<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED JUNE 30, 1995
Commission file number 1-7479
_________________
BAY STATE GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-2548120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Friberg Parkway, Westborough, Massachusetts 01581-5039 (508/836-7000)
(Address and telephone number of principal executive offices)
_________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES ( X ) NO ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at July 31, 1995
----- ----------------------------
<S> <C>
Common Stock, $3.33 1/3 par value 13,350,394 Shares
</TABLE>
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings - Three months, nine months and
twelve months ended June 30, 1995 and 1994................................ 3
Consolidated Balance Sheets at June 30, 1995, 1994
and September 30, 1994.................................................... 5
Consolidated Statements of Capitalization at June 30,
1995, 1994 and September 30, 1994......................................... 6
Consolidated Statements of Cash Flows - Nine months and
twelve months ended June 30, 1995 and 1994................................ 7
Notes to Consolidated Financial Statements................................ 8
Independent Auditors' Report.............................................. 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 13
Item 2. Changes in Securities............................................... 13
Item 3. Defaults Upon Senior Securities..................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................. 13
Item 5. Other Information................................................... 13
Item 6. Exhibits and Reports on Form 8-K.................................... 13
SIGNATURES................................................................... 14
</TABLE>
<PAGE> 3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
BAY STATE GAS COMPANY
Consolidated Statements of Earnings
(Unaudited, in thousands, except per share amounts)
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
1995 1994 1995 1994
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gas revenues $69,113 $61,829 $348,568 $398,552
Cost of gas sold 42,985 37,334 209,873 251,418
------------------------------------------------------------------------------------------------------
Net gas revenues 26,128 24,495 138,695 147,134
------------------------------------------------------------------------------------------------------
Transportation revenues 971 630 3,348 1,892
------------------------------------------------------------------------------------------------------
Net gas and transportation revenues 27,099 25,125 142,043 149,026
------------------------------------------------------------------------------------------------------
Other operating revenues 2,341 2,322 5,738 6,063
Operating expenses:
Operations 18,092 18,061 54,584 59,095
Maintenance 2,055 2,114 6,250 6,523
Depreciation and amortization 6,365 5,949 18,935 17,807
Federal and state taxes on income (1,538) (2,100) 18,597 20,346
Other taxes, principally property taxes 2,644 2,693 8,493 8,362
------------------------------------------------------------------------------------------------------
Total operating expenses 27,618 26,717 106,859 112,133
------------------------------------------------------------------------------------------------------
Operating income 1,822 730 40,922 42,956
Other income, net of taxes 377 145 1,348 401
------------------------------------------------------------------------------------------------------
Income before interest expense 2,199 875 42,270 43,357
------------------------------------------------------------------------------------------------------
Interest expense:
Long-term debt 3,805 3,533 11,370 10,839
Other 684 379 1,337 937
------------------------------------------------------------------------------------------------------
Total interest expense 4,489 3,912 12,707 11,776
------------------------------------------------------------------------------------------------------
Net income (loss) (2,290) (3,037) 29,563 31,581
Dividend requirements on preferred stock 74 78 225 233
------------------------------------------------------------------------------------------------------
Earnings (loss) applicable to common stock $(2,364) $(3,115) $ 29,338 $ 31,348
======================================================================================================
Average number of shares outstanding 13,347 13,133 13,339 13,033
======================================================================================================
Earnings (loss) per average common share $ (0.18) $ (0.24) $ 2.20 $ 2.41
======================================================================================================
Dividends declared per common share $ 0.375 $ 0.365 $ 1.105 $ 1.075
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3
<PAGE> 4
<TABLE>
BAY STATE GAS COMPANY
Consolidated Statements of Earnings
(Unaudited, in thousands, except per share amounts)
<CAPTION>
Twelve months ended
June 30,
1995 1994
------------------------------------------------------------------------
<S> <C> <C>
Gas revenues $390,915 $441,024
Cost of gas sold 235,354 276,788
------------------------------------------------------------------------
Net gas revenues 155,561 164,236
------------------------------------------------------------------------
Transportation revenues 3,992 2,351
------------------------------------------------------------------------
Net gas and transportation revenues 159,553 166,587
------------------------------------------------------------------------
Other operating revenues 7,460 7,665
Operating expenses:
Operations 71,947 76,741
Maintenance 8,002 8,627
Depreciation and amortization 24,603 23,273
Federal and state taxes on income 13,915 15,465
Other taxes, principally property taxes 11,229 11,012
------------------------------------------------------------------------
Total operating expenses 129,696 135,118
------------------------------------------------------------------------
Operating income 37,317 39,134
Other income, net of taxes 1,029 111
------------------------------------------------------------------------
Income before interest expense 38,346 39,245
------------------------------------------------------------------------
Interest expense:
Long-term debt 14,929 14,172
Other 949 1,170
------------------------------------------------------------------------
Total interest expense 15,878 15,342
------------------------------------------------------------------------
Net income 22,468 23,903
Dividend requirements on preferred stock 303 310
------------------------------------------------------------------------
Earnings applicable to common stock $ 22,165 $ 23,593
========================================================================
Average number of shares outstanding 13,315 12,989
========================================================================
Earnings per average common share $ 1.66 $ 1.82
========================================================================
Dividends declared per common share $ 1.47 $ 1.43
========================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE> 5
<TABLE>
BAY STATE GAS COMPANY
Consolidated Balance Sheets
(In thousands)
<CAPTION>
June 30, September 30,
1995 1994 1994
---------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C> <C>
ASSETS
Utility plant, at cost $660,849 $609,689 $627,131
Accumulated depreciation and amortization 176,376 156,803 163,023
---------------------------------------------------------------------------------------------------------
Net utility plant 484,473 452,886 464,108
---------------------------------------------------------------------------------------------------------
Other property and investments, at cost 13,214 13,145 12,721
---------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 9,467 2,302 3,980
Accounts receivable, less allowances of $5,563, $7,654
and $5,072 39,606 47,979 25,490
Unbilled revenues 3,638 3,643 3,661
Deferred gas costs 839 5,016 7,468
Prepaid and deferred income taxes 3,165 862 9,097
Inventories, at average cost 14,105 20,013 24,451
Prepaid benefit plans and other 24,476 29,578 28,202
---------------------------------------------------------------------------------------------------------
Total current assets 95,296 109,393 102,349
---------------------------------------------------------------------------------------------------------
Deferred debits:
Income taxes 15,702 14,719 14,751
Other 27,030 22,244 26,799
---------------------------------------------------------------------------------------------------------
Total Assets $635,715 $612,387 $620,728
=========================================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization (see accompanying statements):
Common stock equity $231,341 $224,921 $215,389
Preferred stock equity 5,219 5,345 5,293
Long-term debt, net 198,000 179,000 191,000
---------------------------------------------------------------------------------------------------------
Total capitalization 434,560 409,266 411,682
---------------------------------------------------------------------------------------------------------
Commitments and contingencies (Note 3) -- -- --
Current liabilities:
Short-term debt 5,950 31,950 37,750
Current maturities of long-term debt -- 2,000 --
Accounts payable 26,712 31,767 26,734
Fuel purchase commitments 11,349 12,875 20,820
Refunds due customers 38,366 20,871 10,509
Taxes accrued 14,158 10,487 11,588
Other 7,183 6,609 7,905
---------------------------------------------------------------------------------------------------------
Total current liabilities 103,718 116,559 115,306
---------------------------------------------------------------------------------------------------------
Deferred credits:
Deferred income taxes 72,102 64,783 69,198
Other 25,335 21,779 24,542
---------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $635,715 $612,387 $620,728
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Page 5
<PAGE> 6
<TABLE>
BAY STATE GAS COMPANY
Consolidated Statements of Capitalization
(In thousands)
<CAPTION>
June 30, September 30,
1995 1994 1994
-----------------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
<S> <C> <C> <C>
Common stock equity:
Common Stock, $3.33 1/3 par value, authorized 36,000,000
shares; 13,350,394, 13,183,511 and 13,290,491 shares
outstanding $ 44,501 $ 43,945 $ 44,302
Paid-in capital 100,302 97,030 99,145
Retained earnings 86,538 83,946 71,942
-----------------------------------------------------------------------------------------------------------------
Total common stock equity 231,341 224,921 215,389
-----------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Non-redeemable cumulative preferred stock 2,572 2,572 2,572
Redeemable cumulative preferred stock 2,647 2,773 2,721
-----------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock 5,219 5,345 5,293
-----------------------------------------------------------------------------------------------------------------
Long-term debt:
Revolving credit agreement 20,000 18,000 18,000
Notes 178,000 163,000 173,000
-----------------------------------------------------------------------------------------------------------------
Total long-term debt 198,000 181,000 191,000
Less current maturities -- 2,000 --
-----------------------------------------------------------------------------------------------------------------
Long-term debt, net 198,000 179,000 191,000
-----------------------------------------------------------------------------------------------------------------
Total capitalization $434,560 $409,266 $411,682
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Page 6
<PAGE> 7
<TABLE>
BAY STATE GAS COMPANY
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<CAPTION>
Nine months ended Twelve months ended
June 30, June 30,
1995 1994 1995 1994
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,563 $ 31,581 $ 22,468 $ 23,903
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,935 17,807 24,603 23,273
Deferred income taxes 5,801 459 10,597 2,918
Changes in operating assets and liabilities:
Accounts receivable (14,116) (23,828) 8,373 (7,937)
Inventories 10,346 9,493 5,908 (3,214)
Accounts payable (22) 4,568 (5,055) 5,639
Fuel purchase commitments (9,471) (9,071) (1,526) 4,351
Taxes accrued 346 6,690 220 1,861
Refunds due customers 27,857 17,527 17,495 13,771
Deferred gas costs 6,629 12,445 4,177 (95)
Prepaid benefit plans and other 3,726 (10,958) 4,240 (10,585)
Prepaid and deferred income taxes 5,909 (3,757) (2,399) 1,311
Other (950) 6,630 1,135 533
----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 84,553 59,586 90,236 55,729
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (excluding AFUDC) (37,280) (33,135) (53,940) (48,036)
Additions to other property and investments (1,717) (142) (2,209) (4,371)
Dividend from investment in MASSPOWER 503 -- 503 --
Other energy-related activities (Note 2) (2,087) (793) (2,251) (841)
----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (40,581) (34,070) (57,897) (53,248)
----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,356 7,295 3,828 9,335
Dividends on common stock (14,742) (13,998) (19,574) (18,560)
Dividends on preferred stock (225) (233) (302) (310)
Issuance of long-term debt 7,000 15,000 17,000 41,000
Retirements of preferred stock and long-term debt (74) (14,047) (126) (24,100)
Short-term debt (31,800) (18,500) (26,000) (8,770)
----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (38,485) (24,483) (25,174) (1,405)
----------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS 5,487 1,033 7,165 1,076
Cash and temporary cash investments at beginning of
period 3,980 1,269 2,302 1,226
----------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 9,467 $ 2,302 $ 9,467 $ 2,302
================================================================================================================
Supplemental cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 12,686 $ 12,348 $ 15,891 $ 13,943
================================================================================================================
Income taxes $ 6,270 $ 7,846 $ 7,449 $ 9,533
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
Page 7
<PAGE> 8
Notes to Consolidated Financial Statements
June 30, 1995 and 1994
(Unaudited)
NOTE 1 - ACCOUNTING POLICY
The accompanying consolidated financial statements have been prepared in
accordance with the instructions for Form 10-Q and, therefore, do not include
all information and footnotes required by generally accepted accounting
principles. In the opinion of management, the consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the Company's financial position, results of operations and
cash flows for all periods shown. Certain information in the prior period
financial statements has been reclassified to conform with the current period's
presentation. It is suggested that these financial statements and accompanying
notes be read in conjunction with the financial statements and the notes
included in the Company's annual report to shareholders for the year ended
September 30, 1994 and the subsequent quarterly reports of December 31, 1994 and
March 31, 1995.
Because of the seasonal nature of the Company's business, the results of
operations for the three and nine months ended June 30, 1995 and 1994 are not
necessarily indicative of the results for the full fiscal year.
NOTE 2 - ENERGY-RELATED INVESTMENTS
On June 1, 1995, the Company formed a new subsidiary, Bay State Energy
Enterprises, Inc. ("BSEE"). On June 19, 1995, BSEE entered into a partnership
agreement with Connecticut Natural Gas Corporation and Koch Gas Services Company
to form KBC Energy Services ("KBC"). KBC will market natural gas supplies and
energy-related services on an unregulated basis to commercial and industrial
end-users. Each partner holds a one-third equity interest in the partnership.
The Company is committed to invest up to $1.7 million in KBC.
The Company's wholly-owned subsidiary, Granite State Gas Transmission, Inc.
("Granite"), currently transports natural gas imported from Canada on behalf of
the Company and the Company's wholly-owned subsidiary, Northern Utilities Inc.
("Northern"), through a converted oil pipeline leased from the Portland Pipe
Line Corporation ("PPLC"). The PPLC lease extends to March 31, 1997. Granite
is seeking an agreement with PPLC to extend the lease through the 1997-1998
heating season. Granite and Northern have developed short-term contingency
plans for supplying Northern's customers through the 1997-1998 heating season
in the event that the lease is not extended.
Long-term, Granite plans to replace the pipeline capacity provided by the PPLC
lease through two projects it is currently pursuing. The first is a 2.0
million MMBtu liquified natural gas ("LNG") storage facility to be located in
southern Maine. On February 28, 1995, Granite completed its application with
the Federal Energy Regulatory Commission ("FERC") for a certificate of public
convenience and necessity for the construction and operation of the LNG
facility. Northern plans to file in the near future for approval from the
public utility commissions of Maine and New Hampshire of its agreement with
Granite for service from the LNG facility. While the timing and receipt of the
required approvals cannot be predicted with certainty, the Company believes that
the LNG facility will be completed and available for service by November 1998.
The second project Granite is pursuing to replace the PPLC leased pipeleine is a
new 240-mile dedicated natural gas pipeline proposed to be built from the
U.S.-Canadian border at Jay, Vermont to the New Hampshire-Massachusetts border
at Haverhill, Massachusetts. In 1991, the Company initiated the formation of a
partnership of energy companies to develop the pipeline, which is known as the
Portland Natural Gas Transmission System ("PNGTS"). The PNGTS partnership plans
to file an application with the FERC for a certificate of public convience and
necessity to construct and operate the pipeline during fiscal 1996. The Company
and Northern have entered into agreements with PNGTS for service on the
pipeline. Such agreements are subject to state regulatory review and approval
processes in Massachusetts, Maine and New Hampshire. The timing and receipt of
the required approvals cannot be predicted with certainty at this time.
Page 8
<PAGE> 9
Notes to Consolidated Financial Statements
June 30, 1995 and 1994
(Unaudited)
Approximately $1.9 million and $3.0 million has been expended by the Company on
the LNG facility and PNGTS, respectively. Recovery of these expenditures is
dependent upon, among other things, successful completion of the projects and
the terms of required regulatory approvals. While the Company believes that
these projects will be successful, their completion is subject to a number of
factors beyond the Company's control.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
The Company, like other companies in the natural gas industry, is a party to
governmental actions associated with former gas manufacturing sites. Management
estimates that, exclusive of insurance recoveries, if any, expenditures to
remediate and monitor known environmental sites will range from $3.0 million to
$8.0 million. Accordingly, the Company has accrued $3.0 million with an
offsetting charge to a regulatory asset.
Environmental expenditures for the quarters ended June 30, 1995 and 1994 were
$67,000 and $55,000 respectively. Exclusive of amounts accrued for future
expenditures, at June 30, 1995 and 1994, approximately $3.1 million and $3.0
million of environmental expenditures had been deferred for future recovery from
customers under previously approved rate orders.
The Company has recorded significant regulatory assets and liabilities
associated with costs (income taxes; postretirement and postemployment benefit
plans; and environmental response costs) and obligations (income taxes; amounts
to be refunded to customers or to be used for specific purposes) arising from
the rate making process. Based on its assessments of decisions by applicable
regulatory authorities, management believes that all regulatory assets and
liabilities will be settled at recorded amounts through specific provisions of
future rate orders.
<TABLE>
NOTE 4 - RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the twelve months ended June 30,
1995, and for the years ended September 30 are set forth below.
<CAPTION>
Year ended September 30
June ---------------------------------------------
(In thousands) 1995 1994 1993 1992 1991 1990
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income $22,468 $24,485 $22,807 $18,363 $15,817 $20,185
Adjustments:
Income taxes 14,464 15,642 13,726 11,250 8,733 11,037
Fixed charges (see below) 18,302 17,149 15,895 15,170 14,832 13,720
--------------------------------------------------------
Total adjusted earnings $55,234 $57,276 $52,428 $44,783 $39,382 $44,942
========================================================
Fixed charges:
Total interest expense $16,128 $15,095 $13,599 $13,073 $12,253 $11,430
Interest component of rents 2,174 2,054 2,296 2,097 2,579 2,290
--------------------------------------------------------
Total fixed charges $18,302 $17,149 $15,895 $15,170 $14,832 $13,720
========================================================
Ratio of earnings to fixed charges 3.02 3.34 3.30 2.95 2.66 3.28
========================================================
</TABLE>
Page 9
<PAGE> 10
Independent Auditors' Report
----------------------------
The Board of Directors
Bay State Gas Company:
We have reviewed the consolidated balance sheets and statements of
capitalization of Bay State Gas Company and subsidiaries as of June 30, 1995
and 1994, and the related consolidated statements of earnings and cash flows for
the three months, nine months and twelve months then ended. These consolidated
financial statements are the responsibility of the Company's management.
We have conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of the interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet and statement of capitalization of
Bay State Gas Company and subsidiaries as of September 30, 1994, and the
related consolidated statements of earnings and cash flows for the year then
ended not presented herein; and, in our report dated October 20, 1994, we
expressed an unqualified opinion on those consolidated financial statements.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 25, 1995
Page 10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial
----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
RESULTS OF OPERATIONS
Earnings and dividends
----------------------
For the three months ended June 30, 1995, operating revenues were $72.4 million,
up from $64.8 million in the prior year, while the net loss per average common
share was $.18 versus $.24 a year earlier. Earnings per share improved
primarily due to a $2 million increase in net gas and transportation revenues,
which resulted from weather that was 14% colder than the year earlier, while
operating and maintenance expenses remained level.
For the nine-month period ended June 30, 1995, earnings per average common share
were $2.20, 8.7% lower than the $2.41 earned for the same period last year. For
the twelve-month period ended June 30, 1995, earnings per average common share
were $1.66 compared to $1.82 for the same period the year before. This
decrease in earnings for both periods was primarily the result of weather that
was 11% warmer than the previous year for both the nine and twelve month
periods. Partially offsetting the negative effect of the weather were decreases
in operating and maintenance expenses of 7.3% and 6.3% for the nine and twelve
month periods, respectively.
Dividends declared per common share were $.375 for the three-month period ended
June 30, 1995, compared to $.365 for the same period last year. This quarterly
dividend represents an annualized dividend rate of $1.50 per common share, up
2.7% from the $1.46 annualized dividend last year. For the twelve-month period
ended June 30, 1995, dividends declared were $1.47, compared to $1.43 for the
same period in the prior year.
Net gas and transportation revenues
-----------------------------------
Primarily as the result of warmer weather, net gas and transportation revenues
for the nine and twelve months are down 4.6% and 4.2% from one year ago,
respectively. For both the nine and twelve months ended June 30, 1995, the
weather was 7% warmer than normal and 11% warmer than the comparative periods
in 1994. For both the nine and twelve months ended June 30, net revenues were
negatively impacted by the weather by approximately $4.5 million in 1995 as
compared to an estimated positive impact of $2.6 million in 1994, due to colder
than normal weather. This weather impact was partially offset by a 3.4% and
3.1% increase in normalized sales volumes, including transportation volumes, for
the comparative nine and twelve month periods, respectively.
Operating expenses
------------------
Total operating expenses, excluding federal and state taxes on income, for the
nine months ended June 30, 1995 were $88.3 million compared to $91.8 million for
the same period last year. These expenses for the twelve- month period ended
June 30, 1995 were $115.8 million compared to $119.7 million for the prior
twelve months. The decreases in both the nine- and twelve-month periods are
primarily attributable to reductions in operating and maintenance expenses
offset by increases in depreciation and amortization expenses. The decrease in
operating and maintenance expenses for both periods is the result of lower bad
debt, labor, benefits and outside services expenses and an increase in service
revenues.
Other income, net of taxes
--------------------------
Other income, net of taxes for the nine-month period ended June 30, 1995 was
$1.3 million as compared to $401,000 for the same period last year. For the
comparable twelve-month period, other income, net of taxes was $1.0 million and
$111,000. The increase in both periods was primarily a result of the profits
generated from the Company's investment in MASSPOWER, a cogeneration facility.
Page 11
<PAGE> 12
Interest expense and dividend requirements on preferred stock
-------------------------------------------------------------
Interest expense for the nine-month period ended June 30, 1995 was $12.7 million
compared to $11.8 million for the same period last year. For the twelve months
ended June 30, 1995, interest expense was $15.9 million compared to $15.3
million for the previous twelve months. The increase in interest expense for
both periods was primarily the result of an additional $.8 million in expense
accrued on overcollections of gas costs, a result of the warmer than normal
weather, and higher than anticipated pipeline supplier refunds.
Dividend requirements on preferred stock were relatively flat for the
comparative periods.
LIQUIDITY AND CAPITAL RESOURCES
The seasonal nature of the gas distribution business creates large short-term
working capital requirements to finance customers accounts receivable and
deferred gas costs, as well as construction expenditures. Short-term funds are
obtained from the issuance of commercial paper, traditional bank lines of credit
and demand loans under Fuel Purchase Agreements.
Cash flows from operations have enabled the Company to keep new debt financing
to a minimum. During the month of June, $5.0 million of medium term notes were
issued. This was the first new long-term debt issuance since October 1994.
Total net short- and long-term debt is down $9.0 million from June 30, 1994 to
June 30, 1995. The Company is continuing to generate high cash flows from
operating activities. The increase in cash flows from the comparative period is
primarily the result of decreasing accounts receivable balances and increases in
refunds due customers. As a result of market forces and the receipt of $12.0
million in pipeline supplier refunds, the Company has overcollected gas costs
which must be returned to customers. This amount, which will be refunded in the
near future through reduced gas prices, will cause short-term debt balances to
grow over the next six months.
As a result of planned spending, capital expenditures increased by $5.7 million
for the nine-month period and $3.7 million for the twelve-month period ended
June 30, 1995, as compared to the year before. Total capital expenditures for
fiscal 1995 are projected to be approximately $55.0 million
Page 12
<PAGE> 13
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
---------------------------
There were no material legal proceedings instituted in the third
quarter of 1995, and there were no material developments during the
quarter in legal proceedings disclosed in previous filings.
Item 2. Changes in Securities
-------------------------------
None.
Item 3. Defaults Upon Senior Securities
-----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
None.
Item 5. Other Information
---------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
(a) Exhibits:
15. Consent of KPMG Peat Marwick LLP re: Registration
Statement No. 33-57702
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended June 30, 1995.
Page 13
<PAGE> 14
SIGNATURES
Pursuant to the requirements 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.
BAY STATE GAS COMPANY
---------------------
(Registrant)
By: /s/ Thomas W. Sherman
-----------------------------------
Thomas W. Sherman
Executive Vice President and Chief
Financial and Accounting Officer
By: /s/ Stephen J. Curran
-----------------------------------
Stephen J. Curran
Controller
Date: August 9, 1995
Page 14
<PAGE> 1
EXHIBIT 15
The Board of Directors
Bay State Gas Company
Gentlemen:
Re: Registration Statement No. 33-57702
With respect to the subject registration statement, we acknowledge our awareness
of the use therein of our report dated July 25, 1995 related to our review of
interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered a part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK LLP
Boston, Massachusetts
August 9, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 484,473
<OTHER-PROPERTY-AND-INVEST> 13,214
<TOTAL-CURRENT-ASSETS> 95,296
<TOTAL-DEFERRED-CHARGES> 42,732
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 635,715
<COMMON> 44,501
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<RETAINED-EARNINGS> 86,538
<TOTAL-COMMON-STOCKHOLDERS-EQ> 231,341
0
5,219
<LONG-TERM-DEBT-NET> 198,000
<SHORT-TERM-NOTES> 5,950
<LONG-TERM-NOTES-PAYABLE> 178,000
<COMMERCIAL-PAPER-OBLIGATIONS> 20,000
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 2,719
<LEASES-CURRENT> 1,028
<OTHER-ITEMS-CAPITAL-AND-LIAB> 191,458
<TOT-CAPITALIZATION-AND-LIAB> 635,715
<GROSS-OPERATING-REVENUE> 357,654
<INCOME-TAX-EXPENSE> 18,597
<OTHER-OPERATING-EXPENSES> 298,135
<TOTAL-OPERATING-EXPENSES> 316,732
<OPERATING-INCOME-LOSS> 40,922
<OTHER-INCOME-NET> 1,348
<INCOME-BEFORE-INTEREST-EXPEN> 42,270
<TOTAL-INTEREST-EXPENSE> 12,707
<NET-INCOME> 29,563
225
<EARNINGS-AVAILABLE-FOR-COMM> 29,338
<COMMON-STOCK-DIVIDENDS> 14,742
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 84,553
<EPS-PRIMARY> 2.20
<EPS-DILUTED> 2.20
</TABLE>
