Gas Natural Inc. Reports 2014 Third Quarter Results

Total full service distribution throughput volume up 11% in quarter

MENTOR, Ohio, Nov. 13, 2014 /PRNewswire/ -- Gas Natural Inc. (NYSE MKT: EGAS) ("Gas Natural" or the "Company"), a holding company operating local natural gas utilities serving approximately 67,000 customers in six states, reported financial results for the third quarter and nine-month period ended September 30, 2014. As a result of the Company's previously signed agreements to sell its Wyoming operations which serve 6,700 customers, these operations are now reported as discontinued.

Adjusted loss from continuing operations, a non-GAAP number, was $1.1 million, or $0.11 per share, for the third quarter. The adjustment excludes non-recurring professional and legal fees of approximately $0.4 million after taxes. GAAP loss from continuing operations was $1.5 million, or $0.14 per share, for the third quarter, compared with loss from continuing operations of $0.9 million, or $0.08 per share, for third quarter of 2013. See attached table on page 12 for a reconciliation of GAAP (loss) income from continuing operations to non-GAAP adjusted (loss) income from continuing operations.

On a year-to-date basis, adjusted income from continuing operations, a non-GAAP number was $2.9 million, or $0.28 per share, for the third quarter. The adjustment excludes $0.7 million of unusual professional and legal fees as well as a $0.7 million bad debt charge, all after taxes. GAAP income from continuing operations for the first nine months of 2014 was $1.5 million, or $0.15 per share, compared with $3.1 million, or $0.34 per share, for the same period last year. See attached table on page 12 for a reconciliation of GAAP (loss) income from continuing operations to adjusted (loss) income from continuing operations.

Gregory J. Osborne, Gas Natural's President and Chief Executive Officer noted, "While the results for the quarter are disheartening, we are, none-the-less, making measurable progress focused on transparency, customer growth and strategic alignment, such as the following:

The Public Utility Commission of Ohio audit is winding down and will be completed by year-end. The results of the audit are expected from the PUCO in January 2015. We have been pleased with the progress we are making with the Commission and its staff.
The progress of the Loring Pipeline conversion in Maine provides more natural gas service to the region. We also initiated service to Lincoln Paper and Tissue, one of our largest and newest industrial customers, which provides a base load for the Loring Pipeline.
The announced sale of our Wyoming operations will provide valuable capital to invest in our operations to drive growth.

We are continuing to work on improving productivity while expanding our customer base. In addition, the strategic rationalization of our assets enables us to better focus our resources on areas of large customer concentration and opportunities for growth. We expect this focus to help drive earnings power as well."

Natural Gas Operations Segment Review
The Company added 589 new customers during the quarter and 1,118 new customers year-to-date. The Natural Gas Operations segment reported a $1.0 million, or 9%, revenue growth in the quarter on increased natural gas prices, which are passed on to customers, along with higher sales volumes.

Natural Gas Operations Income Statement

($ in thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013
Natural Gas Operations
Operating revenues	$ 12,543	$ 11,500	$ 88,327	$ 64,779
Gas purchased	5,739	4,681	56,258	36,426
Gross margin	6,804	6,819	32,069	28,353
Operating expenses	8,120	7,279	24,223	21,043
Operating (loss) income	(1,316)	(460)	7,846	7,310
Other income	369	290	620	582
Income before interest and taxes	(947)	(170)	8,466	7,892
Interest expense	(586)	(665)	(1,895)	(1,930)
Income before income taxes	(1,533)	(835)	6,571	5,962
Income tax expense	653	395	(2,381)	(2,175)
Net (loss) income	$ (880)	$ (440)	$ 4,190	$ 3,787

On a year-to-date basis, the first nine months' revenue was up $23.5 million, or 36%, due to increased gas prices passed onto customers and higher sales volumes from the customer growth, magnified by the colder weather in the first three months of the 2014 period.

Gross margin for the third quarter of 2014 was $6.8 million and remained relatively unchanged from the prior-year period due to lower volume in certain jurisdictions. On a year-to-date basis, gross margin increased $3.7 million to $32.1 million mostly as a result of customer growth, magnified by colder weather in all markets during the first quarter of the year.

The increase in operating expenses for the quarter and year-to-date periods was $0.8 million and $3.2 million, respectively. These expenses included higher than usual legal and consulting fees for increased regulatory proceedings in all markets and higher corporate allocations for increased accounting costs for the establishment of new control processes and changes in auditors. Depreciation expense increased $0.4 million and $1.0 million for the quarter and nine months ending September 30, 2014, respectively, reflecting continued capital investments for growth.

Other Operating Segments
The Marketing and Production segment reported a net loss of $0.1 million for the third quarter of 2014, relatively unchanged from the prior-year period. On a year-to-date basis, the first nine months' net loss of the Marketing and Production segment was $0.9 million compared with net income of $0.3 million for the prior-year period. Year-to-date general and administrative expenses for the segment included a $1.1 million bad debt charge resulting from a ruling against the Company in a large industrial customer's Chapter 11 bankruptcy proceedings.

Adjusted EBITDA
Adjusted earnings from continuing operations before interest, taxes, depreciation, amortization, accretion, and non-recurring expenses ("Adjusted EBITDA") for the third quarter of 2014 was $0.7 million compared with Adjusted EBITDA of $0.6 million for the same period of the prior year. On a year-to-date basis Adjusted EBITDA was $12.2 million, or 12.8% of revenue, compared with $11.2 million, or 15.4% of revenue in the prior-year period. The Company believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), Adjusted EBITDA, which is a non-GAAP measure, helps in the understanding of its operating performance. See the attached tables on page 12 for important disclosures regarding the Company's use of Adjusted EBITDA, as well as a reconciliation of GAAP (loss) income from continuing operations to Adjusted EBITDA.

Balance Sheet and Cash Management
Cash and cash equivalents as of September 30, 2014 were $1.1 million, down $2.1 million and $11.6 million from the balances at June 30, 2014 and December 31, 2013, respectively.

Cash provided by operating activities was $8.6 million in the first nine months of 2014 compared with $13.6 million in the prior-year period. The decrease was the result of lower net income, increases in natural gas inventory purchases and regulatory assets and a decrease in accounts payable.

Capital expenditures for the first nine months of 2014 were $16.3 million compared with $15.4 million in the 2013 period. Total capital expenditures for 2014 are expected to be approximately $19.5 million. Capital investments are focused on the growth of the Company's Natural Gas Operations segment, specifically including the active expansion of systems in North Carolina and Maine to meet the high customer interest in natural gas service in those service areas.

Mr. Osborne concluded, "While 2014 has been a major transition period for the Company, there have been measurable outcomes of our efforts and we are nearing conclusion of others.

We added new talent to our Board of Directors with Michael R. Winter, who brings extensive utility experience to the Board.
The Board has approved a change to our dividend payment schedule to a typical quarterly payment.
We are making progress with operational efficiencies and regulatory relationships since Kevin Degenstein's return as our Chief Operating Officer and Chief Compliance Officer.

As we approach 2015, we expect that our efforts will begin to generate positive results and in the long-term, we believe we will continue to build a quality natural gas utility that will drive enhanced shareholder value."

About Gas Natural Inc.

Gas Natural Inc., a holding company, distributes and sells natural gas to end-use residential, commercial, and industrial customers. It distributes approximately 35 billion cubic feet of natural gas to approximately 67,000 customers through regulated utilities operating in Montana, Ohio, Pennsylvania, Maine, North Carolina and Kentucky. The Company's other operations include interstate 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 the Maine and North Carolina markets, while looking for acquisitions that are either adjacent to its existing utilities or in under saturated markets.

Gas Natural Inc. regularly posts information on its website at www.egas.net.

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

For more information, contact:

Gas Natural Inc.	Investor Relations:
James E. Sprague, Chief Financial Officer	Deborah K. Pawlowski or Karen L. Howard, Kei Advisors LLC
Phone: (440) 974-3770	Phone: (716) 843-3908 / (716) 843-3942
Email: jsprague@egas.net	Email: dpawlowski@keiadvisors.com / khoward@keiadvisors.com

FINANCIAL TABLES FOLLOW.

Gas Natural Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013
REVENUE
Natural gas operations	$ 12,542,698	$ 11,500,163	$ 88,327,066	$ 64,779,596
Marketing and production	1,072,273	2,117,165	7,284,543	8,334,626
Total revenue	13,614,971	13,617,328	95,611,609	73,114,222

COST OF SALES
Natural gas purchased	5,739,430	4,681,265	56,257,668	36,426,083
Marketing and production	860,900	1,701,554	6,538,023	6,794,511
Total cost of sales	6,600,330	6,382,819	62,795,691	43,220,594

GROSS MARGIN	7,014,641	7,234,509	32,815,918	29,893,628

OPERATING EXPENSES
Distribution, general, and administrative	6,321,270	5,595,965	19,018,069	15,638,813
Maintenance	295,762	274,403	920,308	827,727
Depreciation and amortization	1,794,019	1,402,867	5,074,876	3,959,418
Accretion	45,523	44,411	139,927	130,530
Provision for doubtful accounts	7,626	13,558	829,814	37,115
Taxes other than income	901,329	944,411	2,861,724	2,606,160
Total operating expenses	9,365,529	8,275,615	28,844,718	23,199,763

OPERATING INCOME (LOSS)	(2,350,888)	(1,041,106)	3,971,200	6,693,865

Loss from unconsolidated affiliate	-	(980)	(977)	(5,007)
Other income, net	408,821	305,956	617,656	713,265
Gain on sale of marketable securities	183,371	-	183,371	-
Acquisition expense	-	(87,575)	(7,197)	(244,109)
Interest expense	(764,367)	(811,476)	(2,334,435)	(2,379,368)
Income (loss) before income taxes	(2,523,063)	(1,635,181)	2,429,618	4,778,646
Income tax benefit (expense)	1,008,494	785,135	(901,141)	(1,724,239)

INCOME (LOSS) FROM CONTINUING OPERATIONS	(1,514,569)	(850,046)	1,528,477	3,054,407
Discontinued operations, net of tax	34,825	(154,292)	581,652	402,062

NET INCOME (LOSS)	$ (1,479,744)	$ (1,004,338)	$ 2,110,129	$ 3,456,469


Basic weighted shares outstanding	10,487,511	10,054,558	10,475,213	8,974,584
Dilutive effect of stock based compensation	-	-	-	903
Diluted weighted shares outstanding	10,487,511	10,054,558	10,475,213	8,975,487

BASIC AND DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations	$ (0.14)	$ (0.08)	$ 0.15	$ 0.34
Discontinued operations	-	(0.02)	0.05	0.05
Net income (loss) per share	$ (0.14)	$ (0.10)	$ 0.20	$ 0.39

Weighted average dividends declared per common share	$ 0.135	$ 0.139	$ 0.405	$ 0.341

Gas Natural Inc. and Subsidiaries Condensed Consolidated Balance Sheets

	September 30,	December 31,
	2014	2013
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$ 1,103,434	$ 12,741,197
Marketable securities	-	406,134
Accounts receivable
Trade, less allowance for doubtful accounts of $223,293 and $1,978,358, respectively	6,039,891	12,305,657
Related parties	219,918	146,225
Unbilled gas	2,160,367	7,172,062
Note receivable, current portion	1,938	1,938
Inventory
Natural gas	7,892,795	4,996,065
Materials and supplies	2,638,416	2,285,722
Prepaid income taxes	707,191	727,427
Prepayments and other	1,529,065	970,574
Recoverable cost of gas purchases	1,927,177	1,209,982
Deferred tax asset	750,471	1,225,032
Derivative instruments	8,419	-
Assets held for sale	35,115	-
Discontinued operations	11,041,679	12,032,203
Total current assets	36,055,876	56,220,218

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment	181,878,664	164,886,688
Less accumulated depreciation, depletion and amortization	(44,752,830)	(40,299,043)
PROPERTY, PLANT AND EQUIPMENT, NET	137,125,834	124,587,645

OTHER ASSETS
Note receivable, less current portion	90,975	93,727
Regulatory assets
Deferred costs	2,327,501	-
Property taxes	6,250	25,000
Income taxes	296,819	296,819
Rate case costs	97,734	130,228
Debt issuance costs, net of amortization	1,093,245	1,388,124
Goodwill	16,267,377	16,267,377
Customer relationships	3,003,208	3,230,333
Investment in unconsolidated affiliate	350,748	351,724
Restricted cash	1,897,701	1,137,442
Other assets	9,169	3,160
Total other assets	25,440,727	22,923,934
TOTAL ASSETS	$ 198,622,437	$ 203,731,797

Gas Natural Inc. and Subsidiaries Condensed Consolidated Balance Sheets


	September 30,	December 31,
	2014	2013
	(unaudited)
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES
Checks in excess of amounts on deposit	$ 1,523,212	$ 842,443
Line of credit	24,060,799	24,529,799
Accounts payable
Trade	7,814,606	12,355,605
Related parties	9	559,933
Notes payable, current portion	542,156	3,502,190
Contingent consideration, current portion	671,638	671,638
Accrued liabilities
Taxes other than income	1,763,630	3,043,583
Vacation	331,467	83,189
Employee benefit plans	82,712	161,440
Interest	359,156	169,581
Deferred payments received from levelized billing	2,326,208	2,293,801
Customer deposits	713,914	667,479
Related parties	69,253	-
Capital lease obligation, current portion	188,224	177,570
Over-recovered gas purchases	885,500	793,184
Build-to-suit liability	4,148,469	-
Other current liabilities	1,308,544	1,464,646
Discontinued operations	617,774	574,889
Total current liabilities	47,407,271	51,890,970

LONG-TERM LIABILITIES
Deferred investment tax credits	118,458	134,255
Deferred tax liability	9,761,396	9,055,166
Asset retirement obligation	2,166,280	2,026,353
Customer advances for construction	996,416	987,265
Regulatory liability for income taxes	83,161	83,161
Customer deposits	949,540	-
Capital lease obligation, less current portion	1,674,714	1,862,938
Contingent consideration, less current portion	10,362	13,362
Total long-term liabilities	15,760,327	14,162,500

NOTES PAYABLE, less current portion	39,856,427	40,198,552

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock; $0.15 par value, 1,500,000 shares authorized, no shares issued or outstanding	-	-
Common stock; $0.15 par value, Authorized: 15,000,000 shares: Issued: 10,487,511 and 10,451,678 shares, respectively; Outstanding: 10,487,511 and 10,451,678 shares, respectively	1,573,127	1,567,752
Capital in excess of par value	63,821,456	63,468,969
Accumulated other comprehensive income	-	104,909
Retained earnings	30,203,829	32,338,145
Total stockholders' equity	95,598,412	97,479,775
TOTAL CAPITALIZATION	135,454,839	137,678,327
TOTAL LIABILITIES AND CAPITALIZATION	$ 198,622,437	$ 203,731,797

Gas Natural Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
	2014	2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 2,110,129	$ 3,456,469
Loss from discontinued operations	581,652	402,062
Income from continuing operations	1,528,477	3,054,407
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	5,074,876	3,959,418
Accretion	139,927	130,530
Amortization of debt issuance costs	304,177	315,898
Provision for doubtful accounts	829,814	37,115
Stock based compensation	312,100	2,423
Gain on sale of marketable securities	(183,371)	-
Loss (gain) on sale of assets	10,635	(154,657)
Loss from unconsolidated affiliate	977	5,007
Unrealized holding (gain) loss on contingent consideration	(3,000)	215,000
Change in fair value of derivative financial instruments	(8,419)	-
Investment tax credit	(15,797)	(15,797)
Deferred income taxes	1,243,512	2,467,689
Changes in assets and liabilities
Accounts receivable, including related parties	5,467,686	5,394,354
Unbilled gas	5,011,695	2,501,719
Natural gas inventory	(3,048,511)	(1,173,128)
Accounts payable, including related parties	(3,425,347)	(2,398,156)
Recoverable/refundable cost of gas purchases	(624,880)	(778,963)
Regulatory assets	(2,401,250)	245,577
Prepayments and other	(560,351)	839,282
Other assets	(141,418)	(834,170)
Other liabilities	(912,571)	(191,348)
Net cash provided by operating activities of continuing operations	8,598,961	13,622,200
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures	(16,276,508)	(15,357,615)
Proceeds from sale of fixed assets	33,234	958,448
Proceeds from sale of marketable securities	421,875	-
Proceeds from notes receivable	2,752	5,657
Investment in unconsolidated affiliate	-	(35,000)
Restricted cash – capital expenditures fund	57,441	1,062,763
Customer advances for construction	15,303	31,212
Contributions in aid of construction	1,942,695	296,342
Net cash used in investing activities of continuing operations	(13,803,208)	(13,038,193)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from lines of credit	16,450,000	14,400,000
Repayments of lines of credit	(16,919,000)	(20,048,956)
Proceeds from notes payable	102,000	-
Repayments of notes payable	(3,429,702)	(506,311)
Payments of capital lease obligations	(177,570)	(167,518)
Debt issuance costs	(9,298)	(7,492)
Proceeds from issuance of common shares	-	15,943,051
Exercise of stock options	45,761	159,500
Restricted cash – debt service fund	131,840	749,326
Dividends paid	(4,242,608)	(3,598,449)
Net cash provided by (used in) financing activities of continuing operations	(8,048,577)	6,923,151
DISCONTINUED OPERATIONS
Operating cash flows	1,907,389	1,028,772
Investing cash flows	(346,220)	(338,827)
Financing cash flows	53,892	(134,552)
Net cash provided by discontinued operations	1,615,061	555,393
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(11,637,763)	8,062,551
Cash and cash equivalents, beginning of period	12,741,197	3,202,643

CASH AND CASH EQUIVALENTS, END OF PERIOD	$ 1,103,434	$ 11,265,194

Gas Natural Inc. and Subsidiaries Segments of Operations (Unaudited)

Three Months Ended September 30, 2014
	Natural Gas	Marketing &	Corporate &
	Operations	Production	Other	Consolidated

OPERATING REVENUES	$ 12,544,151	$ 2,134,914	$ -	$ 14,679,065
Intersegment elimination	(1,453)	(1,062,641)	-	(1,064,094)
Total operating revenue	12,542,698	1,072,273	-	13,614,971

COST OF SALES	5,740,883	1,923,541	-	7,664,424
Intersegment elimination	(1,453)	(1,062,641)	-	(1,064,094)
Total cost of sales	5,739,430	860,900	-	6,600,330

GROSS MARGIN	$ 6,803,268	$ 211,373	$ -	$ 7,014,641

OPERATING EXPENSES	8,146,216	372,682	873,202	9,392,100
Intersegment elimination	(26,571)	-	-	(26,571)
Total operating expenses	8,119,645	372,682	873,202	9,365,529

OPERATING INCOME (LOSS)	$ (1,316,377)	$ (161,309)	$ (873,202)	$ (2,350,888)

DISCONTINUED OPERATIONS	$ -	$ -	$ 34,825	$ 34,825

NET INCOME (LOSS)	$ (879,952)	$ (108,248)	$ (491,544)	$ (1,479,744)


Three Months Ended September 30, 2013
	Natural Gas	Marketing &	Corporate &
	Operations	Production	Other	Consolidated

OPERATING REVENUES	$ 11,502,306	$ 4,036,248	$ -	$ 15,538,554
Intersegment elimination	(2,143)	(1,919,083)	-	(1,921,226)
Total operating revenue	11,500,163	2,117,165	-	13,617,328

COST OF SALES	4,683,408	3,620,637	-	8,304,045
Intersegment elimination	(2,143)	(1,919,083)	-	(1,921,226)
Total cost of sales	4,681,265	1,701,554	-	6,382,819

GROSS MARGIN	$ 6,818,898	$ 415,611	$ -	$ 7,234,509

OPERATING EXPENSES	7,304,083	604,673	392,044	8,300,800
Intersegment elimination	(25,185)	-	-	(25,185)
Total operating expenses	7,278,898	604,673	392,044	8,275,615

OPERATING INCOME (LOSS)	$ (460,000)	$ (189,062)	$ (392,044)	$ (1,041,106)

DISCONTINUED OPERATIONS	$ -	$ -	$ (154,292)	$ (154,292)

NET INCOME (LOSS)	$ (440,255)	$ (129,525)	$ (434,558)	$ (1,004,338)

Gas Natural Inc. and Subsidiaries Segments of Operations, Continued (Unaudited)

Nine Months Ended September 30, 2014
	Natural Gas	Marketing &	Corporate &
	Operations	Production	Other	Consolidated

OPERATING REVENUES	$ 88,343,864	$ 13,136,479	$ -	$ 101,480,343
Intersegment elimination	(16,798)	(5,851,936)	-	(5,868,734)
Total operating revenue	88,327,066	7,284,543	-	95,611,609

COST OF SALES	56,274,466	12,389,959	-	68,664,425
Intersegment elimination	(16,798)	(5,851,936)	-	(5,868,734)
Total cost of sales	56,257,668	6,538,023	-	62,795,691

GROSS MARGIN	$ 32,069,398	$ 746,520	$ -	$ 32,815,918

OPERATING EXPENSES	24,301,048	2,156,684	2,464,547	28,922,279
Intersegment elimination	(77,561)	-	-	(77,561)
Total operating expenses	24,223,487	2,156,684	2,464,547	28,844,718

OPERATING INCOME (LOSS)	$ 7,845,911	$ (1,410,164)	$ (2,464,547)	$ 3,971,200

DISCONTINUED OPERATIONS	$ -	$ -	$ 581,652	$ 581,652

NET INCOME (LOSS)	$ 4,189,646	$ (936,885)	$ (1,142,632)	$ 2,110,129



Nine Months Ended September 30, 2013
	Natural Gas	Marketing &	Corporate &
	Operations	Production	Other	Consolidated

OPERATING REVENUES	$ 64,797,098	$ 13,852,389	$ -	$ 78,649,487
Intersegment elimination	(17,502)	(5,517,763)	-	(5,535,265)
Total operating revenue	64,779,596	8,334,626	-	73,114,222

COST OF SALES	36,443,585	12,312,274	-	48,755,859
Intersegment elimination	(17,502)	(5,517,763)	-	(5,535,265)
Total cost of sales	36,426,083	6,794,511	-	43,220,594

GROSS MARGIN	$ 28,353,513	$ 1,540,115	$ -	$ 29,893,628

OPERATING EXPENSES	21,114,497	1,109,762	1,046,918	23,271,177
Intersegment elimination	(71,414)	-	-	(71,414)
Total operating expenses	21,043,083	1,109,762	1,046,918	23,199,763

OPERATING INCOME (LOSS)	$ 7,310,430	$ 430,353	$ (1,046,918)	$ 6,693,865

DISCONTINUED OPERATIONS	$ -	$ -	$ 402,062	$ 402,062

NET INCOME (LOSS)	$ 3,787,103	$ 297,808	$ (628,442)	$ 3,456,469

Gas Natural Inc. and Subsidiaries Natural Gas Operations

Utility Throughput

	Three Months Ended September 30,		Nine Months Ended September 30,
(in million cubic feet (MMcf))	2014	2013	2014	2013

Full Service Distribution Revenues
Residential	355	291	3,662	2,960
Commercial	565	537	3,572	2,160
Industrial	-	-	-	-
Total full service distribution	920	828	7,234	5,120

Transportation	1,871	2,580	7,865	8,482
Bucksport	2,018	3,672	4,778	10,545

Total Volumes	4,809	7,080	19,877	24,147

Heating Degree Days

		Three Months Ended		Percent Colder (Warmer)
		September 30,		2014 Compared to
	Normal	2014	2013	Normal	2013

Great Falls, MT	359	325	190	(9.47%)	71.05%
Bangor, ME	230	235	249	2.17%	(5.62%)
Elkin, NC	88	63	67	(28.41%)	(5.97%)
Youngstown, OH	183	193	189	5.46%	2.12%
Jackson, KY	84	97	91	15.48%	6.59%

		Nine Months Ended		Percent Colder (Warmer)
		September 30,		2014 Compared to
	Normal	2014	2013	Normal	2013

Great Falls, MT	4,758	5,188	4,382	9.04%	18.39%
Bangor, ME	4,784	5,352	5,006	11.87%	6.91%
Elkin, NC	3,048	2,856	1,750	(6.30%)	63.20%
Youngstown, OH	4,111	4,604	4,082	11.99%	12.79%
Jackson, KY	2,756	3,178	2,997	15.31%	6.04%

Gas Natural Inc. and Subsidiaries Reconciliation of GAAP (Loss) Income from Continuing Operations to Adjusted (Loss) Income from Continuing Operations⁽¹⁾

(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
	$	per diluted share	$	per diluted share	$	per diluted share	$	per diluted share
GAAP (loss) income from continuing operations	$ (1,515)	$(0.14)	$ (850)	$(0.08)	$1,528	$ 0.15	$3,054	$ 0.34
Add back after tax:
Bad debt charge					689	0.07
Non-recurring legal fees	260	0.02			398	0.04
Non-recurring professional and other expenses	138	0.01			326	0.03

Non-GAAP adjusted (loss) income from continuing operations	$(1,117)	$(0.11)	$ (850)	$(0.08)	$2,941	$ 0.29	$3,054	$ 0.34

Gas Natural Inc. and Subsidiaries GAAP (Loss) Income from Continuing Operations to Adjusted EBITDA Reconciliation¹

(in thousands)	Three Months Ended September 30,		Nine Months Ended September 30,
	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013

GAAP (loss) income from continuing operations	$ (1,515)	$ (850)	$ 1,528	$ 3,054
Add back:
Net interest expense	764	811	2,334	2,379
Income taxes	(1,008)	(785)	901	1,724
Depreciation, amortization and accretion	1,840	1,447	5,215	4,090
Bad debt charge			1,100
Non-recurring legal fees	415		635
Non-recurring professional and other expenses	220		520

Non-GAAP Adjusted EBITDA⁽¹⁾	$ 716	$ 623	$ 12,233	$ 11,247

Sales	$ 13,615	$ 13,617	$ 95,612	$ 73,114
Non-GAAP EBITDA Margin	5.3%	4.6%	12.8%	15.4%

⁽¹⁾Non-GAAP Financial Measures:
The Company believes that, when used in conjunction with GAAP measures, Adjusted (Loss) Income from Continuing Operations and Adjusted EBITDA, or earnings before interest, taxes, depreciation, amortization, accretion and non-recurring charges which are non-GAAP measures, allow investors to view its performance in a manner similar to the methods used by management and provides additional insight into its operating results. Adjusted (Loss) Income from Continuing Operations and Adjusted EBITDA are not calculated through the application of GAAP and are not the required form of disclosure by the Securities and Exchange Commission. As such, these measures should not be considered as a substitute for the GAAP measure of net income and, therefore, should not be used in isolation of, but in conjunction with, the GAAP measure. The use of any non-GAAP measure may produce results that vary from the GAAP measure and may not be comparable to a similarly defined non-GAAP measure used by other companies.

SOURCE Gas Natural Inc.

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