-----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, BYL/tFi9FlGcdaV1+qfqE6WaL1/jxGA00qJcCR1lh3w4fVR0WfmfVzj8v/jIJFkb V9pBe9Z3JSwJH7v3FPLjHA== 0000024751-97-000007.txt : 19980109 0000024751-97-000007.hdr.sgml : 19980109 ACCESSION NUMBER: 0000024751-97-000007 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971230 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORNING NATURAL GAS CORP CENTRAL INDEX KEY: 0000024751 STANDARD INDUSTRIAL CLASSIFICATION: 4923 IRS NUMBER: 160397420 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-00643 FILM NUMBER: 97746645 BUSINESS ADDRESS: STREET 1: 330 W WILLIAM ST STREET 2: P O BOX 58 CITY: CORNING STATE: NY ZIP: 14830 BUSINESS PHONE: 6079363755 MAIL ADDRESS: STREET 1: 330 W WILLIAM STREET STREET 2: P O BOX 58 CITY: CORNING STATE: NY ZIP: 14830 10KSB 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 (X) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (Fee Required) For the twelve month period ended September 30, 1997 Commission file number 0-643 Corning Natural Gas Corporation (Name of small business issuer in its charter) New York 16-0397420 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 330 W. William St., Corning NY 14830 (Address of principal executive offices) (Zip Code) Issuer's telephone number (607) 936-3755 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock - $5.00 par value (Title of class) Check whether the issurer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes X No Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- KSB or any amendment to this Form 10-ISV. (X) Revenues for 12 month period ended September 30, 1997 $17,835,687 The aggregate market value of the 331,362 shares of the Common Stock held by non-affiliates of the Registrant at the $20 average of bid and asked prices as of November 1, 1997 was $6,627,240. Number of shares of Common Stock outstanding as of the close of business on November 1, 1997 - 460,000. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Shareholders for the twelve month period ended September 30, 1997, and definitive proxy statement and notice of annual meeting of shareholders, dated February 15, 1998, are incorporated by reference into Part I, Part II and Part II hereof. Information contained in this Form 10-KSB and the Annual Report to shareholders for fiscal 1997 period which is incorporated by reference contains certain forward looking comments which may be impacted by factors beyond the control of the Company, including but not limited to natural gas supplies, regulatory actions and customer demand. As a result, actual conditions and results may differ from present expectations. CORNING NATURAL GAS CORPORATION FORM 10-KSB For the 12 Month Period Ended September 30, 1997 Part I ITEM 1 - DESCRIPTION OF BUSINESS (a) Business Development Corning Natural Gas Corporation (the "Company" or "Registrant"), incorporated in 1904, is a natural gas utility. The Company purchases its entire supply of gas, and distributes it through its own pipeline distribution and transmission systems to residential, commercial, industrial and municipal customers in the Corning, New York area and to two other gas utilities which service the Elmira and Bath, New York areas. The Company is under the jurisdiction of the Public Service Commission of New York State which oversees and sets rates for New York gas distribution companies. The Company also sells, leases and services appliances, primarily gas burning, through its wholly owned subsidiary, Corning Natural Gas Appliance Corporation. (b) Business of Issuer (1) The Company maintains a gas supply portfolio of numerous contracts and is not dependent on a single supplier. Additionally, the Company has capabilities for storing 793,000 Mcf through storage operations with two of its suppliers. The Company had no curtailments during fiscal 1997 and expects to have an adequate supply available for its customers during fiscal 1998 providing that no abnormal conditions or actions occur. (2) The Company is franchised to supply gas service in all the political subdivisions in which it operates. (3) Since the Company's business is seasonal by quarters, sales for each quarter of the year vary and are not comparable. Sales for different periods vary depending on variations in temperature, but the Company's Weather Normalization Clause (WNC) serves to stabilize net revenue from the effects of temperature variations. The WNC allows the Company to adjust customer billings to compensate for fluctuations in net revenue caused by temperatures which are higher or lower than the thirty year average temperature for the period. Degree days, which represent the number of degrees that the average daily temperature falls below 65 degrees Fahrenheit, totaled 6,831 for the period October 1, 1996 through September 30, 1997 and 7,076 for the same period ended September 30, 1996. (4) The Company has three major customers, Corning Incorporated, New York State Electric & Gas (NYSEG), and Bath Electric, Gas & Water Systems (BEGWS). The loss of any of these customers could have a significant impact on the Company's financial results. (5) Historically, the Company's competition in the residential market has been primarily from electricity in cooking, water heating and clothes drying, and to a very small degree, in heating. The price of gas remains low in comparison to that of electricity in the Company's service territory and the Company's competitive position in the residential market continues to be very strong. Approximately 99% of the Company's general service customers heat with gas. In recent years competition from oil has developed in the industrial market. The Company has been able to counteract much of this competition, to date, through the transportation of customer owned gas for a transportation charge. The customer arranges for their own gas supply, then moves it through the Company's facilities for a transportation fee. The Company's transportation rate is equal to the lowest unit rate of the appropriate rate classification, exclusive of gas costs, hence the profit margin is maintained. Additionally, under an increasingly deregulated environment there is opportunity for the Company to increase revenue by selling its upstream pipeline capacity to transportation customers. The Company is authorized to retain 15% of such revenue and 85% is returned to firm customers in the form of lower gas costs. Transportation customers that pay for this capacity are virtually assured that their supply will not be interrupted. Revenues derived from the resale of this capacity were $242,289 for 12 months ended September 30, 1997 and $181,681 for the 12 months ended September 30, 1996. For those willing to bear some risk, the Company has an interruptible transportation rate for its large industrial customers whereby the customer may elect to avoid payment of demand charges but bears the risk of partial or total upstream interruption of service during certain periods. To maintain industrial load in the event that oil prices temporarily drop below the equivalent gas price, the Company continues to maintain a flexible transportation rate schedule. This flexible rate has been used infrequently since its inception. In September 1995 the Company purchased the assets of a local gas distribution company, Finger Lakes Gas Company, through the Federal Bankruptcy Court. Finger Lakes Gas served customers in the Hammondsport, NY area and had a customer base of approximately 320 customers. The Company was able to purchase this all plastic system with a bid of $560,000. The Company was pleased to purchase these assets that originally cost over $1.5 million to construct for its relatively low bid. The nearly new, all plastic, system was already connected and serving 320 customers with a potential to add 200 more in the near future. On a per customer basis, this represents a very low investment. The capital to purchase these assets was obtained through short term debt. The Company has not found it necessary to apply for an increase in rates on this part of our system which means the original rates made effective in 1990 remain in effect currently. Shortly after the Company took possession of the system, Mercury Aircraft, Inc. announced it would purchase the former Taylor Wine Company facilities and centralize their other plants. The reopening of this major facility will most certainly contribute toward the stability and future viability of the new gas system which is now part of the Company. The former Finger Lakes Gas Company's operations contributed in excess of $150,000 to gross margin for the period ended September 30, 1996, and in excess of $218,000 for the 12 months ended September 30, 1997. In December, 1994 the New York Public Service Commission instituted a proceeding to address issues related to the merging competitive natural gas market. This proceeding is intended to provide a framework whereby access to facilities on upstream pipelines made available by FERC Order 636 would be available to end use customers on the Local Distribution Company level. New tariff filings were approved and became effective September 1, 1996. The Company considers this a transitional step towards full unbundling of services with future changes made as circumstances warrant. In 1997 the PSC instituted another proceeding designed to assess the issues associated with the future of the natural gas industry and the role of the local gas utility. The staff of the PSC has made certain proposals which, if instituted, will effectively separate the structure of the industry into four distinct segments. Under the proposed structure, production, transportation, marketing and distribution will become distinct businesses. Gas utilities would no longer sell natural gas, they would merely provide the distribution facilities to get gas to the burnertip. The PSC staff proposal indicates that this change should be complete within five years. Such a drastic change will obviously require much effort in working out the details to ensure that customers are provided with the same safe, reliable service that has historically been provided. This company has taken the position that it does not oppose this transition to a fully competitive market but that it must be allowed to evolve naturally. In order to minimize the potential for unintended consequences which could have a negative effect on the customer, arbitrary deadlines and regulations designed to accelerate the process need to be avoided. If, in fact, marketers can provide a more economic product than the gas utility, customers will be quick to respond. (6) The Company believes compliance with present federal, state and local provisions relating to the protection of the environment will not have any material adverse effect on capital expenditures, earnings and financial position of the Company and its subsidiary. (7) Sixty-nine persons were employed on a full-time basis and seven on a part-time basis by the Company in 1997 and 67 full-time and six part-time in fiscal 1996. (8) The Company's labor-management relationship is good. Typical labor negotiations are completed in one to two days. The current labor contract was signed September 1, 1995 for a three year period. ITEM 2 - DESCRIPTION OF PROPERTY The Company completed the construction of a new office building at 330 West William Street, Corning, NY in the fall of 1991. This structure is physically connected to the operations center built three years earlier. The Company had outgrown its general offices at 27 East Denison Parkway. The property has been sold, and the gain on the sale was returned to ratepayers. The Company's pipeline system is thoroughly surveyed each year. Any necessary replacements are included in the construction budget. Approximately 105 miles of transmission main, 284 miles of distribution main, 13,800 services and 86 measuring and regulating stations, along with various other property are distributed throughout the service area. All of the above described property is owned by the Company, except for one short section of 10" gas main which is under a long-term lease and is used primarily to serve Corning Incorporated. All of the above described property which is owned by the Company is adequately insured, and is subject to the lien of the Company's first mortgage indenture. ITEM 3 - LEGAL PROCEEDINGS The Company is not a party to any material pending legal proceedings, nor is the Company aware of any problems of any consequence which it anticipates may result in legal proceedings. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the third quarter of 1997. Additional Item Executive Officers of the Registrant (Including Certain Significant Employees) Business Experience Years Served Name Age During Past 5 Years In This Office Thomas K. Barry 52 Chairman of the Board of Directors 4 President & C.E.O. 13 Edgar F. Lewis 60 Senior Vice President - Operations 17 Kenneth J. Robinson 53 Executive Vice President 6 Phyllis J. Groeger 57 Secretary 10 Thomas S. Roye 44 Vice President - Administration 6 Gary K. Earley 43 Treasurer 6 Term of office is for one year. (Normally from April to April) Part II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The principal market on which the Registrant's common stock is traded, the range of high and low bid quotations for each quarterly period during the past two years, the amount and frequency of dividends, and a description of restrictions upon the Registrant's ability to pay dividends, appear in the table below. The number of stockholders of record of the Registrant's Common Stock was 372 at September 30, 1997. The high and low bid quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions. MARKET PRICE - (OTC) Dividend Quarter Ended High Low Paid March 31, 1996 $ 23 $ 22 $ .315 June 30, 1996 23 22 .315 September 30, 1996 22 21 1/2 .315 December 31, 1996 22 21 1/2 .32 March 31, 1997 22 21 1/2 $ .32 June 30, 1997 21 1/4 20 .32 September 30, 1997 21 1/4 20 .32 The Company incurred $4,700,000 in new long-term debt in 1997. The proceeds of this new issue were used to pay off $3.1 million in short-term debt and retire a 10% First Mortgage Bond with a balance of $1.6 million. The new debt is an unsecured senior note at 7.9 percent interest with a maturity date of September 25, 2017. Canada Life Assurance Company of Toronto is the debt holder; interest payments are made quarterly with sinking fund payments as follows: $355,000 annually starting September, 2006 with a $795,000 payment due September 1, 2017. ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion of financial condition and results of operations of the Company appears in the 1997 Annual Report to Shareholders which is incorporated by reference. ITEM 7 - FINANCIAL STATEMENTS The consolidated financial statements, together with the independent auditors' report thereon of KPMG Peat Marwick LLP dated November 7, 1997 are included in the 1997 Annual Report to Shareholders attached hereto, and are incorporated in this Form 10-KSB by reference thereto. ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None Part III ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The information required regarding the executive officers of the Registrant is included in Part 1 under "Additional Item". ITEM 10 - EXECUTIVE COMPENSATION The information required regarding the compensation of the executive officers appears in the Definitive Proxy Statement attached hereto. ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required regarding the security ownership of certain beneficial owners and management appears in the Definitive Proxy Statement attached hereto. ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required regarding certain relationships and related transactions appears in the Definitive Proxy Statement attached hereto. Part IV ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The following exhibits are filed with this Form 10-KSB or incorporated herein by reference: (Exhibit numbers correspond to numbers assigned to exhibits in Item 601 of Regulation S-B) Exhibit Name of Exhibit Page 3 A copy of the Corporation's Articles of Incorporation, as currently in effect, including all amendments, was filed with the Company's Form 10-K for December 31, 1987. 3 A copy of the Corporation's complete by-laws, as currently in effect, was filed with the Corporation's report on Form 10-Q for the quarter ended March 31, 1984. 10 A copy of the "Agreement Between Corning Natural Gas Corporation and Local 139", dated September 1, 1995 was filed with Form 10-KSB for December 31, 1995. 10 Consulting Agreement and Employment Contracts with three executive officers were filed with the Company's Form 10-K for December 31, 1987. 10 A copy of the Service Agreement with CNG Transmission Corporation was filed with the Company's Form 10-KSB for December 31, 1993. 10 A copy of the Sales Agreement with Bath Electric, Gas and Water was filed with the Company's Form 10-K for December 31, 1989. 10 A copy of the Transportation Agreement between the Company and New York State Electric and Gas Corporation was filed with the Company's Form 10-KSB for December 31, 1992. 10 A copy of the Transportation Agreement between the Company and Corning Incorporated was filed with the Company's Form 10-KSB for December 31, 1992. 10 A copy of the Service Agreement with Columbia Gas Transmission Co. was filed with the Company's 10-KSB for December 31, 1993. 13 A copy of the Corporation's Annual Report to Shareholders for 1997, is filed herewith. 22 Information regarding the Company's sole subsidiary was filed as Exhibit 22 with the Company's Form 10-K for the period ended December 31, 1981. 28 Corning Natural Gas Corporation Proxy Statement is filed herewith. 99 Order from the U.S. Bankruptcy Court, Northern District of New York re: Approval of Acquisition of Finger Lakes Gas Company was filed with the Company's 10-KSB for the period ended December 31, 1995. 99 Order from the Public Service Commission of New York State re: Approval of Acquisition of Finger Lakes Gas Company was filed with the Company's 10-KSB for the period ended December 31, 1995. (b) Reports on Form 8-K The Company filed no reports on Form 8-K during the three month period ended September 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CORNING NATURAL GAS CORPORATION (R egistrant) Date December 19 1997 THOMAS K. BARRY Thomas K. Barry, Chairman of the Board, President and C.E.O. Date December 19, 1997 GARY K. EARLEY Gary K. Earley, Treasurer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date December 19, 1997 J.E. BARRY J.E. Barry, Director Date December 19, 1997 DONALD R. PATNODE Donald R. Patnode, Director Date December 19, 1997 J.A. FINLEY J.A. Finley, Director ?? EX-28 2 Corning Natural Gas Corporation 330 W. William Street P.O. Box 58 Corning, New York 14830 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS to be held on Thursday, February 12, 1998 Corning, New York January 15, 1998 To the Common Stockholders of Corning Natural Gas Corporation Notice is hereby given that the Annual Meeting of Stockholders of Corning Natural Gas Corporation will be held at the office of the Company, 330 W. William Street, in the City of Corning, New York, on Thursday, February 12, 1998 at 10:30 A.M., local time, for the following purposes: (1) To fix the number of Directors at seven and to elect a Board of Directors for the ensuing year. (2) To transact such other business as may properly come before the meeting. The stock transfer books will not be closed, but only common stockholders of record at the close of business on January 8, 1998 will be entitled to vote at the meeting or any adjournment thereof. You are cordially invited to attend the meeting and vote your shares. In the event that you cannot attend, please date, sign and mail the enclosed proxy in the enclosed self-addressed envelope. A stockholder who executes and returns a proxy in the accompanying form has the power to revoke such proxy at any time prior to the exercise thereof. By Order of the Board of Directors PHYLLIS J. GROEGER, Secretary CORNING NATURAL GAS CORPORATION PROXY STATEMENT January 15, 1998 By Whom Proxy Solicited and Solicitation Expenses. The accompanying proxy is solicited by the Board of Directors of the Company for use at the Annual Meeting of Stockholders to be held on Thursday, February 12, 1998. Proxies in substantially the accompanying form, properly executed and received prior to or delivered at the meeting and not revoked, will be voted in accordance with the specification made. The expense of soliciting proxies will be borne by the Company. The approximate date upon which this proxy statement and the accompanying proxy will first be mailed to stockholders is January 15, 1998. Right to Revoke Proxy. Any stockholder giving the proxy enclosed with this statement has the power to revoke it at any time prior to the exercise thereof. Such revocation may be by writing (which may include a later dated proxy) received by the Office of the Secretary, Corning Natural Gas Corporation, 330 W. William Street, P.O. Box 58, Corning, New York, 14830, no later than February 11, 1998 if by mail, or prior to the exercise thereof if delivered by hand. Such revocation may also be effected orally at the meeting prior to the exercise of the proxy. Proposals of Stockholders. Stockholders' proposals intended to be presented at the 1999 Annual Meeting of Stockholders must be received by the Office of the Secretary, Corning Natural Gas Corporation, 330 W. William Street, P.O. Box 58, Corning, New York 14830, by September 17, 1998. Voting Securities Outstanding. There were 460,000 shares of common stock outstanding and entitled to vote on January 8, 1998 (the "Record Date"). Each share of common stock is entitled to one vote. Only stockholders of record on the Record Date are entitled to notice of and to vote at the meeting or any adjournment thereof. Abstentions and broker non-votes are each included in calculating the number of shares present and voting for purposes of determining quorum requirements. However, each is tabulated separately. Abstentions are counted in tabulating the votes cast on proposals presented to shareholders, whereas broker non-votes are not counted for purposes of determining whether a proposal has been approved. The following table sets forth the shares of the Company's common stock, and the percent of total outstanding shares represented thereby, beneficially owned* by the nominees for director of the Company, the Chief Executive Officer of the Company, all directors and officers as a group, and all persons or groups known to the Company to beneficially own more than 5% of such stock. * As used in this Proxy Statement, "beneficial ownership" includes direct or indirect, sole or shared power to vote, or to direct the voting of, and/or investment power to dispose of, or to direct the disposition of, shares of the common stock of the Company. Except as otherwise indicated in the footnotes below, the listed beneficial owners held direct and sole voting and investment power with respect to the stated shares. Shares of Stock Beneficially Owned Directly or Indirectly Percent Beneficial Owners as of September 30, 1997 of Class J. Edward Barry (Director) 45,999(1) 10.0% 330 W. William Street Corning, New York Thomas K. Barry (Director and 15,300(2) 3.3% Chief Executive Officer) 330 W. William Street Corning, New York Thomas H. Bilodeau (Director) 3,788(3) 0.8% 1648 Jupiter Cove Dr., Apt. 312 Jupiter, Florida Bradford J. Faxon (Director) 27,210(4) 5.9% 225 Hix Bridge Road Westport, Massachusetts Jay A. Finley (Director) 15,900(5) 3.5% 27 Spring Terrace Corning, New York Liselotte R. Lull and 45,029(6) 9.8% Robert E. Lull 231 Watauga Avenue Corning, New York Jack R. McCormick (Director) 1,969(7) 0.4% 2560 Riverside Avenue Somerset, Massachusetts Donald R. Patnode (Director) 14,194(8) 3.1% 91 Stage Harbor Road Chatham, Massachusetts All directors and officers 128,638(9) 28.0% of the Company, twelve persons as a group (1) Includes 25,066 shares held in trust, with respect to which J. Edward Barry has shared voting and investment power, and 20,933 shares beneficially owned and held in trust on behalf of Virginia S. Barry, with respect to which J. Edward Barry also has shared voting and investment power. Percentage reflects rounding; actual percentage is less than 10 percent. (2) Includes indirect beneficial ownership of 1,100 shares owned by children of Thomas K. Barry, and as to which Thomas K. Barry has shared voting and investment power. Also includes 1,200 shares owned by two daughters of Thomas K. Barry, as to which shares Mr. Barry disclaims beneficial ownership. (3) All shares are held in trusts and Mr. Bilodeau is a beneficiary or contingent beneficiary of such trusts. (4) Includes indirect beneficial ownership of 5,431 shares owned by children of Bradford J. Faxon, and as to which Bradford J. Faxon has shared voting and investment power. (5) Includes indirect beneficial ownership of 7,900 shares owned by Gertrude C. Finley, who has sole voting and investment power over such shares. (6) Includes 23,378 shares owned by Liselotte R. Lull and 21,651 shares owned by Robert E. Lull. (7) All shares are owned jointly with Madeline McCormick. (8) Includes 2,000 shares owned by spouse, who has sole voting and investment power over such shares. Also includes 6,994 shares held in two trusts, of which Donald R. Patnode is co-trustee. (9) Aggregate record or imputed beneficial ownership, with sole or shared voting or investment power. Election of Directors. (Proposal No. 1) It is the intention of the persons named in the enclosed proxy to vote the shares represented by the proxy to fix the number of directors at seven and to elect the nominees listed below to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. In the event of a vacancy in the list of nominees, an event which the Board of Directors does not anticipate, the holders of the proxies will vote for the election of a nominee acceptable to the remiaining nominees. The directors must be elected by a plurality of votes cast. The following is a brief description of each nominee, including his principal employment or professional experience for the past five years. J. Edward Barry, 85, Consultant to the Company. Former Chairman of the Board of Directors 1975 - 1993; former Chief Executive Officer, President, Executive Vice President, Vice President and Secretary of the Company. A Director since 1953 and Chairman of the Executive and Pension Fund Committees. Father of Thomas K. Barry, Chairman of the Board, Chief Executive Officer and President of the Company. Thomas K. Barry, 52, Chairman of the Board of Directors since 1993, President of the Company since 1983, Chief Executive Officer since 1984. A Director since 1983 and a member of the Executive and Pension Fund Committees. A Director of Fall River Gas Company. Son of J. Edward Barry, Consultant to the Company. Thomas H. Bilodeau, 55, Vice President - Finance, Medical & Environmental Coolers, Inc. since 1990. A Director since 1984 and a member of the Compensation and Audit Committees. A Director of Fall River Gas Company. Bradford J. Faxon, 59, Chairman of the Board of Directors, President and Director of Fall River Gas Company since 1986. A Director since 1984, Chairman of the Compensation Committee and a member of the Pension Fund Committee. Jay A. Finley, 82, Retired; former President of the Company, 1977-1983. A Director since 1975 and a member of the Executive Committee. Jack R. McCormick, 73, Utility Consultant; current Director and former President (1974-1986) of Fall River Gas Company. A Director since 1985 and a member of the Audit Committee. Donald R. Patnode, 69, Retired; former President of Industrial Filters and Equipment Corporation 1989-1994. A Director since 1964, Chairman of the Audit Committee and a member of the Compensation Committee. Director also of Fall River Gas Company. The Board of Directors does not have a standing nominating committee, or any committee performing similar functions. The Board of Directors has a standing Audit Committee, of which Messrs. D.R. Patnode, J.R. McCormick and T.H. Bilodeau are the members, the function of which is to recommend the selection of independent auditors, review the plan and results of the independent audit and approve each professional service provided by the independent auditors. The Audit Committee had one meeting in 1997. The Board of Directors also has a standing compensation committee, of which Messrs. D. R. Patnode, B. J. Faxon and T.H. Bilodeau are the members. This committee met once during 1997. This committee reviews officer performance and duties and decides upon appropriate remuneration. The Board of Directors met five times in 1997. Each Director attended more than 75% of the aggregate number of meetings of the Board and committees on which he served during the year. At the most recent annual meeting of stockholders of the Company, held on February 13, 1997, out of a total of 460,000 shares entitled to vote at the meeting, 404,457 shares (87.9% of the total) were actually voted at the meeting with respect to the election of Directors. Nominees proposed for election by the Board of Directors were elected by requisite vote at such meeting. Each nominee received an affirmative vote of over 99% of the votes cast. Cash Compensation of Executive Officers. The following table sets forth the compensation paid or accrued by the Company and its subsidiary during the fiscal years ended December 31, 1995, September 30, 1996 and September 30, 1997 to the Company's Chief Executive Officer. Other than the Chief Executive Officer, no other executive officer of the Company was paid an annual salary and bonus in 1997 that aggregated $100,000. Although only principal capacities are listed, the compensation figures include all compensation received in any capacity, including directorships, for services rendered during the fiscal years indicated. SUMMARY COMPENSATION TABLE Annual Compensation(1) Name and Other Annual Principal Position Year Salary Bonus Compensation Thomas K. Barry 1997 $150,167 --- $ 4,220 President and Chief 1996 106,800(2) --- 2,970(2) Executive Officer 1995 134,967 --- 3,721 (1) The Company did not pay any long-term compensation to its Chief Executive Officer or to its other executive officers during the fiscal years ended December 31, 1995, September 30, 1996 and September 30, 1997. (2) 1996 amounts reflect compensation received with respect to the Company's nine month 1996 fiscal year (ended September 30, 1996) that result from the adoption by the Company of a fiscal year end of September 30 instead of December 31 each year. A description of the executive officers, other than Mr. Thomas K. Barry, for whom a description is provided above, is set forth below. Kenneth J. Robinson (age 53) is Executive Vice President. Mr. Robinson joined the Company in 1978 as an accountant. Most recently he served as Financial Vice President and Treasurer for 4 years and in his current position for 6 years. Edgar F. Lewis (age 60) is Senior Vice President - Operations. Mr. Lewis' career with the Company dates back to 1956. He has been in charge of operations for the past 25 years; 17 years in his current position. Thomas S. Roye (age 44) is Vice President - Administration. Mr. Roye has served 6 years in his current position and was previously Assistant Treasurer & Assistant Secretary. He has prior utility experience and accounting education and has been employed since 1978. Gary K. Earley (age 43) is Treasurer. Mr. Earley has been a practicing accountant since 1976. He joined the firm in 1987 as an accountant in the rates and regulations department and has served as Treasurer for the past 6 years. Phyllis J. Groeger (age 57) is Corporate Secretary. Mrs. Groeger has been employed since 1973 in a number of positions advancing to Assistant Secretary in 1986 and has been Secretary of the Company for the past 10 years. Compensation Pursuant to Plans. The Company has entered into separate supplemental benefits agreements with Thomas K. Barry and one other executive officer (collectively, the "Supplemental Benefits Agreements"), which provide that the officer covered thereby and retiring after the age of 62 is entitled to receive monthly payments equal to 35% of such officer's monthly salary at retirement for either life or 180 months, whichever is longer. Such amount payable shall increase by 4% annually on the anniversary date of such officer's retirement. Retirement benefits otherwise available upon retirement at age 62 under the Supplemental Benefit Agreements are reduced cumulatively by 4% for each year prior to age 60 in which the covered officer retires; provided, however, that an officer covered under a Supplemental Benefits Agreement receives no retirement benefits thereunder in the event that such officer retires before age 55. Furthermore, the Supplemental Benefits Agreements provide that in the event that an officer covered by a Supplemental Benefits Agreement dies prior to retirement, such officer's designated beneficiary is entitled to receive monthly payments equal to 50% of such officer's monthly salary at death for 180 months. The Company has also entered into an additional, more limited, Supplemental Benefits Agreement with one other employee, which contains terms similar to the foregoing agreements. However, such limited Supplemental Benefits Agreement provides for monthly payments equal to 20% of the subject employee's monthly salary in the event of retirement, monthly payments equal to 35% of his monthly salary in the event of his death prior to retirement, and does not include an annual escalator. Eligibility to enter into a Supplemental Benefits Agreement, or equivalent thereof, is based upon employee performance, service and value to the Company; such eligibility is determined on an individual basis by the Board of Directors. Currently, Mr. Thomas K. Barry and two other executive officers (as discussed, above) are the only employees of the Company covered by a Supplemental Benefits Agreement, and no payments have been made to date under such agreements. The Supplemental Benefits Agreements are in addition to the amounts shown in the Summary Compensation Table and are not subject to limitation. As of September 30, 1997, the estimated annual benefits payable under a Supplemental Benefits Agreement upon retirement at the normal retirement age for Mr. Thomas K. Barry are $ 51,800. The Company also maintains the Corning Natural Gas Corporation Employees Savings Plan (the "Savings Plan"). All employees of the Company who work for more than 1,000 hours per year and who have completed one year of service may participate in the Savings Plan as of the following January 1 or July 1. Under the Savings Plan, participants may contribute up to 15% of their wages. For non-union employees, the Company will match one-half of the participant's contributions up to a total of 3% of the participant's wages. Company matching contributions vest in the participants account at a rate of 20% per year and become fully vested after five years. All participants may select one of five investment plans, or a combination thereof, for their account. Distribution of amounts accumulated under the Savings Plan occurs upon termination of employment or death of the participant. The Savings Plan also contains loan and hardship withdrawal provisions. During the fiscal year ended September 30, 1997 no amounts were distributed to executive officers under the Savings Plan. Mr. Thomas K. Barry had $4,220 accrued to his account under the Savings Plan during said period. This accrual is included in the figures appearing in the summary compensation table on page 4. Compensation of Directors. The current annual Director's compensation is $5,000. In addition, Directors are paid $300 for each Board meeting attended. Additionally, the chairmen of the Board's Executive, Audit, Compensation and Pension Fund committees and those directors who serve on more than one committee receive an annual fee of $1,500 for such services. Committee members other than the chairmen are paid $1,000 annually for their services, subject to the limitation that no committee chairman or member may receive than $1,500 annually for such services regardless of the number of committees on which he serves. As allowed by New York law, the Company currently has in effect an insurance policy, with an effective date of June 1, 1997, with National Union Fire Insurance Company for the indemnification of officers and directors at an annual premium cost of $ 43,000. Employment Contracts and Termination of Employment and Change-in-Control Arrangements. In January of 1992, the Company entered into an employment contract with its President and Chief Executive Officer, Mr. Thomas K. Barry. Under the terms of such employment contract, Mr. Barry is compensated for his duties as an officer and director with such salary as is determined from time to time by the Board of Directors. The term of Mr. Barry's employment contract is five years, unless earlier terminated by an act of either the Company or Mr. Barry. Beginning in 1994, however, Mr. Barry's employment contract is automatically extended for an additional one-year period. Mr. Barry's employment contract further provides that upon any change in control of the Company leading to the termination of Mr. Barry's employment with the Company, the Company shall pay Mr. Barry three times his then-present annual salary, or such lesser amount as may be required to comply with certain provisions of the Internal Revenue Code. Selection of Auditors. KPMG Peat Marwick, Certified Public Accountants of Rochester, New York, have been selected as auditors for the Company for the ensuing year. KPMG Peat Marwick, who served as principal accountants for the Company for the past fiscal year, have no direct or indirect financial interest in the Company or its subsidiaries in the capacity of promoter, underwriter, voting director, officer or employee. A representative of KPMG Peat Marwick will be present at the meeting, with the opportunity to make a statement if such representative desires to do so, and will be available to respond to appropriate questions. Other Matters. Except for the matters set forth above, the Board of Directors knows of no matters which may be presented to the meeting, but if any other matters properly come before the meeting, it is the intention of the persons named in the accompanying form of proxy to vote such proxy in accordance with their judgment in such matters. PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY. By Order of the Board of Directors, PHYLLIS J. GROEGER, Secretary Persons whose proxies are solicited by the Board of Directors of the Company may obtain, without charge, a copy of the Company's Annual Report on Form 10-KSB, including the financial statements and schedules thereto, required to be filed with the Securities and Exchange Commission for the Company's most recent fiscal year. The report will be furnished upon request made in writing to: Thomas K. Barry Chairman of the Board of Directors Corning Natural Gas Corporation 330 W. William Street P.O. Box 58 Corning, New York 14830 EX-27 3
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