Document And Entity Information
v4.1.212.0
Document And Entity Information
9 Months Ended
Jun. 30, 2011
Jul. 31, 2011
Document And Entity Information    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2011
Document Fiscal Year Focus 2011  
Document Fiscal Period Focus Q3  
Entity Registrant Name RGC RESOURCES INC  
Entity Central Index Key 0001069533  
Current Fiscal Year End Date --09-30  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   2,308,466

Condensed Consolidated Balance Sheets
v4.1.212.0
Condensed Consolidated Balance Sheets (USD $)
Jun. 30, 2011
Sep. 30, 2010
ASSETS    
Cash and cash equivalents $ 16,618,911 $ 6,745,630
Accounts receivable (less allowance for uncollectibles of $340,582 and $65,275, respectively) 2,890,545 3,273,627
Note receivable 87,000 87,000
Materials and supplies 612,553 563,178
Gas in storage 9,316,841 13,810,208
Prepaid income taxes 0 2,532,057
Deferred income taxes 3,571,961 3,436,923
Other 1,112,925 1,206,367
Total current assets 34,210,736 31,654,990
UTILITY PROPERTY:    
In service 126,967,479 123,073,541
Accumulated depreciation and amortization (44,792,759) (43,084,808)
In service, net 82,174,720 79,988,733
Construction work in progress 2,086,336 1,466,658
Utility plant, net 84,261,056 81,455,391
OTHER ASSETS:    
Note receivable 952,000 1,039,000
Regulatory assets 6,346,268 6,480,325
Other 129,907 53,610
Total other assets 7,428,175 7,572,935
TOTAL ASSETS 125,899,967 120,683,316
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current maturities of long-term debt 15,000,000 0
Dividends payable 784,878 750,786
Accounts payable 6,623,571 4,572,917
Customer credit balances 1,049,661 2,637,380
Income taxes payable 355,754 0
Customer deposits 1,670,888 1,632,977
Accrued expenses 1,663,570 2,058,643
Over-recovery of gas costs 2,613,268 2,581,600
Fair value of marked-to-market transactions 2,829,966 3,619,705
Total current liabilities 32,591,556 17,854,008
LONG-TERM DEBT 13,000,000 28,000,000
DEFERRED CREDITS AND OTHER LIABILITIES:    
Asset retirement obligations 3,139,382 3,073,782
Regulatory cost of retirement obligations 8,094,185 7,699,319
Benefit plan liabilities 9,908,609 9,850,526
Deferred income taxes 8,970,261 7,860,064
Deferred investment tax credits 24,845 35,870
Total deferred credits and other liabilities 30,137,282 28,519,561
STOCKHOLDERS' EQUITY:    
Common stock, $5 par value; authorized 10,000,000 shares; issued and outstanding 2,307,716 and 2,274,432, respectively 11,538,580 11,372,160
Preferred stock, no par, authorized 5,000,000 shares; no shares issued and outstanding 0 0
Capital in excess of par value 18,297,585 17,462,670
Retained earnings 23,671,904 21,341,740
Accumulated other comprehensive loss (3,336,940) (3,866,823)
Total stockholders' equity 50,171,129 46,309,747
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 125,899,967 $ 120,683,316

Condensed Consolidated Balance Sheets (Parenthetical)
v4.1.212.0
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jun. 30, 2011
Sep. 30, 2010
Condensed Consolidated Balance Sheets    
Allowance for uncollectibles, accounts receivable $ 340,582 $ 65,275
Common stock, par value $ 5 $ 5
Common stock, shares authorized 10,000,000 10,000,000
Common stock, shares issued 2,307,716 2,274,432
Common stock, share outstanding 2,307,716 2,274,432
Preferred stock, par value $ 0 $ 0
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, share outstanding 0 0

Condensed Consolidated Statements Of Income And Comprehensive Income
v4.1.212.0
Condensed Consolidated Statements Of Income And Comprehensive Income (USD $)
3 Months Ended 9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
Jun. 30, 2011
Jun. 30, 2010
OPERATING REVENUES:        
Gas utilities $ 10,759,012 $ 10,050,355 $ 59,780,573 $ 64,102,256
Other 348,473 283,946 947,240 1,025,276
Total operating revenues 11,107,485 10,334,301 60,727,813 65,127,532
COST OF SALES:        
Gas utilities 5,842,241 5,471,261 37,717,906 42,738,615
Other 200,257 151,731 513,990 515,516
Total cost of sales 6,042,498 5,622,992 38,231,896 43,254,131
GROSS MARGIN 5,064,987 4,711,309 22,495,917 21,873,401
OTHER OPERATING EXPENSES:        
Operations and maintenance 3,012,695 2,977,662 9,656,044 9,280,160
General taxes 315,557 312,161 974,421 981,932
Depreciation and amortization 1,001,805 962,988 3,005,762 2,880,963
Total other operating expenses 4,330,057 4,252,811 13,636,227 13,143,055
OPERATING INCOME 734,930 458,498 8,859,690 8,730,346
OTHER INCOME, Net 19,611 16,309 52,359 54,761
INTEREST EXPENSE 456,314 455,551 1,374,782 1,376,319
INCOME BEFORE INCOME TAXES 298,227 19,256 7,537,267 7,408,788
INCOME TAX EXPENSE 113,610 5,790 2,863,472 2,812,024
NET INCOME 184,617 13,466 4,673,795 4,596,764
OTHER COMPREHENSIVE INCOME (LOSS) NET OF TAX (174,831) (437,348) 529,883 (278,109)
COMPREHENSIVE INCOME (LOSS) $ 9,786 $ (423,882) $ 5,203,678 $ 4,318,655
BASIC EARNINGS PER COMMON SHARE $ 0.08 $ 0.01 $ 2.04 $ 2.04
DILUTED EARNINGS PER COMMON SHARE $ 0.08 $ 0.01 $ 2.04 $ 2.03
DIVIDENDS DECLARED PER COMMON SHARE $ 0.34 $ 0.33 $ 1.02 $ 0.99

Condensed Consolidated Statements Of Cash Flows
v4.1.212.0
Condensed Consolidated Statements Of Cash Flows (USD $)
9 Months Ended
Jun. 30, 2011
Jun. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income $ 4,673,795 $ 4,596,764
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 3,123,379 2,989,830
Cost of removal of utility plant, net (298,940) (218,367)
Changes in assets and liabilities which used cash, exclusive of changes and noncash transactions shown separately 8,852,995 6,070,841
Net cash provided by operating activities 16,351,229 13,439,068
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to utility plant and nonutility property (5,256,744) (4,575,843)
Proceeds from disposal of equipment 0 10,265
Net cash used in investing activities (5,256,744) (4,565,578)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds on collection of note 87,000 87,000
Proceeds from issuance of stock (33,284 and 26,737 shares, respectively) 1,001,335 771,761
Cash dividends paid (2,309,539) (2,203,224)
Net cash used in financing activities (1,221,204) (1,344,463)
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,873,281 7,529,027
BEGINNING CASH AND CASH EQUIVALENTS 6,745,630 7,422,360
ENDING CASH AND CASH EQUIVALENTS 16,618,911 14,951,387
SUPPLEMENTAL INFORMATION:    
Interest 1,503,314 1,509,863
Income taxes $ (705,000) $ 919,000

Condensed Consolidated Statements Of Cash Flows (Parenthetical)
v4.1.212.0
Condensed Consolidated Statements Of Cash Flows (Parenthetical)
Jun. 30, 2011
Jun. 30, 2010
Condensed Consolidated Statements Of Cash Flows    
Issuance of stock, shares 33,284 26,737

Basis Of Presentation
v4.1.212.0
Basis Of Presentation
9 Months Ended
Jun. 30, 2011
Basis Of Presentation  
Basis Of Presentation

1.Basis of Presentation

 

RGC Resources, Inc. is an energy services company primarily engaged in the sale and distribution of natural gas.  The consolidated financial statements include the accounts of RGC Resources, Inc. and its wholly owned subsidiaries ("Resources" or the "Company"); Roanoke Gas Company; Diversified Energy Company; and RGC Ventures of Virginia, Inc.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly RGC Resources, Inc.'s financial position as of June 30, 2011 and the results of its operations for the three months and nine months ended June 30, 2011 and 2010 and its cash flows for the nine months ended June 30, 2011 and 2010.  The results of operations for the three months and nine months ended June 30, 2011 are not indicative of the results to be expected for the fiscal year ending September 30, 2011 as quarterly earnings are affected by the highly seasonal nature of the business and weather conditions generally result in greater earnings during the winter months.

                                                                                                                                                           

The condensed consolidated interim financial statements and condensed notes are presented as permitted by Rule 8-03 of Regulation S-X and the instructions to Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes thereto.  The condensed consolidated financial statements and condensed notes should be read in conjunction with the financial statements and notes contained in the Company's Form 10-K.  The September 30, 2010 balance sheet was included in the Company's Form 10-K.

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

The Company's significant accounting policies are described in Note 1 to the consolidated financial statements in Form 10-K for the year ended September 30, 2010.  Newly adopted and newly issued accounting standards are discussed below.

 

      Recently Adopted Accounting Standards

 

In July 2010, the FASB issued guidance under FASB ASC No. 310 - Receivables, to provide greater transparency about an entity's allowance for credit losses and the credit quality of its financing receivables on a disaggregated basis.  Financing receivables represent a contractual right to receive money either on demand or on fixed or determinable dates and are recognized as assets on the entity's balance sheet.  The Company has two primary types of financing receivables: trade accounts receivable, resulting from the sale of natural gas and other services to its customers, and a note receivable.  Trade accounts receivable are specifically excluded from the provisions of this guidance as they are short-term in nature.  The Company's note receivable represents the balance on a five-year note with a fifteen year amortization for partial payment on the sale of the Bluefield, Virginia natural gas distribution assets to ANGD, LLC in October 2007.  Interest on the note is accrued monthly and paid quarterly.  The note is a performing asset with all principal and interest payments current.  Management evaluates the status of the note each reporting period to make an assessment on the collectibility of the balance.  In its most recent evaluation, management concluded that the note continued to be fully collectible and no loss reserve was required.  The note would be considered past due if either the quarterly interest payment or the annual principal installment were outstanding for more than 30 days after their contractual due date.  Additional information regarding this note is included under the fair value measurements section below. 

 

Recently Issued Accounting Standards

 

In May 2011, the FASB issued guidance under FASB ASC No. 820 – Fair Value Measurement, which serves to converge guidance between the FASB and the International Accounting Standards Board ("IASB") for fair value measurements and their related disclosures.  This guidance provides for common requirements for measuring fair value and for disclosing information about fair value measurements including the consistency of the meaning of the term "fair value".  This guidance provides clarification about the application of existing fair value measurement and disclosure requirements as well as changes in particular requirements for measuring fair value or for disclosing information about fair value measurements.  The new requirements are effective for interim and annual periods beginning after December 15, 2011.  Management is currently evaluating the impact of this guidance but does not anticipate these changes to have a material impact on its financial position, results of operations or cash flows.  However, management does anticipate the adoption of this guidance will result in changes to disclosures surrounding fair value.     

 

In June 2011, the FASB issued guidance under FASB ASC No. 220 – Comprehensive Income that defines the presentation of Comprehensive Income in the financial statements.  According to the guidance, an entity may present a single continuous statement of comprehensive income or two separate statements – a statement of income and a statement of other comprehensive income that immediately follows the statement of income.  In either presentation, the entity is required to present on the face of the financial statement the components of other comprehensive income including the reclassification adjustment for items that are reclassified from other comprehensive income to net income.  The new requirements are effective on a retrospective basis for interim and annual periods beginning after December 15, 2011.   Management is currently evaluating the specific requirements of this guidance but does not anticipate these changes to have a material impact on its financial position or cash flows.  Management does expect changes related to its statement of income and comprehensive income to include additional details currently included in the footnotes.

 

Other accounting standards that have been issued by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a material impact on the Company's financial position, results of operations and cash flows.


Stock Dividend
v4.1.212.0
Stock Dividend
9 Months Ended
Jun. 30, 2011
Stock Dividend  
Stock Dividend

2.  Stock Dividend

 

On July 25, 2011, the Board of Directors of RGC Resources, Inc. declared a two for one stock split effected in the form of a 100% share dividend upon the issued and outstanding common stock.  The stock dividend is payable on September 1, 2011 to shareholders of record on August 15, 2011.  As the stock dividend was declared subsequent to the end of the quarter, the Company's average share count and earnings per share for the period ended June 30, 2011 were not adjusted for the increase in the number of shares. 


Rates And Regulatory Matters
v4.1.212.0
Rates And Regulatory Matters
9 Months Ended
Jun. 30, 2011
Rates And Regulatory Matters  
Rates And Regulatory Matters

3.   Rates and Regulatory Matters

 

The State Corporation Commission of Virginia ("SCC") exercises regulatory authority over the natural gas operations of Roanoke Gas.  Such regulation encompasses terms, conditions, and rates to be charged to customers for natural gas service; safety standards; extension of service; accounting and depreciation. 

 

On November 1, 2010, Roanoke Gas Company placed into effect new base rates, subject to refund, that provided for approximately $1,400,000 in additional annual non-gas revenues.  On March 11, 2011, the Company reached a stipulated agreement with the SCC staff for a non-gas rate award in the amount of $814,000 in additional annual non-gas revenues.  On March 31, 2011, the Hearing Examiner issued a report accepting the stipulated agreement and recommended the Commission issue a final order approving the stipulated amount.  On April 6, 2011, the SCC issued a final order accepting the Hearing Examiner's report.  In June 2011, the Company completed its refund for the difference between the rates placed into effect on November 1 and the final rates approved by the SCC.


Short-Term Debt
v4.1.212.0
Short-Term Debt
9 Months Ended
Jun. 30, 2011
Short-Term Debt  
Short-Term Debt

4.   Short-Term Debt

 

      On March 14, 2011, the Company and Wells Fargo Bank (formerly Wachovia Bank) renewed its line-of-credit agreement.  The new agreement maintained the same variable interest rate of 30 day LIBOR plus 100 basis points and the availability fee equal to 15 basis points applied to the difference between the face amount of the note and the average outstanding balance during the period.  The Company continued the multi-tiered borrowing limits to accommodate seasonal borrowing demands and to minimize borrowing costs.  The Company's total available borrowing limits during the remaining term of the line-of-credit agreement ranges from $1,000,000 to $5,000,000.

 

      The line-of-credit agreement will expire March 31, 2012, unless extended.  The Company anticipates being able to extend or replace the credit line upon expiration.  At June 30, 2011, the Company had no outstanding balance under its line-of-credit agreement.


Long-Term Debt
v4.1.212.0
Long-Term Debt
9 Months Ended
Jun. 30, 2011
Long-Term Debt  
Long-Term Debt

5.   Long-Term Debt

 

      On October 20, 2010, the Company executed a modification of the $15,000,000 unsecured variable rate note dated November 28, 2005 with the current lender.  This modification extended the due date for the principal balance to March 31, 2012 from the original maturity date of December 1, 2010.  All other terms and conditions provided for in the original note remain in place after the modification.  The Company anticipates being able to renew this note on comparable terms as currently in place until such time the note co-terminates with the corresponding interest rate swap.


Derivatives And Hedging
v4.1.212.0
Derivatives And Hedging
9 Months Ended
Jun. 30, 2011
Derivatives And Hedging  
Derivatives And Hedging

6.  Derivatives and Hedging

 

The Company's risk management policy allows management to enter into derivatives for the purpose of managing commodity and financial market risks of its business operations.  The Company's risk management policy specifically prohibits the use of derivatives for speculative purposes.  The key market risks that the Company seeks to hedge include the price of natural gas and the cost of borrowed funds.

 

The Company periodically enters into collars, swaps and caps for the purpose of hedging the price of natural gas in order to provide price stability during the winter months. The fair value of these instruments is recorded in the balance sheet with the offsetting entry to either under-recovery of gas costs or over-recovery of gas costs. Net income and other comprehensive income are not affected by the change in market value as any cost incurred or benefit received from these instruments is recoverable or refunded to customers through the purchased gas adjustment clause ("PGA") included as part of the Company's billing rate.  During the quarter ended June 30, 2011, the Company had no outstanding derivative collar arrangements for the purchase of natural gas.

 

The Company has two interest rate swaps associated with its variable rate notes.  The first swap relates to the $15,000,000 note issued in November 2005.  This swap essentially converts the floating rate note based upon LIBOR into fixed rate debt with a 5.74% effective interest rate.  The second swap relates to the $5,000,000 variable rate note issued in October 2008.  This swap converts the variable rate note based on LIBOR into a fixed rate debt with a 5.79% effective interest rate.  Both swaps mature on December 1, 2015 and qualify as cash flow hedges with changes in fair value reported in other comprehensive income.  No portions of interest rate swaps were deemed ineffective during the periods presented.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The table below reflects the fair values of the derivative instruments and their corresponding classification in the consolidated balance sheets under the current liabilities caption of "Fair value of marked-to-market transactions" as of June 30, 2011 and September 30, 2010:

 

 

 

 

June 30,

 

September 30,

 

 

 

2011

 

2010

 

Derivatives designated as hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

  Interest rate swaps

 

 $    2,829,966

 

 $    3,536,545

 

  Natural gas collar arrangements

 

                      -

 

            83,160

 

 

 

 

 

 

 

  Total derivatives designated as hedging instruments

 

 $    2,829,966

 

 $    3,619,705

 

The table in Note 7 reflects the effect on income and other comprehensive income of the Company's cash flow hedges.

 

Based on the current interest rate environment, management estimates that approximately $910,000 of the fair value on the interest rate hedges will be reclassified from other comprehensive loss into interest expense on the income statement over the next 12 months.  Changes in LIBOR rates during this period could significantly change the amount estimated to be reclassified to income as well as the fair value of the interest rate hedges. 


Comprehensive Income
v4.1.212.0
Comprehensive Income
9 Months Ended
Jun. 30, 2011
Comprehensive Income  
Comprehensive Income

7.   Comprehensive Income

     

A summary of other comprehensive income and loss is provided below:

 

 

 

 

         Three Months Ended

 

          Nine Months Ended

 

 

 

                      June 30,

 

                     June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Interest Rate SWAPs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses

 

 $   (567,898)

 

 $   (975,783)

 

 $          (860)

 

 $(1,266,654)

 

Income tax

 

        215,574

 

        370,407

 

               328

 

        480,823

 

 

 

 

 

 

 

 

 

 

 

Net unrealized losses

 

      (352,324)

 

      (605,376)

 

             (532)

 

      (785,831)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer of realized losses to interest expense

        236,922

 

        233,446

 

       707,439

 

        706,204

 

Income tax

 

        (89,936)

 

        (88,616)

 

      (268,545)

 

      (268,076)

 

 

 

 

 

 

 

 

 

 

 

Net transfer of realized losses to interest expense

         146,986

 

         144,830

 

         438,894

 

          438,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined Benefit Plans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transfer of realized losses to income

          37,401

 

          25,619

 

       112,203

 

          76,857

 

Income tax

 

        (14,198)

 

          (9,725)

 

        (42,594)

 

        (29,175)

 

 

 

 

 

 

 

 

 

 

 

Net transfer of realized losses to income

 

          23,203

 

          15,894

 

          69,609

 

          47,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of transition obligation

 

          11,773

 

          11,773

 

          35,319

 

          35,319

 

Income tax

 

          (4,469)

 

          (4,469)

 

        (13,407)

 

        (13,407)

 

 

 

 

 

 

 

 

 

 

 

Net amortization of transition obligation

 

            7,304

 

            7,304

 

          21,912

 

          21,912

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net other comprehensive income (loss)

 

 $   (174,831)

 

 $   (437,348)

 

 $     529,883

 

 $   (278,109)

 

 

 

 

 

 

 

 

 

 

 

Accumulated comprehensive loss - beginning of period

    (3,162,109)

 

    (2,725,467)

 

    (3,866,823)

 

     (2,884,706)

 

 

 

 

 

 

 

 

 

 

 

Accumulated comprehensive loss - end of period

                     $ (3,336,940)

 

                    $ (3,162,815)

 

   $(3,336,940)

 

                    $ (3,162,815)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The components of accumulated comprehensive loss as of June 30, 2011 and September 30, 2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

    June 30

 

September 30

 

 

 

 

 

 

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 $(1,755,711)

 

 $(2,194,073)

 

 

 

 

 

Pension plan

 

   (1,063,498)

 

   (1,113,787)

 

 

 

 

 

Postretirement benefit plan

 

      (517,731)

 

      (558,963)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total accumulated comprehensive loss

 

 $(3,336,940)

 

 $(3,866,823)

 

 

 

 


Earnings Per Share
v4.1.212.0
Earnings Per Share
9 Months Ended
Jun. 30, 2011
Earnings Per Share  
Earnings Per Share

8.     Earnings Per Share

       

        Basic earnings per common share for the three months and nine months ended June 30, 2011 and 2010 are calculated by dividing net income by the weighted average common shares outstanding during the period.  Diluted earnings per common share for the three months and nine months ended June 30, 2011 are calculated by dividing net income by the weighted average common shares outstanding during the period plus dilutive potential common shares.     A reconciliation of basic and diluted earnings per share is presented below:

 

 

 

        Three Months Ended

 

         Nine Months Ended

 

 

               June 30, 

 

               June 30, 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 Net Income

 $  184,617

 

 $    13,466

 

$4,673,795

 

$4,596,764

 

 

 

 

 

 

 

 

 

 

 Weighted average common shares

  2,302,214

 

  2,263,119

 

  2,291,436

 

  2,252,447

 

 

 

 

 

 

 

 

 

 

 Effect of dilutive securities:

 

 

 

 

 

 

 

 

   Options to purchase common stock

         3,767

 

         6,384

 

         4,428

 

         7,272

 

 

 

 

 

 

 

 

 

 

 Diluted average common shares

  2,305,981

 

  2,269,503

 

  2,295,864

 

  2,259,719

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Earnings Per Share of Common

   Stock:

 

 

 

 

 

 

 

 

 Basic

 $        0.08

 

 $        0.01

 

 $        2.04

 

 $        2.04

 

 Diluted

 $        0.08

 

 $        0.01

 

 $        2.04

 

 $        2.03


Commitments And Contingencies
v4.1.212.0
Commitments And Contingencies
9 Months Ended
Jun. 30, 2011
Commitments And Contingencies  
Commitments And Contingencies

9.  Commitments and Contingencies

 

Roanoke Gas currently holds the only franchises and/or certificates of public convenience and necessity to distribute natural gas in its service area.  These franchises are effective through January 1, 2016.  Certificates of public convenience and necessity in Virginia are exclusive and are intended for perpetual duration. 

 

Due to the nature of the natural gas distribution business, the Company has entered into agreements with both suppliers and pipelines for natural gas commodity purchases, storage capacity and pipeline delivery capacity.  The Company obtains most of its regulated natural gas supply from an asset manager.  The Company uses an asset manager to assist in optimizing the use of its transportation, storage rights, and gas supply in order to provide a secure and reliable source of natural gas to its customers.  The Company also has storage and pipeline capacity contracts to store and deliver natural gas to the Company's distribution system.  Roanoke Gas is served directly by two primary pipelines.  These two pipelines deliver 100% of the natural gas supplied to the Company's customers.  Depending on weather conditions and the level of customer demand, failure of one or both of these transmission pipelines could have a major adverse impact on the Company.

 

There have been no changes to the status of the lawsuits reported in the Annual Report on Form 10-K for the year ended September 30, 2010.

 

Except to the extent, if any, described above, the Company is not a party to any material pending legal proceedings.


Employee Benefit Plans
v4.1.212.0
Employee Benefit Plans
9 Months Ended
Jun. 30, 2011
Employee Benefit Plans  
Employee Benefit Plans

10. Employee Benefit Plans

 

The Company has both a defined benefit pension plan (the "pension plan") and a postretirement benefit plan (the "postretirement plan").  The pension plan covers substantially all of the Company's employees and provides retirement income based on years of service and employee compensation.  The postretirement plan provides certain healthcare and supplemental life insurance benefits to retired employees who meet specific age and service requirements.  Net pension plan and postretirement plan expense recorded by the Company is detailed as follows:

 

 

 

 

      Three Months Ended

 

      Nine Months Ended

 

 

 

              June 30,

 

              June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Components of net periodic pension cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 $ 119,809

 

 $ 112,215

 

 $ 359,427

 

 $ 336,645

 

Interest cost

 

    227,219

 

    213,411

 

    681,657

 

    640,233

 

Expected return on plan assets

 

 (232,052)

 

 (204,657)

 

 (696,156)

 

 (613,971)

 

Recognized loss

 

      81,793

 

      68,778

 

   245,379

 

    206,334

 

 

 

 

 

 

 

 

 

 

 

Net periodic pension cost

 

 $ 196,769

 

 $ 189,747

 

 $ 590,307

 

 $ 569,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

      Three Months Ended

 

      Nine Months Ended

 

 

 

              June 30,

 

              June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Components of postretirement benefit cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

 $   48,711

 

 $   39,946

 

 $ 146,133

 

 $ 119,838

 

Interest cost

 

    144,994

 

    128,359

 

    434,982

 

    385,077

 

Expected return on plan assets

 

   (89,320)

 

   (81,263)

 

 (267,960)

 

 (243,789)

 

Amortization of transition obligation

 

      47,223

 

      47,223

 

    141,669

 

    141,669

 

Recognized loss

 

      50,288

 

      17,134

 

    150,864

 

      51,402

 

 

 

 

 

 

 

 

 

 

 

Net postretirement benefit cost

 

 $ 201,896

 

 $ 151,399

 

 $ 605,688

 

 $ 454,197

 

 

The Company contributed $600,000 to its pension plan during the nine-month period ended June 30, 2011.  The Company currently expects to make a total contribution of approximately $1,000,000 to its pension plan and $700,000 to its postretirement benefit plan during the fiscal year ending September 30, 2011.  The Company will continue to evaluate its benefit plan funding levels throughout the year.


Environmental Matters
v4.1.212.0
Environmental Matters
9 Months Ended
Jun. 30, 2011
Environmental Matters  
Environmental Matters

11.  Environmental Matters

 

Both Roanoke Gas Company and a previously owned gas subsidiary operated manufactured gas plants (MGPs) as a source of fuel for lighting and heating until the early 1950s.  A by-product of operating MGPs was coal tar, and the potential exists for on-site tar waste contaminants at the former plant sites.  Should the Company eventually be required to remediate either site, it will pursue all prudent and reasonable means to recover any related costs, including insurance claims and regulatory approval for rate case recognition of expenses associated with any work required.


Fair Value Measurements
v4.1.212.0
Fair Value Measurements
9 Months Ended
Jun. 30, 2011
Fair Value Measurements  
Fair Value Measurements

12.   Fair Value Measurements

       

        FASB ASC No. 820, Fair Value Measurements and Disclosures, established a fair value hierarchy that prioritizes each input to the valuation method used to measure fair value of financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis into one of the following three broad levels:

       

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level 2 – Inputs other than quoted prices in Level 1 that are either for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 

Level 3 – Unobservable inputs for the asset or liability where there is little, if any, market activity for the asset or liability at the measurement date.

 

The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). 

 

The following table summarizes the Company's financial assets and liabilities that are measured at fair value on a recurring basis and the fair value measurements by level within the fair value hierarchy as of June 30, 2011 and September 30, 2010:

 

 

 

 

 

 

    Fair Value Measurements - June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Quoted Prices

 

Significant Other

 

        Significant

 

 

 

 

 

in Active

 

Observable

 

Unobservable

 

 

 

Fair

 

Markets

 

Inputs

 

Inputs

 

 

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

  Natural gas purchases

 

 $   2,217,000

 

 $                  -

 

 $   2,217,000

 

 $                  -

 

  Interest rate swaps

 

      2,829,966

 

                    -

 

      2,829,966

 

                    -

 

  Natural gas derivative

 

                    -

 

                    -

 

                    -

 

                    -

 

 

 

 

 

 

 

 

 

 

 

      Total

 

 $   5,046,966

 

 $                  -

 

 $   5,046,966

 

 $                  -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Fair Value Measurements - September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Quoted Prices

 

Significant Other

 

       Significant

 

 

 

 

 

in Active

 

Observable

 

Unobservable

 

 

 

Fair

 

Markets

 

Inputs

 

Inputs

 

 

 

Value

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

  Natural gas purchases

 

 $      980,334

 

 $                  -

 

 $      980,334

 

 $                  -

 

  Interest rate swaps

 

      3,536,545

 

                    -

 

      3,536,545

 

                    -

 

  Natural gas derivative

 

           83,160

 

                    -

 

           83,160

 

                    -

 

 

 

 

 

 

 

 

 

 

 

      Total

 

 $   4,600,039

 

 $                  -

 

 $   4,600,039

 

 $                  -

 

 

Under the asset management contract, a timing difference can exist between the payment for natural gas purchases and the actual receipt of such purchases.  Payments are made based on a predetermined monthly volume with the price based on weighted average first of the month index prices corresponding to the month of the scheduled payment.  At June 30, 2011 and September 30, 2010, the Company had a liability in accounts payable reflecting the estimated fair value of the liability valued at the corresponding first of month index prices for which the liability is expected to be settled. 

 

The fair value of the interest rate swaps, included in the line item "Fair value of marked-to-market transactions", is determined by the financial institutions issuing those instruments.  The valuation is a mathematical approximation of market value as of the balance sheet date using the counterparty's proprietary models and certain assumptions regarding past, present and future market conditions. 

 

The fair value of the natural gas derivatives, included in the line item "Fair Value of marked-to-market transactions", is determined by applying the NYMEX futures prices to the hedged volumes for each month covered by the derivative contracts.  The Company had no outstanding natural gas derivatives at June 30, 2011.

 

The Company's nonfinancial assets and liabilities that are measured at fair value on a nonrecurring basis consist of its asset retirement obligations.  The asset retirement obligations are measured at fair value at initial recognition based on expected future cash flows to settle the obligation.

 

The carrying value of cash and cash equivalents, accounts receivable, accounts payable (with the exception of the timing difference under the asset management contract), customer credit balances and customer deposits is a reasonable estimate of fair value due to the short-term nature of these financial instruments.  The following table summarizes the fair value of the Company's financial assets and liabilities that are not adjusted to fair value in the financial statements as of June 30, 2011 and September 30, 2010. 

 

 

 

 

              June 30, 2011

 

         September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

 

Fair

 

Carrying

 

Fair

 

 

 

Amount

 

Value

 

Amount

 

Value

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 Note receivable

 

 $   1,039,000

 

 $   1,068,527

 

 $   1,126,000

 

 $   1,156,755

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 Long-term debt

 

 $ 28,000,000

 

 $ 29,159,459

 

 $ 28,000,000

 

 $ 29,452,040

 

 

Note receivable is composed of $87,000 in current assets and $952,000 in other assets.  Long-term debt includes current maturities of long-term debt of $15,000,000.     

 

The fair value of the note receivable is estimated by discounting future cash flows based on a range of rates for similar investments adjusted for management's expectation of credit and other risks.  The fair value of long-term debt is estimated by discounting the future cash flows of the fixed rate debt at rates extrapolated based on current market conditions.  The variable rate long-term debt has interest rate swaps that effectively convert such debt to a fixed rate.  The values of the swap agreements are included in the first table above.

 

FASB ASC 825, Financial Instruments, requires disclosures regarding concentrations of credit risk from financial instruments.  Cash equivalents are investments in high-grade, short-term securities (original maturity less than three months), placed with financially sound institutions.  Accounts receivable are from a diverse group of customers including individuals and small and large companies in various industries.  As of June 30, 2011 and September 30, 2010, no single customer accounted for more than 5% of the total accounts receivable balance.  The Company maintains certain credit standards with its customers and requires a customer deposit if such evaluation warrants.  The Company is also exposed to credit risk of nonperformance by the counterparty on its commodity-based collar agreements.  The Company uses financially sound institutions to mitigate the risk of nonperformance on those contracts.

Subsequent Events
v4.1.212.0
Subsequent Events
9 Months Ended
Jun. 30, 2011
Subsequent Events  
Subsequent Events

13.   Subsequent Events

 

The Company has evaluated subsequent events through the date the financials statements were issued.  There were no items not otherwise disclosed which would have materially impacted the Company's condensed consolidated financial statements.