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News Release
Gas Natural Inc. Reports Second Quarter 2013 Results
- Total throughput volume was up 7.8% on growth in customer base combined with benefit of colder weather
- 2013 first half diluted earnings per share up 71% to $0.53

MENTOR, Ohio, Aug. 14, 2013 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a holding company operating local natural gas utility companies serving approximately 70,000 customers in seven states, reported financial results for the second quarter ended
June 30, 2013. 

Net loss was $0.3 million, or $0.04 per share, for the second quarter, compared with net loss of
$0.7 million, or $0.09 per share, for the quarter ended June 30, 2012.  On a year-to-date basis, net income for the first half of 2013 was $4.5 million, or $0.53 per diluted share, compared with $2.6 million, or $0.31 per diluted share, for last year's first half.      

Richard M. Osborne, Gas Natural's chairman and chief executive officer commented, "We continue to grow our customer base in our North Carolina and Maine markets by investing in the expansion of our system."

Natural Gas Operations Segment

The Company annually distributes over 33 billion cubic feet of natural gas to approximately 70,000 customers through regulated utilities operating in Kentucky, Maine, Montana, North Carolina, Ohio, Pennsylvania, and Wyoming.

Natural Gas Operations Income Statement




Three Months Ended June 30,


Six Months Ended June 30,

($ in thousands)


2013


2012


2013


2012













Natural Gas Operations








Operating revenues


$  17,746


$ 12,801


$    57,691


$    42,649


Gas Purchased


10,049


5,447


34,166


22,684

Gross Margin



7,697


7,354


23,525


19,965


Operating expenses

7,633


6,992


15,210


13,721

Operating income


64


362


8,315


6,244


Other income (expense)

259


295


298


409













Income before interest and taxes

323


657


8,613


6,653


Interest (expense)


(698)


(593)


(1,416)


(1,230)













Income before income taxes

(375)


64


7,197


5,423


Income tax (expense)

139


(105)


(2,722)


(2,111)













Net Income 



$    (236)


$     (41)


$    4,475


$    3,312

The Natural Gas Operations segment reported strong year-over-year revenue growth.  Revenue from the Company's Maine and North Carolina markets increased by $1.3 million in the second quarter compared with the prior-year period, driven by continued customer growth in both markets and an increase in the price paid for natural gas passed on to customers in the Maine market.  Revenue from Gas Natural's Ohio market increased $1.9 million, and revenue from the Company's Montana and Wyoming markets increased $1.7 million, both compared with the prior-year second quarter, and both driven by colder weather.  On a year-to-date basis, the first half of 2013 recorded a $15.0 million revenue increase, or 35.3%, compared with the prior year as a result of customer growth and colder weather.

Gross margin was $7.7 million for the second quarter of 2013 compared with $7.4 million in the 2012 second quarter.  The current year second quarter was impacted by a $0.9 million charge relating to gas cost recovery in Ohio.  On a year-to-date basis, gross margin increased $3.6 million, due to the increased sales volume.

The increase in operating expenses for the quarter and year-to-date period reflects the execution of the Company's growth strategy.    

Other Operating Segments

The Marketing and Production segment reported net income of $179,000 for the second quarter of 2013, compared with a $36,000 net loss in the prior-year period.  On a year-to-date basis, first half net income of the Marketing and Production segment was $427,000 compared with $60,000 for the six months ended June 30, 2012.  The Company's Liquefied Natural Gas (LNG) business drove profit growth for both the quarterly and year-to-date periods.  Additionally, the Company's production operation and the newly formed Gas Natural Resources, which contains the assets purchased from John D. Oil and Gas Marketing, contributed to the increased revenue and profits from the prior year. 

Balance Sheet and Cash Management

Cash and cash equivalents as of June 30, 2013 were $2.8 million, consistent with the balance at
March 31, 2013 and down $0.7 million from December 31, 2012.

Cash provided by operating activities increased $5.2 million to $17.4 million in the first six months of 2013 from $12.2 million in the first six months of 2012.  The increase was driven by higher net income, higher non-cash charges including deferred income taxes, depreciation and amortization, and lower working capital requirements. 

Capital expenditures for the first six months of 2013 were $9.9 million compared with $8.8 million in the 2012 first half, and included $1.6 million for the acquisition of a building in Ohio which houses the Company's corporate headquarters.  The 2013 expenditures are focused on the growth of the Company's Natural Gas Operations segment, specifically the expansion of its gas pipeline system to service the growing demand for natural gas in North Carolina and Maine. 

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 70,000 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 3,400 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.


Thomas J. Smith, Chief Financial Officer


Phone: (440) 974-3770


Email:  tsmith@egas.net


FINANCIAL TABLES FOLLOW

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


















Three Months Ended June 30,


Six Months Ended June 30,


2013


2012


2013


2012

REVENUES








    Natural gas operations

$  17,746,297


$  12,801,547


$  57,690,959


$  42,649,632

    Marketing and production

2,645,682


1,040,354


6,217,461


2,947,448

Pipeline operations

105,032


102,093


203,319


209,877

    Propane operations

658,385


561,552


2,360,959


2,470,710

      Total revenues

21,155,396


14,505,546


66,472,698


48,277,667






-



COST OF SALES








    Natural gas purchased

10,049,089


5,447,322


34,165,510


22,684,216

    Marketing and production

2,232,922


850,311


5,092,957


2,245,727

    Propane purchased

450,702


418,482


1,604,343


1,849,751

      Total cost of sales

12,732,713


6,716,115


40,862,810


26,779,694









GROSS MARGIN

8,422,683


7,789,431


25,609,888


21,497,973









OPERATING EXPENSES








    Distribution, general, and administrative

5,752,110


5,236,512


11,427,097


10,449,432

    Maintenance

309,846


316,722


678,525


612,957

    Depreciation and amortization

1,557,037


1,304,472


3,052,870


2,547,816

    Accretion

43,512


39,554


86,119


77,634

    Taxes other than income

919,844


880,306


1,849,648


1,817,796

      Total operating expenses

8,582,349


7,777,566


17,094,259


15,505,635









OPERATING INCOME (LOSS)

(159,666)


11,865


8,515,629


5,992,338









LOSS FROM UNCONSOLIDATED AFFILIATE

(2,947)


(2,214)


(4,027)


(4,955)

OTHER INCOME, NET

382,590


264,097


390,459


310,767

ACQUISITION EXPENSE

19,345


(457,624)


(156,534)


(576,347)

STOCK SALE EXPENSE

-


(255,279)


-


(255,279)

INTEREST EXPENSE

(774,442)


(625,797)


(1,583,998)


(1,289,866)









INCOME (LOSS) BEFORE INCOME TAXES

(535,120)


(1,064,952)


7,161,529


4,176,658









INCOME TAX BENEFIT (EXPENSE)

208,204


340,762


(2,700,722)


(1,618,001)









NET INCOME (LOSS)

$      (326,916)


$       (724,190)


$      4,460,807


$      2,558,657









Basic weighted shares outstanding

8,465,983


8,155,867


8,425,647


8,155,300

    Dilutive effect of stock options

-


-


847


7,386

Diluted weighted shares outstanding

8,465,983


8,155,867


8,426,494


8,162,686









  Basic and diluted earnings (loss) per share

$            (0.04)


$            (0.09)


$               0.53


$               0.31









  Weighted average dividends declared per common share

$            0.135


$            0.135


$             0.270


$             0.270









COMPREHENSIVE INCOME (LOSS):








NET INCOME (LOSS)

$      (326,916)


$      (724,190)


$      4,460,807


$      2,558,657

OTHER COMPREHENSIVE INCOME, NET OF TAX 








Unrealized gain/(loss) on available for sale securities, net of $2,209, $(9,273), $4,103  AND $(3,794), respectively

3,642


(15,477)


6,207


(6,331)

COMPREHENSIVE INCOME (LOSS)

$     (323,274)


$     (739,667)


$    4,467,014


$    2,552,326

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Balance Sheets






June 30, 


December 31, 


2013


2012


(unaudited)



ASSETS




CURRENT ASSETS




    Cash and cash equivalents

$       2,783,341


$       3,435,117

    Marketable securities

354,375


344,346

    Accounts receivable




       Trade, less allowance for doubtful accounts of $1,408,043 and $1,389,762, respectively

6,910,050


11,933,201

       Related parties

110,478


522,557

    Unbilled gas

1,637,002


4,612,258

    Note receivable - related parties, current portion

1,785


12,615

    Inventory




       Natural gas and propane

3,620,164


5,092,240

       Materials and supplies

2,742,919


1,835,816

    Prepaid income taxes

454,883


498,297

    Prepayments and other

463,853


2,224,267

    Recoverable cost of gas purchases

3,072,480


2,329,524

    Deferred tax asset

828,730


828,730

                Total current assets

22,980,060


33,668,968





PROPERTY, PLANT AND EQUIPMENT




    Property, plant and equipment

174,527,428


165,662,163

    Less accumulated depreciation, depletion and amortization

(49,835,133)


(47,034,673)

PROPERTY, PLANT AND EQUIPMENT, net

124,692,295


118,627,490





OTHER ASSETS




    Notes receivable - related parties, less current portion

97,344


122,650

    Regulatory assets




        Property taxes

166,365


307,732

        Income taxes

452,645


452,645

        Rate case costs

160,966


176,250

    Debt issuance costs, net of amortization

1,593,642


1,798,720

    Goodwill

16,516,895


14,891,377

    Customer relationships

3,105,083


616,500

    Investment in unconsolidated affiliate

352,704


321,731

    Restricted cash

2,089,006


3,150,847

    Other assets

96,086


328,549

                Total other assets

24,630,736


22,167,001





                    TOTAL ASSETS

$  172,303,091


$  174,463,459

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Balance Sheets






June 30, 


December 31, 


2013


2012


(unaudited)



LIABILITIES AND CAPITALIZATION




CURRENT LIABILITIES




    Checks in excess of amounts on deposit

$          604,232


$          720,340

    Lines of credit

16,200,000


24,260,755

    Accounts payable




      Trade

7,897,182


9,201,722

      Related parties

708,358


51,797

    Notes payable, current portion

506,522


633,498

    Contingent consideration, current

196,000


-

    Accrued liabilities




      Taxes other than income

2,118,662


2,548,717

      Vacation

147,604


115,956

      Employee benefit plans

284,596


145,959

      Interest

180,426


191,263

      Deferred payments received from levelized billing

1,601,969


2,822,926

      Customer deposits

721,068


744,974

      Related parties

46,783


595,240

      Obligation under capital lease - current

167,518


167,518

    Other current liabilities

668,093


729,550

    Over-recovered gas purchases

1,146,878


1,185,034

          Total current liabilities

33,195,891


44,115,249





LONG-TERM LIABILITIES




    Deferred investment tax credits

144,786


155,317

    Deferred tax liability

7,829,969


5,144,002

    Asset retirement obligation

1,936,498


1,850,379

    Customer advances for construction

1,019,632


1,009,232

    Regulatory liability for income taxes

83,161


83,161

    Regulatory liability for gas costs

-


20,745

    Long-term obligation under capital lease, less current portion

2,040,508


2,040,508

    Contingent consideration, less current portion

1,279,000


-

        Total long-term liabilities

14,333,554


10,303,344





NOTES PAYABLE, less current portion

43,448,552


43,700,742





COMMITMENTS AND CONTINGENCIES (see Note 12)








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, 8,646,678 and 8,369,752 shares issued and outstanding, respectively

1,297,002


1,255,463

    Capital in excess of par value

47,017,268


44,256,493

    Accumulated other comprehensive income

71,996


65,789

    Retained earnings

32,938,828


30,766,379

       Total stockholders' equity

81,325,094


76,344,124





TOTAL CAPITALIZATION

124,773,646


120,044,866





            TOTAL LIABILITIES AND CAPITALIZATION

$  172,303,091


$  174,463,459

 

Gas Natural Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)






For the Six Months Ending June 30,


2013


2012

CASH FLOWS FROM OPERATING ACTIVITIES




    Net income

$   4,460,807


$   2,558,657

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




     Depreciation and amortization

3,052,870


2,547,816

    Accretion

86,119


77,634

    Amortization of debt issuance costs

212,569


139,388

    Stock based compensation

1,615


29,618

    (Gain)/loss on sale of assets

(123,103)


2,184

    Loss from unconsolidated affiliate

4,027


4,955

    Investment tax credit

(10,531)


(10,531)

    Deferred income taxes

2,725,561


1,628,532

    Changes in assets and liabilities




      Accounts receivable, including related parties

5,435,230


4,441,447

      Unbilled gas

2,975,256


3,166,003

      Natural gas and propane inventory

1,472,076


3,785,744

      Accounts payable, including related parties

(899,739)


(4,843,189)

      Recoverable/refundable cost of gas purchases

(781,112)


(952,398)

      Prepayments and other

1,760,414


344,667

      Other assets

(916,425)


209,790

      Other liabilities

(2,013,559)


(897,090)

          Net cash provided by operating activities

17,442,075


12,233,227





CASH FLOWS FROM INVESTING ACTIVITIES




    Capital expenditures

(9,885,601)


(8,766,629)

    Proceeds from sale of fixed assets

1,023,836


29,302

    Proceeds from related party note receivable

5,217


5,038

    Purchase of Public Gas Company, Inc

-


(1,551,478)

    Cash acquired in acquisition

-


502

    Investment in unconsolidated affiliate

(35,000)


-

    Restricted cash - capital expenditures fund

1,060,190


-

    Acquisition deposit

-


(2,250,000)

    Customer advances for construction

26,155


142,448

    Contributions in aid of construction

273,510


47,402

          Net cash used in investing activities

(7,531,693)


(12,343,415)





CASH FLOWS FROM FINANCING ACTIVITIES




    Proceeds from lines of credit

8,207,000


7,012,377

    Repayment on lines of credit

(16,267,755)


(11,510,000)

    Proceeds from notes payable

-


-

    Repayments of notes payable

(379,166)


(3,852)

    Debt issuance costs

(7,492)


(474,723)

    Exercise of stock options

159,500


-

    Restricted cash - debt service fund

1,651


(759,397)

    Dividends paid

(2,275,896)


(2,201,918)

          Net cash used in financing activities

(10,562,158)


(7,937,513)





NET DECREASE IN CASH AND CASH EQUIVALENTS

(651,776)


(8,047,701)





CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

3,435,117


10,504,845





CASH AND CASH EQUIVALENTS, END OF PERIOD

$   2,783,341


$   2,457,144

 

Gas Natural Inc. and Subsidiaries


Segments of Operations


(Unaudited)




Three Months Ended June 30, 2013




Natural Gas

Operations


Marketing and Production


 

Pipeline Operations


 

Propane  Operations


Corporate and Other


Consolidated














OPERATING REVENUES


$  17,825,910


$ 4,227,929


$    105,032


$     658,385


$                   -


$  22,817,256

    Intersegment eliminations


(79,613)


(1,582,247)


-


-


-


(1,661,860)

Total operating revenue


17,746,297


2,645,682


105,032


658,385


-


21,155,396














COST OF SALES


10,128,702


3,815,169


-


450,702


-


14,394,573

    Intersegment eliminations


(79,613)


(1,582,247)


-


-


-


(1,661,860)

Total cost of sales


10,049,089


2,232,922


-


450,702


-


12,732,713














GROSS MARGIN


$   7,697,208


$    412,760


$   105,032


$    207,683


$                  -


$   8,422,683














OPERATING EXPENSES


7,645,708


243,838


43,457


466,122


229,453


8,628,578

    Intersegment eliminations


(12,569)


-


-


-


(33,660)


(46,229)

Total operating expenses


7,633,139


243,838


43,457


466,122


195,793


8,582,349














OPERATING INCOME (LOSS)


$         64,069


$    168,922


$      61,575


$   (258,439)


$     (195,793)


$     (159,666)














NET INCOME (LOSS)


$     (235,899)


$    178,872


$      33,978


$   (162,089)


$     (141,778)


$     (326,916)

 

Three Months Ended June 30, 2012



Natural Gas Operations


Marketing and

Production


 

Pipeline Operations


 

Propane Operations


Corporate and Other


Consolidated














OPERATING REVENUES


$  12,880,690


$ 2,151,601


$    102,093


$     561,552


$                   -


$  15,695,936

    Intersegment eliminations


(79,143)


(1,111,247)


-


-


-


(1,190,390)

Total operating revenue


12,801,547


1,040,354


102,093


561,552


-


14,505,546














COST OF SALES


5,526,465


1,961,558


-


418,482


-


7,906,505

    Intersegment eliminations


(79,143)


(1,111,247)


-


-


-


(1,190,390)

Total cost of sales


5,447,322


850,311


-


418,482


-


6,716,115














GROSS MARGIN


$   7,354,225


$    190,043


$   102,093


$    143,070


$                  -


$   7,789,431














OPERATING EXPENSES


6,991,710


220,317


61,882


431,539


72,118


7,777,566














OPERATING INCOME (LOSS)


$      362,515


$    (30,274)


$     40,211


$   (288,469)


$       (72,118)


$         11,865














NET INCOME (LOSS)


$       (40,947)


$    (35,575)


$     23,035


$   (156,236)


$     (514,467)


$     (724,190)

 

Gas Natural Inc. and Subsidiaries

Segments of Operations, Continued

(Unaudited)


Six Months Ended June 30, 2013



Natural Gas Operations


Marketing and

Production


 

Pipeline Operations


 

Propane Operations


Corporate and Other


Consolidated














OPERATING REVENUES


$    57,856,318


$    9,816,141


$    203,319


$  2,360,959


$                   -


$    70,236,737

    Intersegment eliminations


(165,359)


(3,598,680)


-


-


-


(3,764,039)

Total operating revenue


57,690,959


6,217,461


203,319


2,360,959


-


66,472,698














COST OF SALES


34,330,869


8,691,637


-


1,604,343


-


44,626,849

    Intersegment eliminations


(165,359)


(3,598,680)


-


-


-


(3,764,039)

Total cost of sales


34,165,510


5,092,957


-


1,604,343


-


40,862,810














GROSS MARGIN


$   23,525,449


$   1,124,504


$   203,319


$    756,616


$                  -


$   25,609,888














OPERATING EXPENSES


15,222,579


505,089


91,135


1,010,537


311,148


17,140,488

    Intersegment eliminations


(12,569)


-


-


-


(33,660)


(46,229)

Total operating expenses


15,210,010


505,089


91,135


1,010,537


277,488


17,094,259














OPERATING INCOME (LOSS)


$     8,315,439


$      619,415


$   112,184


$   (253,921)


$     (277,488)


$     8,515,629














NET INCOME (LOSS)


$     4,475,307


$      427,333


$      61,092


$   (181,077)


$     (321,848)


$     4,460,807

 

 

Six Months Ended June 30, 2012



Natural Gas Operations


Marketing and 

Production


 

Pipeline Operations


 

Propane Operations


Corporate and Other


Consolidated














OPERATING REVENUES


$    42,813,840


$ 5,777,390


$    209,877


$  2,470,710


$                   -


$    51,271,817

    Intersegment eliminations


(164,208)


(2,829,942)


-


-


-


(2,994,150)

Total operating revenue


42,649,632


2,947,448


209,877


2,470,710


-


48,277,667














COST OF SALES


22,848,424


5,075,669


-


1,849,751


-


29,773,844

    Intersegment eliminations


(164,208)


(2,829,942)


-


-


-


(2,994,150)

Total cost of sales


22,684,216


2,245,727


-


1,849,751


-


26,779,694














GROSS MARGIN


$   19,965,416


$    701,721


$   209,877


$    620,959


$                  -


$   21,497,973














OPERATING EXPENSES


13,720,982


551,402


100,388


997,952


134,911


15,505,635














OPERATING INCOME (LOSS)


$     6,244,434


$    150,319


$   109,489


$   (376,993)


$     (134,911)


$     5,992,338














NET INCOME (LOSS)


$     3,311,587


$      59,740


$      61,258


$   (251,077)


$     (622,851)


$     2,558,657

 

Gas Natural Inc. and Subsidiaries

Natural Gas Operations















Utility Throughput 































Three Months Ended June 30,


Six Months Ended June 30,


(in million cubic feet (MMcf))

2013


2012


2013


2012
















Full Service Distribution










Residential



704


567


2,948


2,377



Commercial



926


738


2,897


2,375



Industrial



42


31


91


84




Total full service


1,672


1,336


5,936


4,836
















Transportation



2,733


2,380


5,902


5,332


Bucksport




3,110


3,253


6,873


6,914


















Total Volumes


7,515


6,969


18,711


17,082

 

Heating Degree Days




























Three Months Ended


Percent (Warmer) Colder






June 30,


2013 Compared to




Normal


2013


2012


Normal


2012


Great Falls, MT


1,213


1,310


1,090


8.00%


20.18%


Cody, WY


1,072


1,155


905


7.74%


27.62%


Bangor, ME


1,072


1,171


952


9.24%


23.00%


Elkin, NC


337


451


361


33.83%


24.93%


Youngstown, OH


825


740


669


(10.30%)


10.61%


Jackson, KY


411


446


378


8.52%


17.99%






























Six Months Ended


Percent (Warmer) Colder






June 30,


2013 Compared to




Normal


2013


2012


Normal


2012


Great Falls, MT


4,398


4,192


4,004


(4.68%)


4.70%


Cody, WY


4,102


4,130


3,643


0.68%


13.37%


Bangor, ME


4,807


4,757


4,225


(1.04%)


12.59%


Elkin, NC


2,454


2,683


1,977


9.33%


35.71%


Youngstown, OH


3,943


3,893


3,082


(1.27%)


26.31%


Jackson, KY


2,695


2,906


2,136


7.83%


36.05%

SOURCE Gas Natural Inc.