<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 June 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 Six Months Ended
-------------------------- ------------------------
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES $129,616 $122,807 $423,857 $437,108
Cost of gas sold 70,844 66,698 253,175 260,114
-------- -------- -------- --------
Operating Margin 58,772 56,109 170,682 176,994
OPERATING EXPENSES:
Other operating expenses 37,057 36,958 82,259 81,737
Maintenance 5,063 5,671 11,765 14,817
Depreciation and amortization 8,405 8,128 23,853 21,966
Income taxes 1,359 235 16,611 19,153
-------- -------- -------- --------
Total Operating Expenses 51,884 50,992 134,488 137,673
-------- -------- -------- --------
OPERATING EARNINGS 6,888 5,117 36,194 39,321
OTHER EARNINGS, NET 257 32 296 72
-------- -------- -------- --------
EARNINGS BEFORE INTEREST EXPENSE 7,145 5,149 36,490 39,393
INTEREST EXPENSE:
Long-term debt 4,526 4,313 9,133 8,502
Other, including amortization
of debt expense 518 630 1,622 1,546
Less - Interest during construction (58) (143) (103) (291)
-------- -------- -------- --------
Total Interest Expense 4,986 4,800 10,652 9,757
-------- -------- -------- --------
NET EARNINGS 2,159 349 25,838 29,636
Preferred Stock Dividends 481 481 963 963
-------- -------- -------- --------
NET EARNINGS (LOSS) APPLICABLE TO
COMMON STOCK $ 1,678 $ (132) $ 24,875 $ 28,673
-------- -------- ======== ========
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)
June 30, June 30, December 31,
1995 1994 1994
---------- ---------- -----------
<S> <C> <C> <C>
ASSETS
GAS PLANT, at cost $707,358 $653,489 $704,861
Construction work-in-progress 20,060 21,710 2,070
Less-Accumulated depreciation 243,565 214,615 222,460
-------- -------- --------
Total Net Plant $483,853 460,584 484,471
-------- -------- --------
CURRENT ASSETS:
Cash and cash equivalents 16,722 2,302 3,831
Accounts receivable, less reserves
of $17,242 and $16,575 at
June 30, 1995 and 1994,
respectively, and $15,621 at
December 31, 1994 67,167 92,371 71,408
Deferred gas costs 27,000 44,214 66,865
Natural gas and other inventories 32,795 38,233 46,844
Materials and supplies 5,400 5,587 5,063
Prepaid expenses 4,748 4,626 3,399
Income taxes - - 1,407
-------- -------- --------
Total Current Assets 153,832 187,333 198,817
-------- -------- --------
OTHER ASSETS:
Deferred postretirement benefits cost 95,484 99,607 97,589
Deferred charges and other assets 27,302 23,921 52,759
-------- -------- --------
Total Other Assets 122,786 123,528 150,348
-------- -------- --------
TOTAL ASSETS $760,471 $771,445 $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)
June 30, June 30, December 31,
1995 1994 1994
---------- ---------- ------------
<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 123,615 112,321 108,098
-------- -------- --------
Total Common Stockholder's Investment 218,266 206,972 202,749
Variable term cumulative preferred stock,
$1 par value, 1,200,000 shares authorized
and outstanding 29,245 29,213 29,229
Long-term obligations, less current portion 215,939 206,652 216,680
-------- -------- --------
Total Capitalization 463,450 442,837 448,658
GAS INVENTORY FINANCING 31,978 36,692 53,578
-------- -------- --------
Total Capitalization and Gas Inventory
Financing 495,428 479,529 502,236
-------- -------- --------
CURRENT LIABILITIES:
Current portion of long-term obligations 1,938 2,210 1,890
Notes payable - 31,800 62,530
Accounts payable 36,422 44,721 42,653
Accrued taxes 3,219 2,451 510
Accrued income taxes 6,907 7,295 -
Accrued interest 3,748 3,582 3,524
Customer deposits 2,787 2,677 2,852
Refunds due customers 15,677 14,896 18,719
Pipeline transition costs 8,383 2,190 11,560
-------- -------- --------
Total Current Liabilities 79,081 111,822 144,238
-------- -------- --------
OTHER LIABILITIES:
Deferred income taxes 66,800 60,501 66,577
Unamortized investment tax credits 8,235 9,065 8,704
Postretirement benefits obligation 89,732 91,077 90,214
Other 21,195 19,451 21,667
-------- -------- --------
Total Other Liabilities 185,962 180,094 187,162
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $760,471 $771,445 $833,636
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
FORM 10-Q
Page 5
<TABLE>
<CAPTION>
Boston Gas Company and Subsidiary
- ---------------------------------
Consolidated Statements of Cash Flows
- -------------------------------------
(In Thousands)
For The Six Months Ended
-------------------------
June 30, June 30,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 25,838 $ 29,636
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 23,853 21,966
Deferred taxes 223 (1,060)
Other changes in assets and liabilities:
Accounts receivable 4,241 (3,275)
Inventory 13,712 14,351
Deferred gas costs 39,865 21,588
Accounts payable (6,231) (8,052)
Accrued interest 224 578
Federal and state income taxes 8,314 13,341
Refunds due customers (3,042) 6,867
Other 24,726 419
-------- --------
Net cash provided by operating activities 131,723 96,359
-------- --------
Cash flows from investing activities:
Capital expenditures (21,884) (18,511)
Net cost of removal (2,513) (2,622)
-------- --------
Net cash used for investing activities (24,397) (21,133)
-------- --------
Cash flows from financing activities:
Changes in short-term debt, net (62,530) (74,500)
Changes in inventory financing (21,600) (22,605)
Proceeds from issuance of long-term debt - 36,000
Changes in preferred stock 16 16
Cash dividends paid on common and preferred stock (10,321) (12,995)
-------- --------
Net cash used for financing activities (94,435) (74,084)
-------- --------
Increase in cash and cash equivalents 12,891 1,142
Cash and cash equivalents at beginning of period 3,831 1,160
-------- --------
Cash and cash equivalents at end of period $ 16,722 $ 2,302
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 9,934 $ 9,532
Income taxes $ 8,234 $ 6,979
</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
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JUNE 30, 1995
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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.
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.
<PAGE>
FORM 10-Q
Page 7
BOSTON GAS COMPANY AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
------------------------------------------
JUNE 30, 1995
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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, 1995 and 1994, the Registrant
had $31,978,000 and $36,692,000, 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 8
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 second quarter of 1995
were $1.7 million compared to a slight loss for the comparable period in
1994. This improvement reflects the benefits of 19% colder weather,
increased sales to new firm customers and the reimbursement of previously
incurred environmental expenses. Partially offsetting was reduced
customer demand and an early retirement program ($.7 million) associated
with a corporate reengineering project focused on improving customer
service and lowering operating costs over the longer term. The Registrant
recently announced an involuntary severance program as part of its
reengineering effort.
Net earnings applicable to common stock for the first six months of 1995
were $24.9 million, a decrease of $3.8 million from the same period in
1994. This decrease was principally the result of warmer winter
temperatures ($5.0 million) and lower demand by heating customers. Also
contributing to lower earnings were increased charges for depreciation
and property taxes. Somewhat offsetting were sales to new firm customers,
the recognition of lost margins associated with conservation programs and
lower costs ($3.5 million) related to warmer winter temperatures and
ongoing cost control and productivity initiatives.
LIQUIDITY AND 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.
Capital expenditures for the year are expected to be in line with the
original projection of $58.4 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 9
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 June 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
None
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
<PAGE>
FORM 10-Q
Page 10
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/ J. F. Bodanza
---------------------------------------------------
J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: July 31, 1995
--------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 483,853
<OTHER-PROPERTY-AND-INVEST> 2,547
<TOTAL-CURRENT-ASSETS> 153,832
<TOTAL-DEFERRED-CHARGES> 24,755
<OTHER-ASSETS> 95,484
<TOTAL-ASSETS> 760,471
<COMMON> 51,418
<CAPITAL-SURPLUS-PAID-IN> 43,233
<RETAINED-EARNINGS> 123,615
<TOTAL-COMMON-STOCKHOLDERS-EQ> 218,266
29,245
0
<LONG-TERM-DEBT-NET> 212,400
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 31,978
<LONG-TERM-DEBT-CURRENT-PORT> 480
0
<CAPITAL-LEASE-OBLIGATIONS> 3,539
<LEASES-CURRENT> 1,458
<OTHER-ITEMS-CAPITAL-AND-LIAB> 263,105
<TOT-CAPITALIZATION-AND-LIAB> 760,471
<GROSS-OPERATING-REVENUE> 423,857
<INCOME-TAX-EXPENSE> 16,611
<OTHER-OPERATING-EXPENSES> 82,259
<TOTAL-OPERATING-EXPENSES> 134,488
<OPERATING-INCOME-LOSS> 36,194
<OTHER-INCOME-NET> 296
<INCOME-BEFORE-INTEREST-EXPEN> 36,490
<TOTAL-INTEREST-EXPENSE> 10,652
<NET-INCOME> 25,838
963
<EARNINGS-AVAILABLE-FOR-COMM> 24,875
<COMMON-STOCK-DIVIDENDS> 9,358
<TOTAL-INTEREST-ON-BONDS> 9,133
<CASH-FLOW-OPERATIONS> 131,723
<EPS-PRIMARY> 48.38
<EPS-DILUTED> 48.38
</TABLE>
