<PAGE>
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 September 30, 1995
--------------------------------------
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
---------------------------------------------------------
(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
Page 2
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
Company or group of companies for which report is filed:
BOSTON GAS COMPANY AND SUBSIDIARY ("Registrant")
Consolidated Statements of Earnings
- - -----------------------------------
<TABLE>
<CAPTION>
(In Thousands)
For The Three Months Ended For The Nine Months Ended
-------------------------- -------------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
OPERATING REVENUES $56,957 $72,114 $480,814 $509,222
Cost of gas sold 23,100 37,411 276,275 297,525
------- ------- -------- --------
Operating Margin 33,857 34,703 204,539 211,697
OPERATING EXPENSES:
Other operating expenses 34,945 33,736 117,204 115,473
Maintenance 4,715 4,410 16,480 19,227
Depreciation and amortization 4,997 4,962 28,850 26,928
Income taxes (6,068) (5,575) 10,543 13,578
------- ------- -------- --------
Total Operating Expenses 38,589 37,533 173,077 175,206
------- ------- -------- --------
OPERATING EARNINGS (LOSS) (4,732) (2,830) 31,462 36,491
OTHER EARNINGS, NET 227 41 523 113
------- ------- -------- --------
EARNINGS (LOSS) BEFORE INTEREST
EXPENSE (4,505) (2,789) 31,985 36,604
INTEREST EXPENSE:
Long-term debt 4,506 4,248 13,639 12,750
Other, including amortization
of debt expense 473 1,875 2,095 3,421
Less - Interest during
construction (133) (261) (236) (552)
------- ------- -------- --------
Total Interest Expense 4,846 5,862 15,498 15,619
------- ------- -------- --------
NET EARNINGS (LOSS) (9,351) (8,651) 16,487 20,985
Preferred Stock Dividends 482 482 1,445 1,445
------- ------- -------- --------
NET EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $(9,833) $(9,133) $ 15,042 $ 19,540
------- ------- -------- --------
COMMON STOCK DIVIDENDS $ - $ - $ 9,358 $ 12,032
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 3
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Balance Sheets
- - ---------------------------
<TABLE>
<CAPTION>
(In Thousands)
Sept. 30, Sept. 30, Dec. 31,
1995 1994 1994
------ ------ ------
ASSETS
<S> <C> <C> <C>
GAS PLANT, at cost $708,380 $653,102 $704,861
Construction work-in-progress 35,201 38,332 2,070
Less-Accumulated depreciation 247,295 215,993 222,460
-------- -------- --------
Total Net Plant 496,286 475,441 484,471
-------- -------- --------
CURRENT ASSETS:
Cash 1,142 666 3,831
Accounts receivable, less reserves
of $16,242 and $16,472 at
September 30, 1995 and 1994,
respectively, and $15,621 at
December 31, 1994 25,599 48,141 71,408
Deferred gas costs 64,632 82,417 66,865
Natural gas and other inventories 44,443 47,868 46,844
Materials and supplies 5,449 5,481 5,063
Prepaid expenses 4,430 4,920 3,399
Income taxes 2,554 6,450 1,407
-------- -------- --------
Total Current Assets 148,249 195,943 198,817
-------- -------- --------
OTHER ASSETS:
Deferred Postretirement benefits cost 94,340 98,513 97,589
Deferred charges and other assets 26,648 20,125 52,759
-------- -------- --------
Total Other Assets 120,988 118,638 150,348
-------- -------- --------
TOTAL ASSETS $765,523 $790,022 $833,636
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 4
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Balance Sheets
- - ---------------------------
<TABLE>
<CAPTION>
(In Thousands)
Sept. 30, Sept. 30, Dec. 31,
1995 1994 1994
------ ------ ------
LIABILITIES AND STOCKHOLDER'S INVESTMENT
<S> <C> <C> <C>
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 113,783 103,188 108,098
-------- -------- --------
Total Common Stockholder's Investment 208,434 197,839 202,749
Variable term cumulative preferred stock,
$1 par value, 1,200,000 shares authorized
and outstanding 29,254 29,221 29,229
Long-term obligations, less current portion 212,879 202,778 216,680
-------- -------- --------
Total Capitalization 450,567 429,838 448,658
Gas Inventory Financing 43,982 49,883 53,578
-------- -------- --------
Total Capitalization and Gas Inventory
Financing 494,549 479,721 502,236
-------- -------- --------
CURRENT LIABILITIES:
Current portion of long-term obligations 1,498 1,880 1,890
Notes payable 4,100 63,700 62,530
Accounts payable 39,708 34,975 42,653
Accrued taxes 1,599 644 510
Accrued interest 8,167 7,590 3,524
Customer deposits 2,717 2,726 2,852
Refunds due customers 15,864 15,096 18,719
Pipeline transition costs 8,536 - 11,560
-------- -------- --------
Total Current Liabilities 82,189 126,611 144,238
-------- -------- --------
OTHER LIABILITIES:
Deferred income taxes 66,926 61,626 66,577
Unamortized investment tax credits 8,001 8,884 8,704
Postretirement benefits obligation 89,443 90,555 90,214
Other 24,415 22,625 21,667
-------- -------- --------
Total Other Liabilities 188,785 183,690 187,162
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $765,523 $790,022 $833,636
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 5
Boston Gas Company and Subsidiary
- - ---------------------------------
Consolidated Statements of Cash Flows
- - -------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
For The Nine Months Ended
-------------------------
Sept. 30, Sept. 30,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 16,487 $ 20,985
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 28,850 26,928
Deferred taxes 349 65
Other changes in assets and liabilities:
Accounts receivable 45,809 40,955
Inventory 2,015 4,822
Deferred gas costs 25,071 (16,615)
Accounts payable (2,945) (17,798)
Accrued interest 4,643 4,586
Federal and state income taxes (1,147) (404)
Refunds due customers (2,855) 7,067
Other 5,399 3,726
-------- --------
Net cash provided by operating activities 121,676 74,317
-------- --------
Cash flows from investing activities:
Capital expenditures (38,453) (36,945)
Net cost of removal (4,227) (4,777)
-------- --------
Net cash used for investing activities (42,680) (41,722)
-------- --------
Cash flows from financing activities:
Changes in short-term debt, net (58,430) (42,600)
Changes in inventory financing (9,596) (9,414)
Proceeds from issuance of long-term debt - 36,000
Repayment of long-term debt (2,880) (3,622)
Changes in preferred stock 24 24
Cash dividends paid on common and preferred stock (10,803) (13,477)
-------- --------
Net cash used for financing activities (81,685) (33,089)
-------- --------
Decrease in cash (2,689) (494)
Cash at beginning of period 3,831 1,160
-------- --------
Cash at end of period $ 1,142 $ 666
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 10,941 $ 10,793
Income taxes $ 11,546 $ 14,122
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 6
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
SEPTEMBER 30, 1995
------------------
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 1994 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 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.
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 September 30, 1995 and
1994, the Registrant had $43,982,000 and $49,883,000, 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.
<PAGE>
FORM 10-Q
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- - ------- -----------------------------------------------------------------------
OF OPERATIONS:
--------------
RESULTS OF OPERATIONS
---------------------
The seasonal net loss of $9.8 million for the third quarter of
1995 was $.7 million more than the same period in 1994. The
higher net loss was primarily due to the cost of a severance
program ($1.4 million) associated with a corporate reengineering
project focused on improving customer service and lowering
operating costs over the longer term. Partially offsetting were
lower bad debt and interest expense.
Net earnings applicable to common stock for the first nine months
of 1995 were $15.0 million, a decrease of $4.5 million from the
same period in 1994. This decrease was principally due to warmer
billing temperatures (7%) and lower customer demand. Also
contributing to lower earnings were increased charges for
depreciation and property taxes and costs of the early retirement
and severance programs associated with the aforementioned
reengineering effort. Somewhat offsetting were sales to new firm
customers, the recognition of lost margins associated with
conservation programs, and lower operating costs related to warmer
winter temperatures and ongoing cost control measures.
LIQUIDITY & CAPITAL RESOURCES
-----------------------------
The Registrant filed a $100,000,000 shelf registration (Series C)
with the Securities and Exchange Commission on June 13, 1995. The
proceeds of this financing will be used to finance capital
expenditures and to refinance currently outstanding indebtedness.
As of September 30, 1995 there was no debt outstanding under this
shelf registration. Subsequent to the end of the third quarter,
the Registrant issued $25,000,000 of Medium Term Notes at a coupon
rate of 7.25% maturing in 30 years and $5,000,000 at 7.10%
maturing in 20 years.
Capital expenditures for the year are expected to be in line with
the original projection of $58 million.
The Registrant believes that projected cash flows from operations,
in combination with currently available resources, is sufficient
to meet 1995 capital expenditures, working capital requirements,
normal debt repayments and dividends to shareholders.
<PAGE>
FORM 10-Q
Page 8
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 September 30, 1995, 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
- - -----------------------------------------
(a) List of Exhibits
27 - Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
<PAGE>
FORM 10-Q
Page 9
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
--------------------------------------------------
J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: November 7, 1995
-----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 496,286
<OTHER-PROPERTY-AND-INVEST> 2,547
<TOTAL-CURRENT-ASSETS> 148,249
<TOTAL-DEFERRED-CHARGES> 24,101
<OTHER-ASSETS> 94,340
<TOTAL-ASSETS> 765,523
<COMMON> 51,418
<CAPITAL-SURPLUS-PAID-IN> 43,233
<RETAINED-EARNINGS> 113,783
<TOTAL-COMMON-STOCKHOLDERS-EQ> 208,434
29,254
0
<LONG-TERM-DEBT-NET> 210,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 48,082
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 2,879
<LEASES-CURRENT> 1,498
<OTHER-ITEMS-CAPITAL-AND-LIAB> 265,376
<TOT-CAPITALIZATION-AND-LIAB> 765,523
<GROSS-OPERATING-REVENUE> 480,814
<INCOME-TAX-EXPENSE> 10,543
<OTHER-OPERATING-EXPENSES> 117,204
<TOTAL-OPERATING-EXPENSES> 173,077
<OPERATING-INCOME-LOSS> 31,462
<OTHER-INCOME-NET> 523
<INCOME-BEFORE-INTEREST-EXPEN> 31,985
<TOTAL-INTEREST-EXPENSE> 15,498
<NET-INCOME> 16,487
1,445
<EARNINGS-AVAILABLE-FOR-COMM> 15,042
<COMMON-STOCK-DIVIDENDS> 9,358
<TOTAL-INTEREST-ON-BONDS> 13,639
<CASH-FLOW-OPERATIONS> 121,676
<EPS-PRIMARY> 29,25
<EPS-DILUTED> 29.25
</TABLE>
