0000950144-95-002553.txt : 19950914 0000950144-95-002553.hdr.sgml : 19950914 ACCESSION NUMBER: 0000950144-95-002553 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950911 SROS: NYSE 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: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06196 FILM NUMBER: 95572544 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 PIEDMONT NATURAL GAS COMPANY 10-Q 7/31/95 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 July 31, 1995 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 September 5, 1995 ----------------------------- -------------------------------- Common Stock, no par value 28,742,145 ================================================================================ Page 1 of 11 pages 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (in thousands) ---------------------------------------------------
July 31, October 31, ASSETS 1995 1994 ------ ---- ---- Utility Plant, at original cost $1,036,554 $978,218 Less accumulated depreciation 265,451 243,325 ---------- -------- Utility plant, net 771,103 734,893 ---------- -------- Other Physical Property (net of accumulated depreciation of $12,605 in 1995 and $11,753 in 1994) 25,608 25,188 ---------- -------- Current Assets: Cash and cash equivalents 7,212 6,523 Restricted cash 17,776 14,961 Receivables (less allowance for doubtful accounts of $3,170 in 1995 and $947 in 1994) 28,993 22,597 Gas in storage 32,325 44,725 Deferred cost of gas 2,551 5,162 Refundable income taxes - 10,194 Other 10,457 13,231 ---------- -------- Total current assets 99,314 117,393 ---------- -------- Deferred Charges and Other Assets 24,640 10,296 ---------- -------- Total $ 920,665 $887,770 ========== ======== CAPITALIZATION AND LIABILITIES ------------------------------ Capitalization: Common stock equity: Common stock $ 228,864 $187,592 Retained earnings 137,176 114,400 ---------- -------- Total common stock equity 366,040 301,992 Long-term debt 312,000 313,000 ---------- -------- Total capitalization 678,040 614,992 ---------- -------- Current Liabilities: Current maturities of long-term debt and sinking fund requirements 5,000 5,000 Notes payable 17,000 63,500 Accounts payable 35,776 35,903 Deferred income taxes 9,388 11,314 Taxes accrued (1,312) 8,019 Refunds due customers 36,385 22,124 Other 15,729 18,183 ---------- -------- Total current liabilities 117,966 164,043 ---------- --------- Deferred Credits and Other Liabilities 124,659 108,735 ---------- -------- Total $ 920,665 $887,770 ========== ========
See notes to condensed consolidated financial statements. -2- 3 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Statements of Consolidated Income (in thousands) ---------------------------------------------------
Three Months Nine Months Twelve Months Ended Ended Ended July 31 July 31 July 31 ------------ ----------- ------------- 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Operating Revenues $61,649 $70,641 $443,516 $508,559 $510,310 $578,994 Cost of Gas 26,447 38,169 222,705 306,611 256,669 346,124 ------- ------- -------- -------- -------- -------- Margin 35,202 32,472 220,811 201,948 253,641 232,870 ------- ------- -------- -------- -------- -------- Other Operating Expenses: Operations 23,667 22,262 71,266 67,926 96,025 90,387 Maintenance 4,376 4,026 12,100 11,387 16,239 15,641 Depreciation 7,982 6,031 23,727 18,093 30,205 23,611 General Taxes 5,361 5,183 21,923 21,383 27,105 26,062 Income Taxes (5,481) (4,562) 26,848 25,022 20,884 20,692 ------- ------- -------- -------- -------- -------- Total other operating expenses 35,905 32,940 155,864 143,811 190,458 176,393 ------- ------- -------- -------- -------- -------- Operating Income (703) (468) 64,947 58,137 63,183 56,477 Other Income, Net (801) (623) 3,332 4,173 4,104 4,827 -------- -------- -------- -------- -------- -------- Income Before Utility Interest Charges (1,504) (1,091) 68,279 62,310 67,287 61,304 Utility Interest Charges 7,321 6,148 22,845 18,818 29,839 24,779 ------- ------- -------- -------- -------- -------- Net Income $(8,825) $(7,239) $ 45,434 $ 43,492 $ 37,448 $ 36,525 ======== ======== ======== ======== ======== ======== Average Shares of Common Stock Outstanding 28,644 26,398 27,596 26,291 27,322 26,242 Earnings Per Share of Common Stock $ (0.31) $ (0.27) $ 1.65 $ 1.65 $ 1.37 $ 1.39 Cash Dividends Declared Per Share of Common Stock $ 0.275 $ 0.260 $ 0.810 $ 0.765 $ 1.07 $ 1.01
See notes to condensed consolidated financial statements. -3- 4 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Condensed Statements of Consolidated Cash Flows (in thousands) --------------------------------------------------------------
Three Months Nine Months Twelve Months Ended Ended Ended July 31 July 31 July 31 ------------ ----------- ------------- 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Cash Flows from Operating Activities: Net income $ (8,825) $ (7,239) $ 45,434 $ 43,492 $ 37,448 $ 36,525 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization and other 8,980 6,936 26,705 20,696 34,147 27,016 Other, net 3,657 1,157 7,888 (10,945) 8,917 (16,919) Change in operating assets and liabilities (13,554) (14,463) 23,219 37,604 4,290 21,441 --------- --------- -------- -------- --------- -------- Net cash provided by (used in) operating activities (9,742) (13,609) 103,246 90,847 84,802 68,063 --------- --------- -------- -------- --------- -------- Cash Flows from Investing Activities: Utility construction expenditures (23,737) (26,785) (69,924) (67,739) (105,718) (92,571) Other (711) (657) (1,964) (2,966) (2,866) (3,858) --------- -------- -------- -------- --------- -------- Net cash used in investing activities (24,448) (27,442) (71,888) (70,705) (108,584) (96,429) -------- -------- -------- -------- --------- -------- Cash Flows from Financing Activities: Increase (Decrease) in bank loans, net 17,000 35,000 (46,500) (7,000) (18,000) 6,000 Issuance of long-term debt - - - - 40,000 45,000 Retirement of long-term debt (1,000) (1,000) (1,000) (1,000) (5,000) (5,000) Sale of common stock, net of expenses - - 33,155 - 33,155 - Issuance of common stock through dividend reinvestment and employee stock plans 2,290 2,268 6,335 6,507 8,289 8,353 Dividends paid (7,873) (6,861) (22,659) (20,106) (29,548) (26,498) -------- -------- -------- -------- --------- -------- Net cash provided by (used in) financing activities 10,417 29,407 (30,669) (21,599) 28,896 27,855 -------- -------- --------- --------- --------- -------- Net Increase (Decrease) in Cash and Cash Equivalents (23,773) (11,644) 689 (1,457) 5,114 (511) Cash and Cash Equivalents at Beginning of Period 30,985 13,742 6,523 3,555 2,098 2,609 -------- -------- -------- -------- --------- -------- Cash and Cash Equivalents at End of Period $ 7,212 $ 2,098 $ 7,212 $ 2,098 $ 7,212 $2,098 ======== ======== ======== ======== ========= ======== Cash Paid During the Period for: Interest $ 8,034 $ 6,337 $ 21,236 $ 18,088 $ 27,476 $ 24,495 Income taxes $ 950 $ 3,075 $ 30,001 $ 26,414 $ 30,701 $ 26,471
See notes to condensed consolidated financial statements. -4- 5 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 1. The condensed consolidated financial statements have not been audited by independent auditors. These financial statements should be read in conjunction with the Notes to Consolidated Financial Statements included in the Company's 1994 Annual Report. 2. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of the Company at July 31, 1995, and October 31, 1994, and the results of its operations and its cash flows for the three months, nine months and twelve months ended July 31, 1995 and 1994. 3. The Company's business is seasonal in nature. The results of operations for the three- and nine-month periods ended July 31, 1995, are not necessarily indicative of the results to be expected for the full year. 4. Certain financial statement items for 1994 have been reclassified in order to conform with the 1995 presentation. -5- 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition The Company finances its current cash requirements through internally generated cash, the issuance of new common stock through dividend reinvestment and employee stock purchase plans and committed bank lines of credit totaling $57 million. In addition, the Company sells common stock and long-term debt to cover cash requirements when market or other conditions warrant such long-term financing. Because of the seasonal nature of the natural gas business, a substantial portion of the Company's earnings are realized in the winter period which is the first six months of the fiscal year. Injections of natural gas into storage occur during periods of warm weather (principally April 1 through October 31) for withdrawal from storage during periods of cold weather (principally November 1 through March 31). Due to this seasonality, the inventory of stored gas was reduced due to the demand for gas during the winter season and receivables increased from October 31, 1994, to July 31, 1995. On May 16, 1995, the Company filed a shelf registration statement with the Securities and Exchange Commission for $150 million of debt securities, including $20 million from a previously filed shelf registration. The registration statement became effective on August 14. The Company anticipates drawing from this shelf registration in the fall of 1995; however, the amount and timing will depend on capital requirements and financial market conditions. It is anticipated that the net proceeds from the sale of the debt securities will be used for general corporate purposes, including construction of additional facilities, the repayment of short-term debt and working capital needs. In order to sustain its approximately 6% current annual growth in customer base, the Company has a substantial capital expansion program. The capital expansion program is dependent on the Company's continuing ability to generate the necessary funds required for this growth. Utility construction expenditures for the nine and twelve months ended July 31, 1995, were $71.1 million and $107.9 million, respectively, as compared with $69 million and $94.1 million, respectively, for similar prior periods. At July 31, 1995, the Company's capital structure consisted of long-term debt of 46% and common equity of 54%. Results of Operations Margin for the three months ended July 31, 1995, increased $2.7 million compared with the same period last year due to regulatory rate changes which increased rates and updated gas cost components. Although not a significant factor for third quarter operations, degree days for the three months ended July 31, 1995, -6- 7 were 51% less than degree days in the similar prior period. Delivered volumes of natural gas for the current three-month period increased over the similar prior period by 187,000 dekatherms, less than 1%. Margin earned per dekatherm of gas delivered for the three months ended July 31, 1995, increased over the similar prior period by $.12. Margin for the nine months ended July 31, 1995, increased $18.9 million compared with the same period last year due to regulatory rate changes which increased rates and updated gas cost components. Weather for the nine months ended July 31, 1995, was 12% warmer than the similar prior period. As a result, the weather normalization adjustment (WNA), in effect from November 1 through March 31, increased operating revenues by $10.4 million for the nine months ended July 31, 1995, as compared with an increase of $112,000 for the similar prior period. Delivered volumes of natural gas for the current nine months decreased from the similar prior period by 1.4 million dekatherms, approximately 1%. Margin earned per dekatherm of gas delivered for the nine months ended July 31, 1995, increased over the similar prior period by $.21. Margin for the twelve months ended July 31, 1995, increased $20.8 million compared with the similar prior period due to regulatory rate changes and the impact of the WNA. Weather for the twelve months ended July 31, 1995, was 12% warmer than the similar prior period. The WNA increased operating revenues by $10.4 million in the current period and $107,000 in the similar prior period. Delivered volumes of natural gas for the current twelve months increased over the similar prior period by 86,000 dekatherms, less than 1%. Margin earned per dekatherm of gas delivered for the twelve months ended July 31, 1995, increased over the similar prior period by $.17. Cost of gas per dekatherm of gas sold for the three months, nine months and twelve months ended July 31, 1995, decreased by $.52, $.27 and $.22, respectively, compared with similar prior periods. Changes in purchased gas costs from suppliers have no significant impact on margin as the Company recovers 100% of its prudently incurred gas costs through various regulatory mechanisms. The above decreases were primarily due to reduced commodity gas costs and a lower demand cost component. The cost of gas per dekatherm of gas sold is also impacted by changes in the mix between industrial sales and industrial transportation. Certain large-volume customers purchase gas directly from gas producers or third-party gas marketers and transport it through the Company's distribution system. The Company does not include in its operating revenues and cost of gas the commodity cost of this transported gas. Transportation volumes as a percentage of total industrial volumes were 64% for the three months, 60% for the nine months and 61% for the twelve months ended July 31, 1995, as compared with 50%, 27% and 30%, respectively, for similar prior periods. Operations and maintenance expenses for the three months, nine months and twelve months ended July 31, 1995, increased over -7- 8 similar prior periods primarily due to increases in maintenance and repairs of mains, rents and leases, outside labor, payroll and employee benefit costs. Depreciation expense for the three months, nine months and twelve months ended July 31, 1995, increased over similar prior periods due to the growth of plant in service and to increases in depreciation rates for North Carolina operations effective November 1, 1994. General taxes for the three months, nine months and twelve months ended July 31, 1995, increased over similar prior periods primarily due to increases in property taxes from rate increases and additions to taxable property and to increases in payroll taxes. These increases were partially offset by decreases in gross receipts taxes resulting from decreased revenues. Other income for the three months, nine months and twelve months ended July 31, 1995, decreased from similar prior periods primarily due to decreases in earnings from merchandise and propane operations. Propane operations were negatively impacted by the warmer-than-normal weather noted above. Compared with similar prior periods, the allowance for funds used during construction (AFUDC) for the three-month and nine-month periods ended July 31, 1995, was down due to changes in rates and decreases in the balances on which AFUDC is computed. These decreases in other income were partially offset by increases in earnings from energy marketing services and interest earned on temporary cash investments. Utility interest charges for the three months, nine months and twelve months ended July 31, 1995, increased over similar prior periods due to increases in the amounts of debt and refunds due customers outstanding and to increases in short-term interest rates. -8- 9 PART II. OTHER INFORMATION Item 5. Other Information Expansion of Services As previously reported, the Company filed a petition in September 1994 with the North Carolina Utilities Commission (NCUC) for a certificate of public convenience and necessity to serve four counties in North Carolina not presently receiving natural gas service. The Company estimated that the expansion would require capital expenditures of $57.7 million over a period of five years. The Company also filed applications to establish an expansion fund and place $14.8 million of supplier refunds into this fund. The Company requested permission to use the fund to offset a portion of the cost of the construction in the four counties. Another company, not currently providing natural gas service in North Carolina or elsewhere, also filed an application to serve the four counties; however, this company did not request permission to use expansion funds. On June 19, 1995, the NCUC granted a conditional certificate to the Company to serve the four-county area which would prohibit the Company from utilizing available expansion funds. On July 10, the Company filed its exceptions to the order declining the conditional certificate and requesting that a final order be granted which would not prohibit the Company from using expansion funds. On July 20, the NCUC conditionally granted a certificate to the competing applicant. On August 17, the Company gave notice of appeal and filed its exceptions to the July 20 order. The outcome of these proceedings cannot be determined at this time. LNG Project As previously reported, the Company and Transcontinental Gas Pipe Line Corporation signed a letter of intent to form Pine Needle LNG Company, LLC (Pine Needle). Pine Needle has entered into letters of intent to admit other members for 25% of the interest in Pine Needle. Subject to the execution of definitive agreements, the admission of these members will result in the Company's interest in Pine Needle being reduced from 50% to 37 1/2%. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - 12 Computation of Ratio of Earnings to Fixed Charges. 27 Financial Data Schedule (for Securities and Exchange Commission use only). (b) Reports on Form 8-K - None. -9- 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIEDMONT NATURAL GAS COMPANY, INC. ---------------------------------- (Registrant) Date September 11, 1995 /s/ David J. Dzuricky --------------------- ---------------------------------- David J. Dzuricky Senior Vice President-Finance (Principal Financial Officer) Date September 11, 1995 /s/ Barry L. Guy --------------------- --------------------------------- Barry L. Guy Vice President and Controller (Principal Accounting Officer) -10- EX-12 2 COMPUTATION OF RATIO OF EARNINGS 1 Exhibit 12 PIEDMONT NATURAL GAS COMPANY, INC. AND SUBSIDIARIES Computation of Ratio of Earnings to Fixed Charges For Fiscal Years Ended October 31, 1990 through 1994 and Twelve Months Ended July 31, 1995 (in thousands except ratio amounts) -----------------------------------------------------
July 31, 1995 1994 1993 1992 1991 1990 -------- ---- ---- ---- ---- ---- Earnings: Net income from continuing operations $37,448 $35,506 $37,534 $35,310 $20,552 $25,733 Income taxes 23,601 21,407 23,427 21,259 11,408 14,859 Fixed charges 34,534 29,736 26,715 26,246 26,823 25,739 ------- ------- ------- ------- ------- ------- Total Adjusted Earnings $95,583 $86,649 $87,676 $82,815 $58,783 $66,331 ======= ======= ======= ======= ======= ======= Fixed Charges: Interest $32,331 $27,671 $24,870 $24,570 $25,253 $24,271 Amortization of debt expense 336 334 192 180 259 164 One-third of rental expense 1,867 1,731 1,653 1,496 1,311 1,304 ------- ------- ------- ------- ------- ------- Total Fixed Charges $34,534 $29,736 $26,715 $26,246 $26,823 $25,739 ======= ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges 2.77 2.91 3.28 3.16 2.19 2.58 ======= ======= ======= ======= ====== =======
-11- EX-27 3 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF PIEDMONT NATURAL GAS FOR THE NINE MONTHS ENDED JULY 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS OCT-31-1995 NOV-01-1994 JUL-31-1995 PER-BOOK 771,103 25,608 99,314 24,640 0 920,665 228,864 0 137,176 366,040 0 0 312,000 0 0 0 5,000 0 0 0 237,625 920,665 443,516 26,848 351,721 378,569 64,947 3,332 68,279 22,845 45,434 0 45,434 22,659 0 103,246 1.65 0