<PAGE> 1
DRAFT 7/22/94
4:30 P.M.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ___________June 30, 1994________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________
Commission File Number 2-23416
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BOSTON GAS COMPANY
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1103580
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
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(Address of principal executive offices)
(Zip Code)
617-742-8400
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(Registrant's telephone number, including area code)
NONE
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Former name, former address and former fiscal year,
if changed since last report.
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 ____
Common stock of Registrant at the date of this report was 514,184
shares, all held by Eastern Enterprises.
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FORM 10-Q
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PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
Company or group of companies for which report is filed:
BOSTON GAS COMPANY AND SUBSIDIARY ("Registrant")
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
<CAPTION>
(In Thousands)
For The Three Months Ended For The Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES $122,807 $128,567 $437,108 $386,793
Cost of gas sold 66,698 79,358 260,114 242,302
-------- -------- -------- --------
OPERATING MARGIN 56,109 49,209 176,994 144,491
OPERATING EXPENSES:
Other operating expenses 36,958 25,115 81,737 65,436
Maintenance 5,671 14,135 14,817 17,860
Depreciation and amortization 8,128 5,637 21,966 15,646
Income taxes 235 (124) 19,153 13,746
-------- -------- -------- --------
Total Operating Expenses 50,992 44,763 137,673 112,688
-------- -------- -------- --------
OPERATING EARNINGS 5,117 4,446 39,321 31,803
OTHER EARNINGS, NET 32 32 72 68
-------- -------- -------- --------
EARNINGS BEFORE INTEREST EXPENSE 5,149 4,478 39,393 31,871
INTEREST EXPENSE:
Long-term debt 4,313 3,922 8,502 8,063
Other, including amortization
of debt expense 630 616 1,546 1,350
Less - Interest during construction (143) (97) (291) (185)
-------- -------- -------- --------
Total Interest Expense 4,800 4,441 9,757 9,228
-------- -------- -------- --------
NET EARNINGS 349 37 29,636 22,643
Preferred Stock Dividends 481 219 963 453
-------- -------- -------- --------
NET EARNINGS APPLICABLE TO COMMON STOCK $ (132) $ (182) $ 28,673 $ 22,190
-------- ======== ======== ========
COMMON STOCK DIVIDENDS $ - $ - $ 12,032 $ 8,355
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
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<TABLE>
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<CAPTION>
(In Thousands)
June 30, June 30, December 31,
1994 1993 1993
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
GAS PLANT, at cost $ 653,489 $ 622,607 $ 649,580
Construction work-in-progress 21,710 12,451 8,131
Less-Accumulated depreciation 214,615 197,583 195,284
--------- --------- ---------
Total Net Plant 460,584 437,475 462,427
--------- --------- ---------
CURRENT ASSETS:
Cash 2,302 1,965 1,160
Accounts receivable, less reserves
of $16,575 and $12,474 at
June 30, 1994 and 1993,
respectively, and $13,518 at
December 31, 1993, 92,371 91,453 89,096
Deferred gas costs 44,214 12,913 65,802
Natural gas and other inventories 38,233 37,731 53,152
Materials and supplies 5,587 6,395 5,019
Prepaid expenses 4,626 3,149 3,708
Income taxes - - 6,046
--------- --------- ---------
Total Current Assets 187,333 153,606 223,983
--------- --------- ---------
OTHER ASSETS:
Deferred postretirement benefit cost 99,607 100,712 101,182
Deferred charges and other assets 23,921 24,962 46,848
--------- --------- ---------
Total Other Assets 123,528 125,674 148,030
--------- --------- ---------
TOTAL ASSETS $ 771,445 $ 716,755 $ 834,440
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 4
<TABLE>
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<CAPTION>
(In Thousands)
June 30, June 30, December 31,
1994 1993 1993
--------- -------- ------------
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CAPITALIZATION:
Stockholder's investment -
Common stock, $100 par value,
514,184 shares authorized and outstanding $ 51,418 $ 51,418 $ 51,418
Amounts in excess of par value 43,233 43,233 43,233
Retained earnings 112,321 100,487 95,680
--------- --------- ----------
Total Common Stockholder's Investment 206,972 195,138 190,331
Variable term cumulative preferred stock,
$1 par value, 1,200,000 shares authorized
and outstanding 29,213 29,343 29,197
Long-term obligations, less current portion 206,652 172,862 171,345
--------- --------- ----------
Total Capitalization 442,837 397,343 390,873
Gas Inventory Financing 36,692 24,782 59,297
--------- --------- ----------
TOTAL CAPITALIZATION AND GAS INVENTORY
FINANCING 479,529 422,125 450,170
--------- --------- ----------
CURRENT LIABILITIES:
Current portion of long-term obligations 2,210 1,754 2,165
Notes payable 31,800 49,700 106,300
Accounts payable 44,721 47,265 52,773
Accrued taxes 2,451 893 161
Accrued income taxes 7,295 1,408 -
Accrued interest 3,582 2,967 3,004
Customer deposits 2,677 2,601 2,597
Refunds due customers 14,896 9,812 8,029
Pipeline transition costs 2,190 - 24,174
--------- --------- ----------
TOTAL CURRENT LIABILITIES 111,822 116,400 199,203
--------- --------- ----------
OTHER LIABILITIES:
Deferred income taxes 60,501 54,491 61,561
Unamortized investment tax credits 9,065 9,772 9,427
Postretirement benefits obligation 91,077 91,172 91,955
Other 19,451 22,795 22,124
--------- --------- ----------
Total Other Liabilities 180,094 178,230 185,067
--------- --------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $ 771,445 $ 716,755 $ 834,440
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 5
<TABLE>
BOSTON GAS COMPANY AND SUBSIDIARY
- - - ---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - - -------------------------------------
<CAPTION>
(In Thousands)
For The Six Months Ended
------------------------
June 30, June 30,
1994 1993
-------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $ 29,636 $ 22,643
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 21,966 15,646
Deferred taxes (1,060) 1,767
Other changes in assets and liabilities:
Accounts receivable (3,275) (18,197)
Inventory 14,351 3,664
Deferred gas costs 21,588 27,955
Accounts payable (8,052) (5,786)
Accrued interest 578 (354)
Federal and state income taxes 13,341 6,456
Refunds due customers 6,867 (3,249)
Other 419 (4,867)
-------- --------
Net cash provided by operating activities 96,359 45,678
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,511) (11,451)
Net cost of removal (2,622) (1,260)
-------- --------
Net cash used for investing activities (21,133) (12,711)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contribution from Parent - 20,000
Changes in short-term debt, net (74,500) (3,632)
Changes in inventory financing (22,605) (23,849)
Proceeds from issuance of long-term debt 36,000 -
Repayment of long-term debt - (20,000)
Proceeds from issuance of preferred stock 16 (93)
Cash dividends paid on common and preferred stock (12,995) (8,728)
-------- --------
Net cash used for financing activities (74,084) (36,302)
-------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,142 (3,335)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,160 5,300
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,302 $ 1,965
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 9,532 $ 8,437
Income taxes $ 6,979 $ 6,539
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
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BOSTON GAS COMPANY AND SUBSIDIARY
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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JUNE 30, 1994
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1. ACCOUNTING POLICIES AND OTHER INFORMATION
GENERAL
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It is the Registrant's opinion that the financial information contained
in this report reflects all normal, recurring adjustments necessary to
present a fair statement of results for the period reported, but such
results are not necessarily indicative of results to be expected for the
year due to the seasonal nature of the Registrant's business. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant to
the rules and regulations of the Securities and Exchange Commission.
However, the disclosures herein, when read with the annual report for
1993 filed on Form 10-K, are adequate to make the information presented
not misleading.
CASH AND CASH EQUIVALENTS
-------------------------
For the purposes of the consolidated statements of cash flows, the
Registrant considers highly liquid investment instruments purchased with
a maturity of three months or less to be cash equivalents.
SEASONAL ASPECT
---------------
The amount of natural gas sold by the Registrant for purposes of space
heating is directly related to the ambient air temperature.
Consequently, less gas is sold during the summer months than is sold
during the winter months. In order to more properly match depreciation
and property tax expense with gas sales revenues each month, the
Registrant charges to depreciation and property tax expense an amount
equal to the percentage of the annual volume of firm gas sales
forecasted for the month, applied to the estimated annual depreciation
and property tax expense.
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FORM 10-Q
Page 7
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
------------------------------------------
JUNE 30, 1994
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2. GAS INVENTORY FINANCING
-----------------------
Under the terms of the general rate order issued by the Massachusetts
Department of Public Utilities (the "Department") effective October 1,
1988, the Registrant funds all of its inventory of gas supplies through
external sources. All costs related to this funding are recoverable from
its customers. The Registrant maintains a credit agreement with a group
of banks which provides for the borrowing of up to $90,000,000 for the
exclusive purpose of funding its inventory of gas supplies or for backing
commercial paper issued for the same purpose. At June 30, 1994 and 1993,
the Registrant had $36,692,000 and $24,782,000, respectively, of
commercial paper outstanding for this purpose. Since the commercial
paper is supported by the credit agreement, these borrowings have been
classified as non-current in the accompanying consolidated balance
sheets.
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FORM 10-Q
Page 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - - ------- -----------------------------------------------------------------------
OF OPERATIONS:
--------------
RESULTS OF OPERATIONS
---------------------
The net loss of $.1 million for the second quarter of 1994 was slightly
less than the $.2 million loss reported for the same period in 1993.
The benefit of higher rates ($6.0 million) which took effect November
1, 1993 was essentially offset by the impact of weather which was 13%
warmer than normal compared to near normal weather for the second
quarter of 1993, and increased charges for depreciation, property taxes
and bad debts.
Net earnings applicable to common stock for the first six months of
1994 were $28.7 million, an increase of $6.5 million or 29% from the
same period in 1993. This increase was primarily the result of higher
rates ($14.0 million) and increased sales to new firm customers
($2.9 million). Weather for the first six months of 1994 was 7% colder
than normal compared to near normal weather for the same period in
1993. The benefit of the colder weather was minimal after considering
the higher operating costs associated with the unusual first quarter
weather. Partially offsetting were higher charges for depreciation
($3.9 million), property taxes ($2.8 million) and bad debts ($1.5
million).
LIQUIDITY & CAPITAL RESOURCES
-----------------------------
Notes payable at June 30, 1994 were $31.8 million, a decrease of $74.5
million from December 31, 1993. Approximately half of this decrease
reflects the use of proceeds from the January 1994 issuance of $36.0
million of Medium-term notes Series B pursuant to a $50.0 million
shelf registration statement dated October 28, 1992 on file with the
Securities and Exchange Commission. The issued notes have a weighted
average maturity of 24 years and a coupon rate of 6.94%. The balance
of the decrease in notes payable reflects a reduction in working
capital requirements due to the seasonal nature of the gas
distribution business.
Cash from operations during the first half of 1994 was sufficient to
cover dividends to shareholders, capital expenditures and debt
repayments including the above mentioned notes payable.
Capital expenditures for the full year are expected to approximate the
original projection of $53.0 million.
The Registrant believes that projected cash flow from operations, in
combination with currently available resources, is sufficient to meet
1994 capital expenditures, working capital requirements, normal debt
repayments and dividends to shareholders.
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FORM 10-Q
Page 9
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
--------------------------
Other than the ordinary routine litigation involving the Registrant's
business, there are no material pending legal proceedings involving the
Registrant.
ITEM 2. CHANGES IN SECURITIES
------------------------------
At June 30, 1994, under the most restrictive provision limiting dividend
payments in the Registrant's financing indentures, there were no
restrictions on retained earnings available for dividends.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) List of Exhibits
None
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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FORM 10-Q
Page 10
SIGNATURES
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It is the Registrant's opinion that the financial information contained
in this report reflects all normal, recurring adjustments necessary to a
fair statement of results for the period reported, but such results are
not necessarily indicative of results to be expected for the year due to
the seasonal nature of the business of the Registrant. Except as
otherwise herein indicated, all accounting policies have been applied in
a manner consistent with prior periods. Such financial information is
subject to year-end adjustments and an annual audit by independent
public accountants.
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.
Boston Gas Company
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(Registrant)
/s/ Joseph F. Bodanza
--------------------------------------------------
J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: August 2, 1994
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