Gas Natural Reports Record Net Income in First Quarter 2014 - KXNet.com - Bismarck/Minot/Williston/Dickinson-KXNEWS,ND

Gas Natural Reports Record Net Income in First Quarter 2014

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SOURCE Gas Natural Inc.

- 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: jsprague@egas.net

Email: dpawlowski@keiadvisors.com

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%

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