SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 2003
Commission File Number 000-26591
RGC Resources, Inc.
(Exact name of Registrant as Specified in its Charter)
| VIRGINIA | 54-1909697 | |
| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
| 519 Kimball Ave., N.E., Roanoke, VA | 24016 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(540) 777-4427
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 close of the period covered by this report.
| Class |
Outstanding at December 31, 2003 | |
| Common Stock, $5 Par Value |
2,014,576 |
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
| December 31, 2003 |
September 30, 2003 |
|||||||
| ASSETS |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 1,412,945 | $ | 135,998 | ||||
| Accounts receivable - (less allowance for uncollectibles of $741,799 and $318,899, respectively) |
18,902,360 | 6,183,162 | ||||||
| Inventories |
2,710,830 | 2,559,306 | ||||||
| Prepaid gas service |
10,995,800 | 14,782,752 | ||||||
| Prepaid income taxes |
— | 1,079,802 | ||||||
| Deferred income taxes |
2,007,411 | 1,605,509 | ||||||
| Under-recovery of gas costs |
862,513 | 790,126 | ||||||
| Unrealized gains on marked-to-market transactions |
503,330 | — | ||||||
| Other |
1,032,883 | 541,322 | ||||||
| Total current assets |
38,428,072 | 27,677,977 | ||||||
| Property, Plant And Equipment: |
||||||||
| Utility plant in service |
97,035,515 | 96,385,022 | ||||||
| Accumulated depreciation and amortization |
(39,494,819 | ) | (38,586,345 | ) | ||||
| Utility plant in service, net |
57,540,696 | 57,798,677 | ||||||
| Construction work in progress |
2,476,600 | 1,992,222 | ||||||
| Utility Plant, Net |
60,017,296 | 59,790,899 | ||||||
| Nonutility property |
21,019,094 | 20,793,278 | ||||||
| Accumulated depreciation and amortization |
(9,018,341 | ) | (8,832,823 | ) | ||||
| Nonutility property, net |
12,000,753 | 11,960,455 | ||||||
| Total property, plant and equipment |
72,018,049 | 71,751,354 | ||||||
| Other Assets: |
||||||||
| Goodwill |
298,314 | 298,314 | ||||||
| Other assets |
774,220 | 769,754 | ||||||
| Total other assets |
1,072,534 | 1,068,068 | ||||||
| Total Assets |
$ | 111,518,655 | $ | 100,497,399 | ||||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED
| December 31, 2003 |
September 30, 2003 |
|||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current Liabilities: |
||||||||
| Current maturities of long-term debt |
$ | 32,959 | $ | 1,032,372 | ||||
| Borrowings under lines of credit |
19,080,000 | 12,992,000 | ||||||
| Dividends payable |
574,562 | 571,458 | ||||||
| Accounts payable |
12,222,268 | 9,289,899 | ||||||
| Income taxes payable |
613,371 | — | ||||||
| Customer deposits |
620,628 | 477,465 | ||||||
| Accrued expenses |
4,273,320 | 4,798,106 | ||||||
| Refunds from suppliers – due customers |
44,776 | 42,320 | ||||||
| Overrecovery of gas costs |
2,611,624 | 1,172,585 | ||||||
| Unrealized losses on marked to market transactions |
189,381 | 319,264 | ||||||
| Total current liabilities |
40,262,889 | 30,695,469 | ||||||
| Long-term Debt, Excluding Current Maturities |
30,211,523 | 30,219,987 | ||||||
| Deferred Credits: |
||||||||
| Deferred income taxes |
5,584,358 | 5,457,991 | ||||||
| Deferred investment tax credits |
258,046 | 266,338 | ||||||
| Total deferred credits |
5,842,404 | 5,724,329 | ||||||
| Stockholders’ Equity: |
||||||||
| Common stock, $5 par value; authorized, 10,000,000 shares; issued and outstanding 2,014,576 and 2,003,232 shares, respectively |
10,072,880 | 10,016,160 | ||||||
| Preferred stock, no par, authorized, 5,000,000 shares; no shares issued and outstanding |
— | — | ||||||
| Capital in excess of par value |
12,179,869 | 11,977,084 | ||||||
| Retained earnings |
13,043,761 | 12,018,920 | ||||||
| Accumulated other comprehensive loss |
(94,671 | ) | (154,550 | ) | ||||
| Total stockholders’ equity |
35,201,839 | 33,857,614 | ||||||
| Total Liabilities and Stockholders’ Equity |
$ | 111,518,655 | $ | 100,497,399 | ||||
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 2003 AND 2002
UNAUDITED
| Three Months Ended December 31, | |||||||
| 2003 |
2002 | ||||||
| Operating Revenues: |
|||||||
| Gas utilities |
$ | 25,232,488 | $ | 21,093,267 | |||
| Propane operations |
4,367,615 | 4,449,776 | |||||
| Energy marketing |
4,493,413 | 2,716,562 | |||||
| Other |
207,256 | 196,522 | |||||
| Total operating revenues |
34,300,772 | 28,456,127 | |||||
| Cost of Sales: |
|||||||
| Gas utilities |
18,632,493 | 14,931,493 | |||||
| Propane operations |
2,385,019 | 2,104,523 | |||||
| Energy marketing |
4,436,987 | 2,643,631 | |||||
| Other |
88,700 | 110,683 | |||||
| Total cost of sales |
25,543,199 | 19,790,330 | |||||
| Operating Margin |
8,757,573 | 8,665,797 | |||||
| Other Operating Expenses: |
|||||||
| Operations |
3,431,849 | 3,410,902 | |||||
| Maintenance |
354,071 | 360,906 | |||||
| General taxes |
470,463 | 459,076 | |||||
| Depreciation and amortization |
1,369,518 | 1,335,529 | |||||
| Total other operating expenses |
5,625,901 | 5,566,413 | |||||
| Operating Income |
3,131,672 | 3,099,384 | |||||
| Other Expenses, net |
(881 | ) | 39,309 | ||||
| Interest Expense |
544,966 | 554,576 | |||||
| Income Before Income Taxes |
2,587,587 | 2,505,499 | |||||
| Income Tax Expense |
988,184 | 967,362 | |||||
| Net Income |
$ | 1,599,403 | $ | 1,538,137 | |||
| Basic Earnings Per Common Share |
$ | 0.80 | $ | 0.78 | |||
| Diluted Earnings Per Common Share |
$ | 0.79 | $ | 0.78 | |||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 2003 AND 2002
UNAUDITED
| Three Months Ended December 31, |
|||||||
| 2003 |
2002 |
||||||
| Net Income |
$ | 1,599,403 | $ | 1,538,137 | |||
| Reclassification of loss (gain) transferred to net income |
19,650 | (73,772 | ) | ||||
| Unrealized gain (loss) on cash flow hedges |
40,229 | (83,038 | ) | ||||
| Other comprehensive income (loss), net of tax |
59,879 | (156,810 | ) | ||||
| Comprehensive Income |
$ | 1,659,282 | $ | 1,381,327 | |||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED DECEMBER 31, 2003 AND 2002
UNAUDITED
| Three Months Ended December 31, |
||||||||
| 2003 |
2002 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | 1,599,403 | $ | 1,538,137 | ||||
| Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
1,428,757 | 1,391,516 | ||||||
| Gain on asset disposition |
(14,853 | ) | (3,467 | ) | ||||
| Deferred taxes and investment tax credits |
(283,827 | ) | 350,236 | |||||
| Changes in assets and liabilities which provided (used) cash, exclusive of changes and noncash transactions shown separately |
(4,540,104 | ) | (7,627,352 | ) | ||||
| Net cash used in operating activities |
(1,810,624 | ) | (4,350,930 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Additions to utility plant and nonutility property |
(1,712,366 | ) | (1,891,849 | ) | ||||
| Cost of removal of utility plant, net |
(26,239 | ) | 1,415 | |||||
| Proceeds from sales of assets |
58,006 | 10,861 | ||||||
| Net cash used in investing activities |
(1,680,599 | ) | (1,879,573 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from issuance of long-term debt |
2,000,000 | 8,000,000 | ||||||
| Retirement of long-term debt and capital leases |
(2,132,876 | ) | (32,330 | ) | ||||
| Net borrowings (repayments) under lines of credit |
5,213,000 | (1,396,000 | ) | |||||
| Cash dividends paid |
(571,459 | ) | (559,070 | ) | ||||
| Proceeds from issuance of stock |
259,505 | 215,070 | ||||||
| Net cash provided by financing activities |
4,768,170 | 6,227,670 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
1,276,947 | (2,833 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
135,998 | 288,030 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 1,412,945 | $ | 285,197 | ||||
| SUPPLEMENTAL INFORMATION: |
||||||||
| Interest paid |
$ | 718,438 | $ | 922,940 | ||||
| Income taxes refunded, net |
(383,928 | ) | (825,067 | ) | ||||
Noncash transactions:
The Company executed a $2,000,000 intermediate term note in October 2003, which resulted in the reclassification of $1,125,000 from current maturities of long-term debt and $875,000 from borrowings under lines of credit to long-term debt on the September 30, 2003 balance sheet as the Company met the requirements for making the reclassification.
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED
| 1. |