<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, 1998
----------------------------------
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
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
- -----------------------------------
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended
------------------
March 31, March 31,
1998 1997
-------- --------
<S> <C> <C>
OPERATING REVENUES $280,261 $312,538
Cost of gas sold 164,668 197,459
-------- --------
OPERATING MARGIN 115,593 115,079
OPERATING EXPENSES:
Other operating expenses 40,677 43,530
Maintenance 6,053 6,328
Depreciation and amortization 17,240 16,431
Income taxes 18,319 17,127
-------- --------
Total Operating Expenses 82,289 83,416
-------- --------
OPERATING EARNINGS 33,304 31,663
OTHER EARNINGS, NET 92 91
-------- --------
EARNINGS BEFORE INTEREST EXPENSE 33,396 31,754
INTEREST EXPENSE:
Long-term debt 4,192 4,192
Other, including amortization
of debt expense 576 818
Less - Interest during construction (39) (76)
-------- --------
Total Interest Expense 4,729 4,934
-------- --------
NET EARNINGS 28,667 26,820
Preferred Stock Dividends 482 482
-------- --------
NET EARNINGS APPLICABLE TO COMMON STOCK $ 28,185 $ 26,338
======== ========
COMMON STOCK DIVIDENDS $ 12,649 $ 16,351
-------- --------
</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)
March 31, March 31, December 31,
1998 1997 1997
-------- -------- ------------
<S> <C> <C> <C>
ASSETS
GAS PLANT, at cost $866,128 $811,427 $866,784
Construction work-in-progress 11,922 14,997 2,715
Less-Accumulated depreciation 345,861 306,463 329,918
-------- -------- --------
Total Net Plant 532,189 519,961 539,581
-------- -------- --------
CURRENT ASSETS:
Cash and cash equivalents 1,538 1,216 307
Accounts receivable, less reserves
of $17,048 and $17,410 at
March 31, 1998 and 1997,
respectively, and $15,783 at
December 31, 1997 136,160 132,947 89,859
Deferred gas costs 32,062 26,791 66,595
Natural gas and other inventories 24,175 25,017 44,590
Materials and supplies 3,419 4,107 3,316
Prepaid expenses 1,844 2,557 1,777
-------- -------- --------
Total Current Assets 199,198 192,635 206,444
-------- -------- --------
OTHER ASSETS:
Deferred postretirement benefits cost 82,587 87,404 83,926
Deferred charges and other assets 48,352 34,336 48,206
-------- -------- --------
Total Other Assets 130,939 121,740 132,132
-------- -------- --------
TOTAL ASSETS $862,326 $834,336 $878,157
======== ======== ========
</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,
1998 1997 1997
-------- -------- -----------
<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 167,848 143,969 152,312
-------- -------- --------
Total Common Stockholder's Investment 262,499 238,620 246,963
Cumulative preferred stock, $1 par value,
1,200,000 shares authorized and outstanding 29,335 29,301 29,326
Long-term obligations, less current portion 211,101 211,621 211,236
-------- -------- --------
Total Capitalization 502,935 479,542 487,525
Gas Inventory Financing 31,610 34,636 55,502
-------- -------- --------
Total Capitalization and Gas Inventory
Financing 534,545 514,178 543,027
-------- -------- --------
CURRENT LIABILITIES:
Current portion of long-term obligations 520 470 507
Notes payable 16,200 39,600 39,700
Accounts payable 60,477 48,092 61,931
Accrued taxes 4,568 4,956 1,392
Accrued income taxes 29,111 19,014 11,174
Accrued interest 8,494 8,449 4,372
Customer deposits 2,320 2,426 2,360
Refunds due customers 2,595 3,353 3,136
Pipeline transition costs - 8,168 -
-------- -------- --------
Total Current Liabilities 124,285 134,528 124,572
OTHER LIABILITIES:
Deferred income taxes 76,542 74,549 79,128
Unamortized investment tax credits 5,719 6,610 5,931
Postretirement benefits obligation 82,721 84,430 83,274
Other 38,514 20,041 42,225
-------- -------- --------
Total Other Liabilities 203,496 185,630 210,558
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S INVESTMENT $862,326 $834,336 $878,157
======== ======== ========
</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)
Three Months Ended
---------------------
March 31, March 31,
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 28,667 $ 26,820
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 17,240 16,431
Deferred taxes (2,586) (1,728)
Other changes in assets and liabilities:
Accounts receivable (46,301) (56,115)
Inventory 20,312 23,972
Deferred gas costs 34,533 48,546
Deferred post-retirement benefits 786 762
Accounts payable (1,454) (25,221)
Accrued interest 4,122 4,110
Federal and state income taxes 17,937 29,425
Refunds due customers (541) (31)
Other (788) 3,397
-------- --------
Net cash provided by operating activities 71,927 70,368
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (9,204) (10,256)
Net cost of removal (978) (816)
-------- --------
Net cash used for investing activities (10,182) (11,072)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Changes in notes payable, net (23,500) (17,400)
Changes in inventory financing (23,892) (20,958)
Amortization of preferred stock issuance costs 9 8
Cash dividends paid on common and preferred stock (13,131) (21,204)
-------- --------
Net cash used for financing activities (60,514) (59,554)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,231 (258)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 307 1,474
-------- --------
Cash and cash equivalents at end of period $ 1,538 $ 1,216
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 837 $ 1,011
Income taxes $ 3,193 $(10,338)
</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, 1998
--------------
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 1997 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.
<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 1998 were
$28.2 million, an increase of $1.8 million or 7% from the same period in
1997. Lower operating costs ($2.6 million), higher average rates ($1.1
million) and throughput growth ($1.0 million) were partially offset by
warmer weather ($1.7 million) and the absence of a pension settlement gain
reflected in 1997 ($1.2 million). The decrease in operating costs reflects
weather-related reductions and cost control measures.
Revenues for the first quarter of 1998 declined $32.3 million or 10% from
the same period last year primarily due to the pass through of lower gas
costs ($24.9 million) and the migration of customers from firm sales to
transportation-only service ($11.9 million). This revenue decrease has no
impact on earnings as the Company earns all of its margins on the local
distribution of gas and none on the sale of the commodity itself. The
revenue decrease also reflects 4% warmer weather ($9.7 million), partially
offset by growth in throughput and higher non-firm sales.
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 1998 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 $59 million.
<PAGE>
FORM 10-Q
Page 8
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Other than the Massachusetts LNG Inc. litigation and 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
- ------------------------------------------------------------
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.
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FORM 10-Q
Page 9
SIGNATURES
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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
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(Registrant)
/s/ Joseph F. Bodanza
--------------------------------------------------
J.F. Bodanza, Senior Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: April 24, 1998
-------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 532,189
<OTHER-PROPERTY-AND-INVEST> 2,547
<TOTAL-CURRENT-ASSETS> 199,198
<TOTAL-DEFERRED-CHARGES> 45,805
<OTHER-ASSETS> 82,587
<TOTAL-ASSETS> 862,326
<COMMON> 51,418
<CAPITAL-SURPLUS-PAID-IN> 43,233
<RETAINED-EARNINGS> 167,848
<TOTAL-COMMON-STOCKHOLDERS-EQ> 262,499
29,335
0
<LONG-TERM-DEBT-NET> 209,480
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 16,200
<COMMERCIAL-PAPER-OBLIGATIONS> 31,610
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 1,621
<LEASES-CURRENT> 520
<OTHER-ITEMS-CAPITAL-AND-LIAB> 311,061
<TOT-CAPITALIZATION-AND-LIAB> 862,326
<GROSS-OPERATING-REVENUE> 280,261
<INCOME-TAX-EXPENSE> 18,319
<OTHER-OPERATING-EXPENSES> 40,677
<TOTAL-OPERATING-EXPENSES> 82,289
<OPERATING-INCOME-LOSS> 33,304
<OTHER-INCOME-NET> 92
<INCOME-BEFORE-INTEREST-EXPEN> 33,396
<TOTAL-INTEREST-EXPENSE> 4,729
<NET-INCOME> 28,667
482
<EARNINGS-AVAILABLE-FOR-COMM> 28,185
<COMMON-STOCK-DIVIDENDS> 12,649
<TOTAL-INTEREST-ON-BONDS> 4,192
<CASH-FLOW-OPERATIONS> 71,445
<EPS-PRIMARY> 54.82
<EPS-DILUTED> 54.82
</TABLE>
