CLEVELAND--(BUSINESS WIRE)--

Gas Natural Inc. (NYSE MKT:EGAS) (the “Company”), a holding company operating local natural gas utilities serving approximately 70,000 customers in four states, reported financial results for its first quarter ended March 31, 2017.

First Quarter 2017 Summary

• Net income per share improved to $0.32 from $0.26 in the prior-year quarter
• Full service distribution throughput increased 13%, aided by the addition of approximately 300 new customers in the quarter
• Merger approval process with regulators remains on plan for second half 2017 closing

Mr. Gregory J. Osborne, Gas Natural’s President and Chief Executive Officer, commented, “We continue to focus on providing excellent service to our customers in all of our utility jurisdictions, resulting in growth in full service distribution and gross margin. Additionally, our ongoing focus on cost discipline has contributed to improved earnings.”

He added, “The regulatory approval process for our announced merger with First Reserve continues on plan. We expect completion of the transaction in the second half of 2017.”

Revenue for the first quarter of 2017 increased approximately 4% over the prior-year quarter. Both of the Company’s operating segments contributed to the increase. The Natural Gas segment grew due to: 1) customer growth, primarily in Maine and Montana; 2) colder weather in certain of the Company’s markets, including Montana and Maine; 3) generally higher natural gas prices; and 4) the inclusion of cancellation fee revenue for a terminated long-term customer contract in Maine. The Marketing & Production segment recognized higher revenue due to increased volumes sold as a result of colder weather in its relevant markets.

Gross margin for the first quarter of 2017 increased 6% compared with the prior-year quarter. The increase was primarily due to several factors: 1) higher volume due to increased usage and colder weather in the Company’s Montana and Maine markets, partially offset by warmer weather in its North Carolina and Ohio markets; 2) higher volume driven by customer growth; and 3) cancellation fee revenue with no associated cost, resulting from the termination of a long-term customer contract in Maine. Customer count grew by approximately 300 in the first quarter, compared with the end of 2016.

*See the attached tables for important disclosures regarding the Company’s use of earnings before interest, taxes, depreciation, amortization, non-recurring expenses and discontinued operations (“Adjusted EBITDA”) as well as reconciliations of U.S. generally accepted accounting principles (”GAAP”) net income to non-GAAP Adjusted EBITDA for the 2017 and 2016 first quarters.

For the first quarter of 2017, operating income was $0.4 million higher than the prior-year quarter due to higher gross margin partially offset by higher operating expenses.

Within the Natural Gas segment, gross margin grew $0.9 million and operating expenses increased $0.3 million, contributing to a $0.6 million increase in operating income for the segment. The increase in operating expenses is primarily due to IT-related support costs, partially offset by cost reductions associated with lower legal and professional services as well as lower personnel related costs pertaining to this segment. The higher operating loss within the Corporate and Other segment was primarily due to higher legal and professional costs associated with the Company’s pending merger.

Adjusted EBITDA, a non-GAAP financial measure, was up approximately $0.8 million primarily due to higher operating income as well as higher non-cash costs. The Company believes that, when used in conjunction with measures prepared in accordance with GAAP, Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its financial performance.

Balance Sheet and Cash Management

Cash and cash equivalents as of March 31, 2017 grew to $7.7 million from $6.5 million at December 31, 2016.

Cash provided by operating activities in the first quarter of 2017 was $10.9 million compared with $9.4 million in 2016 first quarter, with the increase primarily due to higher net income and lower working capital requirements.

Capital expenditures for the first quarter of 2017 were $2.0 million compared with $2.3 million in the prior-year quarter. Capital expenditures in the 2016 first quarter included approximately $0.5 million for the portion of the Company’s ERP system that was not financed under a lease agreement. The Company has budgeted $10 million for capital expenditures in 2017, with the majority focused on growth of its Natural Gas Operations segment, including construction activities to support expansion, maintenance and enhancements of its gas pipeline systems.

Cash used in financing activities was $8.4 million in the 2017 first quarter compared with $5.9 million in last year’s quarter. Debt repayment was the primary use of cash in both periods.

About Gas Natural Inc.

Gas Natural Inc., a holding company, distributes and sells natural gas to residential, commercial, and industrial customers. It distributes approximately 21 billion cubic feet of natural gas to roughly 70,000 customers through regulated utilities operating in Montana, Ohio, Maine and North Carolina. The Company’s other operations include intrastate pipeline, natural gas production, and natural gas marketing. The Company's Montana public utility was originally incorporated in 1909. Its strategy for growth is to expand throughput in its markets, while looking for acquisitions that are either adjacent to its existing utilities or in under-served markets. Further information is available on the Company’s website at www.egas.net.

Safe Harbor Regarding Forward-Looking Statements

The Company is including the following cautionary statement in this release to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, Gas Natural Inc. Forward-looking statements are all statements other than statements of historical fact, including, without limitation, those that are identified by use of the words "anticipates," "estimates," "expects," "intends," "plans," "predicts," "believes" and similar expressions. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those expressed. Factors that may affect forward-looking statements and the Company's business generally include, but are not limited to the Company's ability to successfully integrate the operations of the companies it has acquired and consummate additional acquisitions; the Company's continued ability to make or increase dividend payments; the Company's ability to implement its business plan, grow earnings and improve returns on investment; fluctuating energy commodity prices; the possibility that regulators may not permit the Company to pass through all of its increased costs to its customers; changes in the utility regulatory environment; wholesale and retail competition; the Company's ability to satisfy its debt obligations, including compliance with financial covenants; weather conditions; litigation risks; and various other matters, many of which are beyond the Company's control; the risk factors and cautionary statements made in the Company's public filings with the Securities and Exchange Commission; and other factors that the Company is currently unable to identify or quantify, but may exist in the future. Gas Natural Inc. expressly undertakes no obligation to update or revise any forward-looking statement contained herein to reflect any change in Gas Natural Inc.'s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

FINANCIAL TABLES FOLLOW.

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