UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
(Exact name of Registrant as specified in its charter)
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(State of incorporation) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(
(Registrant’s telephone number, including area code)
1
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer ☐ Accelerated Filer ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class |
Shares outstanding as of May 12, 2022 |
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Common Stock, $.01 par value |
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2
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PART I.FINANCIAL INFORMATION |
Page |
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Item 1.Financial Statements |
4 |
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 |
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Item 4.Controls and Procedures |
33 |
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PART II.OTHER INFORMATION |
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Item 1.Legal Proceedings |
34 |
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Item 1A.Risk Factors |
34 |
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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds |
34 |
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34 | |
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Item 4.Mine Safety Disclosures |
34 |
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Item 5.Other Information |
34 |
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Item 6.Exhibits |
34 |
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35 |
PART I
FINANCIAL INFORMATION
Item 1.Financial Statements
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
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Unaudited | ||||||||
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Assets |
March 31, 2022 |
September 30, 2021 | ||||||
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Plant: | ||||||||
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Utility property, plant and equipment |
$ |
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$ |
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Less: accumulated depreciation |
( |
) |
( |
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Total plant, net |
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Investments: | ||||||||
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Marketable securities at fair value |
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Investment in joint ventures |
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Current assets: | ||||||||
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Cash and cash equivalents |
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Customer accounts receivable, (net of allowance for | ||||||||
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uncollectible accounts of $ |
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Other accounts receivable |
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Gas stored underground, at average cost |
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Materials and supplies inventories |
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Prepaid expenses |
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Total current assets |
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Regulatory and other assets: | ||||||||
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Regulatory assets: | ||||||||
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Unrecovered gas and electric costs |
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Deferred regulatory costs |
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Deferred pension |
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Goodwill |
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Other |
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Total regulatory and other assets |
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Total assets |
$ |
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$ |
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See accompanying notes to consolidated financial statements.
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
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Unaudited | ||||||||
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Liabilities and capitalization |
March 31, 2022 |
September 30, 2021 | ||||||
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Long-term debt, less current installments |
$ |
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$ |
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Less: debt issuance costs |
( |
) |
( |
) | ||||
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Total long-term debt |
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Redeemable preferred stock - Series A |
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(Authorized | ||||||||
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less issuance costs of $ | ||||||||
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Redeemable preferred stock - Series C |
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(Authorized | ||||||||
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less issuance costs of $ | ||||||||
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Redeemable preferred stock - Series D | ||||||||
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(Authorized |
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Current liabilities: | ||||||||
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Current portion of long-term debt |
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Demand notes payable |
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Borrowings under lines-of-credit and short-term debt |
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Accounts payable |
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Accrued expenses |
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Customer deposits and accrued interest |
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Dividends declared |
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Total current liabilities |
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Deferred credits and other liabilities: | ||||||||
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Deferred income taxes |
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Regulatory liabilities |
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Deferred compensation |
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Pension costs and post-retirement benefits |
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Other |
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Total deferred credits and other liabilities |
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Commitments and contingencies |
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Temporary equity: | ||||||||
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Redeemable convertible preferred stock - Series B | ||||||||
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(Authorized | ||||||||
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Common stockholders' equity: | ||||||||
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Common stock ($. |
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Authorized | ||||||||
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outstanding: | ||||||||
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and September 30, 2021) | ||||||||
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive income |
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Total common stockholders' equity |
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Total liabilities and capitalization |
$ |
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$ |
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See accompanying notes to consolidated financial statements.
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
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Three Months Ended |
Six Months Ended | |||||||||||||||
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March 31, 2022 |
March 31, 2021 |
March 31, 2022 |
March 31, 2021 | |||||||||||||
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Utility operating revenues: | ||||||||||||||||
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Gas operating revenues |
$ |
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$ |
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$ |
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$ |
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Electric operating revenues |
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Total utility operating revenues |
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Costs of sales: | ||||||||||||||||
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Gas purchased |
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Electricity purchased |
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Total cost of sales |
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Gross margin |
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Cost and expense: | ||||||||||||||||
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Operating and maintenance expense |
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Taxes other than income taxes |
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Depreciation |
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Other deductions, net |
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Total costs and expenses |
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Utility operating income |
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Other income and (expense): | ||||||||||||||||
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Interest expense |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
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Other income (expense), net |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
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Investment (expense) income |
( |
) |
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Loss associated with joint venture |
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( |
) |
( |
) |
( |
) | |||||||||
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Rental income |
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Income from utility operations, before income taxes |
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Income tax expense |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
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Net income |
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Less: Series B Preferred Stock Dividends |
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Net income attributable to common stockholders |
$ |
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$ |
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$ |
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$ |
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Weighted average earnings per share: | ||||||||||||||||
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Basic |
$ |
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$ |
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$ |
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$ |
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Diluted |
$ |
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$ |
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$ |
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$ |
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Average shares outstanding - basic |
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Average shares outstanding - diluted |
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See accompanying notes to consolidated financial statements
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
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Three Months Ended |
Six Months Ended | |||||||||||||||
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March 31, 2022 |
March 31, 2021 |
March 31, 2022 |
March 31, 2021 | |||||||||||||
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Net income |
$ |
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$ |
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$ |
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$ |
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Other comprehensive (loss): | ||||||||||||||||
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Net unrealized loss on debt securities available for sale net of tax of $( |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
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Total comprehensive income |
$ |
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$ |
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$ |
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$ |
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See accompanying notes to consolidated financial statements
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statement of Changes in Common
Stockholders' Equity
For the Three and Six Months ended March 31, 2022 and 2021
(Unaudited)
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Accumulated | ||||||||||||||||||||||||
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Additional |
Other | |||||||||||||||||||||||
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Number of |
Common |
Paid In |
Retained |
Comprehensive | ||||||||||||||||||||
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Shares |
Stock |
Capital |
Earnings |
Income (loss) |
Total | |||||||||||||||||||
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Balances at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Dividends declared on common ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Dividends declared on Preferred B shares ($ |
— |
— |
— |
( |
) |
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( |
) | ||||||||||||||||
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Comprehensive income: | ||||||||||||||||||||||||
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Change in unrealized gain on debt securities available for sale, net of income taxes |
— |
— |
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( |
) |
( |
) | ||||||||||||||||
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Net income |
— |
— |
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Balances at March 31, 2022 |
|
$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated | ||||||||||||||||||||||||
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Additional |
Other | |||||||||||||||||||||||
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Number of |
Common |
Paid In |
Retained |
Comprehensive | ||||||||||||||||||||
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Shares |
Stock |
Capital |
Earnings |
Income (loss) |
Total | |||||||||||||||||||
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Balances at September 30, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Dividends declared on common ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Dividends declared on Preferred B shares ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Comprehensive income: | ||||||||||||||||||||||||
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Change in unrealized gain on debt securities available for sale, net of income taxes |
— |
— |
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( |
) |
( |
) | ||||||||||||||||
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Net income |
— |
— |
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Balances at March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated | ||||||||||||||||||||||||
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Additional |
Other | |||||||||||||||||||||||
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Number of |
Common |
Paid In |
Retained |
Comprehensive | ||||||||||||||||||||
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Shares |
Stock |
Capital |
Earnings |
Income (loss) |
Total | |||||||||||||||||||
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Balances at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock based compensation |
— |
— |
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Dividends declared on common ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Dividends declared on Preferred B shares ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Comprehensive income: | ||||||||||||||||||||||||
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Change in unrealized loss on | ||||||||||||||||||||||||
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debt securities available for sale, net of income taxes |
— |
— |
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( |
) |
( |
) | ||||||||||||||||
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Net income |
— |
— |
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Balances at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated | ||||||||||||||||||||||||
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Additional |
Other | |||||||||||||||||||||||
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Number of |
Common |
Paid In |
Retained |
Comprehensive | ||||||||||||||||||||
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Shares |
Stock |
Capital |
Earnings |
Income (loss) |
Total | |||||||||||||||||||
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Balances at September 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Issuance of common stock |
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Stock based compensation |
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Dividends declared on common ($ |
— |
— |
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( |
) |
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( |
) | ||||||||||||||||
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Dividends declared on Preferred B shares ($ |
— |
— |
|
( |
) |
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( |
) | ||||||||||||||||
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Comprehensive income: | ||||||||||||||||||||||||
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Change in unrealized loss on | ||||||||||||||||||||||||
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securities available for sale, net of income taxes |
— |
— |
— |
— |
( |
) |
( |
) | ||||||||||||||||
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Net income |
— |
— |
— |
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— |
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Balances at March 31, 2021 |
|
$ |
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$ |
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$ |
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$ |
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$ |
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See accompanying notes to consolidated financial statements
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
|
Six Months Ended | ||||||||
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March 31, 2022 |
March 31, 2021 | |||||||
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Cash flows from operating activities: | ||||||||
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash | ||||||||
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provided by operating activities: | ||||||||
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Depreciation |
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Amortization of debt issuance cost |
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Non-cash pension expenses |
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Regulatory asset amortizations |
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Stock issued for services |
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Gain on sale of marketable securities |
( |
) |
( |
) | ||||
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Unrealized loss (gain) on investments |
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( |
) | |||||
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Gain on forgiveness of debt |
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( |
) | |||||
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Deferred income taxes |
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Bad debt expense |
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Loss associated with joint venture |
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Changes in assets and liabilities: | ||||||||
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(Increase) decrease in: | ||||||||
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Accounts receivable |
( |
) |
( |
) | ||||
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Gas stored underground |
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Materials and supplies inventories |
( |
) |
( |
) | ||||
|
Prepaid expenses |
( |
) |
( |
) | ||||
|
Unrecovered gas and electric costs |
( |
| ||||||
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Deferred regulatory costs |
( |
) |
( |
) | ||||
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Other |
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Increase (decrease) in: | ||||||||
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Accounts payable |
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Accrued expenses |
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Customer deposits and accrued interest |
( |
) |
( |
) | ||||
|
Deferred compensation |
( |
) |
( |
) | ||||
|
Deferred pension costs & post-retirement benefits |
|
( |
) | |||||
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Other liabilities and deferred credits |
( |
) |
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Net cash provided by operating activities |
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Cash flows from investing activities: | ||||||||
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Sale of securities, net of purchases |
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Amount received from related parties |
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Proceeds from sale of interest in joint venture |
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Capital expenditures |
( |
) |
( |
) | ||||
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Net cash used in investing activities |
( |
) |
( |
) | ||||
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Cash flows from financing activities: | ||||||||
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Net proceeds on lines-of-credit and short-term debt |
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Debt issuance costs paid |
( |
) |
( |
) | ||||
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Proceeds from issuance of Series D preferred stock |
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Dividends paid |
( |
) |
( |
) | ||||
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Proceeds from demand loan |
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Repayment of demand loan |
( |
) |
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Proceeds under long-term debt |
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Repayment of long-term debt |
( |
) |
( |
) | ||||
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Net cash provided by financing activities |
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Net decrease in cash and cash equivalents |
( |
) |
( |
) | ||||
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ |
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$ |
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Supplemental disclosures of cash flow information: | ||||||||
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Cash paid during the period for: | ||||||||
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Interest |
$ |
|
$ |
| ||||
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Income taxes |
$ |
|
$ |
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Non-cash financing activities: | ||||||||
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Dividends paid with shares |
$ |
|
$ |
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|
Number of shares issued for dividends |
|
|
See accompanying notes to consolidated financial statements
CORNING NATURAL GAS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Basis of Presentation
Corning Natural Gas Holding Corporation (“Holding Company”) was incorporated in New York in July 2013 to serve as a holding company for Corning Natural Gas Corporation (“Corning Gas” or the “Gas Company”) and its dormant subsidiary Corning Natural Gas Appliance Corporation (the “Appliance Company”), Pike County Light & Power Company (“Pike”), Leatherstocking Gas Company, LLC (“Leatherstocking Gas”), and Leatherstocking Pipeline Company, LLC (“Leatherstocking Pipeline”). Until December 31, 2021, the Holding Company also owned 50% of Leatherstocking Gas of New York, Inc. (“Leatherstocking NY”). As used in this document, the term “the Company” refers to the consolidated operations of the Holding Company, Gas Company, Pike, and Leatherstocking Gas and Leatherstocking Pipeline.
The Holding Company’s primary business, through its subsidiaries, is natural gas and electric distribution. Corning Gas serves approximately
On January 12, 2021, Holding Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Holding Company, ACP Crotona Corp. (“Parent”), and ACP Crotona Merger Sub Corp. (“Merger Sub”), pursuant to which Merger Sub will merge with and into Holding Company, and Holding Company will continue as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”). As a result of the Merger, shareholders of Holding Company will receive consideration for their shares in the following amounts: (i) $
The Merger is subject to, among other customary closing conditions, the approvals of the NYPSC and the PAPUC. The Merger Agreement also includes certain termination rights for both the Company and Parent and provides that, in connection with the termination of the Merger Agreement under specified circumstances, termination fees may be owed by the Company to Parent, depending on the circumstances surrounding a termination.
The Merger Agreement provided for a 45-day “Go Shop” period which expired on February 26, 2021. During the “Go Shop” period, the Company received no competing offers or alternative acquisition proposals. The Company is now subject to a customary “No Shop” provision that restricts the Company’s ability to solicit acquisition proposals from third parties and to provide non-public information and to negotiate with third parties regarding unsolicited acquisition proposals that is reasonably expected to lead to a superior proposal. On April 30, 2021, the Company and Argo filed with the NYPSC and PAPUC joint petitions requesting approval to conclude the merger. The Merger was voted on and approved by the Company’s shareholders at its annual shareholder meeting on May 27, 2021. On February 3, 2022, the PAPUC approved the Merger. A decision on the Merger from the NYPSC is expected by the end of the Company’s third quarter (See Note 9 - Regulatory Matters).
In connection with the execution of the Merger Agreement, the Company has suspended its dividend reinvestment plan.
Upon consummation of the Merger, the Company’s common stock will be delisted from the OTCQX and deregistered under the Exchange Act as soon as practicable.
The information furnished herewith reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations, although the Holding Company believes the disclosures which are made are adequate to make the information presented not misleading.
The consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Holding Company’s latest annual report on Form 10-K for the fiscal year ended September 30, 2021 (“Annual Report”), filed on December 17, 2021. These interim consolidated financial statements are unaudited.
Our significant accounting policies are described in the notes to the Consolidated Financial Statements in the Holding Company’s Annual Report. It is important to understand that the application of generally accepted accounting principles in the United States of America involves certain assumptions, judgments and estimates that affect reported amounts of assets, liabilities, revenues and expenses. Thus, the application of these principles can have varying results from company to company.
Because our business is highly seasonal in nature, sales for each quarter of the year vary and are not comparable. Sales vary depending on seasonal variations in temperature, although the Gas Company’s weather normalization and revenue decoupling clauses approved by the NYPSC serve to stabilize net revenue, by insulating the Gas Company, to an extent, from the effects of unusual temperature variations and conservation. Certain larger customer classes are not covered by weather normalization or revenue decoupling and weather will impact revenue from these classes. Neither Pike nor Leatherstocking Gas have weather normalization or revenue decoupling clauses.
It is the Holding Company’s policy to reclassify amounts in the prior year financial statements to conform to the current year or period presentation.
New Accounting Pronouncements Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326), which provides a model, known as the current expected credit loss model, to estimate the expected lifetime credit loss on financial assets, including trade and other receivables, rather than incurred losses over the remaining life of most financial assets measured at amortized cost. The guidance also requires use of an allowance to record estimated credit losses on available-for-sale debt securities. The new standard is effective for annual and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of the guidance on its consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The new standard is effective for annual and interim periods beginning after December 15, 2021. The Company is currently evaluating the impact of the guidance on its consolidated financial statements and related disclosures.
Note 2 – Revenue From Contracts With Customers
The following tables present, for the three and six months ended March 31, 2022 and 2021, revenue from contracts with customers as defined in Accounting Standards Codification (“ASC 606”) (Revenue From Contracts With Customers), as well as additional revenue from sources other than contracts with customers, disaggregated by major source.
|
For the three months ended March 31, 2022 | ||||||||||||
|
Revenues from | ||||||||||||
|
contracts with |
Other revenues |
Total utility | ||||||||||
|
customers |
(a) |
operating revenues | ||||||||||
|
Corning Gas: | ||||||||||||
|
Residential gas |
$ |
|
$ |
|
$ |
| ||||||
|
Commercial gas |
|
|
| |||||||||
|
Transportation |
|
( |
) |
| ||||||||
|
Street lights gas |
|
|
| |||||||||
|
Wholesale |
|
|
| |||||||||
|
Local production |
|
|
| |||||||||
|
Total Corning Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Pike: | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Total Pike retail gas |
|
|
| |||||||||
|
| ||||||||||||
|
Residential electric |
|
( |
) |
| ||||||||
|
Commercial electric |
|
|
| |||||||||
|
Electric – street lights |
|
|
| |||||||||
|
Total Pike retail electric |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
Total Pike |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
Leatherstocking Gas | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Industrial sales |
|
|
| |||||||||
|
| ||||||||||||
|
Total Leatherstocking Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Total consolidated utility operating revenue |
$ |
|
$ |
|
$ |
| ||||||
(a)
|
For the six months ended March 31, 2022 | ||||||||||||
|
Revenues from | ||||||||||||
|
contracts with |
Other revenues |
Total utility | ||||||||||
|
customers |
(a) |
operating revenues | ||||||||||
|
Corning Gas: | ||||||||||||
|
Residential gas |
$ |
|
$ |
|
$ |
| ||||||
|
Commercial gas |
|
|
| |||||||||
|
Transportation |
|
( |
) |
| ||||||||
|
Street lights gas |
|
|
| |||||||||
|
Wholesale |
|
|
| |||||||||
|
Local production |
|
|
| |||||||||
|
Total Corning Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Pike: | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Total Pike retail gas |
|
|
| |||||||||
|
| ||||||||||||
|
Residential electric |
|
|
| |||||||||
|
Commercial electric |
|
|
| |||||||||
|
Electric – street lights |
|
|
| |||||||||
|
Total Pike retail electric |
|
|
| |||||||||
|
| ||||||||||||
|
Total Pike |
|
|
| |||||||||
|
| ||||||||||||
|
Leatherstocking Gas | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Industrial sales |
|
|
| |||||||||
|
| ||||||||||||
|
Total Leatherstocking Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Total consolidated utility operating revenue |
$ |
|
$ |
|
$ |
| ||||||
(a)
|
For the three months ended March 31, 2021 | ||||||||||||
|
Revenues from | ||||||||||||
|
contracts with |
Other revenues |
Total utility | ||||||||||
|
customers |
(a) |
operating revenues | ||||||||||
|
Corning Gas: | ||||||||||||
|
Residential gas |
$ |
|
$ |
|
$ |
| ||||||
|
Commercial gas |
|
|
| |||||||||
|
Transportation |
|
( |
) |
| ||||||||
|
Street lights gas |
|
|
| |||||||||
|
Wholesale |
|
|
| |||||||||
|
Local production |
|
|
| |||||||||
|
Total Corning Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Pike: | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Total Pike retail gas |
|
|
| |||||||||
|
| ||||||||||||
|
Residential electric |
|
|
| |||||||||
|
Commercial electric |
|
|
| |||||||||
|
Electric – street lights |
|
|
| |||||||||
|
Total Pike retail electric |
|
|
| |||||||||
|
| ||||||||||||
|
Total Pike |
|
|
| |||||||||
|
| ||||||||||||
|
Leatherstocking Gas | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Industrial sales |
|
|
| |||||||||
|
| ||||||||||||
|
Total Leatherstocking Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Total consolidated utility operating revenue |
$ |
|
$ |
|
$ |
| ||||||
(a)
|
For the six months ended March 31, 2021 | ||||||||||||
|
Revenues from | ||||||||||||
|
contracts with |
Other revenues |
Total utility | ||||||||||
|
customers |
(a) |
operating revenues | ||||||||||
|
Corning Gas: | ||||||||||||
|
Residential gas |
$ |
|
$ |
|
$ |
| ||||||
|
Commercial gas |
|
|
| |||||||||
|
Transportation |
|
( |
) |
| ||||||||
|
Street lights gas |
|
|
| |||||||||
|
Wholesale |
|
|
| |||||||||
|
Local production |
|
|
| |||||||||
|
Total Corning Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Pike: | ||||||||||||
|
Residential gas |
|
( |
) |
| ||||||||
|
Commercial gas |
|
|
| |||||||||
|
Total Pike retail gas |
|
( |
) |
| ||||||||
|
| ||||||||||||
|
Residential electric |
|
|
| |||||||||
|
Commercial electric |
|
|
| |||||||||
|
Electric – street lights |
|
|
| |||||||||
|
Total Pike retail electric |
|
|
| |||||||||
|
| ||||||||||||
|
Total Pike |
|
|
| |||||||||
|
| ||||||||||||
|
Leatherstocking Gas | ||||||||||||
|
Residential gas |
|
|
| |||||||||
|
Commercial gas |
|
|
| |||||||||
|
Industrial sales |
|
|
| |||||||||
|
| ||||||||||||
|
Total Leatherstocking Gas |
|
|
| |||||||||
|
| ||||||||||||
|
Total consolidated utility operating revenue |
$ |
|
$ |
|
$ |
| ||||||
(a) Other revenues include revenue from alternative revenue programs, such as revenue decoupling mechanisms under New York gas rate plans and weather normalization clauses. Other revenues also includes reductions in revenues resulting from the deferral as regulatory liabilities of the net benefits of the federal Tax Cuts and Jobs Act of 2017. See “Regulatory Matters” in Note 9.
The Gas Company records revenues from residential and commercial customers based on meters read on a cyclical basis throughout each month, while certain large industrial and utility customers’ meters are read at the end of each month. Several meters are read at the end of each month to calculate local production revenues. The Gas Company does not accrue revenue for gas delivered but not yet billed, as the NYPSC requires that such accounting must be adopted during a rate proceeding, which the Gas Company has not done. The Gas Company, as part of its currently effective rate plan, has a weather normalization clause as protection against severe weather fluctuations. This affects space heating customers and is activated when degree days are 2.2% greater or less than the 30-year average. As a result, the effect on revenue fluctuations of weather related gas sales is somewhat moderated.
Pike recognizes revenues for electric and gas service on a monthly billing cycle basis. Pike does not accrue for gas and electricity delivered. Pike does not have a weather normalization clause as protection against severe weather.
Leatherstocking Gas recognizes revenues for gas service on a monthly billing cycle basis. Leatherstocking Gas does not record unbilled revenues. Leatherstocking Gas does not have a weather normalization clause as protection against severe weather.
In addition to weather normalization, the Gas Company has implemented a revenue decoupling mechanism (RDM). The RDM reconciles actual delivery service revenues to allowed delivery service revenues (which are based on the annual customer and volume forecasts in the last rate case) for residential customers. The Gas Company will refund or surcharge customers for differences between actual and allowed revenues. The shortfall or excess after the annual reconciliation will be surcharged or refunded to customers over a twelve-month period starting September 1st each year. Pike and Leatherstocking Gas do not have a revenue decoupling mechanism as part of their rate structures.
Revenues are recorded as energy is delivered, generated, or services are provided and billed to customers. Amounts billed are recorded in customer accounts receivable, with payment generally due the following month.
Note 3 - Pension and Other Post-Retirement Benefit Plans
Components of Net Periodic Benefit Cost:
|
Pension Benefits | ||||||||||||||||
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Service Cost |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
Interest Cost |
|
|
|
| ||||||||||||
|
Expected return on plan assets |
( |
) |
( |
) |
( |
) |
( |
) | ||||||||
|
Amortization of net actuarial gain |
|
|
|
| ||||||||||||
|
Net periodic benefit cost |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
Other Benefits
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Service Cost |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
Interest Cost |
|
|
|
| ||||||||||||
|
Amortization of prior service cost |
|
|
|
| ||||||||||||
|
Amortization of net actuarial gain |
|
|
|
| ||||||||||||
|
Net periodic benefit cost |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
For ratemaking and financial statement purposes, pension expense represents the amount approved by the NYPSC in the Gas Company’s most recently approved rate case. Pension expense for ratemaking and financial statement purposes was $
The NYPSC has allowed the Gas Company to recover incremental costs associated with other post-retirement benefits through rates on a current basis. Other post-retirement benefit expense (benefit) (OPEB) for ratemaking and financial statement purposes was $
Contributions
The Gas Company expects to contribute $
Note 4 – Financing Activities
On December 17, 2021, Corning Gas increased from $
On October 5, 2021, Leatherstocking Gas renegotiated two long term loans with Wayne Bank that were issued in 2019 in the amount of $
On December 13, 2021, Leatherstocking Gas converted its multiple draw construction loan with Wayne Bank into a
On June 25, 2021, Corning Gas entered into a $
On
We are in compliance with our financial covenant calculations as of March 31, 2022.
Note 5 – Fair Value of Financial Instruments
The Holding Company has determined the fair value of debt and other financial instruments using a valuation hierarchy. The hierarchy, which prioritizes the inputs used in measuring fair value, consists of three levels. Level 1 uses observable inputs such as quoted prices in active markets; Level 2 uses inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, which is defined as unobservable inputs in which little or no market data exists, requires the Holding Company to develop its own assumptions. The carrying amount of debt on the Consolidated Balance Sheets approximates fair value as a result of instruments bearing interest rates that approximate current market rates for similar instruments, and the carrying amounts for cash, accounts receivable and accounts payable approximate fair value due to their short-term nature. Investment assets, which fund the Holding Company’s deferred compensation plan, are valued based on Level 1 inputs.
The Holding Company has determined the fair value of certain assets through application of FASB ASC 820 “Fair Value Measurements and Disclosures”.
Fair value of assets and liabilities measured on a recurring basis at March 31, 2022 and September 30, 2021 are as follows:
Fair Value Measurements at Reporting Date Using:
|
Fair Value |
Quoted Prices In Active Markets for Identical Assets/Liabilities (Level 1) |
Level 2 |
Level 3 | |||||||||||||
|
March 31, 2022 | ||||||||||||||||
|
Available-for-sale securities |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
September 30, 2021 | ||||||||||||||||
|
Available-for-sale securities |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
A summary of the marketable securities at March 31, 2022 and September 30, 2021 is as follows:
|
Cost Basis |
Unrealized Gain |
Unrealized Loss |
Market Value | |||||||||||||
|
March 31, 2022 | ||||||||||||||||
|
Cash and equivalents |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
Metlife stock value |
|
|
|
| ||||||||||||
|
Holding Company Preferred A Stock |
|
|
|
| ||||||||||||
|
Equity and debt securities |
|
|
|
| ||||||||||||
|
Total securities |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
| ||||||||||||||||
|
September 30, 2021 | ||||||||||||||||
|
Cash and equivalents |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
Metlife stock value |
|
|
( |
) |
| |||||||||||
|
Government and agency bonds |
|
|
|
| ||||||||||||
|
Holding Company Preferred A Stock |
|
|
|
| ||||||||||||
|
Equity and debt securities |
|
|
|
| ||||||||||||
|
Commodities |
|
|
( |
) |
| |||||||||||
|
Total securities |
$ |
|
$ |
|
$ |
( |
) |
$ |
| |||||||
Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices as of the close of business on the days noted within active markets.
Realized gains included in earnings for the periods reported in investment income are as follows:
|
Investment Income | ||||||||||||||||
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Net realized gains recognized during the period on investments |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
Unrealized (losses) on equity securities included in investment income for the three and six months ended March 31, 2022 were ($
In January of 2022, $
Financial assets and liabilities valued using level 1 inputs are based on unadjusted quoted market prices as of the close of business on the days noted within active markets.
Note 6 – Stockholders’ Equity and Preferred Stock
There were no shares issued during the three and six months ended March 31, 2022. Shares issued during the three and six month ended March 31, 2021 were for the following:
|
Three months ended March 31, 2021 |
Six months ended March 31, 2021 | |||||||||||||||
|
Shares |
Amount |
Shares |
Amount | |||||||||||||
|
Dividend reinvestment program (DRIP) |
|
|
|
$ |
| |||||||||||
|
Directors |
|
|
|
| ||||||||||||
|
Leatherstocking Gas Company |
|
|
|
| ||||||||||||
|
Total |
|
|
|
$ |
| |||||||||||
Shares issued to Leatherstocking Gas were used to compensate its independent director, Carl Hayden.
For the three months ended September 30, 2021, dividends were paid on October 15, 2021 to stockholders of record on September 30, 2021 in the amount of $
There was no stock option activity during the three and six months ended March 31, 2022. The following table details options outstanding as of March 31, 2022.
|
Weighted | ||||||||||||
|
Weighted |
Average | |||||||||||
|
Number of |
Average |
Remaining Life | ||||||||||
|
Options |
Exercise Price |
(years) | ||||||||||
|
Outstanding at September 30, 2021 |
|
$ |
|
| ||||||||
|
Granted |
|
|
— | |||||||||
|
Exercised |
|
|
— | |||||||||
|
Expired or forfeited |
|
|
— | |||||||||
|
Outstanding at March 31, 2022 |
|
$ |
|
| ||||||||
Series A Cumulative Preferred Stock accrues cumulative dividends at a rate of
Series B Convertible Preferred Stock accrues cumulative dividends at a rate of
Series C Cumulative Preferred Stock accrues cumulative dividends at a rate of
On December 3, 2021, the Holding Company amended its certificate of incorporation (“Certificate of Amendment”) to authorize the issuance of
Upon the earlier to occur of (i) the termination of the Company’s merger agreement with Argo, and December 31, 2022, for one year thereafter, any holder of Series D Preferred Stock may elect to require the Holding Company to redeem all of the Series D Preferred Shares held by that holder for an amount equal to $
On December 8, 2021, Holding Company issued
The Company used the funds raised for general working capital and to fund service expansion projects and capital replacement projects at each of its utilities.
The issuance of the Series D Preferred Stock was a private placement to an accredited investor exempt from registration under Section 4(a)(2) of the Securities Act of 1933.
Basic earnings (loss) per share are computed by dividing income (loss) available for common stock (net income less dividends declared on Series B Preferred Stock) by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
Note 7 – Investment in Joint Ventures
The Holding Company had an interest in Leatherstocking Gas and Leatherstocking Pipeline, each of which was a joint venture with Mirabito Regulated Industries, LLC (“Mirabito”), accounted for by the equity method. On July 1, 2020, Leatherstocking Gas distributed to its members franchises, engineering and gas pipeline assets located in New York having a book value of $
The following table represents the Holding Company’s investment activity in the Leatherstocking joint ventures for the six months ended March 31, 2022 and 2021:
|
2022 |
2021 | |||||||
|
Beginning balance in investment in joint ventures |
$ |
|
$ |
| ||||
|
Proceeds from sale of interest in joint ventures |
( |
) |
| |||||
|
Loss on sale of interest in joint ventures |
( |
) |
| |||||
|
Accounts payable due |
|
| ||||||
|
Cost adjustment |
|
| ||||||
|
Loss from joint ventures |
|
( |
) | |||||
|
Ending balance in joint ventures |
$ |
|
$ |
| ||||
As of and for the six months ended March 31, 2022 and 2021, the Joint Ventures financial summary is as follows:
|
2022 |
2021 | |||||||
|
Total assets |
$ |
|
$ |
| ||||
|
Total liabilities |
$ |
|
$ |
| ||||
|
Net (loss) income |
$ |
|
$ |
( |
) | |||
Note 8 – Income Taxes
Income tax expense for the periods ended March 31 are as follows:
|
Three Months Ended |
Three Months Ended |
Six Months Ended |
Six Months Ended | |||||||||||||
|
March 31, 2022 |
March 31, 2021 |
March 31, 2022 |
March 31, 2021 | |||||||||||||
|
Current |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
|
Deferred |
|
|
|
| ||||||||||||
|
Total |
$ |
|
$ |
|
$ |
|
$ |
| ||||||||
Actual income tax expense for the three and six months ended March 31, 2022 and 2021 is greater than tax calculated at the statutory rate (
Note 9 – Regulatory Matters
On May 19, 2021, the NYPSC issued a rate order in Case 21-G-0101, establishing rates and a rate plan for the Gas Company for a one-year period ending on January 31,2022 (“Rate Year”).
The Gas Company, on July 15, 2021, filed a petition with the State of New York Supreme Court in Albany County pursuant to Article 78 of the Civil Practice Law and Rules to review and set aside the NYPSC May 19, 2021 order that was issued in PSC cases 20-G-0101 and 16-G-0204 involving the Gas Company’s rates for gas service. The Gas Company’s petition claims that the NYPSC’s decision was arbitrary and capricious and an abuse of discretion, affected by errors of law, and in violation of established regulatory procedure. The Gas Company’s petition requests a judgment: (1) annulling and setting aside the Order as arbitrary and capricious and an abuse of discretion, affected by errors of law, in violation of lawful regulatory procedure, and unsupported by substantial evidence in the record, insofar as the Order implements four areas of “austerity” adjustments and denies recovery of leak survey and repair costs; (2) remanding this matter to the NYPSC for further proceedings consistent with the Court’s judgment; and (3) granting such other and further relief as may be just and proper. The resolution of this matter is pending judicial review.
On July 16, 2021, the Gas Company filed a three-year rate plan (Case 21-G-0394) with the NYPSC for rate years ending on June 30, 2023, 2024, and 2025. The rate increases requested for the three-year rate plan (as amended) are $
In March of 2021, the NYPSC issued a “Show Cause” order instructing Corning Gas to show cause why its Paycheck Protection Program loan in the amount of $
By petition dated September 3, 2020 in Case 20-G-0442, Corning Gas requested authority under Public Service Law Section 69 to issue approximately $
On March 14, 2022, the Company, Argo, and Staff entered into a Joint Proposal (“Joint Proposal”) which was filed with the NYPSC on that date and subsequently revised and filed on March 17, 2022. In addition, four other parties also participated in the settlement negotiations. Two of the four parties oppose certain Rate Case provisions. If adopted by the NYPSC, the Joint Proposal would resolve all of the issues presented in both Case 21-G-0394 (“Rate Case”), and Case 21-G-0260 (“Merger Case”).
At the core of the Joint Proposal is a comprehensive settlement commencing July 1, 2022 and extending for three consecutive Rate Years (the 12 months ending June 30, 2023, 2024, and 2025). If approved, the Joint Proposal would permit the Company to increase gas revenues by levelized amounts of $
The Joint Proposal contains several performance targets and requirements to develop new programs, including customer service programs, a Strategic Plan for Decarbonization, and a Low Income Program that uses a three-tiered approach to providing credits based on NYPSC recognition of varying levels of need that correlate with Home Energy Assistance Program (“HEAP”) benefits.
The Joint Proposal recommends that the NYPSC approve the Argo Merger as being in the public interest. Among the most significant features of the Joint Proposal as it pertains to the Merger are the following provisions. The Joint Proposal requires the Company’s Board of Directors to have at least one independent local board member who resides within the Company’s gas service territory or has substantial ties to the service territory. The Company’s headquarters must remain within the gas service territory for a minimum of five years following closing of the Merger. The Company must maintain pre-merger employment levels, and to provide pre-merger employee compensation and benefits for at least 12 months.
The Joint Proposal prohibits the pass-through to customers of goodwill and costs of the transaction. The Joint Proposal further proposes several financial metrics designed to maintain financial integrity of the Company. The Joint Proposal recognizes the substantial quantifiable benefits that the Company’s customers will receive as a result of the Merger. These benefits, in the form of the elimination of certain public company expenses, total approximately $
The Joint Proposal is currently under review by the Administrative Law Judge assigned to this case, after which it will be referred to the NYPSC for a final determination. The Company expects a decision by the NYPSC in June of 2022.
Also on April 30, 2021, the Company and Argo filed with the PAPUC a Joint Application requesting certificates of public convenience from the PAPUC, and seeking all other PAPUC approvals necessary for the merger. On February 3, 2022, the PAPUC approved the Merger Agreement with Argo and the accompanying Settlement Agreement. In the Settlement Agreement, the Company agreed not to seek a general base rate increase prior to October 1, 2023. Further, the Company agreed to maintain current staffing levels for at least one year after the merger date, and to maintain its community involvement and charitable contributions at pre acquisition levels for at least three post-closing years. The Company also agreed to a one-time bill credit to customers at varying amounts, depending on customer class. The total amount of customer credits is approximately $
Note 10 – Segment Reporting
The Company’s reportable segments have been determined based upon the nature of the products and services offered, customer base, availability of discrete internal financial information, homogeneity of products, delivery channel and other factors.
The Gas Company is a gas distribution company providing gas on a commodity and transportation basis to its customers in the Southern Tier of New York State. Pike provides electricity and natural gas services to Pike County, Pennsylvania. Leatherstocking Gas and Leatherstocking Pipeline are presented together as the Leatherstocking Companies in the table below. Leatherstocking Gas provided natural gas service to customers in northeast Pennsylvania. Leatherstocking Pipeline has had no revenues since 2018. The Holding Company is the parent company of all subsidiaries and, until December 31, 2021, had a 50% ownership in Leatherstocking NY. The Appliance Company’s information is presented with the Holding Company as it has little activity.
The following table reflects the results of the segments consistent with the Holding Company’s internal financial reporting process. The following results are used in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments.
As of and for the three months ended March 31, 2022
|
Leatherstocking |
Holding |
Total | ||||||||||||||||||
|
Gas Company |
Pike |
Companies |
Company |
Consolidated | ||||||||||||||||
|
Total electric utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total gas utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Investment expense |
$ |
( |
) |
$ |
|
$ |
|
$ |
|
$ |
( |
) | ||||||||
|
Net income (loss) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
| |||||||||
|
Income tax expense (benefit) |
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
| |||||||
|
Interest expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Depreciation expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Amortization expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Capital expenditures |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
As of and for the three months ended March 31, 2021
|
Leatherstocking |
Holding |
Total | ||||||||||||||||||
|
Gas Company |
Pike |
Companies |
Company |
Consolidated | ||||||||||||||||
|
Total electric utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total gas utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Investment income |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Loss associated with joint venture |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) | ||||||||
|
Net income (loss) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
| |||||||||
|
Income tax expense (benefit) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
| |||||||||
|
Interest expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Depreciation expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Amortization expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Capital expenditures |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
As of and for the six months ended March 31, 2022
|
Leatherstocking |
Holding |
Total | ||||||||||||||||||
|
Gas Company |
Pike |
Companies |
Company |
Consolidated | ||||||||||||||||
|
Total electric utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total gas utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Investment income |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Loss associated with joint venture |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) | ||||||||
|
Net income (loss) |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||
|
Income tax expense (benefit) |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||
|
Interest expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Depreciation expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Amortization expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Capital expenditures |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
As of and for the six months ended March 31, 2021
|
Leatherstocking |
Holding |
Total | ||||||||||||||||||
|
Gas Company |
Pike |
Companies |
Company |
Consolidated | ||||||||||||||||
|
Total electric utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total gas utility revenue |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Investment income |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Loss associated with joint venture |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) | ||||||||
|
Net income (loss) |
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
| |||||||||
|
Income tax expense (benefit) |
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||
|
Interest expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Depreciation expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Amortization expense |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Total assets |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
|
Capital expenditures |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
| ||||||||||
Note 11 – Subsequent Events
On May 11, 2022, Corning Gas and Pike entered into separate loan agreements with M & T Bank. Corning Gas increased its demand line of credit with M & T Bank from $
Also on May 11, 2022, Pike increased its demand line of credit with M & T Bank from $
The Holding Company guarantees these loans.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statement Regarding Forward-Looking Statements
This report contains statements which, to the extent they are not recitations of historical facts, constitute "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (Reform Act). The words "estimate", "project", "anticipate", "expect", "intend", "believe", "could" and similar expressions are intended to identify forward-looking statements. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be achieved. As forward-looking statements, these statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the expected results. Accordingly, actual results may differ materially from those expressed in any forward-looking statements. Factors that could cause results to differ materially from our management's expectations include, but are not limited to, those listed under Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended September 30, 2021, in addition to:
|
* |
|
the impact of the COVID-19 pandemic, |
|
* |
completion of the pending merger with Argo, | |
|
* |
the effect of an interruption in our supply of natural gas or electricity or a substantial increase in the price of natural gas or electricity, | |
|
* |
our ability to successfully negotiate new supply agreements for natural gas and electricity as they expire, on terms favorable to us, or at all, | |
|
* |
the effect on our operations of actions by the NYPSC or PAPUC, | |
|
* |
the effect of litigation, | |
|
* |
the effect on our operations of unexpected changes in legal or regulatory requirements, including environmental and energy consumption regulations and laws, | |
|
* |
the amount of natural gas and electricity directed through our pipeline and wires, | |
|
* |
our successful completion of various capital projects and the use of pipelines, compressor stations and storage by customers and counterparties at levels consistent with our expectations, | |
|
* |
The effect of weather on our utility infrastructure, | |
|
* |
our ability to retain the services of our senior executives and other key employees, | |
|
* |
our vulnerability to adverse economic and industry conditions generally and particularly the effect of those conditions on our major customers, | |
|
* |
the impact of New York State’s Climate Leadership and Community Protection Act legislation on the Company’s sales and its ability to recover in cost of service through depreciation expense its investment in utility plant, | |
|
* |
the effect of any leaks in our transportation and delivery pipelines, | |
|
* |
competition to our gas transportation business from other pipelines, and | |
|
* |
the possibility of cyber and malware attacks. |
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events.
Overview
In fiscal 2021, the Company pursued rate cases in New York and Pennsylvania, and its Argo merger case in New York and Pennsylvania. We completed our two Pennsylvania rate cases in the summer of 2021 with new electric and gas rates taking effect on July 28, 2021. Our New York rate case, which we filed in July of 2021, is under consideration by the New York Public Service Commission, and we expect new rates to take effect in July of 2022 (see Note 9 Regulatory Matters of the notes accompanying our consolidated financial statements). The Pennsylvania Public Utility Commission approved our merger with Argo on February 3, 2022. Our regulatory investments have improved our business outlook. Our results at Pike for our second quarter, and for our fiscal year to date, are significantly better than in prior years in terms of higher revenues and margins. We expect similar financial improvements resulting from our New York rate case.
We look forward to completing our merger with Argo in the third quarter of fiscal 2022. The merger will result in reduced operating costs and will provide us the financial backing to continue to expand our customer base and to invest in capital that will promote safe and reliable energy service to our customers.
We believe our key performance indicators are net income, stockholders’ equity and the safety and reliability of our systems. Net income increased by $138,479 for the three months and increased $419,598 for the six months ended March 31, 2022 compared to the three months and six months ended March 31, 2021, respectively. Basic earnings per share increased from $0.74 per share to $0.78 per share for the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021, and from $0.78 per share to $0.91 per share for year to date 2022 versus year to date 2021. Our earnings increase is primarily related to colder weather in 2022 than in 2021, and the increase in Pike’s earnings resulting from its July of 2021 rate order, offset by a decline in investment income, and for year to date, the loss on the sale of Leatherstocking of New York. Because the Holding Company’s principal operations are conducted through Corning Gas and Pike, both regulated utility companies, stockholders’ equity is an important performance indicator. The NYPSC and PAPUC allow the Company the opportunities to earn a just and reasonable return on stockholders’ equity as determined under applicable regulations. Stockholders’ equity is, therefore, a precursor of future earnings potential. As of March 31, 2022, compared to March 31, 2021, stockholders’ equity decreased slightly from $37,501,650 to $37,342,544. We plan to continue our focus on building stockholders’ equity. Safety and efficiency indicators include leak repair, main and service replacements and customer service metrics.
We continue to focus on improving the efficiency of our operations and making capital investments to improve our infrastructure. Corning Gas’s infrastructure improvement program concentrates on the replacement of older distribution mains and customer service lines. In the first six months of fiscal 2022 the Gas Company repaired 38 leaks, replaced 100 bare steel services and replaced or remediated 4.87 miles of older steel main. In fiscal 2021 the Gas Company repaired 110 leaks and replaced 9.0 miles of bare steel main and 176 bare steel services. In the first six months of fiscal 2022 Pike replaced approximately 49 poles. In fiscal 2021 Pike replaced approximately 82 poles and did extensive tree trimming to maintain our electric infrastructure. On January 18, 2019, Pike filed a gas Long Term Infrastructure Improvement Plan (“LTIIP”) to accelerate replacement of cast iron, wrought iron and bare steel pipe over 11 years. The PAPUC approved the LTIIP plan on June 13, 2019.
Key financial performance indicators:
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Net income |
$ |
2,468,546 |
$ |
2,330,067 |
$ |
2,932,839 |
$ |
2,513,241 | ||||||||
|
Stockholders' equity |
$ |
37,342,544 |
$ |
37,501,650 |
$ |
37,342,544 |
$ |
37,501,650 | ||||||||
|
Stockholders' equity per outstanding common share |
$ |
12.11 |
$ |
12.16 |
$ |
12.11 |
$ |
12.16 | ||||||||
Gas Revenue and Margin
Retail gas revenue increased $2,359,325 for the three months and increased $3,606,490 for the six months ended March 31, 2022 compared to the same periods last year. Gas revenues were bolstered by higher purchased gas costs, new rates at Pike, and colder weather in fiscal 2022. Purchased gas costs are subject to a NYPSC and PAPUC approved reconciliation that permits recovery of all prudently incurred costs. Higher gas cost revenues do not impact net income.
Other gas revenue decreased $151,017 for the three months and decreased $107,681 for the six months ended March 31, 2022 compared to the same periods last year. The components of this decrease are detailed in the tables below.
|
Three months ended March 31, |
Six months ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Retail gas revenue: | ||||||||||||||||
|
Residential |
$ |
8,876,788 |
$ |
7,285,905 |
$ |
13,564,681 |
$ |
11,232,427 | ||||||||
|
Commercial |
1,738,758 |
1,332,395 |
2,646,654 |
1,986,092 | ||||||||||||
|
Transportation |
1,701,231 |
1,659,373 |
2,961,702 |
2,889,580 | ||||||||||||
|
Wholesale |
1,074,174 |
753,953 |
1,778,374 |
1,236,822 | ||||||||||||
|
Total retail gas revenue |
$ |
13,390,951 |
$ |
11,031,626 |
$ |
20,951,411 |
$ |
17,344,921 | ||||||||
|
| ||||||||||||||||
|
Other gas revenue: | ||||||||||||||||
|
Local production |
$ |
73,279 |
$ |
178,881 |
$ |
142,344 |
$ |
354,486 | ||||||||
|
Customer discounts forfeited |
1,538 |
20 |
1,544 |
(8 |
) | |||||||||||
|
Reconnect fees |
- |
(5 |
) |
541 |
60 | |||||||||||
|
Surcharges |
346 |
2,762 |
753 |
(1,915 |
) | |||||||||||
|
Other (see detail below) |
198,716 |
243,238 |
280,887 |
181,127 | ||||||||||||
|
Total other gas revenue |
$ |
273,879 |
$ |
424,896 |
$ |
426,069 |
$ |
533,750 | ||||||||
|
| ||||||||||||||||
|
Total gas operating revenue |
$ |
13,664,830 |
$ |
11,456,522 |
$ |
21,377,480 |
$ |
17,878,671 | ||||||||
The following table details amounts making up the Other line in the schedule of Other gas revenue above:
|
Three months ended March 31, |
Six months ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Other gas revenues: | ||||||||||||||||
|
Delivery Rate Adjustment (DRA) carrying costs |
$ |
702 |
$ |
822 |
$ |
2,070 |
$ |
3,047 | ||||||||
|
Contract customer reconciliation |
(10,174 |
) |
(61,395 |
) |
(7,053 |
) |
(72,474 |
) | ||||||||
|
Monthly RDM amortizations |
215,933 |
97,396 |
266,417 |
(85,701 |
) | |||||||||||
|
Local production revenues |
(2,665 |
) |
12,044 |
(2,765 |
) |
26,004 | ||||||||||
|
2017 Jobs Act federal Income tax reconciliation |
- |
353,082 |
- |
456,764 | ||||||||||||
|
Regulatory liability reserve |
- |
(171,910 |
) |
- |
(171,910 |
) | ||||||||||
|
Capacity release revenues |
8,453 |
12,073 |
15,633 |
20,827 | ||||||||||||
|
All other |
(13,533 |
) |
1,126 |
6,585 |
4,570 | |||||||||||
|
Total other gas revenues |
$ |
198,716 |
$ |
243,238 |
$ |
280,887 |
$ |
181,127 | ||||||||
Gas purchases are our largest expenses. Purchased gas expense increased $1,803,210 for the three months and increased $3,118,278 for the six months ended March 31, 2022, compared to the same periods last year. The increase in costs is due primarily to higher gas prices.
We anticipate that the cost of purchased natural gas will increase in the near term due to the post pandemic demand for energy and current economic conditions. Increases in the cost of gas should be tempered by our access to lower-cost local production gas.
Gas margin (the excess of utility gas revenue over the cost of natural gas purchased) increased $405,098 for the three months and increased $380,531 for the six months ended March 31, 2022 compared to the same periods last year due to increased rates and colder weather. The gas margin percentages were negatively impacted by higher purchased gas costs.
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Gas Margin: | ||||||||||||||||
|
Utility Gas Revenues |
$ |
13,664,830 |
$ |
11,456,522 |
$ |
21,377,480 |
$ |
17,878,671 | ||||||||
|
Natural Gas Purchased |
5,282,955 |
3,479,745 |
7,867,705 |
4,749,427 | ||||||||||||
|
Margin |
$ |
8,381,875 |
$ |
7,976,777 |
$ |
13,509,775 |
$ |
13,129,244 | ||||||||
|
Margin % |
61.34 |
% |
69.63 |
% |
63.20 |
% |
73.44 |
% | ||||||||
Electric Revenue and Margin
Retail electric revenue increased $1,698,516 for the three months and increased $2,446,853 for the six months ended March 31, 2022 compared to the same periods last year. These increases were mainly attributable to increased purchased power costs and increased customer usage. Our customer usage increase reflects new electric rates at Pike that took effect in July of 2021 and increased deliveries. Purchased electricity costs are subject to a PAPUC approved reconciliation that permits recovery of all prudently incurred costs. Higher purchased electricity costs do not impact net income.
Other electric revenues decreased $165,129 for the three months and decreased $45,092 for the six months ended March 31, 2022 compared to the same periods last year. The components of these decreases are detailed in the tables below.
|
Three months ended March 31, |
Six months ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Retail electric revenue: | ||||||||||||||||
|
Residential |
$ |
1,720,573 |
$ |
944,659 |
$ |
2,995,340 |
$ |
1,922,578 | ||||||||
|
Commercial |
1,644,976 |
736,310 |
2,976,152 |
1,624,244 | ||||||||||||
|
Street lights |
44,791 |
30,855 |
85,644 |
63,461 | ||||||||||||
|
Total retail electric revenue |
$ |
3,410,340 |
$ |
1,711,824 |
$ |
6,057,136 |
$ |
3,610,283 | ||||||||
|
| ||||||||||||||||
|
Other electric revenue: | ||||||||||||||||
|
Customer discounts forfeited |
$ |
3,733 |
$ |
— |
$ |
3,733 |
$ |
— | ||||||||
|
Third party billings |
(43,316 |
) |
59,090 |
4,658 |
59,343 | |||||||||||
|
Other |
(70,853 |
) |
(4,397 |
) |
— |
(5,860 |
) | |||||||||
|
Total other electric revenue |
$ |
(110,436 |
) |
$ |
54,693 |
$ |
8,391 |
$ |
53,483 | |||||||
|
| ||||||||||||||||
|
Total electric operating revenue |
$ |
3,299,904 |
$ |
1,766,517 |
$ |
6,065,527 |
$ |
3,663,766 | ||||||||
Electricity costs increased $1,203,229 for the three months and increased $1,463,900 for the six months ended March 31, 2022 compared to the same periods last year. The increase in costs for fiscal year 2022 is due primarily to an increase in the price of purchased electricity.
Electric margin (the excess of utility electric revenue over the cost of purchased power costs) increased $330,158 for the three months and increased $937,861 for the six months ended March 31, 2022 compared to the same periods last year. The electric margin percentage was negatively impacted by the higher purchased power costs in fiscal year 2022. The increase in electric margin resulted from new rates which took effect in July of 2021.
|
Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||||
|
2022 |
2021 |
2022 |
2021 | |||||||||||||
|
Electric Margin: | ||||||||||||||||
|
Utility Electric Revenues |
$ |
3,299,904 |
$ |
1,766,517 |
$ |
6,065,527 |
$ |
3,663,766 | ||||||||
|
Electricity Purchased |
1,564,315 |
361,086 |
2,618,067 |
1,154,167 | ||||||||||||
|
Margin |
$ |
1,735,589 |
$ |
1,405,431 |
$ |
3,447,460 |
$ |
2,509,599 | ||||||||
|
Margin % |
52.60 |
% |
79.56 |
% |
56.84 |
% |
68.50 |
% | ||||||||
Operating and Interest Expenses
Operating and maintenance expense increased $294,361 for the three months and increased $172,088 for the six months ended March 31, 2022 compared to the same periods last year. The increase for the three-month period primarily results from timing of payroll costs offset by merger related costs and lower regulatory amortizations. The increase for the six-month period primarily results from timing of payroll costs offset by merger related costs, expenses related to the COVID pandemic and lower regulatory amortization.
Taxes other than income taxes increased $166,366 for the three months and increased $251,268 for the six months ended March 31, 2022 compared to the same periods last year. The increase for the three-month period primarily results from increase gross receipts tax increase of $210,337 net of lower property and other taxes of $43,972. The increase for the six-month period primarily results from increase gross receipts tax increase of $268,385 net of lower property and other taxes of $17,117.
Depreciation expense increased $88,138 for the three months and increased $64,538 for the six months ended March 31, 2022 compared to the same periods last year. The increases resulted from additional depreciation expense from utility plant placed in service.
Interest expense increased $118,139 for the three months and increased $229,749 for the six months ended March 31, 2022 compared to the same periods last year. The increases were due to higher levels of debt to support our mandated infrastructure improvement program, and additional dividends associated with outstanding Preferred Series D shares which is recorded as interest expense.
Liquidity and Capital Resources
The Holding Company does not have any borrowings (excluding Series A, Series C and Series D Preferred Stock that is classified as debt) at the corporate level and has no access to liquidity except through dividends and distributions from its subsidiaries as well as equity issuances. Its principal liquidity requirements are for investments in all three companies to enhance their ability to make the capital expenditures required to provide services to the utilities’ customers.
The Gas Company’s internally generated cash from operating activities consists of net income, adjusted for non-cash expenses, and changes in operating assets and liabilities. Non-cash items include depreciation and amortization; investment gains and losses, and deferred income taxes. Over or under-recovered gas costs significantly impact cash flow. In addition, there are significant year-to-year changes in regulatory assets that impact cash flow. The Gas Company’s cash flow is seasonal. Cash expenditures are the highest in the summer and fall months when we refill gas storage and conduct our construction programs. Our cash receipts are highest during the heating season. At Pike cash flow is strongest in the winter and summer when customer demand for natural gas and electricity are highest. Given year-round electric sales, Pike is less seasonal than the Gas Company.
Capital expenditures are funded by both operating cash and new debt. In fiscal year 2022 to date, the Company has spent approximately $6.3 million on projects and safety-related infrastructure improvements. This, in conjunction with our growth projects, creates liquidity pressure on the Holding Company. We anticipate that our aggressive capital construction program will continue to require the Company to raise new debt and/or equity.
Cash flows from financing activities of the Company consist of new long-term borrowings, repayment of long-term debt, net borrowings and repayments under our lines-of-credit, and quarterly dividend payments. For the Gas Company’s operations, it has an $8.5 million revolving line of credit with M&T Bank. Interest is a variable rate determined by the Gas Company’s funded debt to EBITDA ratio calculated ninety days after the end of each quarter added to the daily LIBOR rate with no additional collateral or covenants beyond those included in the M&T Bank term notes. The amount outstanding under this line as of March 31, 2022 was $6.1 million with an interest rate of 3.4%.
For Pike’s operations, it has a $2.0 million revolving line of credit with M&T Bank. Interest is a variable rate determined by Pike’s funded debt to EBITDA ratio calculated ninety days after the end of each quarter added to the daily LIBOR rate with no additional collateral or covenants beyond those included in the M&T Bank term notes. The amount outstanding under this line as of March 31, 2022 was approximately $1.9 million with an interest rate of 3.25%.
For Leatherstocking’s operations, it has a $1.5 million revolving line of credit with Wayne Bank. Interest on the line of credit is the prime rate (3.50% at March 31, 2022). The line of credit is for an indefinite period, is guaranteed by Leatherstocking Pipeline, and is secured by Leatherstocking Gas and Leatherstocking Pipeline assets. The amount outstanding under this line as of March 31, 2022 was approximately $1.2 million.
The Company was in compliance with all of its loan covenants as of March 31, 2022.
During the three months ended March 31, 2022, the Gas Company mainly withdrew gas from storage, and as of March 31, 2022 had a balance of $478,812 worth of gas in storage. The volume in storage at March 31, 2022 was 166,665 1,000 cubic feet (“Mcf”) at an average price of $3.19 per Mcf. As of March 31, 2021, the Company had a balance of $493,612 worth of gas in storage. The volume in storage at March 31, 2021 was 269,973 Mcf at an average price of $1.73 per Mcf. During the next quarter, the Gas Company expects to begin injecting gas into storage to have sufficient gas to supply customers for the winter season.
As of March 31, 2022, we believe that cash flow from operating activities and borrowings under our lines of credit will be sufficient to satisfy our working capital and debt service requirements over the next twelve months. We believe new debt will be required to satisfy our capital expenditures and to finance our internal growth needs for the next twelve months. We are confident we can finance them with our current lender.
Off Balance Sheet Arrangements
We have no off balance sheet arrangements.
Critical Accounting Policies
Our significant accounting policies are described in the notes to the Consolidated Financial Statements in the Holding Company’s Form 10-K for the year ended September 30, 2021, filed on December 17, 2021. There have been no significant changes in our accounting policies during the six months ended March 31, 2022.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of March 31, 2022, the Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based upon the Company’s evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures are effective as of March 31, 2022.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that was conducted during the last fiscal quarter for the Company, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
OTHER INFORMATION
Item 1.Legal Proceedings.
The Holding Company and its subsidiaries have lawsuits and complaints pending of the type incurred in the normal course of business. The Company expects that any potential losses will be covered by insurance, subject to deductibles, and will not have a material adverse impact on the Company.
Item 1A.Risk Factors.
Please refer to risk factors listed under Item 1A – “Risk Factors” of the Holding Company’s Form 10-K for the fiscal year ended September 30, 2021, for disclosure relating to certain risk factors applicable to the Company.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3.Defaults Upon Senior Securities.
None
Item 4.Mine Safety Disclosures.
Not applicable
Item 5.Other Information.
None
Item 6.Exhibits.
|
31.1** |
Certification of the Chief Executive Officer and President pursuant to 17 CFR Section 240.13a-14 |
|
31.2** |
Certification of the Chief Financial Officer and Treasurer pursuant to 17 CFR Section 240.13a-14 |
|
32.1** |
Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
101** |
The following materials from the Corning Natural Gas Holding Corporation Quarterly Report on Form 10Q for the period ended March 31, 2022, formatted in XBRL (eXtensible Business Reporting Language): |
|
(i) the Consolidated Balance Sheets at March 31, 2022 and September 30, 2021, | |
|
(ii) the Consolidated Statements of Income for the three and six months ended March 31, 2022, and 2021, | |
|
(ii) the Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2022 and 2021, | |
|
(iv) the Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021, and | |
|
(v) related notes to the Consolidated Financial Statements |
** Filed herewith
*** Furnished herewith
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.
|
CORNING NATURAL GAS HOLDING CORPORATION | ||
|
| ||
|
Date: May 12, 2022 |
By: /s/ Michael I. German | |
|
Michael I. German, Chief Executive Officer and President | ||
|
(Principal Executive Officer) | ||
|
| ||
|
Date: May 12, 2022 |
By: /s/ Charles A. Lenns | |
|
Charles A. Lenns, Chief Financial Officer | ||
|
(Principal Financial and Accounting Officer) |
35