-----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, ILXDRlzISBXZK69Nxs5FqqB5+xBF6VqtMSsJ1wWE0Xmi1iEju6PWHbZb5Qf1ZPP4 nPpHqfVmA+xOiLFJIS7pSg== 0000950144-01-503329.txt : 20010611 0000950144-01-503329.hdr.sgml : 20010611 ACCESSION NUMBER: 0000950144-01-503329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010608 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIEDMONT NATURAL GAS CO INC CENTRAL INDEX KEY: 0000078460 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 560556998 STATE OF INCORPORATION: NC FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06196 FILM NUMBER: 1656401 BUSINESS ADDRESS: STREET 1: 1915 REXFORD RD CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043643120 MAIL ADDRESS: STREET 1: P.O. BOX 33068 CITY: CHARLOTTE STATE: NC ZIP: 28233 10-Q 1 g69945e10-q.txt PIEDMONT NATURAL GAS COMPANY INC 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from ___________________ to __________________ Commission file number 1-6196 ------ Piedmont Natural Gas Company, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) North Carolina 56-0556998 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1915 Rexford Road, Charlotte, North Carolina 28211 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (704) 364-3120 ---------------------- 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. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at June 1, 2001 - --------------------------- --------------------------- Common Stock, no par value 32,219,385 =============================================================================== Page 1 of 16 pages 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) --------------------------------------------------- April 30, October 31, 2001 2000 Unaudited Audited ---------- ---------- ASSETS Utility Plant, at original cost $1,583,580 $1,533,962 Less accumulated depreciation 488,362 462,955 ---------- ---------- Utility plant, net 1,095,218 1,071,007 ---------- ---------- Other Physical Property (net of accumulated depreciation of $1,270 in 2001 and $1,187 in 2000) 958 976 ---------- ---------- Current Assets: Cash and cash equivalents 14,605 8,747 Restricted cash 16,903 39,796 Receivables (less allowance for doubtful accounts of $3,493 in 2001 and $482 in 2000) 131,472 55,145 Gas in storage 47,559 67,709 Deferred cost of gas 24,717 13,228 Deferred income taxes 11,996 -- Refundable income taxes 708 69,118 Other 14,328 30,492 ---------- ---------- Total current assets 262,288 284,235 ---------- ---------- Deferred Charges and Other Assets 120,075 88,785 ---------- ---------- Total $1,478,539 $1,445,003 ---------- ---------- CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity: Common stock $ 323,552 $ 314,230 Retained earnings 279,268 213,142 ---------- ---------- Total common stock equity 602,820 527,372 Long-term debt 451,000 451,000 ---------- ---------- Total capitalization 1,053,820 978,372 ---------- ---------- Current Liabilities: Current maturities of long-term debt and sinking fund requirements 32,000 32,000 Notes payable 33,985 99,500 Accounts payable 98,712 87,604 Deferred income taxes -- 8,678 Income taxes accrued 9,388 -- General taxes accrued 5,328 11,205 Refunds due customers 42,558 32,889 Other 23,945 25,121 ---------- ---------- Total current liabilities 245,916 296,997 ---------- ---------- Deferred Credits and Other Liabilities 178,803 169,634 ---------- ---------- Total $1,478,539 $1,445,003 ---------- ----------
See notes to condensed consolidated financial statements. -2- 3 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Statements of Consolidated Income (Unaudited) (in thousands except per share amounts) --------------------------------------------------------
Three Months Six Months Twelve Months Ended Ended Ended April 30 April 30 April 30 ------------------------- ------------------------- ------------------------- 2001 2000 2001 2000 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- Operating Revenues $ 408,012 $ 282,955 $ 875,585 $ 551,603 $1,154,360 $ 743,084 Cost of Gas 288,382 167,792 627,353 319,367 820,032 425,671 ---------- ---------- ---------- ---------- ---------- ---------- Margin 119,630 115,163 248,232 232,236 334,328 317,413 ---------- ---------- ---------- ---------- ---------- ---------- Other Operating Expenses: Operations 27,915 28,012 58,158 54,761 113,340 105,516 Maintenance 4,975 4,105 9,295 8,055 18,298 16,065 Depreciation 12,803 12,137 25,552 23,982 50,463 46,598 General taxes 5,546 4,871 11,152 9,900 20,013 21,124 Income taxes 23,210 22,456 49,249 46,196 36,742 36,685 ---------- ---------- ---------- ---------- ---------- ---------- Total other operating expenses 74,449 71,581 153,406 142,894 238,856 225,988 ---------- ---------- ---------- ---------- ---------- ---------- Operating Income 45,181 43,582 94,826 89,342 95,472 91,425 Other Income, Net 4,271 2,908 14,654 10,535 15,840 7,705 ---------- ---------- ---------- ---------- ---------- ---------- Income Before Utility Interest Charges 49,452 46,490 109,480 99,877 111,312 99,130 Utility Interest Charges 9,583 9,054 19,309 18,347 38,640 34,624 ---------- ---------- ---------- ---------- ---------- ---------- Net Income $ 39,869 $ 37,436 $ 90,171 $ 81,530 $ 72,672 $ 64,506 ========== ========== ========== ========== ========== ========== Average Shares of Common Stock: Basic 32,126 31,526 32,056 31,453 31,900 31,296 Diluted 32,357 31,704 32,302 31,632 32,174 31,500 Earnings Per Share of Common Stock: Basic $ 1.24 $ 1.19 $ 2.81 $ 2.59 $ 2.28 $ 2.06 Diluted $ 1.23 $ 1.18 $ 2.79 $ 2.58 $ 2.26 $ 2.05 Cash Dividends Per Share of Common Stock $ 0.385 $ 0.365 $ 0.75 $ 0.71 $ 1.48 $ 1.40
See notes to condensed consolidated financial statements. -3- 4 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Statements of Consolidated Cash Flows (Unaudited) (in thousands) -----------------------------------------------------------
Three Months Six Months Twelve Months Ended Ended Ended April 30 April 30 April 30 ---------------------- ---------------------- ---------------------- 2001 2000 2001 2000 2001 2000 --------- --------- --------- --------- --------- --------- Cash Flows from Operating Activities: Net income $ 39,869 $ 37,436 $ 90,171 $ 81,530 $ 72,672 $ 64,506 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,079 13,144 26,161 25,906 52,346 50,214 Other, net 20,719 (1,069) (9,238) (353) 16,172 1,025 Net gain on propane business combination, net of tax -- -- -- -- (5,063) -- Change in operating assets and liabilities (19,761) 53,693 28,118 5,327 (58,675) (74,507) --------- --------- --------- --------- --------- --------- Net cash provided by operating activities 53,906 103,204 135,212 112,410 77,452 41,238 --------- --------- --------- --------- --------- --------- Cash Flows from Investing Activities: Utility construction expenditures (14,035) (21,441) (40,522) (40,931) (104,920) (94,284) Investment in propane partnership -- -- -- -- (30,552) -- Proceeds from propane business combination -- -- -- -- 36,748 -- Other (59) (312) (6,691) (595) (7,005) (1,433) --------- --------- --------- --------- --------- --------- Net cash used in investing activities (14,094) (21,753) (47,213) (41,526) (105,729) (95,717) --------- --------- --------- --------- --------- --------- Cash Flows from Financing Activities: Increase (Decrease) in bank loans, net (31,015) (71,500) (65,515) (49,500) 3,985 30,000 Issuance of long-term debt -- -- -- -- 60,000 90,000 Retirement of long-term debt -- -- -- -- (2,000) (46,000) Issuance of common stock through dividend reinvestment and employee stock plans 3,871 4,193 7,418 7,929 14,941 15,903 Dividends paid (12,363) (11,502) (24,044) (22,325) (47,206) (43,805) --------- --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities (39,507) (78,809) (82,141) (63,896) 29,720 46,098 --------- --------- --------- --------- --------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 305 2,642 5,858 6,988 1,443 (8,381) Cash and Cash Equivalents at Beginning of Period 14,300 10,520 8,747 6,174 13,162 21,543 --------- --------- --------- --------- --------- --------- Cash and Cash Equivalents at End of Period $ 14,605 $ 13,162 $ 14,605 $ 13,162 $ 14,605 $ 13,162 ========= ========= ========= ========= ========= ========= Cash Paid During the Period for: Interest $ 2,720 $ 2,978 $ 19,628 $ 16,496 $ 38,103 $ 33,017 Income taxes $ 48,685 $ 51,384 $ 48,745 $ 53,023 $ 81,570 $ 64,800
See notes to condensed consolidated financial statements. -4- 5 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) ---------------------------------------------------------------- 1. Independent auditors have not audited the condensed consolidated financial statements. These financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in our 2000 Annual Report. 2. In our opinion, the unaudited condensed consolidated financial statements include all normal recurring adjustments necessary for a fair statement of financial position at April 30, 2001, and October 31, 2000, and the results of operations and cash flows for the three months, six months and twelve months ended April 30, 2001 and 2000. We make estimates and assumptions when preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. 3. Our business is seasonal in nature. The results of operations for the three-month and six-month periods ended April 30, 2001, do not necessarily reflect the results to be expected for the full year. 4. Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur when common stock equivalents are added to common shares outstanding. Shares that may be issued under the long-term incentive plan are our only common stock equivalents. A reconciliation of basic and diluted earnings per share is shown below:
Three Months Six Months Twelve Months Ended Ended Ended April 30 April 30 April 30 -------------------- -------------------- -------------------- (in thousands except per share amounts) 2001 2000 2001 2000 2001 2000 ------- ------- ------- ------- ------- ------- Net Income $39,869 $37,436 $90,171 $81,530 $72,672 $64,506 ======= ======= ======= ======= ======= ======= Average shares of common stock outstanding for basic earnings per share 32,126 31,526 32,056 31,453 31,900 31,296 Contingently issuable shares under the long-term incentive plan 231 178 246 179 274 204 ------- ------- ------- ------- ------- ------- Average shares of dilutive stock 32,357 31,704 32,302 31,632 32,174 31,500 ======= ======= ======= ======= ======= ======= Earnings Per Share: Basic $ 1.24 $ 1.19 $ 2.81 $ 2.59 $ 2.28 $ 2.06 Diluted $ 1.23 $ 1.18 $ 2.79 $ 2.58 $ 2.26 $ 2.05
-5- 6 5. Business Segments We have two reportable business segments, domestic natural gas distribution and retail energy marketing services. Operations of our domestic natural gas distribution segment are conducted by the parent company and by limited liability companies of which two wholly owned subsidiaries of our wholly owned subsidiary, Piedmont Energy Partners, are members. Operations of our retail energy marketing services segment are conducted by a limited liability company of which a wholly owned subsidiary of Piedmont Energy Partners is a member. All of our other activities included in Other in the segment tables consist primarily of propane operations conducted by a master limited partnership of which a wholly owned subsidiary of Piedmont Energy Partners has an equity interest. We evaluate performance based on margin, operations and maintenance expenses, operating income and income before taxes. The basis of segmentation and the basis of the measurement of segment profit or loss have not changed from that reported in our audited financial statements for the year ended October 31, 2000. Continuing operations by segment for the three months and six months ended April 30, 2001 and 2000, are presented below:
Domestic Retail Natural Gas Energy Distribution Marketing Other Total -------------------- --------------------- --------------------- -------------------- (in thousands) Three Months Ended April 30 2001 2000 2001 2000 2001 2000 2001 2000 - --------------------------- -------- -------- -------- -------- -------- -------- -------- -------- Revenues from external customers $408,012 $282,955 $ -- $ -- $ -- $ 11,236 $408,012 $294,191 Margin 119,630 115,163 -- -- (264) 4,485 119,366 119,648 Operations and maintenance expenses 32,890 32,119 -- 2 589 2,871 33,479 34,992 Operating income 45,181 43,581 (1) (3) (857) 806 44,323 44,384 Other income 1,956 1,878 4,883 1,817 1,221 15 8,060 3,710 Income before income taxes 60,773 58,869 4,732 2,154 368 779 65,873 61,802 Capital expenditures 15,323 22,312 -- -- -- 250 15,323 22,562 Six Months Ended April 30 - ------------------------- Revenues from external customers $875,585 $551,603 $ -- $ -- $ -- $ 26,458 $875,585 $578,061 Margin 248,232 232,236 -- -- (264) 11,080 247,968 243,316 Operations and maintenance expenses 67,453 62,818 1 2 564 5,236 68,018 68,056 Operating income 94,816 89,315 1 (19) (833) 4,328 93,984 93,624 Other income 3,711 3,884 18,439 8,704 3,316 35 25,466 12,623 Income before income taxes 128,486 121,063 18,032 9,351 2,490 4,217 149,008 134,631 Capital expenditures 44,109 42,921 -- -- -- 508 44,109 43,429
-6- 7 A reconciliation of net income in the consolidated financial statements for the three months and six months ended April 30, 2001 and 2000, is presented below:
Three Months Six Months Ended April 30 Ended April 30 ---------------------- ---------------------- 2001 2000 2001 2000 -------- -------- -------- -------- (in thousands) Income before income taxes for reportable segments $ 65,505 $ 61,023 $146,518 $130,414 Income before income taxes for other non-utility activities 368 779 2,490 4,217 Income taxes 26,004 24,366 58,837 53,101 -------- -------- -------- -------- Net income $ 39,869 $ 37,436 $ 90,171 $ 81,530 ======== ======== ======== ========
A reconciliation of consolidated assets in the consolidated financial statements as of April 30, 2001 and October 31, 2000, is presented below: 2001 2000 ----------- ----------- (in thousands) Domestic natural gas operations $ 1,456,674 $ 1,437,950 Retail energy marketing services 41,294 9,055 Other 36,971 34,959 Eliminations/Adjustments (56,400) (36,961) ----------- ----------- Consolidated assets $ 1,478,539 $ 1,445,003 =========== =========== 6. Derivatives and Hedging Activities Effective November 1, 2000, we adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Hedging Activities." Implementation did not have a material impact on our financial condition or results of operations. We purchase natural gas for our regulated operations. We purchase gas primarily for resale under tariffs approved by the state commissions having jurisdiction over the service territory where the customer is located. We recover the cost of gas purchased for regulated operations through purchased gas adjustment mechanisms. We structure the pricing and performance of gas supply contracts to maximize flexibility and minimize cost and risk for the ratepayer. Our risk management policies allow us to use financial instruments for trading purposes and to hedge risks; however, currently, we do not engage in such activities. In the quarter ended April 30, 2001, we purchased financial call options for natural gas for delivery in January 2002 under the guidelines of the Tennessee Incentive Plan. This plan establishes an incentive sharing mechanism based on differences in the actual cost of gas purchased and benchmark rates, together with income from marketing transportation and storage capacity in the secondary market, subject to an overall cap of $1.6 million on gains or losses. Gains or losses inside of the cap are part of a regulatory asset that will be recovered from ratepayers. Any gains or losses outside of the overall cap will be shared between the ratepayer and the shareholder. At the end of the quarter, these options were marked to their fair value. The portion of the fair value -7- 8 subject to recovery under the incentive plan was deferred under regulatory accounting. The portion of the fair value that was outside the provisions of the incentive plan was included in other gas revenues. -8- 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements Our discussion contains forward-looking statements concerning, among others, plans, objectives, proposed capital expenditures and future events or performance. Our statements reflect our current expectations and involve a number of risks and uncertainties. Although we believe that our expectations are based on reasonable assumptions, we can give no assurances that these expectations will be achieved. Important factors that could cause actual results to differ include: o Regulatory issues, including those that affect allowed rates of return, rate structure and financings, o Industrial, commercial and residential growth in our service territories, o Deregulation, unanticipated impacts of restructuring and increased competition in the energy industry, o The potential loss of large-volume industrial customers due to bypass or the shift by such customers to special competitive contracts at lower per-unit margins, o Economic and capital market conditions, o The ability to meet internal performance goals, o The capital intensive nature of our business, including development project delays or changes in project costs, o Changes in the availability and price of natural gas, o Changes in demographic patterns and weather conditions, and o Changes in environmental requirements and cost of compliance. All of these factors are difficult to predict and many are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. When used in our documents or oral presentations, the words "anticipate," "believe," "estimate," "expect," "objective," "projection," "forecast," "goal" or similar words are intended to identify forward-looking statements. Financial Condition We finance current cash requirements primarily from operating cash flows and short-term borrowings. Outstanding short-term borrowings under our bank lines of credit ranged from zero to $127 million during the quarter ended April 30, 2001, and from zero to $148.5 million during the six months ended April 30, 2001. The level of our short-term borrowings can vary significantly over the year due to changes in the wholesale prices for natural gas that we are charged by our suppliers and to increased gas supplies required to meet our customers' needs during cold weather. Short-term debt increases when wholesale prices for natural gas increase because we must pay our suppliers for the gas before we can recover our gas costs from our -9- 10 customers through their monthly bills. In addition to short-term borrowings, we sell common stock and long-term debt to cover cash requirements when market and other conditions favor such long-term financing. Our dividend reinvestment and stock purchase plan is also a source of capital. The natural gas business is seasonal in nature resulting in fluctuations in balances in accounts receivable from customers, inventories of stored natural gas and accounts payable to suppliers in addition to short-term borrowings discussed above. From April 1 to October 31, we build up natural gas inventories by injecting gas into storage for sale in the colder months. Inventory of stored gas decreased and accounts payable and accounts receivable increased from October 31, 2000, to April 30, 2001, due to this seasonality and the demand for gas during the winter season. Most of our annual earnings are realized in the winter period, which is the first five months of our fiscal year. Due to increased wholesale gas costs, our accounts receivable are higher than historical levels as of April 30, 2001, as such gas costs are passed through to our customers through purchased gas adjustment (PGA) mechanisms. This balance in accounts receivable is likely to remain at higher levels since some customers may be slow to pay their gas bills that were higher than normal due to the increased wholesale gas costs and colder-than-normal weather. We may also incur more short-term debt to pay gas commodity and other bills if collections from customers are significantly slower. It is also likely that some customers will be unable to pay their gas bills, thereby increasing our bad debt expense. In response to this possibility, we increased our reserve for uncollectibles in January. We have a substantial capital expansion program for construction of distribution facilities, purchase of equipment and other general improvements funded through sources noted above. The capital expansion program supports our approximately 5% current annual growth in customer base. Utility construction expenditures for the three months ended April 30, 2001, were $15.3 million, compared with $22.3 million for the same period in 2000. Utility construction expenditures for the six months ended April 30, 2001, were $44 million, compared with $42.9 million for the same period in 2000. Utility construction expenditures for the twelve-month period ended April 30, 2001, were $109.8 million, compared with $98.1 million for the same period in 2000. On June 4, 2001, we filed a combined debt and equity shelf registration statement for $250 million of securities with the Securities and Exchange Commission. Unless otherwise specified at the time such securities are offered for sale, the net proceeds from the sale of the securities will be used for general corporate purposes, including construction of additional facilities, the repayment of short-term debt and working capital needs. Pending such use, we may temporarily invest the net proceeds in investment grade securities. At April 30, 2001, our capitalization consisted of 43% in long-term debt and 57% in common equity. -10- 11 Results of Operations We will discuss the results of operations for the three months, six months and twelve months ended April 30, 2001, compared with similar periods in 2000. Margin Margin (operating revenues less cost of gas) for the three months ended April 30, 2001, increased $4.5 million compared with the same period in 2000 primarily for the reasons listed below. o Even though delivered volumes of natural gas, which we refer to as system throughput, decreased 3.4 million dekatherms from the same period in 2000, increased customer growth and 11% colder weather contributed to margin. Higher-margin residential customers consumed 2.7 million more dekatherms than the same period in 2000. o Rates charged to customers were increased due to general rate increases in Tennessee effective July 1, 2000, and in North Carolina effective November 1, 2000. o Secondary market wholesale transactions increased margin as compared with the same period in 2000. o Margin for the current three-month period reflects revenues from customers of $5.9 million from the weather normalization adjustment (WNA) due to weather that was 5% warmer than normal. The WNA is designed to offset the impact of unusually cold or warm weather on customer billings and operating margin. The same period in 2000 reflected increased margin of $6.7 million from the WNA due to weather that was 15% warmer than normal. Margin for the six months ended April 30, 2001, increased $16 million compared with the same period in 2000 primarily for the reasons listed below. o System throughput increased 5.6 million dekatherms over the same period in 2000, primarily due to customer growth and 22% colder weather. o Rates charged to customers were increased due to general rate increases as noted above. o Secondary market wholesale transactions increased margin as compared with the same period in 2000. Margin for the current six-month period reflects WNA refunds of $8.5 million, compared with WNA charges of $19.3 million for the same period in 2000. Margin for the twelve months ended April 30, 2001, increased $16.9 million compared with the same period in 2000 primarily for the reasons listed below. -11- 12 o System throughput increased 2.8 million dekatherms over the same period in 2000, primarily due to customer growth and 19% colder weather. o Rates charged to customers were increased due to general rate increases as noted above. o Secondary market wholesale transactions increased margin as compared with the same period in 2000. Margin for the current twelve-month period reflects WNA refunds of $8.5 million, compared with WNA charges of $19.3 million for the same period in 2000. Margin was reduced in North Carolina, effective for bills rendered after August 1, 1999 (which included volumes delivered in July), due to the elimination of the gross receipts tax that was previously included in rates billed to customers. Gross receipts tax expense in the same amount also reduced general taxes. Under PGA mechanisms in all three states, we revise rates periodically without formal rate proceedings to reflect changes in the wholesale cost of gas. Charges to cost of gas are based on the amount recoverable under approved rate schedules. The net of any over- or under-recoveries of gas costs are added to or deducted from cost of gas and included in refunds due customers in the condensed consolidated financial statements. Operations and Maintenance Expenses Operations and maintenance expenses for the three months ended April 30, 2001, increased $773,000 compared with the same period in 2000 primarily for the reasons listed below. o Increase in transportation, o Increase in utilities, o Increase in the provision for uncollectibles, o Increase in outside consultants fees and o Increase in employee benefits. A decrease in payroll partially offset these increases for the three months ended April 30, 2001, compared with the same period in 2000. Operations and maintenance expenses for the six months ended April 30, 2001, increased $4.6 million compared with the same period in 2000 primarily for the reasons listed below. o Increase in payroll, o Increase in utilities, o Increase in the provision for uncollectibles and o Increase in outside consultants fees. A decrease in advertising expense partially offset these increases for the six months ended April 30, 2001, compared with the same period in 2000. -12- 13 Operations and maintenance expenses for the twelve months ended April 30, 2001, increased $10.1 million compared with the same period in 2000 primarily for the reasons listed below. o Increase in payroll, o Increase in utilities, o Increase in employee expenses, o Increase in the provision for uncollectibles, o Increase in risk insurance, o Increase in outside consultants fees and o Increase in employee benefits. Decreases in outside labor expense and advertising expense partially offset these increases for the twelve months ended April 30, 2001, compared with the same period in 2000. General Taxes General taxes for the three months ended April 30, 2001, increased $675,000 compared with the same period in 2000 primarily due to an increase in property taxes. General taxes for the six months ended April 30, 2001, increased $1.3 million compared with the same period in 2000 primarily due to an increase in property taxes, partially offset by a decrease in franchise taxes. General taxes for the twelve months ended April 30, 2001, decreased $1.1 million compared with the same period in 2000 primarily for the reasons listed below. o Elimination of the gross receipts tax in North Carolina as noted above and o Decrease in franchise taxes. An increase in property taxes partially offset these decreases for the twelve months ended April 30, 2001, compared with the same period in 2000. Other Income Other income for the three months and six months ended April 30, 2001, increased $1.4 million and $4.1 million, respectively, compared with the same periods in 2000 primarily for the reasons listed below. o Increase in earnings from unregulated retail energy marketing services and o Increase in earnings from non-utility interstate LNG operations. These increases were partially offset by the following decreases. o Decrease in earnings from jobbing operations, o Decrease in earnings from propane operations, -13- 14 o Decrease in the portion of the allowance for funds used during construction (AFUDC) attributable to equity funds. Other income for the twelve months ended April 30, 2001, increased $8.1 million compared with the same period in 2000 primarily for the reasons listed below. o Increase in earnings from unregulated retail energy marketing services, o Increase in earnings from non-utility interstate LNG operations, o Increase in earnings from intrastate pipeline operations and o Gain on sale of propane assets in connection with a business combination in August 2000. These increases in other income were partially offset by a decrease in the portion of the AFUDC attributable to equity funds and a decrease in earnings from jobbing operations. Utility Interest Charges Utility interest charges for the three months ended April 30, 2001, increased $529,000 compared with the same period in 2000 primarily due to an increase in interest on long-term debt from higher amounts of debt outstanding. An increase in the portion of the AFUDC attributable to borrowed funds partially offset this increase. Utility interest charges for the six months and twelve months ended April 30, 2001, increased $962,000 and $4 million, respectively, compared with the same periods in 2000 primarily for the reasons listed below. o Increase in interest on long-term debt from higher amounts of debt outstanding, o Increase in interest on short-term debt due to higher amounts of debt outstanding (primarily due to the increases in the wholesale commodity prices of natural gas) at slightly higher interest rates and o Increase in interest on refunds due customers from larger balances outstanding in the current periods. These increases in utility interest charges were partially offset by an increase in the portion of the AFUDC attributable to borrowed funds. -14- 15 PART II. OTHER INFORMATION Item 5. Other Information Expansion Fund As previously reported, the North Carolina Utilities Commission (NCUC) has established an expansion fund consisting of supplier refunds due customers to be used to extend natural gas service into unserved areas of the state. The NCUC decides the use of these funds as we file individual project applications for unserved areas. The NCUC has authorized us to use $38.5 million of the expansion funds to extend natural gas service to the counties of Avery, Mitchell and Yancey, of which $26.6 million has been used as of April 30, 2001. The total cost of the project is estimated to be $44.2 million. As of April 30, 2001, the North Carolina State Treasurer held $17.1 million in our expansion fund account. This amount along with other supplier refunds, including interest earned to date, is included in restricted cash in the condensed consolidated balance sheet as of April 30, 2001. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 12 Computation of Ratio of Earnings to Fixed Charges. (b) Reports on Form 8-K - None. -15- 16 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. Piedmont Natural Gas Company, Inc. ---------------------------------- (Registrant) Date June 8, 2001 /s/ David J. Dzuricky -------------- --------------------------------------------- David J. Dzuricky Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date June 8, 2001 /s/ Barry L. Guy -------------- --------------------------------------------- Barry L. Guy Vice President and Controller (Principal Accounting Officer) -16- EX-12 2 g69945ex12.txt COMPUTATION RATIO OF EARNINGS TO FIXED CHARGES 1 Exhibit 12 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges For Fiscal Years Ended October 31, 1996 through 2000 and Twelve Months Ended April 30, 2001 (in thousands except ratio amounts) - -------------------------------------------------------------------------------
April 30, 2001 2000 1999 1998 1997 1996 -------- -------- -------- -------- -------- -------- Earnings: Net income from continuing operations $ 72,672 $ 64,031 $ 58,207 $ 60,313 $ 54,074 $ 48,562 Income taxes 47,093 41,356 37,645 38,807 34,650 30,928 Fixed charges 47,466 44,368 37,978 38,415 39,263 37,009 -------- -------- -------- -------- -------- -------- Total Adjusted Earnings $167,231 $149,755 $133,830 $137,535 $127,987 $116,499 ======== ======== ======== ======== ======== ======== Fixed Charges: Interest $ 45,413 $ 42,010 $ 35,911 $ 36,453 $ 36,949 $ 34,511 Amortization of debt expense 480 465 323 304 346 345 One-third of rental expense 1,573 1,893 1,744 1,658 1,968 2,153 -------- -------- -------- -------- -------- -------- Total Fixed Charges $ 47,466 $ 44,368 $ 37,978 $ 38,415 $ 39,263 $ 37,009 ======== ======== ======== ======== ======== ======== Ratio of Earnings to Fixed Charges 3.52 3.38 3.52 3.58 3.26 3.15 ======== ======== ======== ======== ======== ========
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