Item 1. Business.
GENERAL
Mobile Gas Service Corporation (together with its subsidiaries, the "Company" or "Registrant", and exclusive of its subsidiaries, "Mobile Gas") was incorporated under the laws of the State of Alabama in 1933. The Company is engaged in the purchase, distribution, sale and transportation of natural gas to over 100,000 residential, commercial and industrial customers in southwest Alabama, including the City of Mobile and adjacent areas. The Company's service territory covers approximately 300 square miles. Mobile Gas is also involved in merchandise sales, specifically sales of natural gas appliances.
MGS Energy Services, Inc. ("MGS Energy"), a wholly-owned subsidiary, was incorporated in March 1983. Through MGS Energy, the Company provides contract and consulting work for utilities and industrial customers. MGS Energy owns a 51% interest in Southern Gas Transmission Company ("SGT"), an Alabama general partnership which was formed in November 1991. SGT was established to provide transportation services to the facilities of Alabama River Pulp Company, Inc. During fiscal year 1992, SGT constructed and began operating a 50-mile pipeline from the facilities of Koch Gateway Pipeline Company ("Koch"), formerly United Gas Pipe Line Company, near Flomaton, Alabama to the facilities of Alabama River Pulp Company, Inc. in Claiborne, Alabama.
MGS Storage Services, Inc. ("MGS Storage"), a wholly-owned subsidiary, was incorporated on December 4, 1991. MGS Storage and MGS Energy formed Bay Gas Storage Company, Ltd. ("Bay Gas"), an Alabama limited partnership, on January 13, 1992, with MGS Storage as general partner and MGS Energy as the initial limited partner. Currently, MGS Storage holds a general partnership interest of 87 1/2% in Bay Gas and a 12 1/2% limited partnership interest is held by Olin Corporation. Bay Gas has constructed an underground gas storage cavern which is used to provide storage and delivery of natural gas for Mobile Gas and other customers.
MGS Marketing Services, Inc. ("MGS Marketing"), a wholly-owned subsidiary, was incorporated on March 5, 1993 to assist existing and potential customers in the purchase of natural gas.
CUSTOMERS
Of the approximately 100,000 customers of the Company, approximately 95% are residential customers. In the fiscal year ended September 30, 1996, approximately 64% of the Company's gas revenues was derived from residential sales, 12% from small commercial and industrial sales, 12% from large commercial and industrial sales, 10% from transportation services, and 2% from storage and miscellaneous services. Residential sales in 1996 accounted for approximately 16% of the total volume of gas delivered to the Company's customers, with small commercial and industrial, large commercial and industrial, and transportation deliveries accounting for approximately 4%, 6% and 74%, respectively. The ten largest customers of the Company accounted for approximately 10% of the Company's gross margin in fiscal 1996, with the largest accounting for approximately 2%. For further information with respect to revenues from and deliveries to the various categories of the Company's customers, see Item 6, "Selected Financial Data".
In May 1995, the Company entered into a long-term contract with Tuscaloosa Steel Corporation to transport natural gas to a new iron ore reduction facility which is currently under construction on a site located adjacent to downtown Mobile. When fully operational, that facility is expected to use approximately 35,000 MMBTU of gas per day, making Tuscaloosa Steel the largest volume user of natural gas on the Company's system. To fulfill its obligations under such contract, the Company is constructing approximately five miles of new high pressure pipeline and upgrading certain other segments of its existing facilities, representing a capital commitment of nearly $10,000,000. The Company expects construction to be completed in mid-1997.
GAS SUPPLY
The Company is directly connected to two natural gas processing plants in south Mobile County. Mobile Gas has contracted for a portion of its firm supply directly with these producers. For the fiscal year ended September 30, 1996, the Company obtained approximately 90% of its gas supply from sources located in the Mobile Bay area, with the balance being obtained from interstate sources.
To encourage more competition among natural gas suppliers, the Federal Energy Regulatory Commission ("FERC") issued Order 636 in 1992. Order 636 required interstate pipelines to unbundle or separate gas sales, transportation and storage services. With the implementation of Order 636, most pipelines discontinued their traditional merchant function resulting in each local distribution company becoming responsible for obtaining all of its gas supply in the open market. While unbundling of these services allows a local distribution company, such as Mobile Gas, more flexibility in selecting and managing the type of services required to provide its customers with the lowest possible priced gas while maintaining a reliable gas supply, it also places additional responsibility on a distribution company to obtain its natural gas supply in the open market on a timely basis to fulfill commitments during peak demand periods. The Company believes that the Bay Gas storage facility, which had already been planned by the Company prior to Order 636, has enhanced its ability to respond to the changes in the industry brought about by Order 636.
The Company has a current peak day firm requirement of 129,870 MMBtus. Firm supply needs of 80,000 MMBtu/day are expected to be met through the withdrawal of gas from the storage facility owned by Bay Gas. The Company also has firm supply contracts with PanEnergy Trading and Market Services L.L.C., an assignee of a prior contract with Mobil Natural Gas, Inc. ("Mobil"), for 10,000 MMBtu/day until October 31, 2000 and Shell Gas Trading Company ("Shell") for 13,000 MMBtu/day until December 31, 1996, through the direct connections with Mobil and Shell's processing plants. The Company is negotiating currently with Coral Energy Resources, L.P. to contract for 13,000 MMBtu/day which will be supplied through the direct connection with Shell's processing plant. Additionally, the Company has contracted for firm transportation and storage service ("No-Notice Service") for 26,870 MMBtu/day from Koch under agreements extending to April 1, 1999. In conjunction with the No-Notice Service, the Company has contracted with Koch Gas Services, an affiliate of Koch, to provide firm gas supply through April 1, 1997.
GAS STORAGE
Construction of the Bay Gas storage facility was completed in 1994. The cavern is designed to hold up to 3.7 BCF of natural gas. At full capacity, approximately 1.3 BCF of the gas to be injected into the storage cavern, called "base gas," will remain in the cavern to provide sufficient pressure to maintain cavern integrity, and the remainder, approximately 2.4 BCF, represents working storage capacity. Bay Gas has pipeline interconnects with Florida Gas Transmission and Koch which provide access to interstate markets.
In 1994 Mobile Gas entered into a gas storage agreement with Bay Gas under which Bay Gas agreed to provide storage of approximately one-third of the working storage capacity for an initial period of 20 years. Under the Mobile Gas storage contract, injection and withdrawal capacity of 15,000 MMBtu/day and 80,000 MMBtu/day, respectively, is committed to Mobile Gas. At September 30, 1996, the storage facility's injection and withdrawal capacity was 35,000 MMBtu/day and 100,000 MMBtu/day, respectively. In November 1996, Bay Gas completed the installation of additional dehydration equipment which increased the withdrawal capacity to 260,000 MMBtu/day, of which 180,000 MMBtu is available to current and prospective customers other than Mobile Gas. An additional compressor will be added to increase the injection capacity if significant contracts are entered into which provide for firm injection services. There can be no assurance that Bay Gas will enter into additional contracts.
Under its agreements with Olin, Bay Gas has the right to develop up to 2 additional caverns on the property leased from Olin. Olin has the right, until Bay Gas makes certain required payments to Olin prior to commencement of the construction of a second cavern, to increase its ownership interest in Bay Gas by an additional 12 1/2%, by purchasing from MGS Storage such additional percentage at a price based on the book equity of MGS Storage in Bay Gas. The Company is unable to determine at this time whether additional caverns will be developed at the storage facility, but anticipates that an additional cavern would be considered if and when contracts are obtained for the entire capacity of the first cavern.
COMPETITION
Gas Distribution Competition. The Company is not in significant direct competition with respect to the retail distribution of natural gas to residential, small commercial and small industrial customers within its service area. Electricity competes with natural gas for such uses as cooking, water heating and space heating.
The Company's large commercial and industrial customers with requirements of 200 MMBtu per day or more contract with the Company to transport customer-owned gas while other commercial and industrial customers buy natural gas from the Company. Some industrial customers have the capability to use either fuel oil, coal, wood chips or natural gas, and choose their fuel depending upon a number of factors, including the availability and price of such fuels. In recent years, the Company has had adequate supplies so that interruptible industrial customers that are capable of using alternative fuels have not had supplies curtailed, and the price of natural gas has remained at levels such that, in most cases, these industrial customers have chosen to use natural gas rather than other fuels. The Company's rate tariffs include a competitive fuel clause which allows the Company to adjust its rates to certain large commercial and industrial customers in order to compete with alternative energy sources. However, there can be no assurance that the current competitive advantage of natural gas over alternative fuels will continue. See "Rates and Regulation."
Due to the close proximity of various pipelines and gas processing plants to the Company's service area, there exists the possibility that current or prospective customers could install their own facilities and connect directly to a supply source and thereby "bypass" the Company's service. The Company believes that because it has worked closely with major industrial customers to meet those customers' needs, and because of its ability to provide competitive pricing under its rate tariffs, none of the Company's customers have bypassed its facilities to date. Although there can be no assurance as to future developments, the Company intends to continue its efforts to reduce the likelihood of bypass by offering competitive rates and services to such customers.
Gas Storage Competition. A number of types of competitors may provide services like or in competition with those of Bay Gas. These include, among others, natural gas storage facilities, natural gas aggregators (who rebundle services ordered unbundled by Order 636), and natural gas pipelines. Bay Gas believes that its strategic geographic location and its ability to charge market-based rates for interstate storage services will enable it to effectively compete with such competitors. See "Rates and Regulation."
RATES AND REGULATION
The Company's natural gas distribution operations are under the jurisdiction of the Alabama Public Service Commission ("APSC"). The APSC approves rates which are intended to permit the recovery of the cost of service including a return on investment. Rates are determined by reference to rate tariffs approved by the APSC in traditional rate proceedings or, for certain large customers, on a case-by-case basis. In addition, pursuant
to APSC order, rates for a limited number of large industrial customers are determined on a privately negotiated basis. The Company also is allowed to recover costs associated with the Company's replacement of cast iron mains. This component of rates is adjusted annually through a filing with the APSC. The rates for service rendered by the Company are on file with the APSC. The APSC also approves the issuance of debt and equity securities and has supervision and regulatory authority over service, equipment, accounting, and other matters.
On June 10, 1996, the APSC authorized the Company to apply a temperature rate adjustment to customers' gas bills for the months of November through April. The temperature rate adjustment will help level out the effects of temperature extremes on Company earnings by reducing high gas bills to customers in colder than normal weather and increasing gas revenues received by the Company in warmer than normal weather. The temperature rate adjustment was reflected in customers' gas bills beginning November 1996.
The Company's tariffs include a purchased gas adjustment clause which allows the Company to pass on to certain of its customers increases or decreases in gas costs from those reflected in its tariff charges. Adjustments under such clauses require periodic filings with the APSC but do not require a general rate proceeding. Under the purchased gas adjustment clause, the Company has a competitive fuel clause which gives it the right to adjust its rates to certain large customers in order to compete with alternative energy sources. Any margin lost as a result of competitive fuel clause adjustments is recoverable from its other customers.
Gas deliveries to certain industrial customers are subject to regulation by the APSC through contract approval. The operations of SGT, which consist only of intrastate transportation of gas, are also regulated by the APSC.
Bay Gas is a regulated utility governed under the jurisdiction of the APSC. As a regulated utility, Bay Gas' intrastate storage contracts are subject to APSC approval. Operation of the storage cavern and well-head equipment are subject to regulation by the Oil and Gas Board of the State of Alabama. Bay Gas is allowed by FERC order to charge market-based rates for interstate storage services. Market-based rates allow Bay Gas to respond to market conditions and minimizes regulatory involvement in the setting of its rates for storage services.
The Company has been granted nonexclusive franchises to construct, maintain and operate a natural gas distribution system in the areas in which it operates. Except for the franchise granted by Mobile County, Alabama, which has no stated expiration date, the franchises have expiration dates, the earliest of which is in 2007. The Company has no reason to believe that the franchises will not be renewed upon expiration.
SEASONAL NATURE OF BUSINESS
The nature of the Company's business is highly seasonal and temperature sensitive. As a result, the Company's operating results in any given period have historically
reflected, in addition to other matters, the impact of weather, with colder temperatures resulting in increased sales by the Company. The substantial impact of this sensitivity to seasonal conditions has been reflected in the Company's results of operations. As discussed above under "Rates and Regulation - Results of Operations" and below under "Management's Discussion and Analysis of Financial Condition and Results of Operations" the application of a temperature rate adjustment in customers' bills beginning in November 1996 will help level out the effects of temperature extremes on results of operations in future periods.
Due to the seasonality of the Company's business, the generation of working capital is impaired during the summer months because of reduced gas sales. Cash needs during this period are met generally through short-term financing arrangements or the reduction of temporary investments as is common in the industry.
ENVIRONMENTAL ISSUES
The Company is subject to various federal, state and local laws and regulations relating to the environment, which have not had a material effect on the Company's financial position or results of operations.
Like many gas distribution companies, prior to the widespread availability of natural gas, the Company manufactured gas for sale to its customers. In contrast to some other companies which operated multiple manufactured gas plants, the Company and its predecessor operated only one such plant, which discontinued operations in 1933. The process for manufacturing gas produced by-products and residuals, such as coal tar, and certain remnants of these residuals are sometimes found at former gas manufacturing sites.
The Company conducted a preliminary assessment in 1994 of its former gas plant site and has tested certain waters in the vicinity of the site. The Company developed and has implemented a plan for the site based on the advice of its environmental consultants, which involves securing and monitoring the site, and continued testing. Based on the results of tests to date, the Company does not believe that the site currently poses any threat to human health or the environment. While no conclusion can be reached at this time as to whether any further remedial action might ultimately be required, based on currently available information, it is believed that any costs with respect to the site are likely to be immaterial, and the Company has therefore established no reserve for such costs in its financial statements. The Company intends that, should further investigation or changes in environmental laws or regulations require material expenditures for investigation, remediation, or clean-up with regard to the site, it would apply to the APSC for appropriate rate recovery of such costs. However, there can be no assurance that the APSC would approve the recovery of such costs or the amount and timing of any such recovery.
EMPLOYEES
Mobile Gas employed 271 full-time employees as of September 30, 1996. Of these, approximately 38% are represented by the Oil, Chemical and Atomic Workers International
Union, Local No. 3-541. As of September 30, 1996 Bay Gas employed five full-time employees. The Company believes that it enjoys generally good labor relations.
Item 2.
Item 2. Properties.
The Company's properties consist of distribution, general, transmission, and storage plant. The distribution plant is located in Mobile County, Alabama and is used in the distribution of natural gas to the Company's customers. The distribution plant consists primarily of mains, services, meters and regulating equipment, all of which are adequate to serve the present customers. The distribution plant is located on property which the Company is entitled to use as a result of franchises granted by municipal corporations, or on easements or rights-of-way.
The general plant consists of land, structures (with aggregate floor space of approximately 118,000 square feet), office equipment, transportation equipment and miscellaneous equipment, all located in Mobile County, Alabama.
The transmission plant consists of a pipeline of approximately 50 miles and related surface equipment which is used in the transmission of natural gas by SGT and is located primarily in Monroe County, Alabama. The transmission plant is located on easements or rights-of-way.
The storage plant, consisting of an underground cavern for the storage of natural gas and related pipeline and surface facilities, is located primarily in Washington County, Alabama. The storage plant is constructed on a leasehold estate with an initial term of 50 years, which will expire in 2040, and which may be renewed at the Company's option for an additional term of 20 years.
Substantially all of the property of the Company is pledged as collateral for the long-term debt.
Item 3.
Item 3. Legal Proceedings.
The Company is involved in litigation arising in the normal course of business. Management believes that the ultimate resolution of such litigation will not have a material adverse effect on the consolidated financial statements of the Company.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the fourth quarter of fiscal year 1996.
Executive Officers of the Registrant
Pursuant to General Instruction G(3) of Form 10-K, the following list is included as an unnumbered Item in Part I of this Report in lieu of being included in the proxy statement to be filed with the Securities and Exchange Commission.
Information relating to executive officers who are also directors is included under the caption "Election of Directors" contained in the Company's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders and is incorporated herein by reference.
The following is a list of names and ages of all of the executive officers who are not also directors or nominees for election as directors of the Registrant indicating all positions and offices with the Registrant held by each such person and each such person's principal occupations or employment during the past five years. All such persons have been elected for terms expiring in January 1997. Officers are appointed by the Board of Directors of the Company.
* Mr. Downing is the son-in-law of Gaylord C. Lyon, a Director of the Company.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock Equity and Related Stockholder Matters.
The Registrant's Common Stock, $2.50 par value, is traded on the NASDAQ National Market under the symbol "MBLE". As of December 18, 1996 there were 1,624 holders of record of the Company's Common Stock. Information regarding Common Stock dividends and the bid price range for Common Stock during the periods indicated is as follows:
Over-the-counter quotations reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
While the Board of Directors intends to continue the practice of paying dividends quarterly, amounts and dates of such dividends as may be declared will be dependent upon the Registrant's future earnings, financial requirements, and other factors.
The Registrant's long-term debt instruments contain certain debt to equity ratio requirements and restrictions on the payment of cash dividends and the purchase of shares of its capital stock. At September 30, 1996, under the most limiting of such provisions, retained earnings in the amount of $15,235,000 were unrestricted.
Item 6.
Item 6. Selected Financial Data.
Note: (1) The number of degrees that the daily mean temperature falls below 65 degrees F. The Company's rates were designed assuming annual normal degree days of 1,640 beginning December 1, 1995 and an annual normal of 1,695 for prior periods.
Item 7.
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition.
THE COMPANY
The Company's natural gas distribution operations are under the jurisdiction of the Alabama Public Service Commission (APSC). The Company's rate tariffs allow a pass through to customers of the cost of gas supplies, certain taxes and, beginning December 1, 1995, incremental costs associated with the Company's replacement of cast iron mains. These costs, therefore, ultimately have little impact on the Company's earnings. Other costs, including a return on investment, have historically been recovered through rates approved in traditional rate proceedings.
The nature of the Company's distribution business is highly seasonal and temperature sensitive. As a result, the Company's operating results in any given period reflect, in addition to other matters, the impact of weather, through either increased or decreased sales volumes.
Bay Gas, which commenced operations in September 1994, is a regulated utility governed under the jurisdiction of the APSC and as such, Bay Gas' intrastate storage contracts are subject to APSC approval. In addition, by Federal Energy Regulatory Commission order, Bay Gas is permitted to charge market-based rates for interstate storage services.
RESULTS OF OPERATIONS
NET INCOME
The Company's net income was $8.6 million or $2.68 per share in 1996, $4.0 million or $1.26 per share in 1995, and $4.9 million or $1.78 per share in 1994. The 1996 increase in net income resulted primarily from colder weather combined with a general rate increase which went into effect on December 1, 1995. The general rate increase, which was approved by the APSC, was designed to provide additional annual revenues of $6.9 million based on normal weather. The impact of colder weather increased 1996 earnings per share by $.81 compared to 1995 and $.45 compared to earnings that would have occurred with normal weather. Weather normalized earnings will be useful in evaluating future earnings since the APSC authorized Mobile Gas to apply, on a prospective basis, a temperature rate adjustment to customers' gas bills for the months of November through April. This temperature rate adjustment will help level out the effects of temperature extremes on Company earnings by reducing high gas bills to customers in colder than normal weather and increasing gas revenues received by the Company in warmer than normal weather. The temperature rate adjustment is reflected in customers' gas bills beginning November 1996. Also contributing to the strong earnings performance in fiscal 1996 were increased Bay Gas earnings, increased merchandising earnings and the continued growth of industrial sales and transportation revenues.
The 1995 decrease in net income resulted from warmer weather during fiscal 1995 compared to fiscal 1994. Earnings per share in 1995 were impacted also by the September 1994 issuance of 460,000 shares of Common Stock.
OPERATING REVENUES
Revenues from the sale and transportation of natural gas were $68.3 million in 1996, $56.2 million in 1995, and $60.5 million in 1994. The 1996 increase in gas revenues was due primarily to the increase in rates and to colder weather during the 1995-96 heating season. Based on heating degree days billed, temperatures in the Company's service area during fiscal 1996 were 53% colder than prior year and 24% colder than normal. As a result of colder weather, the volume of gas sold and delivered to temperature sensitive customers, who are primarily residential, small commercial and small industrial customers, increased 23% in 1996 compared to 1995. Revenues from temperature sensitive customers increased $9.4 million or 21.8% in fiscal 1996 compared to fiscal 1995. Other components of gas revenues which contributed to the 1996 increase were an increase in large commercial and industrial volumes of 19.0% and an increase in transportation volumes of 1.8%, representing a combined gas revenue increase of $2.2 million. Non-intercompany revenues from Bay Gas increased $681,000 in 1996 compared to 1995.
The decrease in 1995 gas revenues compared to 1994 reflects the impact of weather which was 27.5% warmer than 1994 and 21.8% warmer than normal. Temperature sensitive volumes decreased 13.0% in 1995, which resulted in a $4.8 million decrease in gas revenues from these customers compared to 1994.
EXPENSES
Cost of gas increased $1.2 million or 6.8% in 1996 compared to 1995. This increase is attributed primarily to the 1996 increase in gas volumes sold and delivered. The effect on cost of gas of increased gas volumes was offset partially by a reduction in the deferred purchased gas adjustment of $5.3 million. Cost of gas decreased $6.9 million, or 27.5% in 1995 compared to 1994. The 1995 decrease is attributed primarily to the Company's use of the Bay Gas storage facility, as opposed to interstate pipeline companys' facilities, for storage of gas which is used as a firm gas supply to ensure that a certain amount of gas supply is available during peak demand periods. Amounts paid to Bay Gas in 1996 and 1995 of $4.1 million for gas storage services have been eliminated in consolidation. Another contributing factor for the 1995 decrease is the decrease in gas volumes sold to customers during 1995 due to warmer weather.
A variety of factors caused the $2.8 million increase in operations and maintenance expenses in 1996 as compared to 1995. Bay Gas operations and maintenance expenses increased $160,000 in conjunction with serving new storage customers. For Mobile Gas, certain non-routine maintenance projects totaling $450,000 were initiated and completed in 1996. The cold 1996 winter impacted
operations expense in two respects. A $190,000 increase in bad debt expense was primarily associated with higher customer bills from increased usage caused by the cold winter. Additionally, the Company incurred over $100,000 in increased overtime expense responding to customer and system needs during the extreme weather periods. Expenses in 1996 also rose from increased advertising, contributions and additional personnel hired in late 1995 in order to improve the responsiveness to customers. Other factors affecting expenses were rate proceeding expenses and transition costs associated with the adoption of Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (see Note 9 to the Consolidated Financial Statements), both of which are being amortized to expense over a three year period beginning December 1, 1995 in accordance with APSC order.
Operations and maintenance expenses increased $842,000 in 1995 compared to 1994. Of this increase, $647,000 is attributed to the effect of the first full year of Bay Gas operations.
Depreciation expense increased $351,000 or 6.9% in 1996 compared to 1995 and $1.0 million or 26.0% in 1995 compared to 1994. Increases for both years reflect the growth in property, plant and equipment. Depreciation attributable to Bay Gas accounted for $776,000 of the 1995 increase.
Taxes, other than income taxes, primarily consist of state and local taxes which are based on gross revenues and fluctuate accordingly. These taxes are passed through to customers and thus do not impact the Company's net income. The 1996 increase of $816,000 or 17.2% is attributed primarily to increased gas revenues in 1996. Property taxes are another component of other taxes. Bay Gas property taxes and other taxes increased $362,000 in 1995 compared to 1994 as a result of the first full year of Bay Gas operations. As a result, other taxes increased in 1995 despite lower gas revenues as compared to 1994.
Interest expense decreased $176,000, or 3.2% in 1996 compared to 1995 as a result of decreased levels of short-term debt, lower short-term interest rates and decreased interest on long-term debt. Interest expense was slightly higher in 1995 compared to 1994 due to increased levels of short-term borrowings. The allowance for borrowed funds used during construction decreased $1.9 million in 1995 compared to 1994 as a result of the commencement of Bay Gas operations. Prior to commencement, interest on the debt of Bay Gas was capitalized to plant.
Interest income increased $446,000 in 1996 compared to 1995. Improved cash flows in 1996 provided more opportunities to invest in short-term financial instruments.
Income taxes fluctuated with the changes in pre-tax income. The Company's effective tax rates in 1996, 1995, and 1994 were 36.7%, 36.0% and 36.4%, respectively. Income tax expense is detailed in Note 7 to the Consolidated Financial Statements.
EFFECTS OF INFLATION
Inflation impacts the prices the Company must pay for labor and other goods and services required for operation, maintenance and capital improvements. Changes in purchased gas costs are passed through to customers in accordance with the approved provision of the Company's rate tariffs. Increases in other costs must be recovered through timely filings for rate relief.
GAS SUPPLY
A primary goal of the Company is to provide gas at the lowest possible cost while maintaining a reliable long-term supply. To accomplish this goal, the Company has diversified its gas supply by constructing and purchasing pipelines to access the vast gas reserves in our area, both offshore and onshore. The Company has also contracted with certain of these sources for firm supply. In addition, the Company has a natural gas storage cavern which provides for a major portion of the Company's peak day needs. The storage cavern commenced operations in September 1994 when the Company began to inject gas for storage. The diversification of sources gives the Company more flexibility to obtain gas at the most favorable prices.
ENVIRONMENTAL
The Company is subject to various federal, state and local laws and regulations relating to the environment, which have not had a material effect on the Company's financial position or results of operations. See Note 10 to the Consolidated Financial Statements for a discussion of certain environmental issues.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash needs reflect the capital-intensive nature of its business. The following table briefly describes capital expenditures in the periods indicated:
The Company generally relies on cash generated from operations and, on a temporary basis, short-term borrowings to meet working capital requirements and to finance normal capital expenditures. Cash provided by operating activities was $13.0 million in 1996, $8.9 million in 1995 and $13.0 million in 1994. The increased cash flow from operating activities for fiscal 1996 primarily reflect increased net income and
increased provision for deferred taxes, both of which were partially offset by the change in operating assets and liabilities. The fluctuation in operating assets and liabilities was impacted primarily from a one-time reduction in the deferred purchased gas adjustment. Other fluctuations within operating assets and liabilities are generally the result of the timing of cash receipts and payments.
The decrease in cash flow from operating activities in fiscal 1995 compared to fiscal 1994 was attributed primarily to a decrease in net income and a decrease in operating assets and liabilities, both of which were partially offset by an increase in depreciation in 1995.
The Company's remaining cash needs for its distribution operations in 1996 and 1995 were obtained by drawings upon the Company's revolving credit agreement. Of the $13.2 million increase in short-term borrowings for 1996, $11 million is related to a purchase of short-term investments which are reflected within the balance sheet as cash equivalents at September 30, 1996.
The Company began construction of its Bay Gas storage facility in 1992 and commenced operations in September 1994. The investment in Bay Gas as of September 30, 1996, which includes construction work-in-progress, was $34.8 million plus an additional $2.4 million for base gas. Sources of funds for the development and construction of the Bay Gas storage facility include the private issuance in 1993 of $22.5 million of Bay Gas Notes, pursuant to an Indenture of Mortgage which secures the Bay Gas Notes. A portion of the funds from that issuance was temporarily invested and then used as construction continued in 1994 and 1995. Additional funds have come from short-term borrowings and Mobile Gas' issuance of 460,000 shares of common stock in September 1994, which generated net proceeds of $9.3 million.
Bay Gas currently is adding dehydration equipment which will more than double its maximum daily withdrawal capacity. At September 30, 1996, $312,000 had been expended on this equipment. The Company estimates that an additional $968,000 will be expended to complete this project by November 1996. An additional compressor at an estimated cost of $2.5 million will be required to increase the gas injection capacity should significant contracts be entered into which provide for firm injection services. Funding for the additional dehydration equipment and for the additional compressor, if added, will come from internal cash generation and an equity contribution from the Bay Gas partners. Funds for such equity contribution by Mobile Gas would be obtained from short-term bank borrowings.
During fiscal 1995, Mobile Gas entered into a long-term contract with an industrial customer to transport gas to the customer's facility. In order to service the customer by mid-1997, an estimated $10 million in new facilities are under construction by the Company. At September 30, 1996, $1.7 million had been expended on these facilities. Funding for this project will come from $12 million 7.27% bonds which were issued in late November 1996. The balance of funds not used for this project will be used for general corporate and working capital purposes.
In addition to the cash requirements of Bay Gas and the above mentioned construction project of Mobile Gas, the Company expects fiscal 1997 capital expenditures related to the Company's regular construction program to be $6.8 million. Funds for the Company's cash needs for its regular construction program are expected to come from cash provided by operations, the November 1996 bond issue, and draws upon the Company's revolving credit agreement. Management believes it has adequate financial flexibility to meet its expected cash needs in the foreseeable future.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The financial statements and financial statement schedules and the Independent Auditor's Report thereon filed as part of this report are listed in the "Mobile Gas Service Corporation and Subsidiaries Index to Financial Statements and Schedules" at Page, which follows Part IV hereof.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There have been no disagreements on accounting and financial disclosure with the Company's outside auditors which are required to be disclosed.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
Information under the captions "Election of Directors" and "Information Regarding the Board of Directors" contained in the Company's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders is incorporated herein by reference.
For information with respect to executive officers of the Registrant, see "Executive Officers of the Registrant" at the end of Part I of this Report.
Information under the caption "Reports Under Section 16 of the Securities and Exchange Act" contained in the Company's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation.
Information under the caption "Executive Compensation" contained in the Company's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information under the caption "Security Ownership of Certain Beneficial Owners and Management" contained in the Company's definitive proxy statement with respect to its 1997 Annual Meeting of Stockholders is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions.
There were no transactions required to be disclosed pursuant to this item.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a), (d) Financial Statements and Financial Statement Schedules
See "Mobile Gas Service Corporation and Subsidiaries Index to Financial Statements and Schedules" at page, which follows Part IV hereof.
(3) Exhibits - See Exhibit Index on pages E-1 through E-4.
(b) No reports on Form 8-K were filed during the last quarter of the fiscal year ended September 30, 1996.
(c) Exhibits filed with this report are attached hereto.
Signatures
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOBILE GAS SERVICE CORPORATION ------------------------------ Registrant
By: /s/ Charles P. Huffman ------------------------------ Charles P. Huffman, Vice President, Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signatures (Continued)
MOBILE GAS SERVICE CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Schedules other than that referred to above are omitted and are not applicable or not required.
INDEPENDENT AUDITOR'S REPORT
Mobile Gas Service Corporation:
We have audited the accompanying consolidated balance sheets of Mobile Gas Service Corporation and subsidiaries as of September 30, 1996 and 1995 and the related consolidated statements of income, common stockholders' equity, and cash flows for each of the three fiscal years in the period ended September 30, 1996. Our audits also included the financial statement schedules listed in the Index referred to in Item 14. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Mobile Gas Service Corporation and its subsidiaries at September 30, 1996 and 1995, and the results of their operations and their cash flows for each of the three fiscal years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP - ------------------------- Deloitte & Touche LLP Atlanta, Georgia November 7, 1996
CONSOLIDATED BALANCE SHEETS
ASSETS
See Accompanying Notes to Consolidated Financial Statements
CAPITALIZATION AND LIABILITIES
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
See Accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
See Accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Mobile Gas Service Corporation, its wholly-owned subsidiaries, MGS Energy Services, Inc., MGS Storage Services, Inc., MGS Marketing Services, Inc., its 87.5% owned partnership, Bay Gas Storage Company, Ltd., (Bay Gas) and its 51% owned partnership, Southern Gas Transmission Company (collectively the "Company"). All significant intercompany balances and transactions have been eliminated.
DESCRIPTION OF BUSINESS
The Company is engaged principally in the distribution of natural gas to residential, commercial, and industrial customers in South Alabama, subject to regulation by the Alabama Public Service Commission (APSC). For the major portion of the Company's business, the APSC approves rates which are intended to permit the recovery of the cost of service including a return on investment. Gas deliveries to certain industrial customers are subject to regulation by the APSC through contract approval. In September 1994, Bay Gas completed the development and construction of a natural gas storage facility located in a salt dome near the north end of the Company's service area. As a separate utility regulated by the APSC, Bay Gas' intrastate storage contracts require APSC approval. In addition, by Federal Energy Regulatory Commission order, Bay Gas is permitted to charge market-based rates for interstate storage services. The Company is also engaged in various unregulated activities including the sale and financing of gas appliances, jobbing work, and contract and consulting work for utilities and industrial customers.
REVENUES AND GAS COSTS
Revenues from residential and commercial customers are recorded as meters are read on a cycle basis throughout each month. The commodity cost of purchased gas applicable to gas delivered to customers but not yet billed under the cycle billing method is deferred. Increases or decreases in the cost of gas and certain other costs are passed through to customers in accordance with provisions in the Company's rate schedules. Any over or under recoveries of these costs are charged or credited to cost of gas and included in current assets or liabilities.
PROPERTY, PLANT, AND EQUIPMENT
Substantially all property, plant, and equipment is considered utility plant. Included in property, plant, and equipment are acquisition adjustments, net of amortization, of $8,812,000 and $9,203,000 at September 30, 1996 and 1995, respectively. Such acquisition adjustments are being amortized to cost of service over the lives of the assets acquired.
The cost of additions includes direct labor and materials, allocable administrative and general expenses, pension and payroll taxes, and an allowance for funds used during construction. The cost of depreciable property retired, plus cost of dismantling, less salvage, is charged to accumulated depreciation. Estimated interest cost associated with property under construction, based upon weighted average interest rate for short-term borrowings or the interest rate on borrowings for specific projects, is capitalized as an allowance for borrowed funds used during construction. Maintenance, repairs, and minor renewals and betterment of property are charged to operations.
Provisions for depreciation are computed principally on straight-line rates for financial statement purposes and on accelerated rates for income tax purposes. Depreciation for financial statement purposes is provided at an annual rate averaging approximately 4.0% of depreciable property, excluding the gas storage facility which is depreciated at an annual rate averaging 2.7%.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
INCOME TAXES
The Company provides deferred tax liabilities and assets, as measured by enacted tax rates, for all temporary differences caused when the tax basis of an asset or liability differs from that reported in the financial statements. Investment tax credits realized after 1980 are deferred and amortized over the average life of the related property in accordance with regulatory treatment.
EARNINGS PER SHARE
Earnings per share are computed based on weighted average number of common shares outstanding and additional common shares assumed to be outstanding to reflect the dilutive effect of outstanding stock options, which are common stock equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS 121") was issued in March 1995 and is effective for the Company October 1, 1996. SFAS 121 established accounting standards for the impairment of long-lived assets. The Company does not believe that it has any assets which currently are impaired under SFAS 121.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") was issued in October 1995 and is effective for the Company October 1, 1996. SFAS 123 established a fair value method of accounting for stock-based compensation plans. SFAS 123 allows companies to either measure stock-based compensation using the fair value method or to continue to apply existing accounting standards and include footnote disclosure of pro forma net income and earnings per share calculated as if the fair value method had been applied. Stock options outstanding at September 30, 1996 are not subject to the requirements of SFAS 123 since the option grant date is prior to the effective date of pro forma disclosures. The Company expects to continue to apply existing accounting standards for stock-based compensation and to include disclosures required by SFAS 123 for stock options granted in the future.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to conform with the 1996 financial statement presentation.
2. DETAIL OF SELECTED BALANCE SHEET ACCOUNTS
The functional classifications for the cost of property, plant, and equipment are as follows at September 30, (in thousands):
The components of regulatory assets are as follows at September 30, (in thousands):
3. CAPITAL STOCK
The Mobile Gas Service Corporation 1992 Stock Option Plan (the "Plan") provides for the granting of incentive stock options, non-qualified stock options, and stock appreciation rights to key employees. Under the Plan, an aggregate of 150,000 shares of the Company's authorized but unissued Common Stock have been reserved for issuance. Stock options become 25% exercisable on the first anniversary of the grant date and an additional 25% become exercisable each succeeding year. No option may be exercised after the expiration of ten years from the grant date. During the year ended September 30, 1995, 105,000 options were granted at an option price of $21.125, representing the market price on the date of grant. No stock options were granted or exercised during the year ended September 30, 1996. At September 30, 1996, 26,250 stock options are exercisable and there remains 45,000 shares for which options may be granted under the Plan.
At September 30, 1996, 213,000 shares of the Company's authorized but unissued Common Stock were reserved for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan.
4. RESTRICTIONS ON RETAINED EARNINGS
The Company's long-term debt instruments contain certain debt to equity ratio requirements and restrictions on the payment of cash dividends and the purchase of shares of its capital stock. At September 30, 1996, under the most limiting provisions, retained earnings in the amount of $15,235,000 was unrestricted.
5. LONG-TERM DEBT
Long-term debt consists of the following at September 30, (in thousands):
Maturities and sinking fund requirements on long-term debt in each of the five fiscal years subsequent to September 30, 1996 are as follows: 1997 - $2,818,000; 1998 - $2,180,000; 1999 - $2,100,000; 2000 - $1,962,000; and 2001 - $2,045,000.
Substantially all of the property of the Company is pledged as collateral for the long-term debt.
At September 30, 1996, the Company had a $20 million revolving credit agreement with a group of banks, which expires in July 1998. Drawings upon the agreement may be made as needed providing that the Company
is in compliance with certain covenants in the revolving credit agreement and other loan agreements. The Company currently is in compliance with all such covenants. The Company pays a fee for its committed lines of credit rather than maintain compensating balances. The commitment fee is 0.125% of the average daily unborrowed amount during the annual period of calculation. Unused committed lines of credit at September 30, 1996 and 1995 were $5.0 million and $18.2 million, respectively. Short-term borrowings outstanding were $15.0 million and $1.8 million, respectively, at September 30, 1996 and 1995. The weighted average interest rates on short-term debt outstanding at September 30, 1996 and 1995 were 6.5% and 6.9%, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Disclosures about fair values of financial instruments are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
The carrying amounts for cash and cash equivalents, gas and other receivables, notes payable, accounts payable and other current liabilities approximate fair value. The fair value of merchandise receivables is estimated based on market interest rates for similar receivables at the end of each respective year. The carrying amount of merchandise receivables (including the reserve for uncollectible merchandise receivables) was $6,938,000 and $6,571,000 as of September 30, 1996 and 1995, respectively. The fair value of merchandise receivables was $7,142,000 and $6,408,000 as of September 30, 1996 and 1995, respectively. The fair value of long-term debt is estimated based on interest rates available to the Company at the end of each respective year for the issuance of debt with similar terms and remaining maturities. The carrying amount of long-term debt (including current maturities) was $57,327,000 and $59,047,000 as of September 30, 1996 and 1995, respectively. The fair value of long-term debt was $61,257,000 and $65,518,000 as of September 30, 1996 and 1995, respectively.
7. INCOME TAXES
The components of income tax expense are as follows for the years ended September 30, (in thousands):
A reconciliation of income tax expense and the amount computed by multiplying income taxes by the statutory federal income tax rate for the periods indicated is as follows for the years ended before September 30, (in thousands) :
The tax effect of differences in book and tax depreciation related to pre-1981 property additions was flowed through to income for accounting and ratemaking purposes prior to 1981. With the adoption in fiscal 1994 of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," the Company recorded deferred taxes related to this temporary difference and a corresponding regulatory asset expected to be collected in customer rates when such taxes become payable in
accordance with the current ratemaking practices followed by the APSC. Such future collections included in regulatory assets are $1,215,000 and $1,569,000 at September 30, 1996 and 1995, respectively.
No valuation allowance is deemed necessary, as the Company anticipates generating adequate future taxable income to realize the benefits of all deferred tax assets on the balance sheet.
The significant tax components of the Company's net deferred tax liability as of September 30, are (in thousands):
8. RETIREMENT PLANS AND OTHER BENEFITS
The Company has a noncontributory, defined benefit retirement plan covering substantially all of its employees. Benefits are based on the greater of amounts resulting from two different formulas: years of service and average compensation during the last five years of employment or years of service and compensation during the term of employment. The "projected unit credit" actuarial method was used to determine the service cost and actuarial liability. The Company annually contributes to the plan the amount deductible for federal income tax purposes.
Net periodic pension cost included the following components for the years ended September 30, (in thousands):
Assumptions used in the actuarial computations for years ended September 30, were:
The following table sets forth the plan's funded status and amount recorded in the financial statements at September 30, (in thousands):
The Company's eligible employees may participate in the Employee Savings Plan or the Bargaining Unit Employees Savings Plan by investing a percentage of their compensation in the Plans with the Company matching a part of the employee investment. The Company's contributions for the years ended September 30, 1996, 1995 and 1994 were $199,000, $177,000 and $162,000, respectively.
9. OTHER POSTEMPLOYMENT BENEFITS
The Company provides certain health care and life insurance benefits for retired employees. Substantially all employees may become eligible for such benefits if they retire under the provisions of the Company's retirement plan.
The Company is accruing the costs over the expected service period of the employees. The "projected unit credit" actuarial method was used to determine the service cost and actuarial liability.
Net periodic postretirement benefit cost included the following components for years ended September 30, (in thousands):
The September 30, 1996 accumulated benefit obligation was determined using an assumed health care cost trend rate of 9.6% in 1996, gradually declining to 5.0% in the year 2004 and thereafter. The September 30, 1995 accumulated benefit obligation was determined using an assumed health care cost trend rate of 10.7% in 1995 which gradually declines to 5.0% in the year 2006 and thereafter. If the health care cost trend rate assumptions were increased by 1%, the accumulated postretirement benefit obligation as of September 30, 1996 would be increased by
13.4%. The effect of this change on the sum of the service cost and interest cost components would be an increase of 15.7%.
The following table sets forth the plan's funded status and amount recorded in the financial statements at September 30, (in thousands):
The unrecognized net loss has resulted principally from a difference between estimated and actual health care costs.
In September 1991, the Company formed two voluntary employees' beneficiary association (VEBA) trusts to fund postretirement health and life insurance benefits. The Company's contributions to these trusts in 1996, 1995 and 1994 were $200,000, $218,000 and $200,000, respectively.
Beginning October 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). SFAS 112 required the Company to record the cost of providing postemployment benefits to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement. For the year ended September 30, 1995, the Company recorded a liability for postemployment benefits of $211,000 with a corresponding charge to a regulatory asset. The regulatory asset is being amortized to expense and collected from customers over a three year period beginning December 1, 1995 as approved by the APSC.
10. COMMITMENTS AND CONTINGENCIES
The Company has contracts, which expire at various dates through the year 2000 for firm supplies of natural gas. A portion of firm supply requirements is expected to be met through the withdrawal of gas from the storage facility owned by Bay Gas. Mobile Gas Service Corporation has entered into a Gas Storage Agreement under which Bay Gas is to provide storage services for an initial period of 20 years which began in September 1994 with the commencement of commercial operations of the storage facility. The purchased gas adjustment provisions of the Company's rate schedules permit the recovery of gas costs from customers.
The Company is subject to various federal, state and local laws and regulations relating to the environment, which have not had a material effect on the Company's financial position or results of operations.
Like many gas distribution companies, prior to the widespread availability of natural gas, the Company manufactured gas for sale to its customers. In contrast to some other companies which operated multiple manufactured gas plants, the Company and its predecessor operated only one such plant, which discontinued operations in 1933. The process for manufacturing gas produced by-products and residuals, such as coal tar, and certain remnants of these residuals are sometimes found at former gas manufacturing sites.
The Company conducted a preliminary assessment in 1994 of its former gas plant site and has tested certain waters in the vicinity of the site. The Company developed and has implemented a plan for the site based on the advice of environmental consultants, which involves securing and monitoring the site, and continued testing. Based on the results of tests to date, the Company does not believe that the site currently poses any threat to human health or the environment. While no conclusion can be reached at this time as to whether any further remedial action might ultimately be required, based on currently available information, it is believed that any costs with respect to the site are likely to be immaterial, and the Company has therefore established no reserve for such costs in its financial statements. The Company intends that, should further investigation or changes in environmental laws or regulations require material expenditures for investigation, remediation, or clean-up with regard to the site, it would apply to the APSC for appropriate rate recovery of such costs. However, there can be no assurance that the APSC would approve the recovery of such costs or the amount and timing of any such recovery.
The Company is involved in litigation arising in the normal course of business. Management believes that the ultimate resolution of such litigation will not have a material adverse effect on the consolidated financial statements of the Company.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for 1996 and 1995 is summarized as follows (in thousands, except per share data):
The pattern of quarterly earnings reflects a seasonal nature because weather conditions strongly influence operating results.
12. SUBSEQUENT EVENT (UNAUDITED)
The Company issued $12,000,000 of 7.27% First Mortgage Bonds in late November 1996. The bonds mature beginning November 1, 2000 and ending November 1, 2006.
SCHEDULE II
MOBILE GAS SERVICE CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994 (in thousands)
NOTES:
(1) Amounts written off - net of recoveries.
S-1
EXHIBIT INDEX
E-1
E-2
E-3
E-4
* Filed herewith
** Management contract or compensatory plan or arrangement
E-5