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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 March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 2-23416
BOSTON GAS COMPANY
(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
(Address of principal executive offices)
(Zip Code)
617-742-8400
(Registrant's telephone number, including area code)
NONE
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)
Three Months Ended
------------------
March 31, March 31,
1994 1993
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<S> <C> <C>
OPERATING REVENUES $ 314,302 $ 258,226
Cost of gas sold 193,416 162,944
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Operating Margin 120,886 95,282
OPERATING EXPENSES:
Other operating expenses 44,779 40,321
Maintenance 9,146 3,725
Depreciation and amortization 13,839 10,009
Income taxes 18,918 13,870
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Total Operating Expenses 86,682 67,925
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OPERATING EARNINGS 34,204 27,357
OTHER EARNINGS, NET 40 36
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EARNINGS BEFORE INTEREST EXPENSE 34,244 27,393
INTEREST EXPENSE:
Long-term debt 4,189 4,141
Other, including amortization
of debt expense 916 734
Less - Interest during construction (148) (88)
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Total Interest Expense 4,957 4,787
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NET EARNINGS 29,287 22,606
Preferred Stock Dividends 482 234
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NET EARNINGS APPLICABLE TO COMMON STOCK $ 28,805 $ 22,372
========== ==========
COMMON STOCK DIVIDENDS $ 12,032 $ 8,355
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 3
<TABLE>
BOSTON GAS COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(In Thousands)
March 31, March 31, December 31,
1994 1993 1993
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<S> <C> <C> <C>
ASSETS
GAS PLANT, at cost $ 649,903 $ 622,851 $ 649,580
Construction work-in-progress 13,320 6,796 8,131
Less-Accumulated depreciation 208,364 192,594 195,284
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Total Net Plant 454,859 437,053 462,427
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CURRENT ASSETS:
Cash and cash equivalents 4,398 4,230 1,160
Accounts receivable, less reserves
of $14,850 and $10,969 at
March 31, 1994 and 1993,
respectively, and $13,518 at
December 31, 1993 160,895 134,888 89,096
Deferred gas costs 24,421 10,392 65,802
Natural gas and other inventories 24,421 17,572 53,152
Materials and supplies 5,395 5,985 5,019
Prepaid expenses 3,412 2,761 3,708
Income taxes - - 6,046
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Total Current Assets 222,942 175,828 223,983
--------- --------- ---------
OTHER ASSETS:
Deferred postretirement benefit cost 100,461 100,002 101,182
Deferred charges and other assets 48,774 23,445 46,848
--------- --------- ---------
Total Other Assets 149,235 123,447 148,030
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TOTAL ASSETS $ 827,036 $ 736,328 $ 834,440
========= ========= =========
</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)
March 31, March 31, 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 23,233 43,233
Retained earnings 112,453 100,669 95,680
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Total Common Stockholder's Investment 207,104 175,320 190,331
Variable term cumulative preferred stock,
$1 par value, 1,200,000 shares authorized
and outstanding 29,205 29,343 29,197
Long-term obligations, less current portion 206,745 192,946 171,345
--------- --------- ---------
Total Capitalization 443,054 397,609 390,873
Gas Inventory Financing 32,079 33,789 59,297
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Total Capitalization and Gas Inventory
Financing 475,133 431,398 450,170
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CURRENT LIABILITIES:
Current portion of long-term obligations 2,201 1,746 2,165
Notes payable 60,500 51,850 106,300
Accounts payable 49,968 43,920 52,773
Accrued taxes 4,069 1,741 161
Accrued income taxes 14,999 7,582 -
Accrued interest 6,853 7,037 3,004
Customer deposits 2,613 2,768 2,597
Refunds due customers 2,397 10,315 8,029
Pipeline transition costs 26,079 - 24,174
--------- --------- ---------
Total Current Liabilities 169,679 126,959 199,203
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OTHER LIABILITIES:
Deferred income taxes 60,959 53,655 61,561
Unamortized investment tax credits 9,246 9,944 9,427
Postretirement benefits obligation 91,582 90,462 91,955
Other 20,437 23,910 22,124
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Total Other Liabilities 182,224 177,971 185,067
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $ 827,036 $ 736,328 $ 834,440
========= ========= =========
</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 STATEMENTS OF CASH FLOWS
<CAPTION>
(In Thousands)
Three Months Ended
------------------
March 31, March 31,
1994 1993
---------- ----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net earnings $ 29,287 $ 22,606
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 13,839 10,009
Deferred taxes (602) 931
Other changes in assets and liabilities:
Accounts receivable (71,799) (61,632)
Inventory 28,355 24,233
Deferred gas costs 41,381 30,476
Accounts payable (2,805) (9,051)
Accrued interest 3,849 3,716
Federal and state income taxes 21,045 12,629
Refunds due customers (5,632) (2,746)
Other 2,823 (808)
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Net cash provided by operating activities 59,741 30,363
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,015) (5,797)
Net cost of removal (965) (606)
--------- ---------
Net cash used for investing activities (6,980) (6,403)
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CASH FLOW FROM FINANCING ACTIVITIES:
Changes in notes payable, net (45,800) (1,482)
Changes in inventory financing (27,218) (14,842)
Proceeds from issuance of long-term debt 36,000 -
Proceeds from issuance of preferred stock 8 (93)
Cash dividends paid on common and preferred stock (12,513) (8,613)
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Net cash used for financing activities (49,523) (25,030)
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 3,238 (1,070)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,160 5,300
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,398 $ 4,230
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,256 $ 1,154
Income taxes $ (1,471) $ 1,108
</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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
1. ACCOUNTING POLICIES AND OTHER INFORMATION
General
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.
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 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.
2. GAS INVENTORY FINANCING
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 March
31, 1994 and 1993, the Registrant had $32,079,000 and $33,789,000,
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
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS
Net earnings applicable to common stock for the first quarter of 1994
were $28.8 million, an increase of $6.4 million or 29% from the same
period in 1993. This increase was primarily the result of higher
rates ($9.9 million) that took effect November 1, 1993 and colder
weather. The improvement in earnings attributable to weather was
about $3 million, after taking into account the higher
workload-related labor and operating costs associated with the colder
weather. Weather during the first quarter of 1994 was 14.1% colder
than normal compared with near normal weather for the first three
months of 1993. Increased sales to new firm customers also
contributed $2.2 million to earnings.
Partially offsetting the above were higher charges for depreciation
and amortization ($2.4 million), property taxes ($1.9 million), and
bad debts ($1.2 million).
LIQUIDITY AND CAPITAL RESOURCES
Notes payable at March 31, 1994 were $60.5 million, a decrease of
$45.8 million from December 31, 1993. The majority of this decrease
reflects the use of proceeds from the January 1994 issuance of $36.0
million of Series B Medium-Term Notes pursuant to a $50.0 million
shelf registration dated October 28, 1992 on file with the SEC. The
issued notes have a weighted average coupon and maturity of 6.94% and
24 years, respectively. 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 quarter of 1994 was sufficient
to cover dividends to shareholders, capital expenditures and debt
repayments including the above mentioned notes payable.
Capital expenditures for the year are expected to be in line with the
original projection of $53.0 million.
The Company 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
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PART II. OTHER INFORMATION
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 March 31, 1994, under the most restrictive provision limiting dividend
payments in the Registrant's financing indentures, there were no restrictions
on retained earnings available for payment of dividends.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of the Registrant was held
on April 20, 1994.
(b) On April 20, 1994, 514,184 shares of Registrant's common
stock, being all its capital stock outstanding, voted in favor
of electing the following Directors to serve until the next
annual meeting of the stockholders and until their successors
are elected and qualified:
J. F. Bodanza
R. R. Clayton
A. J. DiGiovanni
W. J. Flaherty
J. A. Ives
C. R. Messer
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(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
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SIGNATURES
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
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J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: May 4, 1994
