Gas Natural Reports Record Net Income in First Quarter 2014
- Gross margin grows 13% to $18.8 million, driven by continued customer expansion in Maine, North Carolina and Ohio, as well as colder weather in all service areas
- First quarter 2014 net income of $5.0 million, up 5% from $4.8 million in the prior year
MENTOR, Ohio, May 15, 2014 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a holding company operating local natural gas utility companies serving approximately 73,000 natural gas customers in seven states, reported financial results for the first quarter ended March 31, 2014.
Net income was $5.0 million, or $0.48 per diluted share, for the 2014 first quarter compared with $4.8 million or $0.57 per diluted share, for the quarter ended March 31, 2013. The higher income was driven by continued customer growth in Maine, North Carolina and Ohio amplified by colder weather in all markets.
Mr. Gregory J. Osborne, Gas Natural's President and Chief Executive Officer commented, "We've started 2014 on a strong footing. Our rate of change has been brisk as we continue to profitably grow our customer base, especially in our Maine and North Carolina markets. The harsh winter tested our pipeline infrastructure, which performed very well. We also continue to make internal changes, aligning our processes and organization to support our growth strategy. And we believe that our increasing full service utility throughput serves as our foundation for future growth and profitability."
Natural Gas Operations Segment
The Company annually distributes over 36 billion cubic feet of natural gas to approximately 73,000 customers through regulated utilities operating in Kentucky, Maine, Montana, North Carolina, Ohio, Pennsylvania, and Wyoming.
Natural Gas Operations Income Statement |
|||
Three Months Ended March 31, |
|||
($ in thousands) |
2014 |
2013 |
|
Natural Gas Operations |
|||
Operating revenues |
$ 60,254 |
$ 39,945 |
|
Gas purchased |
41,956 |
24,116 |
|
Gross margin |
18,298 |
15,829 |
|
Operating expenses |
8,602 |
7,577 |
|
Operating income |
9,696 |
8,252 |
|
Other income |
112 |
39 |
|
Income before interest and taxes |
9,808 |
8,291 |
|
Interest expense |
(744) |
(718) |
|
Income before income taxes |
9,064 |
7,573 |
|
Income tax expense |
(3,371) |
(2,861) |
|
Net Income |
$ 5,693 |
$ 4,712 |
The Natural Gas Operations segment reported strong year-over-year revenue growth. Revenue in the 2014 quarter from the Company's Maine and North Carolina markets increased by $9.3 million and revenue from the Ohio market increased $6.8 million compared with the prior-year period, driven by increased natural gas prices passed on to customers, continued customer growth and colder weather. Revenue from Gas Natural's Montana and Wyoming markets increased $4.0 million compared with the prior-year first quarter, driven by higher prices for natural gas passed through to customers as well as colder weather.
Gross margin was $18.3 million for the quarter compared with $15.8 million last year, driven by increased customer growth in Maine, North Carolina and Ohio as well as colder weather in all service territories.
The increase in operating expenses for the quarter reflects an increase in the implementation of greater internal controls and enhanced infrastructure including higher depreciation of $0.3 million. The segment reported first quarter net income of $5.7 million compared with $4.7 million in the 2013 quarter.
Marketing and Production Operations Segment
The Marketing and Production segment was breakeven for the first quarter of 2014 compared with $0.2 million of net income in the prior-year period. The Company's newly formed Gas Natural Resources (GNR) subsidiary drove revenue growth for the quarter, partially offset by lower sales volume from the Company's Liquid Natural Gas (LNG) operation. Compared with the prior year, overall segment profitability was impacted by $0.3 million of lower gross margin due to higher cost natural gas supplied to fixed price sales commitments.
Corporate and Other Operations Segment
Increased operating expenses support the Company's growth strategy and also include approximately $0.3 million for non-cash stock compensation costs, a $0.2 million write-off related to a terminated software conversion project, and increased professional service costs. Approximately $0.6 million of those costs are non-recurring in nature.
Balance Sheet and Cash Management
Cash and cash equivalents as of March 31, 2014 were $11.1 million, compared with $13.1 million at December 31, 2013.
Cash provided by operating activities of continuing operations was $6.0 million in the 2014 first quarter compared with $11.0 million in the prior-year period. The decrease was due to higher working capital requirements, especially gas purchases that are expected to be recovered throughout the rest of 2014.
Capital expenditures in the 2014 first quarter were $5.7 million compared with $5.1 million in the 2013 period. Expenditures continue to focus on growth of the Company's Natural Gas Operations segment, especially the expansion of its gas pipeline systems to service the growing demand for natural gas in North Carolina and Maine.
Webcast and Conference Call
Gas Natural will host a conference call and live webcast on Friday, May 16th at 10:00 a.m. Eastern Time. During the conference call and webcast, management will review the financial and operating results for the first quarter and discuss Gas Natural's corporate strategies and outlook. A question-and-answer session will follow. The teleconference can be accessed by calling (201) 689-8471. The webcast can be monitored on the Company's website at www.egas.net.
A telephonic replay will be available from 2:00 p.m. ET on the day of the teleconference through Friday, May 23, 2014. To listen to a replay of the call, dial (858) 384-5517 and enter the conference ID number 13580807. An archive of the webcast will be available on the Company's website at www.egas.net and will include a transcript, once available.
About Gas Natural Inc.
Gas Natural Inc., a holding company, distributes and sells natural gas to end-use residential, commercial, and industrial customers. It distributes approximately 36 billion cubic feet of natural gas to approximately 73,000 customers through regulated utilities operating in Montana, Wyoming, Ohio, Pennsylvania, Maine, North Carolina and Kentucky. The Company's other operations include interstate pipeline, natural gas production, and natural gas marketing. The Company's Montana public utility was originally incorporated in 1909. Its strategy for growth is to expand throughput in the Maine and North Carolina markets, while looking for acquisitions that are either adjacent to its existing utilities or in under saturated markets.
The Company's toll-free number is 800-570-5688. Gas Natural Inc. regularly posts information on its website at www.egas.net.
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, Gas Natural 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. Gas Natural Inc. expressly undertakes no obligation to update or revise any forward-looking statement contained herein to reflect any change in Gas Natural 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: Gas Natural Inc. |
Investor Relations: |
James E. Sprague, Chief Financial Officer |
Deborah K. Pawlowski, Kei Advisors LLC |
Phone: (440) 974-3770 |
Phone: (716) 843-3908 |
Email: [email protected] |
Email: [email protected] |
FINANCIAL TABLES FOLLOW.
Gas Natural Inc. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income (Unaudited) |
|||
Three Months Ended March 31, |
|||
REVENUES |
2014 |
2013 |
|
Natural gas operations |
$ 60,253,810 |
$ 39,944,662 |
|
Marketing and production |
4,689,356 |
3,571,779 |
|
Pipeline operations |
99,014 |
98,287 |
|
Total revenues |
65,042,180 |
43,614,728 |
|
COST OF SALES |
|||
Natural gas purchased |
41,955,435 |
24,116,421 |
|
Marketing and production |
4,240,965 |
2,860,035 |
|
Total cost of sales |
46,196,400 |
26,976,456 |
|
GROSS MARGIN |
18,845,780 |
16,638,272 |
|
OPERATING EXPENSES |
|||
Distribution, general, and administrative |
6,846,678 |
5,322,700 |
|
Maintenance |
346,403 |
329,413 |
|
Depreciation and amortization |
1,821,178 |
1,421,570 |
|
Accretion |
46,578 |
42,607 |
|
Taxes other than income |
996,732 |
910,907 |
|
Total operating expenses |
10,057,569 |
8,027,197 |
|
OPERATING INCOME |
8,788,211 |
8,611,075 |
|
Loss from unconsolidated affiliate |
(973) |
(1,080) |
|
Other income, net |
106,108 |
35,403 |
|
Acquisition expense |
(5,328) |
(175,879) |
|
Interest expense |
(809,381) |
(802,017) |
|
Income before income taxes |
8,078,637 |
7,667,502 |
|
Income tax expense |
(3,044,585) |
(2,897,892) |
|
INCOME FROM CONTINUING OPERATIONS |
5,034,052 |
4,769,610 |
|
Discontinued operations, net of tax |
(15,561) |
18,113 |
|
NET INCOME |
$ 5,018,491 |
$ 4,787,723 |
|
Basic weighted shares outstanding |
10,451,678 |
8,384,863 |
|
Dilutive effect of stock options |
572 |
781 |
|
Diluted weighted shares outstanding |
10,452,250 |
8,385,644 |
|
BASIC AND DILUTED EARNINGS PER SHARE: |
|||
Continuing operations |
$ 0.48 |
$ 0.57 |
|
Discontinued operations |
- |
- |
|
Net income per share |
$ 0.48 |
$ 0.57 |
|
Weighted average dividends declared per common share |
$ 0.135 |
$ 0.135 |
|
COMPREHENSIVE INCOME: |
|||
Net income |
$ 5,018,491 |
$ 4,787,723 |
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
|||
Unrealized gain (loss) on available for sale securities, net of tax of $(1,327), and $1,894, respectively |
(923) |
2,565 |
|
COMPREHENSIVE INCOME |
$ 5,017,568 |
$ 4,790,288 |
Gas Natural Inc. and Subsidiaries Condensed Consolidated Balance Sheets |
|||
March 31, |
December 31, |
||
2014 |
2013 |
||
ASSETS |
(unaudited) |
||
CURRENT ASSETS |
|||
Cash and cash equivalents |
$ 11,133,563 |
$ 13,147,381 |
|
Marketable securities |
403,884 |
406,134 |
|
Accounts receivable |
|||
Trade, less allowance for doubtful accounts of $2,009,461 and $1,986,531, respectively |
17,632,969 |
13,440,565 |
|
Related parties |
174,636 |
146,225 |
|
Unbilled gas |
7,125,801 |
7,729,560 |
|
Note receivable – related parties, current portion |
1,938 |
1,938 |
|
Inventory |
|||
Natural gas |
843,404 |
5,464,744 |
|
Materials and supplies |
2,543,815 |
2,413,745 |
|
Prepaid income taxes |
675,928 |
727,427 |
|
Prepayments and other |
1,675,645 |
1,064,845 |
|
Recoverable cost of gas purchases |
8,411,607 |
1,298,299 |
|
Deferred tax asset |
1,233,624 |
1,225,032 |
|
Discontinued operations |
7,667 |
34,151 |
|
Total current assets |
51,864,481 |
47,100,046 |
|
PROPERTY, PLANT AND EQUIPMENT |
|||
Property, plant and equipment |
190,268,774 |
185,816,790 |
|
Less accumulated depreciation, depletion and amortization |
(53,863,451) |
(52,296,504) |
|
PROPERTY, PLANT, & EQUIPMENT, NET |
136,405,323 |
133,520,286 |
|
OTHER ASSETS |
|||
Notes receivable – related parties, less current portion |
91,671 |
93,727 |
|
Regulatory assets |
|||
Property taxes |
18,750 |
25,000 |
|
Income taxes |
452,645 |
452,645 |
|
Rate case costs |
119,397 |
130,228 |
|
Debt issuance costs, net of amortization |
1,284,978 |
1,388,124 |
|
Goodwill |
16,267,377 |
16,267,377 |
|
Customer relationships |
3,154,625 |
3,230,333 |
|
Investment in unconsolidated affiliate |
350,751 |
351,724 |
|
Restricted cash |
2,087,574 |
1,137,442 |
|
Other assets |
49,528 |
46,683 |
|
Total other assets |
23,877,296 |
23,123,283 |
|
TOTAL ASSETS |
$ 212,147,100 |
$ 203,743,615 |
Gas Natural Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Continued) |
|||
March 31, |
December 31, |
||
2014 |
2013 |
||
LIABILITIES AND CAPITALIZATION |
(unaudited) |
||
CURRENT LIABILITIES |
|||
Checks in excess of amounts on deposit |
$ 1,112,132 |
$ 843,634 |
|
Line of credit |
23,629,799 |
24,529,799 |
|
Accounts payable |
|||
Trade |
15,785,559 |
12,418,701 |
|
Related parties |
253,906 |
559,933 |
|
Notes payable, current portion |
3,500,000 |
3,502,190 |
|
Contingent consideration, current portion |
671,638 |
671,638 |
|
Accrued liabilities |
|||
Taxes other than income |
2,899,047 |
3,173,640 |
|
Vacation |
110,254 |
95,806 |
|
Employee benefit plans |
231,073 |
178,789 |
|
Interest |
373,573 |
169,581 |
|
Deferred payments received from levelized billing |
1,157,406 |
2,469,665 |
|
Customer deposits |
773,040 |
761,022 |
|
Related parties |
233,681 |
- |
|
Capital lease obligation, current portion |
177,570 |
177,570 |
|
Over-recovered gas purchases |
177,228 |
793,184 |
|
Other current liabilities |
1,403,781 |
1,482,375 |
|
Discontinued operations |
9,181 |
45,855 |
|
Total current liabilities |
52,498,868 |
51,873,382 |
|
LONG-TERM LIABILITIES |
|||
Deferred investment tax credits |
128,989 |
134,255 |
|
Deferred tax liability |
12,052,261 |
9,055,166 |
|
Asset retirement obligation |
2,072,931 |
2,026,353 |
|
Customer advances for construction |
1,016,803 |
1,016,671 |
|
Regulatory liability for income taxes |
83,161 |
83,161 |
|
Long-term customer deposits |
949,540 |
- |
|
Capital lease obligation, less current portion |
1,862,938 |
1,862,938 |
|
Contingent consideration, less current portion |
13,362 |
13,362 |
|
Total long-term liabilities |
18,179,985 |
14,191,906 |
|
NOTES PAYABLE, less current portion |
40,073,552 |
40,198,552 |
|
COMMITMENTS AND CONTINGENCIES |
|||
STOCKHOLDERS' EQUITY |
|||
Preferred stock; $0.15 par value, 1,500,000 shares authorized, no shares issued or outstanding |
- |
- |
|
Common stock; $0.15 par value, 15,000,000 shares authorized, 10,451,678 shares issued and outstanding |
1,567,752 |
1,567,752 |
|
Capital in excess of par value |
63,777,299 |
63,468,969 |
|
Accumulated other comprehensive income |
103,986 |
104,909 |
|
Retained earnings |
35,945,658 |
32,338,145 |
|
Total stockholders' equity |
101,394,695 |
97,479,775 |
|
TOTAL CAPITALIZATION |
141,468,247 |
137,678,327 |
|
TOTAL LIABILITIES AND CAPITALIZATION |
$ 212,147,100 |
$ 203,743,615 |
Gas Natural Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||
Three months ended March 31, |
|||
CASH FLOWS FROM OPERATING ACTIVITIES |
2014 |
2013 |
|
Net income |
$ 5,018,491 |
$ 4,787,723 |
|
Less (loss) gain from discontinued operations |
(15,561) |
18,113 |
|
Income from continuing operations |
5,034,052 |
4,769,610 |
|
Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |
|||
Depreciation and amortization |
1,821,178 |
1,421,570 |
|
Accretion |
46,578 |
42,607 |
|
Amortization of debt issuance costs |
103,145 |
104,065 |
|
Stock based compensation |
308,330 |
807 |
|
(Gain) loss on sale of assets |
(22,356) |
28,268 |
|
Loss from unconsolidated affiliate |
973 |
1,080 |
|
Investment tax credit |
(5,265) |
(5,265) |
|
Deferred income taxes |
2,989,830 |
2,886,713 |
|
Changes in assets and liabilities: |
|||
Accounts receivable, including related parties |
(4,220,815) |
(665,538) |
|
Unbilled gas |
603,759 |
154,058 |
|
Restricted cash |
(949,540) |
- |
|
Natural gas inventory |
4,621,340 |
4,238,526 |
|
Accounts payable, including related parties |
4,031,673 |
908,681 |
|
Recoverable/refundable cost of gas purchases |
(7,729,264) |
(2,276,426) |
|
Prepayments and other |
(611,420) |
207,860 |
|
Other assets |
122,081 |
67,218 |
|
Other liabilities |
(187,612) |
(864,062) |
|
Net cash provided by operating activities of continuing operations |
5,956,667 |
11,019,772 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|||
Capital expenditures |
(5,718,202) |
(5,066,920) |
|
Proceeds from sale of fixed assets |
22,356 |
8,100 |
|
Proceeds from related party notes receivable |
2,056 |
2,968 |
|
Restricted cash – capital expenditures fund |
(59) |
325,421 |
|
Customer advances for construction |
132 |
20,668 |
|
Contributions in aid of construction |
211,004 |
52,410 |
|
Net cash used in investing activities of continuing operations |
(5,482,713) |
(4,657,353) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|||
Proceeds from lines of credit |
7,000,000 |
3,750,000 |
|
Repayments of lines of credit |
(7,900,000) |
(9,690,000) |
|
Repayments of notes payable |
(127,190) |
(127,042) |
|
Debt issuance costs |
- |
(6,652) |
|
Exercise of stock options |
- |
159,500 |
|
Restricted cash – debt service fund |
(533) |
(883) |
|
Dividends paid |
(1,410,978) |
(1,131,717) |
|
Net cash used in financing activities of continuing operations |
(2,438,701) |
(7,046,794) |
|
DISCONTINUED OPERATIONS |
|||
Operating cash flows |
(40,444) |
31,402 |
|
Investing cash flows |
- |
595 |
|
Financing cash flows |
(8,627) |
9,000 |
|
Net cash provided by (used in) discontinued operations |
(49,071) |
40,997 |
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
(2,013,818) |
(643,378) |
|
Cash and cash equivalents, beginning of period |
13,147,381 |
3,435,117 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ 11,133,563 |
$ 2,791,739 |
Gas Natural Inc. and Subsidiaries Segments of Operations (Unaudited) |
||||||||||
Three Months Ended March 31, 2014 |
||||||||||
Natural Gas |
Marketing and |
Pipeline |
Corporate & |
|||||||
Operations |
Production |
Operations |
Other |
Consolidated |
||||||
OPERATING REVENUES |
$ 60,340,354 |
$ 7,929,773 |
$ 99,014 |
$ - |
$ 68,369,141 |
|||||
Intersegment elimination |
(86,544) |
(3,240,417) |
- |
- |
(3,326,961) |
|||||
Total operating revenues |
60,253,810 |
4,689,356 |
99,014 |
- |
65,042,180 |
|||||
COST OF SALES |
42,041,979 |
7,481,382 |
- |
- |
49,523,361 |
|||||
Intersegment elimination |
(86,544) |
(3,240,417) |
- |
- |
(3,326,961) |
|||||
Total cost of sales |
41,955,435 |
4,240,965 |
- |
- |
46,196,400 |
|||||
GROSS MARGIN |
18,298,375 |
448,391 |
99,014 |
- |
18,845,780 |
|||||
OPERATING EXPENSES |
8,602,160 |
382,458 |
22,012 |
1,076,184 |
10,082,814 |
|||||
Intersegment elimination |
- |
- |
- |
(25,245) |
(25,245) |
|||||
Total operating expenses |
8,602,160 |
382,458 |
22,012 |
1,050,939 |
10,057,569 |
|||||
OPERATING INCOME (LOSS) |
$ 9,696,215 |
$ 65,933 |
$ 77,002 |
$ (1,050,939) |
$ 8,788,211 |
|||||
DISCONTINUED OPERATIONS |
$ - |
$ - |
$ - |
$ (15,561) |
$ (15,561) |
|||||
NET INCOME (LOSS) |
$ 5,693,246 |
$ 20,801 |
$ 44,948 |
$ (740,504) |
$ 5,018,491 |
|||||
Three Months Ended March 31, 2013 |
||||||||||
Natural Gas |
Marketing and |
Pipeline |
Corporate & |
|||||||
Operations |
Production |
Operations |
Other |
Consolidated |
||||||
OPERATING REVENUES |
$ 40,030,408 |
$ 5,588,212 |
$ 98,287 |
$ - |
$ 45,716,907 |
|||||
Intersegment elimination |
(85,746) |
(2,016,433) |
- |
- |
(2,102,179) |
|||||
Total operating revenues |
39,944,662 |
3,571,779 |
98,287 |
- |
43,614,728 |
|||||
COST OF SALES |
24,202,167 |
4,876,468 |
- |
- |
29,078,635 |
|||||
Intersegment elimination |
(85,746) |
(2,016,433) |
- |
- |
(2,102,179) |
|||||
Total cost of sales |
24,116,421 |
2,860,035 |
- |
- |
26,976,456 |
|||||
GROSS MARGIN |
15,828,241 |
711,744 |
98,287 |
- |
16,638,272 |
|||||
OPERATING EXPENSES |
7,576,871 |
261,251 |
47,678 |
141,397 |
8,027,197 |
|||||
OPERATING INCOME (LOSS) |
$ 8,251,370 |
$ 450,493 |
$ 50,609 |
$ (141,397) |
$ 8,611,075 |
|||||
DISCONTINUED OPERATIONS |
$ - |
$ - |
$ - |
$ 18,113 |
$ 18,113 |
|||||
NET INCOME (LOSS) |
$ 4,711,206 |
$ 248,461 |
$ 27,114 |
$ (199,058) |
$ 4,787,723 |
|||||
Gas Natural Inc. and Subsidiaries Natural Gas Operations |
|||
Utility Throughput |
|||
Three Months Ended March 31, |
|||
(in million cubic feet (MMcf)) |
2014 |
2013 |
|
Full Service Distribution |
|||
Residential |
2,805 |
2,245 |
|
Commercial |
2,323 |
1,972 |
|
Industrial |
51 |
49 |
|
Total full service |
5,179 |
4,266 |
|
Transportation |
3,346 |
3,169 |
|
Bucksport |
957 |
3,763 |
|
Total Volumes |
9,482 |
11,198 |
Heating Degree Days |
|||||||||
Three Months Ended |
Percent Colder (Warmer) |
||||||||
March 31, |
2014 Compared to |
||||||||
Normal |
2014 |
2013 |
Normal |
2013 |
|||||
Great Falls, MT |
2,258 |
3,590 |
2,882 |
58.99% |
24.57% |
||||
Cody, WY |
2,300 |
3,341 |
2,975 |
45.26% |
12.30% |
||||
Bangor, ME |
2,620 |
4,039 |
3,586 |
54.16% |
12.63% |
||||
Elkin, NC |
1,640 |
2,434 |
2,232 |
48.41% |
9.05% |
||||
Youngstown, OH |
2,242 |
3,702 |
3,153 |
65.12% |
17.41% |
||||
Jackson, KY |
1,770 |
2,696 |
2,460 |
52.32% |
9.59% |
SOURCE Gas Natural Inc.
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