Gas Natural Inc. Reports Record Net Income for 2013 First Quarter

- Customer growth in Maine and North Carolina, along with colder weather in Ohio fuels nearly 46% net income growth to a record $4.8 million for the first quarter

- Generated $11.1 million in cash from operations, a 32% increase from the prior-year period

News provided by

Gas Natural Inc

May 15, 2013, 04:14 ET

MENTOR, Ohio, May 15, 2013 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a holding company operating local distributing companies serving approximately 73,000 customers in seven states, reported financial results for the first quarter ended March 31, 2013. 

Consolidated net income was $4.8 million, or $0.57 per diluted share, a record for the first quarter, compared with net income of $3.3 million, or $0.40 per diluted share, for the quarter ended March 31, 2012.  The $1.5 million increase reflects the expanded customer base in the Company's targeted growth utility markets and the effect of colder weather in a number of service territories, most notably in Ohio. 

Richard M. Osborne, Gas Natural's chairman and chief executive officer commented, "We had a very strong first quarter which reflects the successful execution of our natural gas expansion strategy, particularly in our North Carolina and Maine markets.  While we also benefited from colder temperatures in most of our service territories, we continue to look for operational efficiencies in each of our markets and make targeted investments to further penetrate and grow our natural gas utility operations."

Natural Gas Operations Segment

The Company annually distributes over 33 billion cubic feet of natural gas to approximately 69,000 customers through regulated utilities operating in Kentucky, Maine, Montana, North Carolina, Ohio, Pennsylvania, and Wyoming.

Natural Gas Operations Income Statement











Quarter Ended March 31,

($ in thousands)



2013

2012








Natural Gas Operations






Operating revenue



$                    39,945

$                     29,848

Gas Purchased



24,116

17,237

Gross Margin



15,829

12,611

Operating expenses



7,577

6,729

Operating income



8,252

5,882

Other income



39

114

Income before interest and taxes



8,291

5,996

Interest expense



(718)

(637)

Income before income taxes



7,573

5,359

Income tax expense



(2,861)

(2,006)

Net Income



$                      4,712

$                      3,353

The Natural Gas Operations segment reported strong year-over-year net income growth.  The Company's Maine, North Carolina and Ohio service territories drove the gross margin increase of
$3.2 million to $15.8 million for the quarter from the prior-year period.  Full service distribution volumes delivered increased to 4.27 billion cubic feet in the quarter from 3.50 billion cubic feet in the prior-year period due to increased volume in the North Carolina and Maine markets and colder weather in a number of the Company's service territories. 

First quarter operating expenses increased by $848,000 to $7.6 million due to additional operating expenses related to the acquisition of Public Gas Company and higher distribution, general and administrative expenses.

Operating income as a percent of gross margin was 52.1% in the first quarter of 2013 compared with 46.6% in the prior year, a 550 basis point increase.

Other Operating Segments

The Marketing and Production segment reported net income of $248,000 for the first quarter of 2013, an increase of $153,000 from the prior-year period.  The increase was primarily due to higher income from the Company's LNG business.

The Pipeline Operations segment contributed net income of $27,000 for the first quarter which was a decrease of $11,000 from the 2012 first quarter.

The Propane Operations segment reported a net loss of $19,000 for first quarter of 2013, an improvement from the prior year loss of $95,000 due to improved gross margin on propane sales.  

Balance Sheet and Cash Management

Cash and cash equivalents as of March 31, 2013 were $2.8 million, down from the 2012 year-end balance of $3.4 million.    

Cash provided by operating activities in the first quarter of 2013 increased by $2.7 million, or 31.9%, to $11.1 million compared with the prior year first quarter.  The change reflects an increase in net income and a net reduction of working capital requirements.

Capital expenditures for the first quarter ended March 31, 2013 totaled $3.4 million compared with
$4.4 million in the prior-year period, and was focused on the growth of the Company's Natural Gas Operations segment, including expansion, maintenance, and enhancement of its gas pipeline systems.  Capital expenditures for 2013 are expected to be approximately $10 million. 

The Company maintains two revolving credit facilities with $18.3 million in use at March 31, 2013 compared with $24.3 million at the end of 2012.  Long-term debt was $44.2 million at the end the first quarter, relatively consistent with the 2012 year-end balance.

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 33 billion cubic feet of natural gas to approximately 69,000 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, natural gas marketing and propane to 4,000 customers.  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:  Kei Advisors LLC

Thomas J. Smith, Chief Financial Officer

Deborah K. Pawlowski

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, 2013

March 31, 2012

REVENUE




Natural gas operations

$   39,944,662

$   29,848,085

Marketing and production

3,571,779

1,907,094

Pipeline operations

98,287

107,784

Propane operations

1,702,574

1,909,158

Total revenues

45,317,302

33,772,121

COST OF SALES




Natural gas purchased

24,116,421

17,236,894

Marketing and production

2,860,035

1,395,416

Propane purchased

1,153,641

1,431,269

Total cost of sales

28,130,097

20,063,579






GROSS MARGIN

17,187,205

13,708,542

OPERATING EXPENSES




Distribution, general, and administrative

5,674,987

5,212,920

Maintenance

368,679

296,235

Depreciation and amortization

1,495,833

1,243,344

Accretion

42,607

38,080

Taxes other than income

929,804

937,490

Total operating expenses

8,511,910

7,728,069






OPERATING INCOME


8,675,295

5,980,473






LOSS FROM UNCONSOLIDATED AFFILIATE

(1,080)

(2,741)

OTHER INCOME, net

7,869

46,670

ACQUISITION EXPENSE

(175,879)

(118,723)

INTEREST EXPENSE

(809,556)

(664,069)

INCOME BEFORE INCOME TAXES

7,696,649

3,282,847






INCOME TAX EXPENSE

(2,908,926)

(1,958,763)

NET INCOME


4,787,723

3,282,847






   EARNINGS PER SHARE - BASIC AND DILUTED

$              0.57

$              0.40

   WEIGHTED AVERAGE DIVIDENDS DECLARED PER COMMON SHARE

$            0.135

$            0.135

   WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC

8,384,863

8,154,734

   WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED

8,385,644

8,162,957






OTHER COMPREHENSIVE INCOME, NET OF TAX OF $1,894 and $5,480, respectively

Unrealized gain on available for sale securities

2,565

9,146










COMPREHENSIVE INCOME


$     4,790,288

$     3,291,993


Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)


March 31,


December 31,

ASSETS

2013

2012

CURRENT ASSETS


Cash and cash equivalents

$     2,791,739

$     3,435,117

Marketable securities

348,525

344,346

Accounts receivable


Trade, less allowance for doubtful accounts of




$1,428,317 and $1,389,762, respectively

12,946,479

11,933,201

Related parties

153,383

522,557

Unbilled gas

4,458,200

4,612,258

Note receivable - related parties, current portion

12,976

12,615

Inventory


Natural gas and propane

842,893

5,092,240

Materials and supplies

1,934,660

1,835,816

Prepaid income taxes

449,369

498,297

Prepayments and other

1,975,078

2,224,267

Recoverable cost of gas purchases

4,033,859

2,329,524

Deferred tax asset

828,730

828,730

Total current assets

30,775,891

33,668,968




PROPERTY, PLANT AND EQUIPMENT


Property, plant and equipment

168,844,488

165,662,163

Less accumulated depreciation, depletion and amortization

(48,414,865)

(47,034,673)

PROPERTY, PLANT AND EQUIPMENT, net

120,429,623

118,627,490




OTHER ASSETS


Notes receivable - related parties, less current portion

119,321

122,650

Regulatory assets


Property taxes

237,049

307,732

Income taxes

452,645

452,645

Rate case costs

172,085

176,250

Debt issuance costs, net

1,701,307

1,798,720

Goodwill

14,891,377

14,891,377

Customer relationships

610,792

616,500

Investment in unconsolidated affiliate

320,651

321,731

Restricted cash

2,826,309

3,150,847

Other assets

1,862,715

328,549

Total other assets

23,194,251

22,167,001




TOTAL ASSETS

$  174,399,765

$  174,463,459



 

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets, Continued
(Unaudited)


March 31,


December 31,

LIABILITIES AND CAPITALIZATION

2013

2012

CURRENT LIABILITIES


Checks in excess of amounts on deposit

$              845,468

$            720,340

Lines of credit

18,329,755

24,260,755

Accounts payable


Trade

9,796,294

9,201,722

Related parties

127,546

51,797

Notes payable, current portion

633,646

633,498

Accrued liabilities


Taxes other than income

2,267,622

2,548,717

Vacation

112,578

115,956

Employee benefit plans

213,092

145,959

Interest

352,848

191,263

Deferred payments received from levelized billing

1,677,691

2,822,926

Customer deposits

736,141

744,974

Related parties

550,960

595,240

Obligation under capital lease - current

167,518

167,518

Other current liabilities

1,008,415

729,550

Over-recovered gas purchases

612,943

1,185,034

Total current liabilities

37,432,517

44,115,249




LONG-TERM LIABILITIES


Deferred investment tax credits

150,051

155,317

Deferred tax liability

8,032,328

5,144,002

Asset retirement obligation

1,892,986

1,850,379

Customer advances for construction

1,029,900

1,009,232

Regulatory liability for income taxes

83,161

83,161

Regulatory liability for gas costs

2,661

20,745

Long-term obligation under capital lease, less current portion

2,040,508

2,040,508

Total long-term liabilities

13,231,595

10,303,344




NOTES PAYABLE, less current portion

43,573,552

43,700,742




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,


8,389,752 and 8,369,752 shares issued and




outstanding, respectively

1,258,463

1,255,463

Capital in excess of par value

44,413,800

44,256,493

Accumulated other comprehensive income

68,354

65,789

Retained earnings

34,421,484

30,766,379

Total stockholders' equity

80,162,101

76,344,124




TOTAL CAPITALIZATION

123,735,653

120,044,866




TOTAL LIABILITIES AND CAPITALIZATION

$       174,399,765

$     174,463,459


 

Gas Natural Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2013 and 2012 (Unaudited)



2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES


Net income

$     4,787,723

$     3,282,847

Adjustments to reconcile net income to net cash provided by operating activities


   Depreciation and amortization

1,495,833

1,243,344

Accretion

42,607

38,080

Amortization of debt issuance costs

104,065

77,022

Stock based compensation

807

14,993

Loss on sale of fixed assets

29,121

7,747

Loss from unconsolidated affiliate

1,080

2,741

Investment tax credit

(5,265)

(5,265)

Deferred income taxes

2,886,713

211,376

Changes in assets and liabilities


Accounts receivable, including related parties

(644,105)

817,669

Unbilled gas

154,058

1,579,685

Natural gas and propane inventory

4,249,347

5,146,734

Accounts payable, including related parties

833,005

(2,982,618)

Recoverable/refundable cost of gas purchases

(2,276,426)

(1,479,205)

Prepayments and other

249,189

135,676

Other assets

66,961

1,442,540

Other liabilities

(923,539)

(1,158,078)

Net cash provided by operating activities

11,051,174

8,375,288




CASH FLOWS FROM INVESTING ACTIVITIES


Capital expenditures

(3,419,036)

(4,366,485)

Proceeds from sale of fixed assets

10,811

17,302

Proceeds from related party notes receivable

2,968

2,496

Purchase of 8500 Station Street

(1,650,000)

-

Restricted cash - capital expenditures fund

325,421

-

Customer advances for construction

20,668

35,498

Contributions in aid of construction

52,410

48,210

Net cash used in investing activities

(4,656,758)

(4,262,979)




CASH FLOWS FROM FINANCING ACTIVITIES


Proceeds from lines of credit

3,907,000

2,551,000

Repayment on lines of credit

(9,838,000)

(8,060,000)

Repayments of notes payable

(127,042)

(1,905)

Debt issuance costs

(6,652)

(116,579)

Sale of common stock

159,500

-

Restricted cash - debt service fund

(883)

(8,740)

Dividends paid

(1,131,717)

(1,100,884)

Net cash used in financing activities

(7,037,794)

(6,737,108)




NET DECREASE IN CASH AND CASH EQUIVALENTS

(643,378)

(2,624,799)




CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

$    3,435,117

$   10,504,845




CASH AND CASH EQUIVALENTS, END OF PERIOD

$     2,791,739

$     7,880,046



 

Gas Natural Inc. and Subsidiaries
Segments of Operations












Three Months Ended March 31, 2013





















Natural Gas

Marketing and


Pipeline

Propane

Corporate and



Operations

Production

Operations

Operations

Other

Consolidated













OPERATING REVENUES

$ 40,030,408

$5,588,212

$     98,287

$ 1,702,574

$                -

$  47,419,481

Intersegment
       eliminations

(85,746)

(2,016,433)

-

-

-

(2,102,179)

Total operating revenue

39,944,662

3,571,779

98,287

1,702,574

-

45,317,302













COST OF SALES

24,202,167

4,876,468

-

1,153,641

-

30,232,276

Intersegment
       eliminations

(85,746)

(2,016,433)

-

-

-

(2,102,179)

Total cost of sales

24,116,421

2,860,035

-

1,153,641

-

28,130,097













GROSS MARGIN

$ 15,828,241

$   711,744

$     98,287

$    548,933

$                -

$  17,187,205













OPERATING EXPENSES

7,576,871

261,251

47,678

544,415

81,695

8,511,910













OPERATING INCOME (LOSS)

$   8,251,370

$   450,493

$     50,609

$        4,518

$    (81,695)

$    8,675,295













NET INCOME (LOSS)

$   4,711,206

$   248,461

$     27,114

$   (18,988)

$  (180,070)

$    4,787,723

As of March 31, 2013











Goodwill

$ 14,891,377

-

-

-

-

14,891,377

Investment in
   unconsolidated
    affiliate

$                  -

320,651

-

-

-

320,651

Total assets

$165,381,772

8,020,239

602,120

3,477,349

58,115,815

235,597,295

Intersegment
    eliminations

(40,758,854)

(378,742)

(920)

(2,095,655)

(17,963,359)

(61,197,530)

     Total assets

$124,622,918

$7,641,497

$   601,200

$ 1,381,694

$40,152,456

$174,399,765











































 

Gas Natural Inc. and Subsidiaries
Segments of Operations











Three Months Ended March 31, 2012





















Natural Gas

Marketing and


Pipeline

Propane

Corporate and


Operations

Production

Operations

Operations

Other

Consolidated












OPERATING REVENUES

$ 29,933,150

$3,625,789

$   107,784

$1,909,158

$                 -

$  35,575,881

Intersegment
       eliminations

(85,065)

(1,718,695)

-

-

-

(1,803,760)

Total operating revenue

29,848,085

1,907,094

107,784

1,909,158

-

33,772,121












COST OF SALES

17,321,959

3,114,111

-

1,431,269

-

21,867,339

Intersegment
       eliminations

(85,065)

(1,718,695)

-

-

-

(1,803,760)

Total cost of sales

17,236,894

1,395,416

-

1,431,269

-

20,063,579












GROSS MARGIN

$ 12,611,191

$   511,678

$   107,784

$   477,889

$                 -

$  13,708,542












OPERATING EXPENSES

6,729,273

331,084

38,506

566,413

62,793

7,728,069












OPERATING INCOME (LOSS)

$   5,881,918

$   180,594

$     69,278

$  (88,524)

$     (62,793)

$    5,980,473












NET INCOME (LOSS)

$   3,352,534

$     95,315

$     38,223

$  (94,841)

$   (108,384)

$    3,282,847












As of December 31, 2012









Goodwill

$ 14,891,377

-

-

-

-

14,891,377

Investment in
    unconsolidated affiliate

$                  -

321,731

-

-

-

321,731

Total assets

$169,616,395

8,786,247

632,466

3,556,432

64,887,276

247,478,816

Intersegment eliminations

(46,338,335)

(447,549)

(16,073)

(2,096,143)

(24,117,257)

(73,015,357)

     Total assets

$123,278,060

$8,338,698

$   616,393

$1,460,289

$40,770,019

$174,463,459


 

Gas Natural Inc. and Subsidiaries
Natural Gas Operations






Utility Throughput







Three Months Ended


March 31,

(in million cubic feet (MMcf))

2013

2012





Full Service Distribution




Residential

2,245

1,811

Commercial

1,972

1,638

Industrial

49

53


Total full service

4,266

3,502





Transportation

3,169

2,954

Bucksport

3,763

3,662











Total Volumes

11,198

10,118

Heating Degree Days








Three Months Ended

Percent (Warmer) Colder




March 31

2013 Compared to


Normal

2013

2012

Normal

2012

Great Falls, MT

3,185

2,882

2,914

(9.51%)

(1.10%)

Cody, WY

3,030

2,975

2,738

(1.82%)

8.66%

Bangor, ME

3,735

3,586

3,273

(3.99%)

9.56%

Elkin, NC

2,117

2,232

1,616

5.43%

38.12%

Youngstown, OH

3,118

4,005

2,413

28.45%

65.98%

Jackson, KY

2,284

2,460

-

7.71%

0.00%























SOURCE Gas Natural Inc