold 13,688 14,175 19,281 20,578 Cost of Sales - Nonutility 3,800 3,894 7,827 7,720 Operations 4,818 4,698 9,533 9,255 Maintenance 417 388 815 826 Depreciation and Amortization 825 778 1,651 1,555 Taxes - Other Than Federal Income 1,368 1,352 2,220 2,224 - Federal Income 1,593 1,631 1,068 1,122 --------- --------- --------- --------- Total 26,509 26,916 42,395 43,280 --------- --------- --------- --------- Operating Income 3,919 4,016 3,857 3,992 Other Income - Net of Tax 72 93 122 158 --------- --------- --------- --------- Total Income 3,991 4,109 3,979 4,150 --------- --------- --------- --------- Interest Charges: Long-Term Debt 611 477 1,233 964 Other 149 372 276 698 --------- --------- --------- --------- Total 760 849 1,509 1,662 --------- --------- --------- --------- Net Income $ 3,231 $ 3,260 $ 2,470 $ 2,488 ========= ========= ========= ========= Average Number of Common Shares Outstanding 4,970,959 4,261,726 4,955,018 4,261,672 Basic Earnings Per Average Common Share Outstanding $0.65 $0.76 $0.50 $0.58 Dividends Declared on Common Stock $0.185 $0.1825 $0.37 $0.365
The accompanying Notes are an integral part of these statements. - 3 - VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets
(Unaudited) Feb. 28, Aug. 31, 1998 1997 --------- -------- (in thousands) ASSETS Utility Plant - Net $ 51,109 $50,447 -------- ------- Leased Property - Net 2,046 2,377 -------- ------- Nonutility Property-Net 4,056 3,712 -------- ------- Other Investments 1,609 1,592 -------- ------- Current Assets: Cash 966 820 Accounts Receivable - Net 16,515 11,183 Deferred Unbilled Gas Costs 1,414 440 Fuel and Other Inventories (Note 3) 4,565 6,120 Prepayments 722 1,290 Common Stock held for Dividend Reinvestment-amounting to 20,206 and 31,179 shares respectively (Note 4) 229 352 -------- ------- Total 24,411 20,205 -------- ------- Deferred Debits: Recoverable Postretirement Benefits 346 462 Recoverable Vacations Accrued 754 596 Unamortized Debt Discount and Expense 1,746 1,745 Prepaid Pensions 7,960 7,095 Recoverable Deferred FIT 6,034 6,044 Recoverable Transition Obligation 373 373 Other 2,980 3,049 -------- ------- 20,193 19,364 -------- ------- Total $103,424 $97,697 ======== =======
The accompanying Notes are an integral part of these statements. - 4 - VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Cont'd)
(Unaudited) Feb. 28, Aug. 31, 1998 1997 -------- -------- (in thousands) CAPITALIZATION & LIABILITIES Capitalization: Common Stock $ 4,993 $ 4,900 Paid In Capital 24,819 24,035 Retained Earnings 8,900 8,279 Less: Accounts Receivable from ESOP (2,856) (2,907) -------- ------- Total Common Stock Equity 35,856 34,307 -------- ------- Long-Term Debt (Less Current Maturities): 8% First Mortgage Bonds, Series Due 2022 20,039 20,090 7.7% Debentures, Due 2027 7,000 7,000 9% Notes Payable, Due 1999 2,139 2,139 Notes Payable 2,674 2,757 -------- -------- Total Long-Term Debt 31,852 31,986 -------- -------- Total Capitalization 67,708 66,293 -------- -------- Revolving Credit Arrangement 2,300 2,300 -------- ------- Obligation Under Capital Lease 1,402 1,541 -------- ------- Current Liabilities: Current Maturities of Long-Term Debt 150 150 Obligation Under Capital Lease 644 836 Notes Payable 3,900 1,900 Accounts Payable 5,066 4,298 Security Deposits & Refund Obligations 1,007 1,035 Taxes Accrued 1,377 362 Deferred Fuel Costs 729 793 Accrued Interest 788 541 Other 867 697 -------- ------- Total 14,528 10,612 -------- ------- Deferred Credits 5,089 5,130 -------- ------- Deferred Federal Income Taxes 12,397 11,821 -------- ------- $103,424 $97,697 ======== =======
The accompanying Notes are an integral part of these statements. - 5 - VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited)
For the 6 Months Ended Feb. 28, Feb. 28, 1998 1997 -------- -------- (in thousands) Cash Flows from Operating Activities: Net Income $ 2,470 $ 2,488 Adjustments to Reconcile Net Income to Net Cash used in Operating Activities: Depreciation and Amortization 1,651 1,555 Provision for Uncollectibles 1,081 778 Deferred Federal Income Taxes 578 1,410 Amortization of ITC (24) -0- Change in Assets and Liabilities: Accounts Receivable (6,412) (7,578) Deferred Fuel Costs (64) (2,381) Unbilled Gas Costs (974) (1,164) Fuel and Other Inventories 1,555 1,332 Other Current Assets (174) 200 Accounts Payable, Accrued Expenses and Current Liabilities 1,755 998 Other - Net 485 392 ------- ------- Net Cash Provided (Used) by Operating Activities 1,927 (1,970) ------- ------- Cash Flows from Investing Activities: Utility Capital Expenditures (2,016) (1,708) Nonutility Capital Expenditures (641) (371) Other Investments (17) (20) ------- ------- Net Cash (Used) by Investing Activities (2,674) (2,099) ------- ------- Cash Flows from Financing Activities: Dividends Paid (1,850) (1,555) Capital Stock Transactions 877 (34) Issuance of Long Term Debt -0- 100 Retirement of Long-Term Debt (134) (57) Increase in Notes Payable 2,000 5,800 ------- ------- Net Cash Provided by Financing Activities 893 4,254 ------- ------- Net Increase in Cash 146 185 Cash - Beginning 820 507 ------- ------- Cash - Ending $ 966 $ 692 ======= ======= Supplemental Disclosures of Cash Flow Information Cash Paid During the Period for: Interest $ 1,262 $ 1,658 ======= ======= Federal Income Taxes $ -0- $ -0- ======= ======= Capital Lease Obligations Incurred $ 177 $ 201 ======= =======
The accompanying Notes are an integral part of these statements. - 6 - NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1 - ------ New Accounting Standard - ----------------------- The Company has adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), effective quarter ended February 28, 1998 and has reflected basic earnings per share on the face of the consolidated condensed statements of operations. Accordingly, EPS data for all periods presented reflects the computation of EPS in accordance with the provisions of SFAS 128. The adoption of SFAS 128 had no effect on earnings per share. Note 2 - ------ In the opinion of the Corporation, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring accruals and matters discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations") necessary to present fairly the financial position as of February 28, 1998 the results of operations for the three- and six-months ended February 28, 1998 and 1997 and Statement of Cash Flows for the six-months ended February 28, 1998 and 1997. The results of operations for the three- and six-month periods ended February 28, 1998 and 1997 are not necessarily indicative of the results to be expected for the full year. Note 3 - ------ Inventories - Fuel and Other Inventories: (in Thousands)
(Unaudited) February 28, August 31, 1998 1997 ------------ ---------- Fuels (at average cost) $2,042 $3,809 Merchandise and Other (at average cost) 1,141 1,253 Merchandise (at LIFO) 1,382 1,058 ------ ------ $4,565 $6,120 ====== ======
Note 4 - ------ Pursuant to the dividend reinvestment plan, stockholders can reinvest dividends and make limited additional investments in shares of Common Stock. Shares issued through dividend reinvestment can be acquired on the open market or original issue. - 7 - PART I - ITEM II MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- For the three months ended February 28, 1998 vs. 1997 Utility gas revenues for the three months ended February 28, 1998, the second fiscal quarter, totaled $24,829,600, a decrease of one percent from the same period in fiscal 1997. The revenue decrease is primarily the result of lower collections through the PGPA and a decrease in base revenues only partially offset by increased transportation revenues. PGPA revenues decreased due to lower firm gas sales; this decrease does not impact the profitability of the company because it is a pass-through of gas cost changes. Revenues generated from the regulated base tariffs declined less than one percent when compared to the prior year as a result of the transfer of industrial firm sales customers to firm transportation. Total firm gas throughput, firm gas sales and firm transportation, for the second quarter totaled 3,385,600 Mcf compared to 3,367,400 Mcf during the second quarter of fiscal 1997. Throughput increased as a result of increased gas usage by commercial and industrial customers, primarily for non-heating purposes. Weather during the second quarter, as measured by degree days, was 2 percent warmer than the same period last year and 8 percent warmer than a normal year. Valley Gas transports natural gas owned by customers if delivered to Valley Gas' gate station on both an interruptible and firm basis. Transportation revenues for the quarter increased $95,000 over the same period in fiscal 1997 due to the availability of a firm transportation tariff for large commercial and industrial customers. The firm transportation tariffs, which became effective during the first fiscal quarter of 1998, generate approximately the same margin as firm gas sales customers. Nonutility revenues totaled $5,598,200 for the three months ended February 28, 1998, a decrease of 3 percent from the second quarter in fiscal 1997. The decrease in nonutility revenues was spread across all nonutility subsidiaries, except wholesale operations. Wholesale revenues were positively effected by the expansion of an existing product line and a stronger regional economy. Retail merchandising sales declined due to the warm winter weather and its impact on the replacement heating market. Propane revenues were also reduced by the warm winter weather but margins and gallons sold continued to be strong as a result of pricing strategies developed in fiscal 1997. The average cost of gas distributed to firm customers was $3.54 per Mcf versus $4.46 per Mcf during the second fiscal quarter of 1997. Changes in gas costs are recovered from customers through the PGPA. The reduction in nonutility revenues gave rise to decreases in the cost of sales. Other operation and maintenance expenses increased during the period as a result of normal wage increases. For the three months ended February 28, 1998, interest expense decreased 11 percent from the same quarter last year. A reduction in short-term borrowings is responsible for the decrease in interest expense. Interest expense during the second fiscal quarter of 1998 continues to be positively impacted by the corporate refinancing and equity offering completed at the end of fiscal 1997. - 8 - For the six months ended February 28, 1998 Vs 1997 For the six months ended February 28, 1998, utility gas revenues were $34,913,200, a decrease of 4 percent from the same period in fiscal 1997. Utility gas revenues decreased due to lower revenues generated from regulated base tariffs, a reduction in PGPA revenues and a decline in interruptible revenues, slightly offset by an increase in transportation revenues. Base revenues generated from regulated tariffs declined 2 percent as a result of decreased natural gas sales. The reduction in gas sales was primarily due to the transfer of sales customers to transportation. The PGPA revenue reduction is the result of decreased gas sales to firm customers and a lower average PGPA factor than in the prior year. Decreased demand for natural gas from customers with alternate fuel capabilities produced a decrease of 39% in interruptible revenues versus 1997. Sales to interruptible customers are dependent upon the availability of natural gas and the price of alternate fuels. Margins earned from seasonal sales are returned to firm customers through the PGPA and do not impact the profitability of the company. Firm gas throughput to sales and transportation customers increased slightly less than one percent over the prior year despite warmer weather. The increased throughput is due to an increase in the number of customers. Weather, as measured by degree days, was one percent warmer than the prior year six month period, but 5 percent warmer than a normal period. At February 28, 1998 there were 63,069 utility customers versus 62,603 at February 28, 1997. Transportation revenues increased $93,600 for the six months ended February 28, 1998 when compared to the same period in fiscal 1997. The increase in transportation revenues is a direct result of large commercial and industrial customers choosing their own natural gas supplier under the Utilities firm transportation tariff. Nonutility revenues for the six months ended February 28, 1998 totaled $11,339,000, an increase of 2 percent over fiscal 1997. The increase in nonutility revenues came from an increase in retail and wholesale merchandise sales, moderated by a decline in propane and AEC revenues. Sales in the commercial retail market and the wholesale operations contributed to the increased revenues. Propane revenues decreased despite an increase in gallons sold as a result of offering customers fixed price contracts and lower product pricing due to the warm winter weather. Operating expenses for the six month period were impacted by decreases in the cost of gas sold and nonutility cost of sales. Decreases in the demand for natural gas and a decline in supplemental fuel use were the contributors to the decrease in the cost of gas sold. The average cost of gas distributed to firm customers was $3.90 per Mcf for the six months ended February 28, 1998 versus $4.43 per Mcf in the prior year. Nonutility cost of sales decreased, despite an increase in nonutility revenues, due to reductions in the cost of propane. Interest expense decreased $153,000 for the six month period when compared to the prior year. The primary contributor to the decrease was a decline in short-term borrowings offset slightly by increased long-term debt resulting from the debt and equity offering which was completed at the end of the prior fiscal year. Liquidity and Capital Resources - ------------------------------- During the second fiscal quarter the liquidity position of the Corporation improved over the first quarter as a result of increased revenues from winter period sales. Management believes the available financing are sufficient to meet cash requirements for the foreseeable future. The available borrowings under lines of credit at February 28, 1998, were $33,100,000. - 9 - Cash flows were negatively impacted during the second quarter by increases in the cost of natural gas. Sales during the second quarter, despite being greater than the first quarter, were less than anticipated due to warmer than normal winter weather which also negatively impacted liquidity. Additionally, the warmer weather resulted in the holding of supplemental fuel inventories which were anticipated to be sold. On September 24, 1997, Valley Resources issued 93,000 additional shares of common stock in fulfillment of the over-allotment option exercised in connection with the August 1997 offering. This common stock issuance favorably impacted liquidity. Construction expenditures declined during the second fiscal quarter, as planned, due to constraints caused by winter period weather, thereby adding favorably to liquidity. The liquidity position of the Corporation is anticipated to improve in the third quarter as winter bills are collected. Cash expended on the construction program will increase during the third fiscal quarter which will negatively impact cash flows; however, this increased cash requirement should be offset by the improved cash flows. PART I - ITEM 6(a) Item 6(a) - Exhibits - -------------------- 27. Financial Data Schedule (in electronic format only) PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) None. (b) The Company did not file a Form 8-K. - 10 - 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. VALLEY RESOURCES, INC. AND SUBSIDIARIES S/K. W. Hogan ---------------------------------------- K. W. Hogan Senior Vice President, Chief Financial Officer and Secretary April 14, 1998 EX-27 2
5 1,000 6-MOS AUG-31-1998 FEB-28-1998 966 0 17,403 (888) 4,565 24,411 86,137 (35,028) 103,424 14,528 20,039 0 0 4,993 30,863 103,424 46,252 46,252 27,108 42,395 15,287 0 1,509 3,538 1,068 2,470 0 0 0 2,470 0.50 0.50
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