Energy, Inc. Reports 86.6% Increase in Net Income for First Quarter of 2010

- Diluted earnings per share from continuing operations for the first quarter increased 32.6% to $0.61, reflecting operating income growth from our Maine and North Carolina utilities, customer additions and acquisitions

- Operating income grew to 50.6% of gross margin from 45.8% year-over-year, due to increased financial performance in Maine and North Carolina utilities

- Customer base expands more than 50% to approximately 62,000 with the addition of 23,131 customers as a result of the January acquisition of three utilities with service areas in Northeastern Ohio and Western Pennsylvania

News provided by

Energy, Inc.

May 17, 2010, 06:55 ET

GREAT FALLS, Mont.,, May 17 /PRNewswire-FirstCall/ -- Energy, Inc. (NYSE Amex: EGAS), a natural gas utility company serving approximately 62,000 customers in six states, today reported financial results for the first quarter ended March 31, 2010.  Reported results include the acquisitions of the parent companies of Orwell Natural Gas Company and Northeast Ohio Natural Gas Corp. (NEO), and Brainard Gas Corp., as well as Great Plains Land Development, LTD. (GPL), which Energy, Inc. completed on January 5, 2010.

First Quarter 2010 Consolidated Financial Results

Consolidated net income for the first quarter was $3.7 million, or $0.61 per diluted share, compared with net income of $2.0 million, or $0.46 per diluted share, for the same period in 2009.  Earnings growth was driven by strengthened operating performance and customer additions in the Company's utilities in Maine and North Carolina combined with the acquisition of the Ohio utilities. Net income improved to 10.5% of operating revenues in the 2010 first quarter from 6.3% in the same period the prior year.

Operating income was $6.3 million for the 2010 first quarter, up $2.8 million, or 78%.  Approximately $2.3 million of the increase was related to the Ohio utilities acquisition.

Richard M. Osborne, Energy, Inc.'s chairman and chief executive officer, commented, "The results reflect our success at generating improved returns in our organic operations, expanding our customer base and the completion of the acquisition of the Ohio utilities. We believe we can continue to expand our earnings power and grow our customer base by focusing on earning fair returns in our utility operations, allocating our capital where we can capture the best returns and continuing to selectively acquire utilities that would benefit from our operational strength."

Natural Gas Operations Segment

The Natural Gas Operations segment contributed net income of $3.7 million, or $0.62 per diluted share, in the 2010 first quarter compared with $1.5 million, or $0.36 per diluted share, for the same quarter of 2009. Operating income from this segment in 2010 was $5.9 million, or 49.9% of gross margin, compared with $2.8 million, or 41.3% of gross margin, in 2009.  The increased operating income was the result of improved operations in the organic utility businesses, specifically the Maine and North Carolina operations.  The Ohio operations had a net income of approximately $1.4 million for the first quarter.

The Natural Gas Operations segment continues to see customer growth as the Company expands its facilities to meet the strong demand for natural gas service.  Organic customer growth was approximately 4% in the 2010 first quarter, while the acquisition increased the Company's customer base by over 50%.

Volumes in the Natural Gas Operations segment for the quarter were 9,770 million cubic feet (MMcf), an increase from 7,401MMcf for the same quarter in 2009.

Marketing and Production Segment

First quarter 2010 operating income for the Marketing and Production segment was $0.4 million, compared with $0.7 million in the first quarter of 2009.  The Marketing and Production segment had a first quarter net loss of $0.08 million compared with net income of $0.4 million for the same quarter of 2009.  The decline in net income was the result of a jury award of $0.5 million in litigation relating to a gas supply contract that expired in October of 2008.

Pipeline Operations Segment

The Pipeline Operations segment contributed net income of $36,235 for the 2010 first quarter compared with net income of $29,508 for the same quarter in 2009.

Balance Sheet and Cash Management

First quarter 2010 cash and marketable securities of $7.3 million increased 58% compared with the same quarter in 2009, and increased slightly from the December 31, 2009 balance of $7.2 million.  Cash provided by operating activities was $10.1 million compared with $14.9 million in the first quarter of 2009.  Total net increase in cash was $581,000 as compared with $354,000 in the first quarter of 2009.

For the first quarter ended March 31, 2010, capital expenditures were $1.3 million, compared with $1.9 million in 2009.  Capital spending was focused on expanding rate base in the Maine and North Carolina utility operations as the Company captures market share, and for maintenance of existing pipeline systems.

About Energy, Inc.

Energy, Inc. distributes and sells natural gas to end-use residential, commercial, and industrial customers. It distributes approximately 29 billion cubic feet of natural gas to approximately 62,000 customers through regulated utilities operating in Montana, Wyoming, North Carolina, Maine, Ohio and Pennsylvania. The Company markets approximately 2.4 billion cubic feet of natural gas to commercial and industrial customers in Montana and Wyoming on an unregulated basis. The company also has a majority ownership interest in 160 natural gas producing wells and gas gathering assets. In addition, the company owns the Shoshone interstate and the Glacier gathering pipelines located in Montana and Wyoming. The company's Montana public utility was originally incorporated in 1909 and is headquartered in Great Falls, Montana.

The company's toll-free number is 800-570-5688. The company's address is 1 First Avenue South, Great Falls, Montana 59401 and its website is www.ewst.com.

Safe Harbor Regarding Forward-Looking Statements

The company is including the following cautionary statement in this release to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, Energy, Inc. Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those that are identified by the use of the words "anticipates," "estimates," "expects," "intends," "plans," "predicts," "believes" and similar expressions. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Factors that may affect forward-looking statements and the company's business generally include but are not limited to the company's ability to successfully integrate the operations of the companies it has recently acquired and consummate additional acquisitions, the company's continued ability to make dividend payments, the company's ability to implement its business plan, fluctuating energy commodity prices, the possibility that regulators may not permit the company to pass through all of its increased costs to its customers, changes in the utility regulatory environment, wholesale and retail competition, the company's ability to satisfy its debt obligations, including compliance with financial covenants, weather conditions, litigation risks, and various other matters, many of which are beyond the company's control, the risk factors and cautionary statements made in the company's public filings with the Securities and Exchange Commission, and other factors that the company is currently unable to identify or quantify, but may exist in the future. Energy, Inc. expressly undertakes no obligation to update or revise any forward-looking statement contained herein to reflect any change in Energy, Inc.'s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For more information contact:


Energy, Inc.

Kei Advisors LLC

Glenn Hemminger, Director of Finance

Deborah K. Pawlowski, President & CEO

Phone: (440) 205-1987

Phone:  (716) 843-3908

Email:  [email protected]

Email:  [email protected]

FINANCIAL TABLES FOLLOW

ENERGY, INC AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME



Three Months Ended

March 31,

(unaudited)

2010

2009

REVENUES:


 Natural gas operations

$ 31,506,160

$ 26,141,570

 Gas and electric—wholesale

3,118,323

5,079,587

 Pipeline operations

108,602

112,666

          Total revenues

34,733,085

31,333,823

EXPENSES:


 Gas purchased

19,620,814

19,434,852

 Gas and electric—wholesale

2,591,411

4,124,894

         Total cost of sales

22,212,225

23,559,746




GROSS MARGIN

12,520,860

7,774,077

 Distribution, general, and administrative

3,915,442

2,895,554

 Maintenance

291,329

171,407

 Depreciation and amortization

968,029

513,674

 Taxes other than income

1,006,283

629,580

          Total expenses

6,181,083

4,210,215




OPERATING INCOME

6,339,777

3,563,862




OTHER LOSS

(251,415)

(24,979)

INTEREST EXPENSE

(592,784)

(345,952)




INCOME FROM OPERATIONS BEFORE


    INCOME TAX EXPENSE

5,495,578

3,192,931

INCOME TAX EXPENSE

(1,832,636)

(1,230,208)

NET INCOME

$   3,662,942

$   1,962,723

BASIC INCOME PER COMMON SHARE:


    Income from operations

$            0.61

$            0.46




DILUTED INCOME PER COMMON SHARE:


    Income from operations

$            0.61

$            0.46




DIVIDENDS DECLARED PER COMMON SHARE:

$            0.14

$            0.12




WEIGHTED AVERAGE COMMON SHARES




 OUTSTANDING:


 Basic

5,973,851

4,298,092

 Diluted

5,980,627

4,301,522




Please refer to the notes as filed on Form 10-Q that are an integral part of these

  consolidated financial statements.

Three  Months Ended March 31, 2010










Natural Gas Operations

Marketing

and

Production

Pipeline

Operations

Corporate and Other

Eliminations

Consolidated

OPERATING REVENUES:










 Natural gas operations

$ 31,584,769

$              -

$             -

$                -

$      (78,609)

$   31,506,160

 Marketing and Production

-

5,483,312

-

-

(2,364,989)

3,118,323

 Pipeline operations

-

-

108,602

-

-

108,602

Total operating revenue

31,584,769

5,483,312

108,602

-

(2,443,598)

34,733,085












COST OF SALES:










 Gas purchased

19,699,423

-

-

-

(78,609)

19,620,814

 Gas and electric - wholesale

-

4,956,400

-

-

(2,364,989)

2,591,411

Total Cost of Sales

19,699,423

4,956,400

-

-

(2,443,598)

22,212,225

GROSS MARGIN

$ 11,885,346

$  526,912

$ 108,602

$                -

$                 -

$   12,520,860












OPERATING INCOME:

$   5,928,490

$  350,156

$   63,652

$      (2,521)

$                 -

$     6,339,777












NET INCOME

$   3,731,295

$  (78,950)

$   36,235

$    (25,638)

$                 -

$     3,662,942












Total Assets

107,073,699

5,527,569

749,855

63,249,099

(58,543,369)

$ 118,056,853

Goodwill

13,813,626

-

-

-

-

$   13,813,626

Three  Months Ended March 31, 2009






















Natural Gas

Marketing and

Pipeline

Corporate




Operations

Production

Operations

and Other

Eliminations

Consolidated

OPERATING REVENUES:










 Natural gas operations

$    26,383,092

$                  -

$                   -

$                  -

$        (241,522)

$       26,141,570

 Marketing and Production

-

7,374,463

-

-

(2,294,876)

5,079,587

 Pipeline operations

-

-

112,666

-

-

112,666

Total operating revenue

26,383,092

7,374,463

112,666

-

(2,536,398)

31,333,823












COST OF SALES:










 Gas purchased

19,676,374

-

-

-

(241,522)

19,434,852

 Gas and electric - wholesale

-

6,419,770

-

-

(2,294,876)

4,124,894

Total Cost of Sales

19,676,374

6,419,770

-

-

(2,536,398)

23,559,746

GROSS MARGIN

$      6,706,718

$      954,693

$       112,666

$                  -

$                     -

$         7,774,077












OPERATING INCOME:

$      2,768,806

$      744,188

$         50,868

$                  -

$                     -

$         3,563,862












NET INCOME

$      1,538,833

$      422,915

$         29,508

$       (28,533)

$                     -

$         1,962,723












Total Assets

51,164,792

7,499,870

797,807

37,327,368

(32,359,071)

$       64,430,766

Goodwill

-

-

-

-

-

$                       -

ENERGY, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



March 31,

December 31,



(unaudited)

(unaudited)



2010

2009

2009

ASSETS






Current Assets:






 Cash

$               3,332,910

$            1,419,502

$            2,752,168

 Marketable securities

3,917,281

3,158,289

4,411,171

 Accounts and notes receivable less $484,059,

   $279,033, and $233,332, respectively,

   allowance for bad debt

8,360,143

7,719,238

7,579,974

 Accounts and notes receivable - related parties

745,868

-

-

 Unbilled gas


3,379,014

3,090,245

2,869,826

 Natural gas and propane inventories

1,230,476

308,719

5,251,942

 Materials and supplies

1,494,386

1,178,781

1,018,673

 Prepayments and other

713,239

592,877

552,641

 Recoverable cost of gas purchases

1,624,381

920,872

641,755

 Deferred tax asset


320,140

1,041,679

562,936

   Total current assets

25,117,838

19,430,202

25,641,086









Property, Plant and Equipment, Net

71,141,025

35,922,043

41,203,668









Deferred Tax Assets - Long-Term

4,119,023

5,238,266

7,550,970

Deferred Charges


2,018,103

2,422,311

2,094,468

Other Investments

830,432

1,323,298

784,363

Goodwill

13,813,626

-

1,056,771

Customer Relationships

679,292

-

-

Note Receivable - Related Party

52,901

-

-

Other Assets

284,613

94,646

294,356

TOTAL ASSETS

$           118,056,853

$          64,430,766

$          78,625,682









Please refer to the notes as filed on Form 10-Q that are an integral part of these consolidated financial statements

ENERGY, INC AND SUBSIDIARIES










CONSOLIDATED BALANCE SHEETS, CONTINUED











March 31,

December 31,

(unaudited)

(unaudited)

2010

2009

2009

LIABILITIES AND CAPITALIZATION




Current Liabilities:




 Bank overdraft

$                  659,105

$               463,700

$               663,777

 Accounts payable

7,540,774

5,092,863

5,530,645

 Accounts payable - related parties

1,414,910

-

-

 Line of credit

11,198,337

5,595,000

14,651,265

 Notes payable

5,183,007

-

-

 Notes payable - related parties

1,704,345

-

-

 Accrued taxes

301,394

478,818

534,710

 Accrued and other current liabilities

8,595,224

4,339,533

4,594,883

 Overrecovered gas purchases

441,749

1,435,172

1,452,580

    Total current liabilities

37,038,845

17,405,086

27,427,860






Other Obligations:




 Deferred investment tax credits

213,238

234,300

218,503

 Other long-term liabilities

2,864,955

2,398,502

2,291,511

    Total

3,078,193

2,632,802

2,510,014

Long-Term Debt

22,581,334

13,000,000

13,000,000






Commitments and Contingencies










Stockholders' Equity:




 Preferred stock; $.15 par value, 1,500,000 shares authorized,

   no shares outstanding

-

-

-

 Common stock; $.15 par value, 15,000,000 shares    

   authorized,     6,070,903,  4,299,536, and  4,361,869    

   shares outstanding at March 31, 2010 and 2009, and    

   December 31, 2009, respectively

910,635

652,943

654,280

 Treasury stock

-

(8,012)

-

 Capital in excess of par value

23,353,754

5,952,168

6,514,851

 Capital in excess of par value - noncontrolling interest

-

-

100,989

 Accumulated other comprehensive (loss) income

(20,346)

(453,665)

146,701

 Retained earnings

31,114,438

25,249,444

28,270,987

    Total stockholders' equity

55,358,481

31,392,878

35,687,808

TOTAL CAPITALIZATION

77,939,815

44,392,878

48,687,808

TOTAL LIABILITIES AND CAPITALIZATION

$           118,056,853

$          64,430,766

$          78,625,682






Please refer to the notes as filed on Form 10-Q that are an integral part of these consolidated financial statements

ENERGY, INC AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF CASH FLOWS





Three Months Ended

March 31,

(unaudited)

2010

2009




CASH FLOWS FROM OPERATING ACTIVITIES:


Net income

$       3,662,942

$      1,962,723

Adjustments to reconcile net income to


net cash provided by operating activities:


Depreciation and amortization, including deferred




charges and financing costs

991,289

606,456

Stock-based compensation

22,174

26,579

Gain on sale of securities

(26,609)

-

Investment tax credit

(5,265)

(5,265)

Deferred income taxes

1,510,504

738,193

Changes in assets and liabilities:


Accounts and notes receivable

6,338,850

1,460,348

Accounts and notes receivable - related parties

(743,539)

-

Natural gas and propane inventories

4,653,044

9,583,082

Accounts payable

(3,799,570)

(708,840)

Accounts payable - related parties

1,306,603

-

Recoverable/refundable cost of gas purchases

(2,701,968)

1,532,727

Prepayments and other

105,608

(170,363)

Asset retirement obligation liability

29,100

9,984

Other assets & liabilities

(1,288,106)

(141,797)

Net cash provided by operating activities

10,055,057

14,893,827




CASH FLOWS FROM INVESTING ACTIVITIES:


Construction expenditures

(1,272,034)

(1,888,448)

Sale of marketable securities

301,897

-

Purchase of Cut Bank shares

(97,667)

-

Cash acquired in acquisitions

144,203

-

Other investments

(32,486)

(241,875)

Customer advances received for construction

56,899

5,195

Increase from contributions in aid of construction

24,813

7,436

Net cash used in investing activities

(874,375)

(2,117,692)




CASH FLOWS FROM FINANCING ACTIVITIES:


Repayments of long-term debt

(234,229)

-

Proceeds from lines of credit

3,700,000

1,700,000

Repayment of notes payable

(10,752,098)

(13,600,000)

Repayments of other short-term borrowings

(494,169)

-

Dividends paid

(819,444)

(522,162)

Net cash used in financing activities

(8,599,940)

(12,422,162)




NET INCREASE IN CASH AND CASH EQUIVALENTS

580,742

353,973




CASH AND CASH EQUIVALENTS:


Beginning of period

2,752,168

1,065,529

End of period

$       3,332,910

$      1,419,502




Please refer to the notes as filed on Form 10-Q that are an integral part of these consolidated financial statements

SOURCE Energy, Inc.

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