-----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, Mbsir//9FSoZ4xDiMiPBZxc1YoKV+6YdLEhvgF4lI/JT/jJklYesm/ukJ43444LS raQXPz7Tmviz90vRpUVEDA== 0000102710-99-000002.txt : 19990115 0000102710-99-000002.hdr.sgml : 19990115 ACCESSION NUMBER: 0000102710-99-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990114 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: 99506278 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 November 30, 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 Nov. 30, 1998 $1 Par Value 4,974,975 VALLEY RESOURCES, INC. FORM 10-Q NOVEMBER 30, 1998 Page of Form 10-Q PART I: FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Statements of Operations--for the three-months ended November 30, 1998 and 1997................................................... 3 Consolidated Condensed Balance Sheets--November 30, 1998 and August 31, 1998................................... 4 & 5 Consolidated Condensed Statements of Cash Flows--for the three-months ended November 30, 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 PART II: OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders........ 10 Item 6. Exhibits and Reports on Form 8-K........................... 10 PART I: FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited)
For the 3 Months Ended Nov. 30, Nov. 30, 1998 1997 (in thousands except share and per share numbers) Operating Revenues: Utility Gas Revenues $ 9,824 $ 10,084 Nonutility Revenues 5,446 5,741 --------- --------- Total 15,270 15,825 --------- --------- Operating Expenses: Cost of Gas Sold 5,142 5,594 Cost of Sales - Nonutility 3,788 4,027 Operations 4,611 4,715 Maintenance 409 398 Depreciation and Amortization 857 825 Taxes - Other Than Federal Income 866 852 - Federal Income (449) (525) --------- --------- Total 15,224 15,886 --------- --------- Operating Income (Loss) 46 (61) Other Income - Net of Tax 68 49 --------- --------- Total Income (Loss) 114 (12) --------- --------- Interest Charges: Long-Term Debt 619 622 Other 132 127 --------- --------- Total 751 749 --------- --------- Net Loss $ (637) $ (761) ========= ========= Average Number of Common Shares Outstanding 4,984,431 4,939,253 Basic Loss Per Average Common Share Outstanding $(0.13) $(0.15) Dividends Declared on Common Stock $0.1875 $0.185
The accompanying Notes are an integral part of these statements. VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets
(Unaudited) Nov. 30, Aug. 31, 1998 1998 -------- -------- (in thousands) ASSETS Utility Plant - Net $ 51,808 $ 51,310 -------- -------- Leased Property - Net 2,113 2,303 -------- -------- Nonutility Property-Net 4,117 4,106 -------- -------- Other Investments 1,641 1,637 -------- -------- Current Assets: Cash 938 813 Accounts Receivable - Net 10,521 9,684 Deferred Fuel Costs 1,009 485 Deferred Unbilled Gas Costs 1,303 438 Fuel and Other Inventories (Note 3) 6,287 5,819 Prepayments 1,100 1,353 Common Stock held for Dividend Reinvestment-amounting to 18,053 and 10,116 shares respectively (Note 4) 229 121 -------- -------- Total 21,387 18,713 -------- -------- Deferred Debits: Recoverable Postretirement Benefits 173 231 Recoverable Vacations Accrued 638 633 Unamortized Debt Discount and Expense 1,695 1,712 Prepaid Pensions 9,215 8,824 Recoverable Deferred FIT 5,997 6,109 Recoverable Transition Obligation 21 21 Other 3,132 2,882 -------- -------- 20,871 20,412 -------- -------- Total $101,937 $ 98,481 ======== ========
The accompanying Notes are an integral part of these statements. VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Balance Sheets (Cont'd)
(Unaudited) Nov. 30, Aug. 31, 1998 1998 --------- -------- (in thousands) CAPITALIZATION & LIABILITIES Capitalization: Common Stock $ 4,993 $ 4,993 Paid In Capital 24,791 24,811 Retained Earnings 6,616 8,187 Less: Accounts Receivable from ESOP (2,726) (2,768) -------- ------- Total Common Stock Equity 33,674 35,223 -------- ------- Long-Term Debt (Less Current Maturities): 8% First Mortgage Bonds, Due 2022 20,039 20,039 7.7% Debentures, Due 2027 7,000 7,000 Note Payable 2,561 2,599 -------- ------- Total Long-Term Debt 29,600 29,638 -------- ------- Total Capitalization 63,274 64,861 -------- ------- Revolving Credit Arrangement 2,400 2,400 -------- ------- Obligation Under Capital Lease 1,336 1,528 -------- ------- Current Liabilities: Current Maturities of Long-Term Debt 2,289 2,289 Obligation Under Capital Lease 777 775 Notes Payable 6,000 2,300 Accounts Payable 5,914 4,275 Security Deposits & Refund Obligations 991 977 Taxes Accrued (Debit) (560) 435 Accrued Interest 1,088 794 Other 715 741 -------- ------- Total 17,214 12,586 -------- ------- Commitments and Contingencies Deferred Credits 4,550 4,513 -------- ------- Deferred Federal Income Taxes 13,163 12,593 -------- ------ $101,937 $98,481 ======== =======
The accompanying Notes are an integral part of these statements. VALLEY RESOURCES, INC. AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited)
For the 3 Months Ended Nov. 30, Nov. 30, 1998 1997 (in thousands) Cash Flows from Operating Activities: Net Loss $ (637) $ (761) Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities: Depreciation and Amortization 857 825 Provision for Uncollectibles 312 573 Deferred Federal Income Taxes 570 671 Amortization of ITC (12) (12) Change in Assets and Liabilities: Accounts Receivable (1,148) (350) Deferred Fuel Costs (525) (1,389) Unbilled Gas Costs (865) (1,472) Fuel and Other Inventories (468) (363) Other Current Assets (247) (114) Accounts Payable, Accrued Expenses and Current Liabilities 657 628 Other - Net 294 404 ------- ------- Net Cash (Used) by Operating Activities (1,212) (1,360) ------- ------- Cash Flows from Investing Activities: Utility Capital Expenditures (1,206) (1,212) Nonutility Capital Expenditures (160) (349) Other Investments (4) (7) ------- ------- Net Cash (Used) by Investing Activities (1,370) (1,568) ------- ------- Cash Flows from Financing Activities: Dividends Paid (935) (917) Capital Stock Transactions (20) 962 Retirement of Long-Term Debt (38) (46) Increase in Notes Payable 3,700 3,000 ------- ------- Net Cash Provided by Financing Activities 2,707 2,999 ------- ------- Net Increase in Cash 125 71 Cash - Beginning 813 820 ------- ------- Cash - Ending $ 938 $ 891 ======= ======= Supplemental Disclosures of Cash Flow Information Cash Paid During the Period for: Interest $ 456 $ 179 ======= ======= Federal Income Taxes $ -0- $ -0- ======= ======= Capital Lease Obligations Incurred $ 4 $ 139 ======= =======
The accompanying Notes are an integral part of these statements. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Note 1 - ------ The Corporation computes basic and diluted earnings and loss per average common share in accordance with SFAS 128, based on the weighted average number of shares outstanding during the period.
(Unaudited) Three Months Ended November 30, 1998 1997 ---------- ---------- Net Loss $(636,615) $(761,081) Weighted average shares outstanding 4,984,431 4,939,253 Basic and diluted losses per share $ (0.13) $ (0.15)
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 at November 30, 1998, the results of operations for the three-months ended November 30, 1998 and 1997 and Statements of Cash Flows for the three-months ended November 30, 1998 and 1997. The results of operations for the three-month periods ended November 30, 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) November 30, August 31, 1998 1998 ----------- --------- Fuels (at average cost) $3,851 $3,543 Merchandise and Other (at average cost) 1,195 1,241 Merchandise (at LIFO) 1,241 1,035 ------ ------ $6,287 $5,819 ====== ======
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. PART I - ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- For the three months ended November 30, 1998 versus 1997 For the first quarter of fiscal 1999, the consolidated net loss for Valley Resources was $636,600 or $0.13 per share versus a net loss of $761,100 or $0.15 per share in the year earlier quarter. The utility operations lost $748,700 versus $1,005,400 in fiscal 1998's first quarter. Nonutility operations provided net income of $112,100 in the first quarter of fiscal 1999 versus $244,300 in the prior year's first quarter. Utility gas revenues and volumes for the first quarter of fiscal 1999 and fiscal 1998 were as follows:
Revenues Volumes (Mcf's) -------- --------------- 1999 1998 1999 1998 ---- ---- ---- ---- Base Firm Sales Service $8,563,800 $ 8,842,900 1,118,900 1,188,000 Base Firm Transportation 157,700 73,100 134,000 58,800 ---------- ----------- --------- --------- Subtotal 8,721,500 8,916,000 1,252,900 1,246,800 Seasonal/dual fuel service 718,000 746,600 1,462,200 1,550,000 PGPA Revenues 333,400 354,500 -- -- Other Revenues 51,400 66,500 -- -- ---------- ----------- --------- --------- Total Utility Gas Revenues $9,824,300 $10,083,600 2,715,100 2,796,800 ========== =========== ========= =========
Base firm sales service, utility service to the traditional utility customer that purchases a bundled service, declined primarily as some commercial and industrial customers elected to take service under the firm transportation service option. Although not significant in the first quarter, weather was 10.4 percent warmer than the prior year and depressed firm sales in all categories in the month of November. Increased firm transportation from the above-mentioned customers and increased usage of natural gas by existing firm transportation customers brought this service level increased revenues and volumes as compared to the year earlier first quarter. Interruptible service is provided on both a bundled sales basis as well as transportation only service. Interruptible sales service revenues declined $78,800 from the quarter earlier level inspite of a 21.2 percent increase in volumes sold. The revenue decline relates directly to the falling price of competitive fuels, primarily fuel oil. Interruptible transportation revenues increased on a comparative basis as a result of downward billing adjustments included in the first quarter of the prior year. The margin on seasonal sales is passed through to firm customers through the PGPA and has no impact on operating income. Nonutility revenues totaled $5,446,000 for the three months ended November 30, 1998, a decrease of 5.1 percent from the first quarter in fiscal 1998. A decline in retail sales was responsible for the decrease from the prior fiscal year. Retail merchandise sales experienced declines as a result of lower unit sales of residential home heating equipment and installations due to a milder than normal fall season. Revenues from all other nonutility operations, wholesale, propane and AEC, improved as a result of increased units and volumes sold. Wholesale revenues benefited from a stronger regional economy which increased sales of existing product lines. Although the company continues to operate at a loss due to start up costs, AEC revenues increased as a result of natural gas vehicle conversions. Propane revenues increased as a result of offering fixed price contracts to customers which increased volumes of propane sold. Cost of gas sold decreased 8.1 percent from the prior year for the three months ended November 30, 1998 as a result of decreased usage of firm natural gas and lower natural gas prices. The average cost per Mcf of gas distributed was $3.94 versus $4.53 during the first quarter of fiscal 1998. The decline in nonutility sales was responsible for the 5.9 percent decrease in cost of sales-nonutility. The slight decline in other operation expense versus fiscal 1998 was attributable to decreased uncollectible expenses, while maintenance expenses remained flat when compared to the prior fiscal year. Other income increased $18,700 for the quarter compared to last year, driven by an increase in income associated with other investments. For the three months ended November 30, 1998, interest expense remained flat when compared to the same quarter last year. Interest expense for both periods was impacted by the corporate refinancing and equity offering completed at the end of fiscal 1997. Liquidity and Capital Resources - ------------------------------- Operations during the first quarter typically do not generate sufficient cash to meet gas costs and construction requirements. Management believes the available financing are sufficient to meet cash requirements for the foreseeable future. The available borrowings under lines of credit at November 30, 1998, were $31,000,000; there were $6,000,000 of short term borrowings outstanding. Cash flow was negatively impacted during the first quarter by the requirement to increase inventories of supplemental fuels to meet winter requirements. Construction expenditures continued during the first fiscal quarter, as planned, due to more favorable weather conditions, thereby adversely effecting liquidity. A receivable lag that is generally experienced during the first fiscal quarter is expected to be reversed in the second fiscal quarter and revenues should increase with colder weather. Cash flow should be favorable affected by a reduction in construction expenditures which normally accompanies winter weather conditions in the fiscal second quarter. In the first fiscal quarter, the Corporation purchased a weather insurance product which applies to the winter heating season from November 1998 through March 1999. This product provides insurance against extreme shifts in weather conditions on both a colder than and warmer than normal basis as determined by degree days. The insurance coverage either pays to or receives from the Corporation cash when degree days for the measurement period fall outside the predetermined variance from normal. The measurement period occurs at the expiration of the policy. The Corporation will not be able to determine the impact on earnings or cash flow until the expiration of the policy period in March 1999. Year 2000 Issues - ---------------- Certain of the software applications currently in use by the Corporation are certified to be Year 2000 compliant by the software vendors from whom the applications were purchased. Certain other software applications currently in use by the Corporation are not Year 2000 compliant. The Corporation has made plans to modify, replace or upgrade those applications which are not Year 2000 compliant before January 1, 2000. The Corporation has conducted a survey and is compiling cost estimates of the effort involved to perform those modifications, replacements and upgrades. Currently, management believes that the cost to bring all of its software applications into Year 2000 compliance will not have a material adverse effect on the Corporation's results of operations, and involves a remaining capital outlay of approximately $50,000 to $100,000. The Corporation is surveying its significant vendors as to their year 2000 compliance. Based on the nature of their responses, the Corporation will develop contingency plans as appropriate. There can be no guarantee that the systems of other companies on which the Corporation's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Corporation's systems, would not have a material adverse impact on the Corporation. The costs of the project and the date on which the Corporation plans to complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved; actual results could differ materially from those plans. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer programs and microprocessors, and similar uncertainties. Forward Looking Statements; Risk and Uncertainties - -------------------------------------------------- Statements contained in this report that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "anticipates," "expects" and similar expressions are intended to identify forward looking statements. Certain factors that could cause the actual results to differ materially from those projected in these forward-looking statements include, but are not limited to: variations in weather, changes in the regulatory environment, customers' preferences on energy sources, general economic conditions, increased competition and other uncertainties, all of which are difficult to predict, and many of which are beyond the control of the Corporation. PART II: OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Annual Meeting of Stockholders of Valley Resources, Inc. was held on December 8, 1998, for the purpose of electing a board of directors. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and there was no solicitation in opposition to management's solicitations. All of management's nominees for directors were elected by the following vote: Shares Shares Voted Voted "For" "Withheld" ------ ---------- James M. Dillon 4,410,675 62,263 Jonathan K. Farnum 4,417,194 55,744 John F. Guthrie, Jr. 4,413,878 59,060 Item 6 - Exhibits and Reports on Form 8-K (a) 27. Financial Data Schedule. (b) The Company did not file a Form 8-K. 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 January 14, 1999 EX-27 2
5 1,000 3-MOS AUG-31-1999 NOV-30-1998 938 0 11,485 (964) 1,303 21,387 92,472 (36,547) 101,937 17,214 20,039 0 0 4,993 28,681 101,937 15,270 15,270 8,930 15,224 6,294 0 751 (1,086) (449) (637) 0 0 0 (637) (0.13) (0.13)
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