GAS NATURAL INC CLEVELAND, Aug. 9, 2016 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) (the "Company"), a holding company operating local natural gas utilities serving approximately 68,000 customers in four states, reported financial results for the second quarter ended June 30, 2016. Results for the second quarter and first half of 2016 do not include the results of the Kentucky and Pennsylvania utilities which were divested in the fourth quarter of 2015 ("Divestitures").
Second Quarter 2016 Results Summary
-- Seasonal net loss from continuing operations per share of $0.16
unchanged from prior-year period
-- Results impacted by higher legal and other professional costs of $1.6
million
-- Recorded a $0.7 million gain from cancellation of an earn-out provision
-- Throughput increased over 400 MMcf driven by expanding customer base and
cooler weather
-- Improved gross margin of $1.0 million driven by increased throughput
volume
Mr. Gregory J. Osborne, Gas Natural's President and Chief Executive Officer, commented, "We are successfully adding new customers throughout our operating regions. This, along with colder weather, drove our full service distribution throughput up nearly 21%. We expect we can continue expanding even with headwinds from the competition of lower oil prices and weak regional industrial economies. Excluding the settlement and proxy contest costs we incurred, our results demonstrate the leverage we have with higher volume which will drive earnings power."
The number of customers served by Gas Natural's utility operations grew 2% over the past twelve months.
He continued, "The settlement reached during our proxy contest puts many ongoing legal matters behind us. We expect significant cost savings from the elimination of litigation, which quickly cover the cost of the settlement. We continue to expect that we can complete our restructuring and debt refinancing this fall, subject to regulatory approvals. We have agreement with the lenders and our applications are progressing through the regulatory approval process."
The Company previously announced on July 14, 2016 that it had reached a settlement that resulted in the dismissal of nine different pending legal proceedings in which it was either defendant or plaintiff.
Second Quarter and First Half 2016 Operations Review
Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Revenue by segment:
Natural Gas Operations $14,606 $14,768 $49,670 $66,048
Marketing & Production 2,427 1,278 5,670 3,731
----- ----- ----- -----
Consolidated $17,033 $16,046 $55,340 $69,779
======= ======= ======= =======
Revenue for the 2016 second quarter increased approximately 6% over the prior-year quarter. The increase reflects higher sales by Marketing & Production, offset by lower natural gas prices. This segment's sales included sales to the Company's former operations in Wyoming which it divested in the third quarter of 2015. Previously, these sales were recorded as intercompany sales and eliminated from consolidated revenue. Within Natural Gas Operations, higher volume was offset by $0.2 million less revenue from the Divestitures and lower gas prices.
Revenue for the first half of 2016 was down approximately 21% compared with the prior-year first half. The increase in Marketing & Production revenue was more than offset by the impact of warmer weather on volume, lower gas prices, and a $1.2 million reduction from the Divestitures. The increase in revenue from the Marketing & Production segment was for the same reason as in the quarter.
Changes in Gross Margin Three Months Six Months
(in thousands) Ended Ended
----- -----
June 30, 2016
-------------
2015 Gross Margin $7,482 $25,139
------ -------
Utilities sold (129) (505)
Weather 171 (1,883)
Impact of paper mill closures (559) (1,075)
Change in gas cost adjustments 693 693
New utility customers 597 597
--- ---
Natural Gas Operations change $773 $(2,173)
New marketing customers 139 269
Pricing and other 39 (57)
--- ---
Marketing & Production change 178 212
--- ---
Consolidated gross margin change 951 (1,961)
--- ------
2016 Gross Margin $8,433 $23,178
====== =======
Gross margin for the second quarter of 2016 increased 13% over the prior-year period driven by new customers and colder weather. Last year's second quarter was impacted by a $0.7 million unfavorable gas cost adjustment.
Gross margin for the first half of 2016 decreased 8% compared with the prior-year period. The decrease was primarily the result of warmer weather in each of the Company's markets and the impact of closed paper mills in Maine.
Three Months Ended Six Months Ended
(in
thousands) June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
Operating
(loss)
income
by
segment:
Natural
Gas
Operations $(736) $(519) $4,781 $8,122
Marketing
&
Production 894 (4) 977 32
Corporate
& Other (2,139) (949) (2,242) (1,828)
------ ---- ------ ------
Consolidated $(1,981) $(1,472) $3,516 $6,326
======= ======= ====== ======
Non-
GAAP
Adjusted
EBITDA* $1,617 $1,582 $9,285 $12,046
For the second quarter of 2016, operating loss was $0.5 million greater than the prior year. This was primarily because higher gross margin and a $0.7 million favorable cancellation of a contingent consideration liability helped to offset $1.6 million of higher legal and other costs associated with the proxy contest and settlement, a $0.7 million increase in personnel and information technology costs, as well as higher depreciation and amortization.
Within the Natural Gas Operations segment, operating expenses increased $1.2 million primarily due to the Company's increases in personnel and investments in information technology. This was partially offset by the elimination of $0.5 million from the Divestitures. Litigation, settlement and proxy contest costs drove the increase within the Corporate and Other segment. Offsetting those increases, the Marketing and Production segment benefited from a $0.7 million gain from cancellation of an earn-out provision.
Adjusted income before interest, taxes, depreciation, amortization, accretion, atypical expenses and discontinued operations ("Adjusted EBITDA"), a non-GAAP financial measure, was relatively consistent for both quarters, with the increased gross margin offset by higher information technology costs. On a year-to-date basis, Adjusted EBITDA was unfavorably impacted by lower gross margin and higher information technology costs. The Company believes that, when used in conjunction with measures prepared in accordance with GAAP, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its financial performance.
*See the attached tables for important disclosures regarding the Company's use of Adjusted EBITDA, as well as reconciliations of GAAP net (loss) income to non-GAAP Adjusted EBITDA for the 2016 and 2015 second quarter and year-to-date periods.
Balance Sheet and Cash Management
Cash and cash equivalents as of June 30, 2016 grew to $8.2 million from $2.7 million at December 31, 2015.
Cash provided by operating activities of continuing operations in the 2016 first half was $14.7 million compared with $11.4 million in the 2015 first half, with the increase primarily due to lower working capital requirements with warmer weather and lower gas costs.
Capital expenditures for the first half of 2016 were $4.1 million compared with $5.0 million in the prior-year period. 2016 capital expenditures included approximately $1.4 million for the Company's ERP system. Remaining capital expenditures for 2016 are expected to be approximately $2.5 million to $3.5 million, including the final cash capital expenditures for the ERP system. The majority of capital is focused on growth of the Company's Natural Gas Operations segment including construction activities to support expansion, maintenance and enhancements of its gas pipeline systems.
Cash used in financing activities of continuing operations was $5.9 million in the 2016 first half compared with $7.9 million in the prior year first half. Debt repayment was the primary use of cash in both periods.
Webcast and Conference Call
Gas Natural will host a conference call and live webcast on Wednesday, August 10(th) at 1:30 p.m. Eastern Time. During the conference call and webcast, management will review the financial and operating results for the 2016 second 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) 493-6725. The webcast can be monitored on the Company's website at investor.egas.net.
A telephonic replay will be available from 4:30 p.m. Eastern Time on the day of the teleconference through Wednesday, August 17, 2016. To listen to a replay of the call, dial (858) 384-5517 and enter the conference ID number 13641703. An archive of the webcast will be available on the Company's website at investor.egas.net/past events and will include a transcript, once available.
About Gas Natural Inc.
Gas Natural Inc., a holding company, distributes and sells natural gas to residential, commercial, and industrial customers. It distributes approximately 21 billion cubic feet of natural gas to roughly 68,000 customers through regulated utilities operating in Montana, Ohio, Maine and North Carolina. The Company's other operations include intrastate 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 its markets, while looking for acquisitions that are either adjacent to its existing utilities or in under-served markets. Further information is available on the Company's 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 consummate the corporate reorganization and debt refinancing on terms that are acceptable to the Company, or at all; the Company's ability to successfully integrate the operations of the companies it has acquired and consummate additional acquisitions; the Company's continued ability to make or increase dividend payments; the Company's ability to implement its business plan, grow earnings and improve returns on investment; 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: (216)
202-1564 Phone: (716) 843-3908 / (716) 843-3942
Email:
jsprague@egas.net Email: dpawlowski@keiadvisors.com / khoward@keiadvisors.com
FINANCIAL TABLES FOLLOW.
Gas Natural Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
REVENUE
Natural gas operations $14,606 $14,768 $49,670 $66,048
Marketing and production 2,427 1,278 5,670 3,731
Total revenues 17,033 16,046 55,340 69,779
COST OF SALES
Natural gas purchased 6,569 7,504 27,191 41,396
Marketing and production 2,031 1,060 4,971 3,244
Total cost of sales 8,600 8,564 32,162 44,640
----- ----- ------ ------
GROSS MARGIN 8,433 7,482 23,178 25,139
OPERATING EXPENSES
Distribution, general, and
administrative 7,169 5,946 13,096 12,533
Maintenance 240 288 504 615
Depreciation, amortization
and accretion 2,010 1,668 3,967 3,558
Taxes other than income 938 1,005 2,018 2,008
Provision for doubtful
accounts 57 47 77 99
Total operating expenses 10,414 8,954 19,662 18,813
------ ----- ------ ------
OPERATING (LOSS) INCOME (1,981) (1,472) 3,516 6,326
Other income (loss), net 138 (367) (264) (212)
Interest expense (762) (886) (1,515) (1,755)
---- ---- ------ ------
Income before income taxes (2,605) (2,725) 1,737 4,359
Income tax (benefit)
expense (934) (1,012) 706 1,655
---- ------ --- -----
(LOSS) INCOME FROM
CONTINUING OPERATIONS (1,671) (1,713) 1,031 2,704
Discontinued operations,
net of income taxes 14 213 (9) 650
NET (LOSS) INCOME $(1,657) $(1,500) $1,022 $3,354
======= ======= ====== ======
Basic weighted shares
outstanding 10,508,187 10,487,610 10,505,865 10,487,561
Dilutive effect of
restricted stock awards - - 1,232 1,320
--- --- ----- -----
Diluted weighted shares
outstanding 10,508,187 10,487,610 10,507,097 10,488,881
========== ========== ========== ==========
BASIC & DILUTED (LOSS) EARNINGS PER SHARE:
Continuing operations $(0.16) $(0.16) $0.10 $0.26
Discontinued operations 0.00 0.02 (0.00) 0.06
Net (loss) income per
share $(0.16) $(0.14) $0.10 $0.32
====== ====== ===== =====
Dividends declared per
common share $0.075 $ - $0.150 $0.135
====== ================ ====== ======
Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands)
June 30, December 31,
2016 2015
---- ----
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents $8,156 $2,728
Accounts receivable, less allowance for doubtful accounts of
$656 and $506, respectively 6,932 10,635
Accounts receivable due from related parties 74 188
Unbilled gas 1,477 6,995
Inventory
Natural gas 2,509 4,063
Materials and supplies 2,425 2,271
Regulatory assets, current 2,356 2,469
Other current assets 2,258 2,174
Total current assets 26,187 31,523
PROPERTY, PLANT, & EQUIPMENT, NET 140,540 142,416
OTHER ASSETS
Regulatory assets, non-current 1,277 1,523
Goodwill 15,872 15,872
Customer relationships, net of amortization 2,473 2,625
Restricted cash 1,448 1,898
Other non-current assets 1,873 1,530
Total other assets 22,943 23,448
------ ------
TOTAL ASSETS $189,670 $197,387
======== ========
Gas Natural Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
June 30, December 31,
2016 2015
---- ----
LIABILITIES AND CAPITALIZATION
------------------------------
CURRENT LIABILITIES
Line of credit $15,050 $15,750
Accounts payable 5,051 8,784
Accounts payable to related parties 1 192
Notes payable, current portion 34,761 5,012
Note payable to related party 3,940 1,980
Accrued liabilities 4,604 5,667
Accrued liabilities payable to related party 2,988 170
Regulatory liability, current 447 487
Build-to-suit liability - 2,041
Other current liabilities 6,637 5,379
Total current liabilities 73,479 45,462
LONG-TERM LIABILITIES
Deferred tax liability 12,234 12,295
Regulatory liability, non-current 1,333 1,251
Capital lease liability, non-current 4,720 5,177
Other long-term liabilities 2,893 3,286
Total long-term liabilities 21,180 22,009
NOTES PAYABLE, less current portion 6 34,427
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; Issued and
outstanding: 10,511,520 and 10,504,734 shares as of June 30, 2016 and December
31, 2015, respectively 1,577 1,575
Capital in excess of par value 64,054 63,985
Retained earnings 29,374 29,929
------ ------
Total stockholders' equity 95,005 95,489
------ ------
TOTAL CAPITALIZATION 95,011 129,916
------ -------
TOTAL LIABILITIES AND CAPITALIZATION $189,670 $197,387
======== ========
Gas Natural Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(amounts in thousands)
Six Months Ended June 30,
-------------------------
2016 2015
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,022 $3,354
Less (loss) incomefrom discontinued operations (9) 650
--- ---
Incomefrom continuing operations 1,031 2,704
Adjustments to reconcile incomefrom continuing operations to net cash provided by
operating activities:
Depreciation and amortization 3,967 3,537
Accretion - 21
Amortization of debt issuance costs 206 353
Provision for doubtful accounts 77 99
Amortization of deferred loss on sale-leaseback 451 -
Stock based compensation 70 98
Losson sale of assets 529 358
Unrealized holding gain on contingent consideration (672) -
Change in fair value of derivative financial
instruments (168) (135)
Investment tax credit (11) (11)
Deferred income taxes 702 2,038
Changes in assets and liabilities:
Accounts receivable, including related parties 3,741 6,066
Unbilled gas 5,518 5,913
Natural gas inventory 1,555 1,799
Accounts payable, including related parties (4,252) (8,378)
Regulatory assets and liabilities 72 (1,038)
Prepayments and other (62) (35)
Other assets 848 (497)
Other liabilities 1,074 (1,464)
----- ------
Net cash provided by operating activities 14,676 11,428
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,130) (4,973)
Proceeds from sale of fixed assets 2 50
Proceeds from note receivable - 55
Customer advances for construction 67 31
Contributions in aid of construction 708 195
--- ---
Net cash used in investing activities (3,353) (4,642)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from lines of credit 5,800 13,500
Repayments of lines of credit (6,500) (23,561)
Repayments of notes payable (6,760) (272)
Proceeds from notes payable, including related
parties 4,000 5,000
Repayments of capital lease obligations (1,470) (991)
Debt issuance costs paid (168) (151)
Dividends paid (788) (1,416)
---- ------
Net cash used in financing activities (5,886) (7,891)
DISCONTINUED OPERATIONS
Operating cash flows (9) 2,245
Investing cash flows - (398)
--- ----
Net cash (used in) provided by discontinued
operations (9) 1,847
--- -----
NET INCREASE IN CASH AND CASH EQUIVALENTS 5,428 742
Cash and cash equivalents, beginning of period 2,728 1,586
----- -----
CASH AND CASH EQUIVALENTS, END OF PERIOD $8,156 $2,328
====== ======
Gas Natural Inc. and Subsidiaries
Natural Gas Operations
Utility Throughput
Three Months Six Months Ended
Ended June 30, June 30,
--------------- -----------------
(in million cubic
feet (MMcf)) 2016 2015 2016 2015
---- ---- ---- ----
Full service distribution:
Energy West
Montana (MT) 496 474 1,764 1,800
Frontier Natural
Gas (NC) 163 45 574 516
Bangor Gas (ME) 329 290 876 1,130
Ohio Companies
(OH) 572 471 1,955 2,293
Public Gas (KY) - 13 - 88
--- --- --- ---
Total full
service
distribution 1,560 1,293 5,169 5,827
Transportation 2,888 2,446 6,071 5,765
Bucksport 23 285 74 413
--- --- --- ---
Total volumes 4,471 4,024 11,314 12,005
===== ===== ====== ======
Heating Degree Days
Three Months Ended Percent Colder (Warmer)
June 30, 2016 Compared to
-------- ----------------
Normal 2016 2015 Normal 2015
------ ---- ---- ------ ----
Montana weighted
average 1,140 1,095 1,157 (3.95%) (5.36%)
Bangor, ME 1,050 1,003 1,150 (4.48%) (12.78%)
Elkin, NC 260 454 327 74.62% 38.84%
Ohio weighted average 589 678 521 15.11% 30.13%
Total Weighted Average 886 891 847 0.56% 5.19%
Six Months Percent Colder (Warmer)
June 30, 2016 Compared to
-------- ----------------
Normal 2016 2015 Normal 2015
------ ---- ---- ------ ----
Montana weighted
average 4,216 3,842 3,957 (8.87%) (2.91%)
Bangor, ME 4,735 4,448 5,603 (6.06%) (20.61%)
Elkin, NC 2,327 2,583 2,609 11.00% (1.00%)
OH weighted average 3,497 3,278 4,049 (6.26%) (19.04%)
Weighted Average 3,877 3,609 4,022 (6.91%) (10.27%)
Gas Natural Inc. and Subsidiaries
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Adjusted Net (Loss) Income(1)
(in thousands, except
per share data) Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
GAAP net (loss) income $(1,657) $(1,500) $1,022 $3,354
Add back, pre-tax:
Non-recurring legal,
professional and
settlement costs 2,122 667 2,207 1,250
Non-recurring
regulatory and other
expenses - 693 - 731
Gain on cancellation
of contingent
consideration
liability (672) - (672) -
Loss on disposal of
assets - 393 531 393
Tax effect of non-
GAAP continuing
operations items(1) (525) (646) (853) (904)
Discontinued
operations (14) (213) 9 (650)
Non-GAAP Adjusted net
(loss) income(2) $(746) $(606) $2,244 $4,174
===== ===== ====== ======
Non-GAAP Adjusted net
(loss) income per
diluted share(2) $(0.07) $(0.06) $0.21 $0.39
====== ====== ===== =====
( )
(1) Applies an effective tax rate
of 36%, 37%, 41% and 38% to the
non-GAAP pre-tax adjustments
for the periods presented above,
respectively, consistent with
the actual effective tax rates
for those periods.
Gas Natural Inc. and Subsidiaries
Reconciliation of GAAP Net (Loss) Income to Non-GAAP Adjusted EBITDA(1)
(in thousands) Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2016 2015 2016 2015
---- ---- ---- ----
GAAP net (loss) income $(1,657) $(1,500) $1,022 $3,354
Add back:
Net interest expense 762 886 1,515 1,755
Income tax (benefit)
expense (934) (1,012) 706 1,655
Depreciation,
amortization and
accretion 2,010 1,668 3,967 3,558
Non-recurring legal,
professional and
settlement costs 2,122 667 2,207 1,250
Non-recurring
regulatory and other
expenses - 693 - 731
Gain on cancellation
of contingent
consideration
liability (672) - (672) -
Loss on disposal of
assets - 393 531 393
Discontinued
operations (14) (213) 9 (650)
Non-GAAP Adjusted
EBITDA(2) $1,617 $1,582 $9,285 $12,046
====== ====== ====== =======
( )
(2)Non-GAAP Financial Measures:
The Company believes that, when used
in conjunction with GAAP measures,
Adjusted Net (Loss) Income and
Adjusted EBITDA, or earnings before
interest, taxes, depreciation,
amortization, accretion, atypical
charges and discontinued operations,
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 Net
(Loss) Income 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-2016-second-quarter-results-300311264.html
SOURCE Gas Natural Inc.
