SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended December 31, 1998 Commission File No. 0-29812
BERKSHIRE ENERGY RESOURCES
Massachusetts 04-3408946
115 Cheshire Road, Pittsfield, Massachusetts 01201-1803
Registrant's telephone number, including Area Code 413:442-1511
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 [ ]
At December 31, 1998, the Registrant had issued and outstanding 2,397,711
shares of Common Stock, par value $2.50.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - Unaudited
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Operating Revenues $11,981 $14,177
Cost of Gas Sold 5,220 7,077
------- -------
Operating Margin 6,761 7,100
------- -------
Other Operating Expenses 3,569 3,362
Depreciation 1,114 1,067
------- -------
Total 4,683 4,429
------- -------
Utility Operating Income 2,078 2,671
Other Income - Net 549 675
Operating and Other Income 2,627 3,346
Interest Expense 1,157 1,157
Other Taxes 522 465
------- -------
Pre-Tax Income 948 1,724
Income Taxes 346 648
------- -------
NET INCOME 602 1,076
Retained Earnings at Beginning of Period 7,350 7,261
------- -------
Total 7,952 8,337
------- -------
Dividends Declared:
Preferred Stock 4 4
Common Stock 696 645
------- -------
Total Dividends 700 649
------- -------
Retained Earnings at End of Period $ 7,252 $ 7,688
======= =======
Earnings Available for Common Stock $ 598 $ 1,072
======= =======
Average Shares of Common Stock Outstanding 2,397.7 2,263.1
------- -------
Basic and Diluted Earnings
Per Share of Common Stock $ 0.25 $ 0.47
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial
Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - Unaudited
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended
-----------------------
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Operating Revenues $16,228 $18,657
Cost of Gas Sold 6,779 9,026
------- -------
Operating Margin 9,449 9,631
------- -------
Other Operating Expenses 6,478 6,021
Depreciation 1,466 1,432
------- -------
Total 7,944 7,453
------- -------
Utility Operating Income 1,505 2,178
Other Income - Net 981 1,099
------- -------
Operating and Other Income 2,486 3,277
Interest Expense 2,235 2,258
Other Taxes 737 669
------- -------
Pre-Tax(Loss)/Income (486) 350
Income Tax(Benefit)/Expense (212) 110
------- -------
NET (LOSS)/INCOME (274) 240
Retained Earnings at Beginning of Period 8,911 8,739
------- -------
Total 8,637 8,979
------- -------
Dividends Declared:
Preferred Stock 7 8
Common Stock 1,378 1,283
------- -------
Total Dividends 1,385 1,291
------- -------
Retained Earnings at End of Period $ 7,252 $ 7,688
======= =======
(Loss)/Earnings Available for Common Stock ($ 281) $ 232
------- -------
Average Shares of Common Stock Outstanding 2,361.0 2,243.1
------- -------
Basic and Diluted (Loss)/Earnings
Per Share of Common Stock ($ 0.12) $ 0.10
======= =======
</TABLE>
See Independent Accountants= Review Report and Notes to Financial
Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - Unaudited
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Twelve Months Ended
-----------------------
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Operating Revenues $47,431 $50,893
Cost of Gas Sold 22,283 24,954
------- -------
Operating Margin 25,148 25,939
------- -------
Other Operating Expenses 12,823 12,448
Depreciation 4,205 4,113
------- -------
Total 17,028 16,561
------- -------
Utility Operating Income 8,120 9,378
Other Income - Net 1,801 2,292
------- -------
Operating and Other Income 9,921 11,670
Interest Expense 4,369 4,413
Other Taxes 1,938 1,813
------- -------
Pre-Tax Income 3,614 5,444
Income Taxes 1,334 2,065
------- -------
NET INCOME 2,280 3,379
Retained Earnings at Beginning of Period 7,688 6,823
------- -------
Total 9,968 10,202
------- -------
Dividends Declared:
Preferred Stock 16 16
Common Stock 2,700 2,498
------- -------
Total Dividends 2,716 2,514
------- -------
Retained Earnings at End of Period $ 7,252 $ 7,688
======= =======
Earnings Available for Common Stock $ 2,264 $ 3,363
======= =======
Average Shares of Common Stock Outstanding 2,322.0 2,217.6
------- -------
Basic and Diluted Earnings
Per Share of Common Stock $ 0.98 $ 1.52
======= =======
</TABLE>
See Independent Accountants= Review Report and Notes to Financial
Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ --------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Utility Plant:
Utility Plant - at original cost $109,878 $106,654
Less: Accumulated Depreciation 32,455 31,371
-------- --------
Utility Plant - Net 77,423 75,283
-------- --------
Other Property:
Other Property - at original cost 13,878 12,784
Less: Accumulated Depreciation 6,830 6,420
-------- --------
Other Property - Net 7,048 6,364
-------- --------
Current Assets:
Cash 242 160
Accounts Receivable
Utility Service (less allowance: 10,088 5,427
Dec. 1998-$960;June 1998-$900)
Merchandise & Other (less
allowance: Dec. 1998-$91; 747 669
June 1998-$74)
Other Receivables 130 181
Inventories (at the lower of
average cost or market):
Natural Gas 2,896 2,313
Liquefied Petroleum 129 134
Materials and Supplies 1,852 1,814
Prepayments and Other 854 979
Prepaid Taxes 1,893 370
Recoverable Gas Costs 2,586 224
-------- --------
Total Current Assets 21,417 12,271
-------- --------
Deferred Debits:
Unamortized Debt Expense 2,152 2,200
Capital Stock Expense 253 275
Environmental Cleanup Costs 873 800
Other 1,179 1,414
-------- --------
Total Deferred Debits 4,457 4,689
-------- --------
Recoverable Environmental Cleanup Costs 3,290 3,290
-------- --------
TOTAL ASSETS $113,635 $101,897
======== ========
</TABLE>
See Independent Accountants' Review Report and Notes to Financial
Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1998
------------ --------
(Unaudited) (Audited)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Common Shareholders' Equity:
Common Stock $ 5,994 $ 5,790
Premium on Common Stock 20,393 18,835
Retained Earnings 7,252 8,911
-------- --------
Total Common Shareholders' Equity 33,639 33,536
-------- --------
Redeemable Cumulative Preferred Stock 312 321
-------- --------
Long-Term Debt 34,000 34,000
-------- --------
Current Liabilities:
Notes Payable to Banks 17,960 7,085
Current Maturities of Long-Term Debt 6,000 6,000
Accounts Payable 2,941 3,024
Other Current Liabilities 3,133 3,098
-------- --------
Total Current Liabilities 30,034 19,207
-------- --------
Other Liabilities 1,707 1,676
-------- --------
Unamortized Investment Tax Credit 1,104 1,139
-------- --------
Deferred Income Taxes 9,549 8,728
-------- --------
Reserve for Recoverable Environmental
Cleanup Costs 3,290 3,290
-------- --------
TOTAL CAPITALIZATION AND LIABILITIES $113,635 $101,897
======== ========
</TABLE>
See Independent Accountants' Review Report and Notes to Financial
Statements.
BERKSHIRE ENERGY RESOURCES
STATEMENTS OF CASH FLOWS - Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Cash flows from Operating Activities:
Net (Loss)/Income $ (274) $ 240
Adjustments to Reconcile Net (Loss)/Income
to Net Cash Used in Operating Activities:
Depreciation and Amortization 1,915 1,916
Provision for Losses on Accounts Receivable 363 369
Recoverable Gas Costs (2,362) (2,395)
Deferred Income Taxes 821 961
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable (5,102) (1,444)
Other Receivables 51 272
Inventories (616) (985)
Accounts Payable (83) (131)
Prepaid Taxes (1,523) (1,392)
Other 352 (471)
------- -------
Total Adjustments (6,184) (3,300)
------- -------
Net Cash Used in Operating Activities (6,458) (3,060)
------- -------
Cash Flows Used in Investing Activities:
Construction Expenditures (4,703) (4,282)
------- -------
Cash Flows Provided by Financing Activities:
Dividends Paid (1,385) (1,291)
Proceeds from Notes Payable 10,875 7,820
Redemption of Preferred Stock (9) (42)
Proceeds from Other Stock Transactions 1,762 828
------- -------
Net Cash Provided by Financing Activities 11,243 7,315
------- -------
Net Increase/(Decrease) in Cash 82 (27)
Cash at Beginning of Period 160 356
------- -------
Cash at End of Period $ 242 $ 329
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $ 2,141 $ 2,191
======= =======
Income Taxes (net of refund) $ 293 $ 333
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial
Statements.
Berkshire Energy Resources
Notes to Consolidated Financial Statements
December 31,1998
- --------------------------------------------------------------------------
(Dollars in Thousands Except Share Amounts)
NOTES:
OTHER FINANCIAL INFORMATION:
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. All adjustments, which in the
opinion of management are necessary for a fair presentation of the
operations for the interim periods presented, have been made. These
adjustments are of a normal recurring nature. Due to the significant impact
of gas used for space heating during the heating season (November-April) and
the Company's seasonal rate structure, the results of operations for the
interim periods are not necessarily indicative of the results to be expected
for the full year. These financial statements should be read in conjunction
with the summary of accounting policies and notes to financial statements
included in The Berkshire Gas Company's Annual Report on Form 10-K for the
year ended June 30, 1998.
BERKSHIRE ENERGY RESOURCES (formerly The Berkshire Gas Company)
Berkshire Gas Company adopted a holding company corporate structure
effective December 31, 1998, to capitalize on competitive opportunities
associated with the deregulation of the natural gas industry.
The adoption of a holding company structure effectively reorganized
and segregated the Company's regulated business activities from its non-
regulated activities, thereby offering greater flexibility to compete in
non-regulated markets without the inherent delay of regulation.
The holding company, known as Berkshire Energy Resources, has been
organized as a Massachusetts Business Trust and initially has as its
subsidiaries The Berkshire Gas Company, Berkshire Propane, Inc., and
Berkshire Energy Marketing, Inc.
The results of operations for these subsidiaries/divisions have been
reflected in the accompanying consolidated financial statements for the
period ended December 31, 1998. Effective December 31, 1998, the
outstanding shares of The Berkshire Gas Company Common Stock were automatically
exchanged on a share-for-share basis for Berkshire Energy Resources Common
Shares (no par value), and Berkshire Energy Resources became the holding
company of The Berkshire Gas Company. The Berkshire Gas Company stock symbol,
BGAS has changed to BERK, in recognition of the new corporate identity. The
stock continues to be traded on the Nasdaq Stock Market.
WEATHER INSURANCE
To provide protection from dramatic weather fluctuations, the Company
purchased weather insurance for the winter period November 1, 1998, through
March 31, 1999. Berkshire Gas will receive insurance proceeds in the event
that the total degree days for the aforementioned winter period are less
than 95% of the twenty year average degree days for the period. The Company
would be reimbursed in the fourth quarter of fiscal 1999, based on the
number of degree days under the 95% threshold.
CONTINGENCIES:
ENVIRONMENTAL:
Like other companies in the natural gas industry, the Company is a
party to governmental actions associated with former gas manufacturing
sites. Management estimates that expenditures to remediate and monitor
known environmental sites will range from $3,290 to $12,302. In accordance
with SFAS No. 5, the Company has recorded the most likely cost of $3,290.
The Company's unamortized cost at December 31, 1998 was $873 and should be
recovered over a seven-year period through the Cost of Gas Adjustment Clause
("CGAC").
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ----------------------------------------------------------------------------
Results of Operations - Second Quarter Ended December 31, 1998 versus Second
Quarter Ended December 31, 1997
- ----------------------------------------------------------------------------
The Company considers Operating Margin (Operating Margin or Gross
Profit = Operating Revenues Net of Cost of Gas Sold) to be a more pertinent
measure of operating results than Operating Revenues. This is due primarily
to the fact that revenues include changes in the cost of natural gas which
must be recovered or returned to customers through the Cost of Gas
Adjustment Clause. Consequently, changes in the cost of gas will affect
revenue levels, but does not have a corresponding affect on income.
Additionally, margins earned on interruptible gas sold and transported are
flowed back to the customers and therefore are not included in income.
Accordingly, the discussion below pertains to Operating Margin.
Operating Margin decreased $339,000 or 4.8%, causing reduced firm
margins due to 15% warmer weather, from the three months ended December 31,
1997, partially offset by growth in transportation revenues.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
3 Month Firm MCF Sold & Transported 1,594,000 1,710,000
3 Month Operating Margin $6,761,000 $7,100,000
3 Month Average Operating Margin Per Firm MCF $4.24 $4.15
</TABLE>
Other Operating Expenses increased $207,000 or 6.2% from the three
months ended December 31, 1997. The increase is primarily due to higher
costs for the implementation of new information systems companywide,
increased marketing promotions and costs of maintaining the transmission and
distribution system.
Depreciation Expense increased $47,000 or 4.4% due to an increase in
the amount of depreciable assets.
Other Income decreased $126,000 or 18.7% due to lower interest income
from the undercollection of gas costs through the CGAC and costs related to
entering the non-regulated energy marketing business.
Other Taxes increased $57,000, primarily due to increased personal
property taxes reflecting growth in plant assets and higher tax rates.
Income Taxes decreased $302,000 due to a decrease in Pre-Tax Income.
The Allowance for Doubtful Accounts on Utility Service Accounts
Receivable increased by $60,000 since June 30, 1998, reflecting the current
status of uncollectible accounts.
Dividends on Common Stock increased $51,000 primarily due to an
increase in the number of shares reflecting active shareholder participation
in the Dividend Reinvestment Program ("DRIP"), and to a lesser extent, a
quarterly increase in dividends to $.29 per share from $.285 in 1997.
Increases in Accounts Receivable and Notes Payable were caused by
temporary delays in the customer billing cycles. The implementation of new
information systems companywide required technical modifications that
resulted in a billing lag. The December 31, 1998 balances in Accounts
Receivable and Notes Payable are not reflective of ordinary operational
conditions.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ----------------------------------------------------------------------------
Results of Operations - Six Months Ended December 31, 1998 versus Six Months
Ended December 31, 1997
- ----------------------------------------------------------------------------
Operating Margin decreased $182,000 or 1.9%, as compared with the six
months ended December 31, 1997, for the same reasons as discussed in the
Second Quarter Results.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
6 Month Firm MCF Sold & Transported 2,297,000 2,424,000
6 Month Operating Margin $9,449,000 $9,631,000
6 Month Average Operating Margin Per Firm MCF $4.11 $3.97
</TABLE>
Other Operating Expenses increased $457,000 or 7.6% due to the same
reasons as explained in the Three Months Results discussed above as well as
higher other administrative expenses.
Depreciation Expense increased $34,000 due to an increase in the
amount of depreciable assets.
Other Income decreased $118,000 or 10.7%; Other Taxes increased
$68,000 or 10.2%; Income Taxes decreased $322,000 due to a decrease in Pre-
Tax Income; Dividends on Common Stock increased $95,000 from the six months
ended December 31, 1997; for the same reasons previously discussed above in
the Results of Operations - Second Quarter.
Interest Expense decreased $23,000 due to lower average levels of
borrowings.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ----------------------------------------------------------------------------
Results of Operations - Twelve Months Ended December 31, 1998 versus Twelve
Months Ended December 31, 1997
- ----------------------------------------------------------------------------
Earnings available for Common Stock were $2,264,000 for the twelve
months ended December 31, 1998 as compared to $3,363,000 for 1997. The
decrease is primarily due to 14% warmer weather, increased operating
expenses and lower other income also caused by the warmer than normal
weather.
Operating Margin decreased $791,000 or 3.0% from the twelve months
ended December 31, 1997. Decreased volumes from weather sensitive customers
were caused by weather that was substantially warmer than the twenty year
average.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
12 Month Firm MCF Sold & Transported 5,989,000 6,506,000
12 Month Operating Margin $25,148,000 $25,939,000
12 Month Average Operating Margin Per Firm MCF $4.20 $3.99
</TABLE>
Other Operating Expenses rose $375,000 or 3.0% over the twelve months
ended December 31, 1997. The increase is due to costs incurred for the
restructuring to a holding company, employee benefit costs, costs for the
development and implementation of new information systems companywide and
increased marketing and promotion expenses.
Depreciation Expense increased $92,000 or 2.2% due to an increase in
depreciable assets.
Other Income decreased $491,000 or 21.4% from 1997 primarily due to
lower Propane revenues as a result of substantially warmer weather, lower
Interest Income on undercollected gas costs recovered through the CGAC and
costs related to entering the non-regulated energy marketing business. This
was partially offset by increased income from appliance rentals.
Other Taxes increased $125,000 or 6.9% due to increases in plant
property and municipal tax rates.
Income Taxes decreased $731,000 due to the reduction in Pre-Tax
Income.
Dividends declared on Common Stock increased $202,000 primarily due to
additional shares outstanding through the Company's DRIP, and to a lesser
extent, a quarterly increase in dividends to $.29 per share from $.285 in
1997.
LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 1998
The Company added approximately $4,703,000 to Utility Plant assets and
Other Property during the six months ended December 31, 1998. These
construction expenditures primarily represent investments in new and
replacement mains and services.
The capital structure of the Company at December 31, 1998 was 49.5%
Common Equity, 0.5% Preferred Stock and 50.0% Long-Term Debt.
The Company initially finances construction expenditures and other
funding needs primarily with short-term bank borrowings, and to a lesser
extent with the reinvestment of dividends and cash investments from the
Company's DRIP.
The Company continually evaluates its short-term borrowing position
and based on prevailing interest rates, market conditions, etc., makes
determinations regarding conversion of short-term borrowings to long-term
debt or equity.
It is management's view that the Company has adequate access to
capital markets and will have sufficient capital resources, both internal
and external, to meet anticipated capital requirements.
Funds for environmental clean-up costs are initially financed through
short-term borrowings and all such costs will be recovered over a seven year
period under a ruling issued by the Massachusetts Department of
Telecommunications and Energy ("DTE"), formerly the Massachusetts Department
of Public Utilities ("MDPU").
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
This Quarterly Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those contemplated by such statements.
Such statements reflect management's current views, are based on many
assumptions and are subject to risks and uncertainties.
Certain important factors which could cause such results to differ
include risks associated with the Company's maintaining contracts with
specific customers, government regulation, the increasingly competitive
nature of the markets in which the Company is engaged, and dependence on key
personnel. These factors are not intended to represent a complete list of
the general or specific risks that may affect the Company.
Year 2000 Compliance
The Company has identified all significant applications that will
require modification to ensure Year 2000 Compliance. Internal and external
resources are being used to make the required modifications and test Year
2000 Compliance.
The Company believes that the most critical risk relates to the
replacement and modification of its business application software.
During the second quarter of fiscal 1999, the Company has replaced its
core business applications which support customer service, billing,
collection, jobbing and engineering. This upgraded system is Year 2000
compliant. The installation and testing of the upgrade to the Company's
current finance, accounting, payroll and inventory system is currently in
progress. It is anticipated that this will be completed by the end of the
current fiscal year, and those systems will be Year 2000 compliant. These
upgrades were initiated in the normal course of addressing business needs.
The Company has also assessed the other areas of its business not
related to its core information systems. Presently, the Company believes
that these areas which include automated meter reading, dispatch,
administrative and distribution, can be modified or upgraded without
disruption of service or material cost.
Due to the complexity of the Year 2000 problem and the reliance on
certain critical vendors and suppliers, there can be no guarantees that the
Company will achieve Year 2000 compliance or that critical vendors and
suppliers will achieve Year 2000 compliance. A vendor management program
has been undertaken as part of the Company's effort to obtain reasonable
assurances from key vendors that there will not be any interruptions in the
supply of goods and services as a result of the Year 2000 issues. The
Company expects to include contingency plans as part of its Year 2000 study
in an effort to mitigate the risks of any non-compliance by third parties.
The total cost to the Company of Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the date on which
the Company plans to complete Year 2000 modification and testing processes
are based on management's best estimates, which were derived utilizing
numerous assumptions of future events including the continued availability
of certain resources, third party modification plans and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ from those plans.
BERKSHIRE ENERGY RESOURCES (formerly The Berkshire Gas Company)
Berkshire Gas Company adopted a holding company corporate structure
effective December 31, 1998, to capitalize on competitive opportunities
associated with the deregulation of the natural gas industry.
The adoption of a holding company structure effectively reorganized
and segregated the Company's regulated business activities from its non-
regulated activities, thereby offering greater flexibility to compete in
non-regulated markets without the inherent delay of regulation.
The holding company, known as Berkshire Energy Resources, has been
organized as a Massachusetts Business Trust and initially has as its
subsidiaries The Berkshire Gas Company, Berkshire Propane, Inc., and
Berkshire Energy Marketing, Inc. The results of operations for these
subsidiaries have been reflected in the accompanying consolidated financial
statements for the period ended December 31, 1998. Effective December 31,
1998, the outstanding shares of The Berkshire Gas Company Common Stock were
automatically exchanged on a share-for-share basis for Berkshire Energy
Resources Common Shares (no par value), and Berkshire Energy Resources
became the holding company of The Berkshire Gas Company. The Berkshire Gas
Company stock symbol, BGAS has changed to BERK, in recognition of the new
corporate identity. The stock continues to be traded on the Nasdaq Stock
Market.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
No developments during the quarter.
Item 2. Changes in Securities
---------------------
Effective December 31, 1998, the outstanding shares of Common
Stock ($2.50 par value) of The Berkshire Gas Company were
exchanged automatically on a share-for-share basis for Common
Shares (no par value) of Berkshire Energy Resources, and Berkshire
Energy Resources thereby became the holding company for The
Berkshire Gas Company. The Preferred Stock and debt of The
Berkshire Gas Company remain obligations of The Berkshire Gas
Company.
Item 3. Defaults Upon Senior Securities
-------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not Applicable
Item 5. Other Information
-----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8 - K
----------------------------------
(a) List of Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K for the quarter ended December 31, 1998:
Date Filed Items Reported
---------- --------------
December 28, 1998 Item 5. Other Events
The consolidated balance sheet as of December 31, 1998, the related
consolidated statements of operations and retained earnings for the three
month, six month and twelve month periods ended December 31, 1998 and 1997,
and the consolidated statements of cash flows for the six month periods
ended December 31, 1998 and 1997 have been reviewed, prior to filing, by the
Registrant's independent public accountants, Deloitte & Touche LLP, whose
report covering their review of the consolidated financial statements is
presented below.
Deloitte &
Touche LLP
-----------------------------------------------------
City Place Telephone:(860) 280-3000
185 Asylum Street Facsimile:(860) 280-3051
Hartford, Connecticut 06103-3402
INDEPENDENT ACCOUNTANTS' REPORT
Berkshire Energy Resources:
We have reviewed the accompanying balance sheet of Berkshire Energy
Resources as of December 31, 1998, the related consolidated statements of
operations and retained earnings for the three month, six month and twelve
month periods ended December 31, 1998 and 1997, and the consolidated
statements of cash flows for the six month periods ended December 31, 1998
and 1997. These consolidated financial statements are the responsibility of
the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of 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 a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of The Berkshire Gas Company as of June 30,
1998, and the related statements of income, stockholders' equity, and of
cash flows for the year then ended (not presented herein); and in our report
dated August 12, 1998, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of June 30, 1998 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Deloitte & Touche LLP
February 8, 1999
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Berkshire Energy Resources
Registrant
/s/ Michael J. Marrone
---------------------------------
Michael J. Marrone
Vice President, Treasurer &
Chief Financial Officer
Dated: February 12, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 77,423
<OTHER-PROPERTY-AND-INVEST> 7,048
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<TOTAL-DEFERRED-CHARGES> 4,457
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<TOTAL-ASSETS> 113,635
<COMMON> 5,994
<CAPITAL-SURPLUS-PAID-IN> 20,393
<RETAINED-EARNINGS> 7,252
<TOTAL-COMMON-STOCKHOLDERS-EQ> 33,639
0
312
<LONG-TERM-DEBT-NET> 34,000
<SHORT-TERM-NOTES> 17,960
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 21,724
<TOT-CAPITALIZATION-AND-LIAB> 113,635
<GROSS-OPERATING-REVENUE> 16,228
<INCOME-TAX-EXPENSE> (212)
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<TOTAL-OPERATING-EXPENSES> 7,944
<OPERATING-INCOME-LOSS> 1,505
<OTHER-INCOME-NET> 981
<INCOME-BEFORE-INTEREST-EXPEN> 2,486
<TOTAL-INTEREST-EXPENSE> 2,235
<NET-INCOME> (274)
7
<EARNINGS-AVAILABLE-FOR-COMM> (281)
<COMMON-STOCK-DIVIDENDS> 1,378
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (6,458)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
