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Gas Natural Inc. Reports 2015 First Quarter Results

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May 11, 2015 4:52 PM EDT

CLEVELAND, May 11, 2015 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a holding company operating local natural gas utilities serving approximately 68,000 customers in six states, reported financial results for the first quarter of 2015.  As previously announced, the Company has agreed to sell its Wyoming operations which serve 6,700 customers and are reported as discontinued operations.    

Income from continuing operations was $4.4 million, or $0.42 per share, for the first quarter, compared with $4.5 million, or $0.43 per share, for the first quarter of 2014.  Adjusted income from continuing operations, a non-GAAP number, was $4.8 million, or $0.46 per share, for the first quarter of 2015 compared with $5.0 million, or $0.47 per share, for the first quarter of 2014.  The adjustments of $0.4 million after taxes in both the 2015 and 2014 periods reflect the exclusion of non-recurring professional and legal fees related to increased regulatory and legal proceedings.  See attached table for a reconciliation of GAAP income from continuing operations to non-GAAP adjusted income from continuing operations.

Gregory J. Osborne, Gas Natural's President and Chief Executive Officer, commented, "We continue to make progress on our strategic plan, resulting in customer growth in the first quarter of 2015 which drove an increase in gross margin.  While our revenue was affected by lower gas prices and lower sales volumes due to warmer weather in certain markets, we are excited to continue to transform the organization into a higher quality natural gas utility which is focused on growing shareholder value." 

Natural Gas Operations Segment ReviewThe Natural Gas Operations segment reported $51.3 million in revenue for the first quarter, a decrease of $5.5 million, or 10%.  This change was primarily due to a $4.0 million decrease in revenue from our Ohio market due to lower prices paid for natural gas passed on to customers.  Revenue from our Montana market decreased $1.9 million due to a volume decrease driven by significantly warmer weather compared with the prior-year period.  These decreases were partially offset by a $0.4 million increase in revenue from the Company's Maine and North Carolina markets, which was the result of continued customer growth as well as colder weather in Maine.

Natural Gas Operations Income Statement

Three Months Ended March 31,

($ in thousands)

2015

2014

Natural Gas Operations

Operating revenues

$51,279

$56,807

Gas Purchased

33,861

39,846

Gross Margin

17,418

16,961

Operating expenses

8,778

7,820

Operating income

8,640

9,141

Other income

206

107

Income before interest and taxes

8,846

9,248

Interest expense

(671)

(665)

Income before income taxes

8,175

8,583

Income tax expense

(3,062)

(3,196)

Net Income

$  5,113

$  5,387

Gross margin for the first quarter of 2015 increased to $17.4 million compared with $17.0 million in the prior-year quarter.  The increase was driven by continued customer growth in Maine, North Carolina and Ohio markets coupled with colder weather in Maine, which contributed to a $0.7 million improvement to gross margin.  This was partially offset by a $0.3 million decrease in gross margin driven by lower sales volume in Montana caused by especially warm weather.   

Operating expenses increased by $1.0 million, or 12%, for the quarter. This included higher expenses of $0.6 million due to a decrease in capitalized labor and increases in insurance and outside professional fees.  Depreciation and amortization increased by $0.3 million due to the amortization of a regulatory asset as well as higher depreciable assets.

Other Operating Segments

Net income for the Marketing and Production Operations segment was breakeven in the first quarter of both 2015 and 2014.  Revenue decreased by $2.2 million to $2.5 million for the first quarter of 2015, compared with the same period in 2014 and gross margin decreased by $0.3 million to $0.1 million.  The decrease in revenue and gross margin was primarily due to the loss of the Company's liquid natural gas customer to pipeline competition along with lower sales volume and pricing.

Net loss for the Corporate and Other Operations segment improved to $0.3 million compared with net loss of $0.4 million in the prior-year quarter.  The improvement was primarily due to a $0.3 million reduction in administrative costs.

Adjusted EBITDA

Adjusted earnings from continuing operations before interest, taxes, depreciation, amortization, accretion, and non-recurring expenses ("Adjusted EBITDA"), a non-GAAP financial measure, was $10.5 million in both the first quarter of 2015 and 2014.  The Company believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance.  See the attached tables for important disclosures regarding the Company's use of Adjusted EBITDA, as well as a reconciliation of GAAP income from continuing operations to Adjusted EBITDA.

Balance Sheet and Cash Management

Cash and cash equivalents as of March 31, 2015 were $2.7 million, up $1.1 million from December 31, 2014. 

Cash provided by operating activities of continuing operations was $8.0 million in the first quarter of 2015, compared with $5.6 million in the prior-year period.  The increase was primarily the result of improved gas procurement policies, increased utilization of storage capabilities and effective hedging strategies which stabilized the pricing of gas. 

Capital expenditures for the first quarter of 2015 were $2.5 million compared with $5.7 million in the prior-year period.  Capital expenditures in 2015 are expected to be approximately $8 million to $9 million, and are focused on the growth of the Natural Gas Operations segment as well as ongoing construction activities in all of the Company's utility service areas to support expansion, maintenance and enhancement of its gas pipeline systems.

Mr. Osborne concluded, "In the first quarter of 2015, we continued to build the foundation that we began building in 2014.  Our vision is to be a premier natural gas company recognized as the benchmark in the natural gas utility industry by customers, peers and investors.  We are executing our strategy to achieve that vision."

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 26 billion cubic feet of natural gas to approximately 68,000 customers through regulated utilities operating in Montana, 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. 

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 or Karen L. Howard, Kei Advisors LLC

Phone: (440) 974-3770

Phone: (716) 843-3908 / (716) 843-3942

Email: [email protected]

Email: [email protected] / [email protected]

 

FINANCIAL TABLES FOLLOW.

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Statement of Operations

(Unaudited)

Three Months Ended March 31,

2015

2014

REVENUES

Natural gas operations

$51,279,730

$ 56,807,363

Marketing and production

2,453,231

4,689,356

Total revenues

53,732,961

61,496,719

COST OF SALES

Natural gas purchased

33,861,353

39,846,604

Marketing and production

2,306,889

4,240,965

Total cost of sales

36,168,242

44,087,569

GROSS MARGIN

17,564,719

17,409,150

OPERATING EXPENSES

Distribution, general, and administrative

6,617,603

6,480,408

Maintenance

327,480

305,080

Depreciation and amortization

1,878,721

1,669,322

Accretion

11,180

14,228

Provision for doubtful accounts

51,742

8,279

Taxes other than income

1,003,163

921,186

Total operating expenses

9,889,889

9,398,503

OPERATING INCOME

7,674,830

8,010,647

Other income, net

277,622

94,475

Interest expense

(869,022)

(809,099)

Income before income taxes

7,083,430

7,296,023

Income tax expense

(2,666,673)

(2,759,478)

INCOME FROM CONTINUING OPERATIONS

4,416,757

4,536,545

Discontinued operations, net of tax

436,916

481,946

NET INCOME

$  4,853,673

$   5,018,491

Basic weighted shares outstanding

10,487,511

10,451,678

Dilutive effect of stock options

854

572

Diluted weighted shares outstanding

10,488,365

10,452,250

BASIC AND DILUTED EARNINGS PER SHARE:

Continuing operations

$          0.42

$           0.43

Discontinued operations

0.04

0.05

Net income per share

$          0.46

$           0.48

 

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

March 31,

December 31,

2015

2014

(unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$      2,721,167

$      1,585,926

Accounts receivable

Trade, less allowance for doubtful accounts of$469,374  and $370,909, respectively

15,446,459

12,095,535

Related parties

253,057

250,101

Unbilled gas

5,684,249

7,630,852

Note receivable, current portion

2,086

2,070

Inventory

Natural gas

499,957

5,301,895

Materials and supplies

2,383,545

2,300,990

Prepaid income taxes

431,681

431,681

Regulatory assets, current

6,235,884

4,097,822

Deferred tax asset

608,235

635,195

Prepayments and other

1,079,758

986,941

Assets held for sale

801,711

802,436

Discontinued operations

10,631,729

11,653,934

Total current assets

46,779,518

47,775,378

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment

190,196,318

187,566,638

Less accumulated depreciation, depletion and amortization

(47,169,527)

(45,555,553)

PROPERTY, PLANT, & EQUIPMENT, NET

143,026,791

142,011,085

OTHER ASSETS

Notes receivable, less current portion

89,752

90,345

Regulatory assets, non-current

1,922,074

2,055,404

Debt issuance costs, net of amortization

976,244

1,079,447

Goodwill

16,155,672

16,155,672

Customer relationships, net of amortization

2,851,792

2,927,500

Restricted cash

1,897,683

1,897,677

Other assets

15,652

11,404

Total other assets

23,908,869

24,217,449

TOTAL ASSETS

$  213,715,178

$  214,003,912

 

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Cont'd)

March 31,

2015

December 31, 2014

(unaudited)

LIABILITIES AND CAPITALIZATION

CURRENT LIABILITIES

Checks in excess of amounts on deposit

$       264,334

$       194,524

Line of credit

24,740,799

28,760,799

Accounts payable

Trade

13,063,718

14,115,367

Related parties

86,798

170,319

Notes payable, current portion

539,246

542,201

Contingent consideration, current

671,638

671,638

Derivative instruments

1,766,472

3,023,271

Accrued liabilities

4,454,348

4,860,663

Accrued liabilities - related parties

210,736

111,133

Customer deposits, current

639,347

634,090

Obligation under capital lease, current

188,224

188,224

Regulatory liability, current

317,211

925,175

Build-to-suit liability

5,946,089

5,597,287

Other current liabilities

984,950

940,643

Liabilities held for sale

85,515

61,416

Discontinued operations

717,662

544,432

Total current liabilities

54,677,087

61,341,182

LONG-TERM LIABILITIES

Deferred investment tax credits

107,927

113,193

Deferred tax liability

13,434,344

10,538,394

Asset retirement obligation

1,207,698

1,196,518

Customer advances for construction

998,003

993,681

Regulatory liability, non-current 

1,129,758

1,089,850

Customer deposits

949,540

949,540

Obligation under capital lease, less current

1,674,714

1,674,714

Contingent consideration, less current

75,362

75,362

Total long-term liabilities

19,577,346

16,631,252

NOTES PAYABLE, less current portion

39,588,284

39,720,860

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;       Authorized: 30,000,000 shares, respectively;       Issued: 10,487,511shares, respectively;      Outstanding: 10,487,511 shares, respectively

1,573,127

1,573,127

Capital in excess of par value

63,951,000

63,826,341

Retained earnings

34,348,334

30,911,150

Total stockholders' equity

99,872,461

96,310,618

TOTAL CAPITALIZATION

139,460,745

136,031,478

TOTAL LIABILITIES AND CAPITALIZATION

$213,715,178

$214,003,912

 

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three months ended March 31,

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$ 4,853,673

$  5,018,491

Less income from discontinued operations

436,916

481,946

Income from continuing operations

4,416,757

4,536,545

Adjustments to reconcile income from continuing operations to net cash provided by operating activities:

Depreciation and amortization

1,878,721

1,669,322

Accretion

11,180

14,228

Amortization of debt issuance costs

123,066

103,145

Provision for doubtful accounts

51,742

8,279

Stock based compensation

124,659

308,330

Loss(gain) on sale of assets

(37,960)

(18,556)

Loss from unconsolidated affiliate

-

973

Change in fair value of derivative financial instruments

(122,286)

-

Investment tax credit

(5,266)

(5,265)

Deferred income taxes

2,922,910

2,989,830

Changes in assets and liabilities

Accounts receivable, including related parties

(3,445,699)

(4,394,864)

Unbilled gas

1,939,842

427,452

Natural gas inventory

4,801,938

4,486,484

Accounts payable, including related parties

(348,887)

4,062,275

Regulatory assets & liabilities

(3,730,189)

(7,081,394)

Prepayments and other

(93,438)

(650,436)

Other assets

(102,919)

191,134

Other liabilities

(352,371)

(1,080,589)

Net cash provided by operating activities of continuing operations

8,031,800

5,566,893

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditures

(2,493,176)

(5,686,242)

Proceeds from sale of fixed assets

37,960

18,556

Proceeds from note receivable

577

2,056

Restricted cash – capital expenditures fund

-

(59)

Customer advances for construction

4,639

132

Contributions in aid of construction

80,308

211,004

Net cash used in investing activities of continuing operations

(2,369,692)

(5,454,553)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from lines of credit 

8,600,000

7,000,000

Repayments of lines of credit

(12,620,000)

(7,900,000)

Repayments of notes payable

(135,531)

(127,190)

Repayments of build-to-suit

(567,330)

-

Debt issuance costs

(19,863)

-

Restricted cash – debt service fund

(6)

(533)

Dividends paid

(1,416,489)

(1,410,978)

Net cash provided by (used in) financing activities of continuing operations

(6,159,219)

(2,438,701)

DISCONTINUED OPERATIONS

Operating cash flows

1,812,715

634,602

Investing cash flows

(180,363)

(70,505)

Net cash  provided by discontinued operations

1,632,352

564,097

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

1,135,241

(1,762,264)

Cash and cash equivalents, beginning of period

1,585,926

12,741,197

CASH AND CASH EQUIVALENTS, END OF PERIOD

$ 2,721,167

$10,978,933

 

 

 

Gas Natural Inc. and SubsidiariesSegments of Operations

Three Months Ended March 31, 2015

Natural Gas

Marketing &

Corporate &

Operations

Production

Other

Consolidated

OPERATING REVENUES

$51,366,887

$ 4,626,471

$               -

$ 55,993,358

Intersegment elimination

(87,157)

(2,173,240)

-

(2,260,397)

Total operating revenue

51,279,730

2,453,231

-

53,732,961

COST OF SALES

33,948,510

4,480,129

-

38,428,639

Intersegment elimination

(87,157)

(2,173,240)

-

(2,260,397)

Total cost of sales

33,861,353

2,306,889

-

36,168,242

GROSS MARGIN

$17,418,377

$    146,342

$              -

$ 17,564,719

OPERATING EXPENSES

8,813,923

232,756

878,895

9,925,574

Intersegment elimination

(35,685)

-

-

(35,685)

Total operating expenses

8,778,238

232,756

878,895

9,889,889

OPERATING INCOME (LOSS)

$  8,640,139

$     (86,414)

$   (878,895)

$   7,674,830

DISCONTINUED OPERATIONS

$                  -

$                -

$    436,916

$      436,916

NET INCOME (LOSS)

$  5,113,360

$       3,641

$   (263,328)

$   4,853,673

 

Three Months Ended March 31, 2014

Natural Gas

Marketing &

Corporate &

Operations

Production

Other

Consolidated

OPERATING REVENUES

$56,893,907

$ 7,929,773

$               -

$ 64,823,680

Intersegment elimination

(86,544)

(3,240,417)

-

(3,326,961)

Total operating revenue

56,807,363

4,689,356

-

61,496,719

COST OF SALES

39,933,148

7,481,382

-

47,414,530

Intersegment elimination

(86,544)

(3,240,417)

-

(3,326,961)

Total cost of sales

39,846,604

4,240,965

-

44,087,569

GROSS MARGIN

$16,960,759

$    448,391

$                -

$ 17,409,150

OPERATING EXPENSES

7,819,884

382,458

1,196,161

9,398,503

Intersegment elimination

-

-

-

-

Total operating expenses

7,819,884

382,458

1,196,161

9,398,503

OPERATING INCOME (LOSS)

$  9,140,875

$      65,933

$(1,196,161)

$   8,010,647

DISCONTINUED OPERATIONS

$                  -

$                 -

$    481,946

$      481,946

NET INCOME (LOSS)

$  5,387,303

$      20,801

$   (389,613)

$   5,018,491

 

 

Gas Natural Inc. and SubsidiariesNatural Gas Operations

Utility Throughput

Three Months Ended March 31,

(in million cubic feet (MMcf))

2015

2014

Full service distribution:

Energy West Montana (MT)

1,326

1,594

Frontier Natural Gas (NC)

470

430

Bangor Gas (ME)

841

779

Ohio Companies (OH)

1,873

1,835

Public Gas (PGC)

76

71

Total full service distribution

4,586

4,709

Transportation

3,306

3,346

Bucksport

128

957

Total volumes

8,020

9,012

Heating Degree Days

Three Months Ended

Percent Colder (Warmer)

March 31,

2015 Compared to

Normal

2015

2014

Normal

2014

Great Falls, MT

3,211

2,778

3,590

(13.48%)

(22.62%)

Bangor, ME

3,576

4,453

4,039

24.52%

10.25%

Elkin, NC

2,708

2,282

2,434

(15.73%)

(6.24%)

Lancaster, OH

2,853

3,320

3,378

16.37%

(1.72%)

Jackson, KY

2,277

2,631

2,696

15.55%

(2.41%)

Weighted Average

3,088

3,063

3,483

(0.81%)

(12.06%)

 

 

Gas Natural Inc. and Subsidiaries

Reconciliation of GAAP Income from Continuing Operations to

Adjusted Income from Continuing Operations(1)

(in thousands, except per share amounts)

Three Months Ended

March 31,

2015

2014

$

per diluted share

$

per diluted share

GAAP income from continuing operations

$4,417

$       0.42

$4,537

$       0.43

  Add back, after tax:

Non-recurring legal and professional fees

364

0.03

209

0.02

Non-recurring regulatory and other expenses

24

0.01

239

0.02

Non-GAAP adjusted income from continuing operations(1)

$4,804

$       0.46

$4,985

$       0.47

Gas Natural Inc. and Subsidiaries

Reconciliation of GAAP Income from Continuing Operations to Adjusted EBITDA(1)

Three Months Ended

(in thousands)

March 31,

2015

2014

GAAP income from continuing operations

$  4,417

$  4,537

Add back:

Net interest expense

869

809

Income taxes

2,667

2,759

Depreciation, amortization and accretion

1,890

1,684

Non-recurring legal and professional fees

583

336

Non-recurring regulatory and other expenses

38

385

Non-GAAP Adjusted EBITDA(1)

$10,464

$10,510

(1)Non-GAAP Financial Measures:

The Company believes that, when used in conjunction with GAAP measures, Adjusted Income from Continuing Operations and Adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization, accretion and non-recurring charges, which are non-GAAP measures, allow investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results.  Adjusted Income from Continuing Operations and Adjusted EBITDA are not calculated through the application of GAAP and are not the required form of disclosure by the Securities and Exchange Commission.  As such, these measures should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure.  The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/gas-natural-inc-reports-2015-first-quarter-results-300081247.html

SOURCE Gas Natural Inc.


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