<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 March 31, 1997
----------------------------------
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
---------------------------------------------------
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 ("Company")
CONSOLIDATED STATEMENTS OF EARNINGS
- -----------------------------------
(In Thousands)
Three Months Ended
------------------
March 31, March 31,
1997 1996
-------- --------
<TABLE>
<CAPTION>
<S> <C> <C>
OPERATING REVENUES $312,538 $343,341
COST OF GAS SOLD 197,459 221,167
-------- --------
OPERATING MARGIN 115,079 122,174
OPERATING EXPENSES:
Other operating expenses 43,530 49,748
Maintenance 6,328 7,659
Depreciation and amortization 16,431 18,002
Income taxes 17,127 16,431
-------- --------
Total Operating Expenses 83,416 91,840
-------- --------
OPERATING EARNINGS 31,663 30,334
OTHER EARNINGS, NET 91 73
-------- --------
EARNINGS BEFORE INTEREST EXPENSE 31,754 30,407
INTEREST EXPENSE:
Long-term debt 4,192 4,192
Other, including amortization
of debt expense 818 740
Less - Interest during construction (76) (28)
-------- --------
Total Interest Expense 4,934 4,904
-------- --------
NET EARNINGS 26,820 25,503
Preferred Stock Dividends 482 482
-------- --------
NET EARNINGS APPLICABLE TO COMMON STOCK $ 26,338 $ 25,021
======== ========
COMMON STOCK DIVIDENDS $ 16,351 $ 10,335
-------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 3
BOSTON GAS COMPANY AND SUBSIDIARY
- ---------------------------------
CONSOLIDATED BALANCE SHEETS
- ---------------------------
<TABLE>
<CAPTION>
(In Thousands)
March 31, March 31, December 31,
1997 1996 1996
----------- ----------- -------------
ASSETS
<S> <C> <C> <C>
GAS PLANT, at cost $811,427 $761,326 $812,114
Construction work-in-progress 14,997 9,690 4,604
Less-Accumulated depreciation 306,463 272,310 290,492
-------- -------- --------
Total Net Plant 519,961 498,706 526,226
-------- -------- --------
CURRENT ASSETS:
Cash and cash equivalents 1,216 2,275 1,474
Accounts receivable, less reserves
of $17,410 and $18,717 at
March 31, 1997 and 1996,
respectively, and $15,963 at
December 31, 1996 132,947 142,979 76,832
Deferred gas costs 26,791 - 75,337
Natural gas and other inventories 25,017 10,437 49,287
Materials and supplies 4,107 5,278 3,809
Prepaid expenses 2,557 3,317 2,759
Income taxes - - 10,411
-------- -------- --------
Total Current Assets 192,635 164,286 219,909
-------- -------- --------
OTHER ASSETS:
Deferred postretirement benefits cost 87,404 91,225 88,563
Deferred charges and other assets 34,336 30,823 42,346
-------- -------- --------
Total Other Assets 121,740 122,048 130,909
-------- -------- --------
TOTAL ASSETS $834,336 $785,040 $877,044
======== ======== ========
</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)
March 31, March 31, December 31,
1997 1996 1996
--------- -------- -----------
LIABILITIES AND STOCKHOLDER'S INVESTMENT
CAPITALIZATION:
<S> <C> <C> <C>
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 143,969 134,232 133,980
-------- -------- --------
Total Common Stockholder's Investment 238,620 228,883 228,631
Cumulative preferred stock, $1 par value,
1,200,000 shares authorized and outstanding 29,301 29,267 29,293
Long-term obligations, less current portion 211,621 212,091 211,743
-------- -------- --------
Total Capitalization 479,542 470,241 469,667
Gas Inventory Financing 34,636 19,187 55,594
-------- -------- --------
TOTAL CAPITALIZATION AND GAS INVENTORY
FINANCING 514,178 489,428 525,261
-------- -------- --------
CURRENT LIABILITIES:
Current portion of long-term obligations 470 1,550 1,029
Notes payable 39,600 11,300 57,000
Accounts payable 48,092 47,535 73,313
Accrued taxes 4,956 5,884 1,206
Accrued income taxes 19,014 19,275 -
Accrued interest 8,449 8,054 4,339
Customer deposits 2,426 2,684 2,382
Refunds due customers 3,353 4,747 3,384
Pipeline transition costs 8,168 9,260 16,494
Refundable gas costs - 2,659 -
-------- -------- --------
TOTAL CURRENT LIABILITIES 134,528 112,948 159,147
OTHER LIABILITIES:
Deferred income taxes 74,549 67,453 76,277
Unamortized investment tax credits 6,610 7,535 6,836
Postretirement benefits obligation 84,430 85,908 84,827
Other 20,041 21,768 24,696
-------- -------- --------
Total Other Liabilities 185,630 182,664 192,636
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $834,336 $785,040 $877,044
======== ======== ========
</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)
Three Months Ended
------------------
March 31, March 31,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 26,820 $ 25,503
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 16,431 18,002
Deferred taxes (1,728) (4,548)
Other changes in assets and liabilities:
Accounts receivable (56,115) (68,460)
Inventory 23,972 24,191
Deferred gas costs 48,546 74,599
Deferred post-retirement benefits 762 1,923
Accounts payable (25,221) (5,955)
Accrued interest 4,110 4,095
Federal and state income taxes 29,425 19,643
Refunds due customers (31) (8,426)
Other 3,397 3,727
-------- --------
Net cash provided by operating activities 70,368 84,294
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (10,256) (9,398)
Net cost of removal (816) (537)
-------- --------
Net cash used for investing activities (11,072) (9,935)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable, net (17,400) (40,700)
Changes in inventory financing (20,958) (26,413)
Amortization of preferred stock issuance costs 8 5
Cash dividends paid on common and preferred stock (21,204) (10,817)
-------- --------
Net cash used for financing activities (59,554) (77,925)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (258) (3,566)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,474 5,841
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,216 $ 2,275
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 1,011 $ 718
Income taxes $(10,338) $ 1,423
</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
------------------------------------------
MARCH 31, 1997
--------------
1. ACCOUNTING POLICIES AND OTHER INFORMATION
-----------------------------------------
GENERAL
-------
It is the Company'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 Company'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 1996 filed on Form
10-K, are adequate to make the information presented not misleading.
SEASONAL ASPECT
---------------
The amount of the Company's natural gas firm throughput for purposes of
space heating is directly related to the ambient air temperature.
Consequently, there is less gas throughput during the summer months than
during the winter months. In order to more properly match depreciation and
property tax expense with margin each month, the Company charges to
depreciation and property tax expense an amount equal to the percentage of
the annual volume of firm gas throughput forecasted for the month, applied
to the estimated annual depreciation and property tax expense.
2. GAS INVENTORY FINANCING
-----------------------
The Company funds all of its inventory of gas supplies through external
sources. All costs related to this funding are recoverable from its
customers. The Company maintains a credit agreement with a group of banks
which provides for the borrowing of up to $70,000,000 for the exclusive
purpose of funding its inventory of gas supplies or for backing commercial
paper issued for the same purpose. At March 31, 1997 and 1996, the Company
had $34,636,000 and $19,187,000, 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:
----------------------
Net earnings applicable to common stock for the first quarter of
1997 were $26.3 million, an increase of $1.3 million or 5.3% from
the same period in 1996. The negative impact of warmer weather was
more than offset by sales to new customers, lower weather related
operating costs, a gain on the settlement of pension obligations and
a change in the inter-period allocation of depreciation and property
tax expense.
Weather for the first quarter was 7.7% warmer than normal and 8.5%
warmer than the first quarter of 1996. The warmer weather and lower
demand by existing customers reduced net earnings by about $5.0
million after taking into consideration the lower weather related
operating costs. Throughput growth and the pension gain contributed
$2.0 million and $1.2 million to net earnings, respectively.
Effective January 1, 1997 the Company changed the inter-period
allocation of depreciation and property tax expense from a firm
sales volume to a firm throughput basis, reflecting the increasing
importance of unbundled transportation service. This change reduced
first quarter 1997 expenses by $3.6 million or $2.2 million after
tax, as compared to 1996. These expenses will be increased by a
like amount over the remainder of 1997, predominantly in the third
quarter.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that projected cash flow from operations, in
combination with currently available resources, is more than
sufficient to meet 1997 capital expenditures and working capital
requirements, dividend payments and normal debt repayments.
Capital expenditures for the year are projected to be in line with
the original estimate of $51 million.
<PAGE>
FORM 10-Q
Page 8
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
--------------------------
Other than the ordinary routine litigation involving the Company's business,
there are no material pending legal proceedings involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
(a) The annual meeting of stockholders of the Company was held on
February 18, 1997.
(b) On February 18, 1997, 514,184 shares of Company'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
27 - Financial Data Schedule
(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 9
SIGNATURES
----------
It is the Company'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 Company. 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
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Boston Gas Company
-------------------------------------------------
(Registrant)
/s/ Joseph F. Bodanza
-------------------------------------------------
J. F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: April 30, 1997
-------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 519,961
<OTHER-PROPERTY-AND-INVEST> 2,547
<TOTAL-CURRENT-ASSETS> 192,635
<TOTAL-DEFERRED-CHARGES> 31,789
<OTHER-ASSETS> 87,404
<TOTAL-ASSETS> 834,336
<COMMON> 51,418
<CAPITAL-SURPLUS-PAID-IN> 43,233
<RETAINED-EARNINGS> 143,969
<TOTAL-COMMON-STOCKHOLDERS-EQ> 238,620
29,301
0
<LONG-TERM-DEBT-NET> 209,530
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 39,600
<COMMERCIAL-PAPER-OBLIGATIONS> 34,636
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 2,091
<LEASES-CURRENT> 470
<OTHER-ITEMS-CAPITAL-AND-LIAB> 280,088
<TOT-CAPITALIZATION-AND-LIAB> 834,336
<GROSS-OPERATING-REVENUE> 312,538
<INCOME-TAX-EXPENSE> 17,127
<OTHER-OPERATING-EXPENSES> 43,530
<TOTAL-OPERATING-EXPENSES> 83,416
<OPERATING-INCOME-LOSS> 31,663
<OTHER-INCOME-NET> 91
<INCOME-BEFORE-INTEREST-EXPEN> 31,754
<TOTAL-INTEREST-EXPENSE> 4,934
<NET-INCOME> 26,820
482
<EARNINGS-AVAILABLE-FOR-COMM> 26,338
<COMMON-STOCK-DIVIDENDS> 16,351
<TOTAL-INTEREST-ON-BONDS> 4,192
<CASH-FLOW-OPERATIONS> 70,368
<EPS-PRIMARY> 51.22
<EPS-DILUTED> 51.22
</TABLE>
