UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
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 1-722
THE BROOKLYN UNION GAS COMPANY
(Exact name of Registrant as specified in its charter)
New York 11-0584613
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One MetroTech Center, Brooklyn, New York 11201-3851
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 403-2000
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock Outstanding at February 1, 1994
$.33 1/3 par value 46,721,742
<PAGE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
INDEX
Part I. Financial Information Page No.
Condensed Consolidated Balance Sheet -
June 30, 1993 and September 30, 1992 2
Condensed Consolidated Statement of Income -
Three, Nine and Twelve Months Ended
June 30, 1993 and 1992 3
Condensed Consolidated Statement of Cash Flows -
Nine and Twelve Months Ended June 30, 1993 and
1992 4
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
Review by Independent Public Accountants 11
Report of Independent Public Accountants 12
Part II. Other Information
Item 1 - Legal Proceedings 13
Item 4 - Submission of Matters to a Vote of
Security Holders 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
<TABLE>
<CAPTION>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
December 31, September 30,
1993 1993
(Unaudited) (Audited)
_____________ _____________
(Thousands of Dollars)
<S> <C> <C>
Assets
Property
Utility, at cost $ 1,531,846 $ 1,523,894
Accumulated depreciation (330,148) (333,468)
Gas exploration and production, at cost 226,190 205,328
Accumulated depletion (96,679) (90,237)
_____________ _____________
1,331,209 1,305,517
_____________ _____________
Investments in Energy Services 79,102 66,682
_____________ _____________
Current Assets
Cash 16,094 10,834
Temporary cash investments 25 10,425
Common stock proceeds receivable - 44,910
Accounts receivable 382,460 230,688
Allowance for uncollectible accounts (14,323) (14,212)
Gas in storage, at average cost 97,656 102,516
Materials and supplies, at average cost 11,622 11,084
Prepaid gas costs 10,899 13,725
Prepaid taxes and other 16,907 37,304
_____________ _____________
521,340 447,274
_____________ _____________
Deferred Charges 158,271 78,374
_____________ _____________
$ 2,089,922 $ 1,897,847
============= =============
Capitalization and Liabilities
Capitalization
Common stock,$.33 1/3 par value stated at $ 472,559 $ 465,097
Retained earnings 282,269 255,979
_____________ _____________
Total common equity 754,828 721,076
Preferred stock, redeemable 7,500 7,500
Long-term debt 695,100 689,300
_____________ _____________
1,457,428 1,417,876
_____________ _____________
Current Liabilities
Accounts payable 185,853 163,876
Dividends payable 16,329 15,868
Commercial paper 11,500 -
Taxes accrued 27,977 15,345
Customer deposits 22,086 21,584
Customer budget plan credits 33,743 17,296
Interest accrued and other 49,140 53,491
_____________ _____________
346,628 287,460
_____________ _____________
Deferred Credits
Federal income tax 225,166 139,289
Unamortized investment tax credit 22,805 23,074
Other 37,895 30,148
_____________ _____________
285,866 192,511
_____________ _____________
$ 2,089,922 $ 1,897,847
============= =============
See accompanying notes to condensed consolidated financial statements.
2
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<TABLE>
<CAPTION> THE BROOKLYN UNION GAS COMPA
CONDENSED CONSOLIDATED STA
(Unaudited)
Three Months
Ended December 31,
_________________________
1993 1992
___________ ___________
(Thousands of Do
<S> <C> <C> <C>
Operating Revenues
Utility sales $ 354,848 $ 335,915 $
Gas production and other 16,630 12,452
___________ ___________
371,478 348,367
Operating Expenses
Cost of Gas 145,624 134,266
Operation and maintenance 93,812 88,420
Depreciation and depletion 17,304 15,135
General taxes 39,349 39,047
Federal income tax (credit) 22,264 21,003
___________ ___________
Operating Income 53,125 50,496
Other Income
Gain on sale of investment
in Canadian gas company - -
Write-off of investment
in propane company - -
Inc. from energy serv. investments 1,480 1,638
Other income(loss),net (69) 49
Federal income tax benefit(expense) 92 (231)
----------- -----------
Income Before Interest Charges 54,628 51,952
----------- -----------
Interest Charges
Long-term debt 11,859 11,141
Other 606 285
----------- -----------
12,465 11,426
----------- -----------
Net Income (Loss) 42,163 40,526
Dividends on Preferred Stock 90 93
----------- -----------
Income Available for
Common Stock $ 42,073 $ 40,433 $
=========== ===========
Per Share of Common Stock * $ 0.90 $ 0.93 $
=========== ===========
Dividends Declared per Share
of Common Stock * $ 0.338 $ 0.330 $
=========== ===========
Average Common Shares
Outstanding * 46,515,782 43,618,982
=========== ===========
* Restated for three for two stock split effective July 1993.
See accompanying notes to condensed consolidated financial statements
3
</TABLE>
NY AND SUBSIDIARIES
TEMENT OF INCOME
Twelve Months
Ended December 31,
__________________________
1993 1992
___________ ___________
llars)
[C]
1,164,248 $ 1,076,204
65,451 40,338
___________ ___________
1,229,699 1,116,542
475,820 417,726
371,295 346,145
66,948 75,344
145,129 139,342
43,694 33,779
___________ ___________
126,813 104,206
20,462 -
(17,617) -
997 605
(3,965) 2,159
652 307
----------- -----------
127,342 107,277
----------- -----------
46,062 41,544
3,081 2,255
----------- -----------
49,143 43,799
----------- -----------
78,199 63,478
361 1,225
----------- -----------
77,838 $ 62,253
=========== ===========
1.74 $ 1.44
=========== ===========
1.328 $ 1.300
=========== ===========
44,766,565 43,180,998
=========== ===========
.
<TABLE>
<CAPTION>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Twelve Months
Ended December 31, Ended December 31,
__________ __________ __________ __________
1993 1992 1993 1992
__________ __________ __________ __________
(Thousands of Dollars)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 42,163 $ 40,526 $ 78,199 $ 63,478
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and depletion 18,820 16,867 74,056 78,171
Deferred Federal income tax 17,066 5,962 20,395 7,263
Gain on sale of investment in Canadian
gas company - - (20,462) -
Write-off of investment in propane company - - 17,617 -
Amortization of investment tax credit (269) (292) (1,051) (1,098)
Income from energy service investments (1,480) (1,638) (997) (605)
Dividends received from energy services
investments 438 693 7,166 1,925
Allowance for equity funds used during
construction (449) (354) (1,766) (1,556)
__________ __________ __________ __________
76,289 61,764 173,157 147,578
__________ __________ __________ __________
Effect of changes in working capital
and other
Accounts receivable,net (151,135) (140,160) (72,072) (22,120)
Accounts payable 15,424 14,821 41,697 (8,836)
Gas inventory and prepayments 7,686 357 (23,734) (6,675)
Other 41,408 50,901 (7,510) 3,586
__________ __________ __________ __________
(86,617) (74,081) (61,619) (34,045)
__________ __________ __________ __________
Cash provided by (used in )operating activities (10,328) (12,317) 111,538 113,533
__________ __________ __________ __________
FINANCING ACTIVITIES
Sale of common stock 7,500 6,215 73,151 23,768
Common stock proceeds receivable 44,910 - - -
Issuance of long-term debt 5,800 6,900 185,800 6,300
Commercial paper 11,500 15,000 11,500 15,000
__________ __________ __________ __________
69,710 28,115 270,451 45,068
Repayments
Preferred stock - - (300) (37,273)
Long-term debt - (2,400) (180,000) (4,600)
Commercial paper - - (15,000) -
__________ __________ __________ __________
69,710 25,715 75,151 3,195
Dividends on common and preferred stock (15,848) (14,535) (60,592) (57,565)
Trust funds, utility construction - 21,892 32,718 77,169
Other (24) 270 1,529 (1,263)
__________ __________ __________ __________
Cash provided by financing activities 53,838 33,342 48,806 21,536
__________ __________ __________ __________
INVESTING ACTIVITIES
Capital expenditures (excluding allowance
for equity funds used during construction) (58,148) (32,692) (228,298) (158,121)
Proceeds from sale of investment in Canadian
gas company 11,691 - 41,718 -
Other (2,193) (17,015) 28,442 (8,852)
__________ __________ __________ __________
Cash used in investing activities (48,650) (49,707) (158,138) (166,973)
__________ __________ __________ __________
Change in Cash and Temporary Cash Investments $ (5,140)$ (28,682) $ 2,206 $ (31,904)
========== ========== ========== ==========
Cash and Temporary Cash Investments at
End of Period $ 16,119 $ 13,913 $ 16,119 $ 13,913
========== ========== ========== ==========
Temporary cash investments are short-term marketable securities purchased with maturities of
three months or less that are carried at cost which approximates their fair value.
Supplemental disclosures of cash flows
Income taxes $ - $ 4,500 $ 27,600 $ 21,900
Interest $ 15,425 $ 15,091 $ 52,322 $ 40,572
See accompanying notes to condensed consolidated financial statements.
4
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THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
Condensed Consolidated Financial Statements contain all
adjustments necessary to present fairly the financial position
of the Company as of December 31, 1993 and the results of
operations for the three and twelve months ended December 31,
1993 and 1992, and cash flows for the three and twelve months
ended December 31, 1993 and 1992. Certain reclassifications
were made to conform prior period financial statements with
the 1993 financial statement presentation.
As permitted by the rules and regulations of the Securities
and Exchange Commission, the Condensed Consolidated Financial
Statements do not include all of the accounting information
normally included with financial statements prepared in
accordance with generally accepted accounting principles.
Accordingly, the Condensed Consolidated Financial Statements
should be read in conjunction with the financial statements
and notes thereto included in the Company's 1993 Annual Report
to Shareholders, incorporated by reference in PART II, Item 8
of the Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1993.
2. The Company's business is influenced by seasonal weather
conditions. Annual revenues are substantially realized during
the heating season (November 1 to April 30) as a result of the
large proportion of residential heating sales compared to
total sales. Accordingly, results of operations are
historically most favorable in the second quarter (three
months ended March 31) of the Company's fiscal year, with
results of operations being next most favorable in the first
quarter, while results for the third quarter are marginally
unprofitable, and losses are incurred in the fourth quarter.
The Company's tariff contains a weather normalization
adjustment that requires recovery from or refund to firm
customers of shortfalls or excesses of firm net revenues
during a heating season due to variations from normal weather,
which is the basis for projecting base tariff revenue
requirements. Also, results of operations are affected by the
timing and comparative amounts of base tariff rate changes.
Therefore, the interim Condensed Consolidated Statement of
income should not be taken as a prediction for any future
period.
3. The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes," on
October 1, 1993. As a result of adopting this statement,
deferred tax balances increased by approximately $76.6 million
with no effect on net income. The deferred tax balance
includes the following:
(Thousands of dollars)
Property Related..................... 127,882
Customer Revenue Requirement, Taxes.. 76,554
Other............................... 11,407
Deferred tax liability at October 1, 1993.... $215,843
4. The Company adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," on October 1,
1993. Based on the latest available actuarial valuation of
postretirement life and health benefits and assuming a 6.5%
discount rate, the accumulated postretirement benefit
obligation (APBO) as of October 1, 1993, was approximately
$164.1 million. The Company has commenced funding such
benefits, and related plan assets were approximately $46.4
million. The unfunded APBO is estimated to be approximately
$117.7 million and will be amortized and recovered in rates
over 20 years. The health care trend rate used was 11.5% in
the first year, gradually decreasing to 5.5% for the year 2006
and thereafter. A change in the health care trend rate
assumption of one percentage point in all years would change
the APBO by approximately $19.4 million and the aggregate
annual service and interest costs by approximately $2.3
million.
In November 1992, the Financial Accounting Standards Board
issued SFAS-112, "Employers' Accounting for Postemployment
Benefits." This Statement requires recognition of any
obligation which exists to provide benefits to former or
inactive employees after employment, but before retirement.
The Company will adopt SFAS-112 in fiscal 1995. Its adoption
is not expected to have a material effect on the consolidated
financial statements.
5. Investments in Energy Services
(a) Iroquois Pipeline
A Company subsidiary, North East Transmission Co., Inc.
(NETCO), owns an 11.4% interest in Iroquois Gas Transmission
System, L.P. (Iroquois), a 370-mile pipeline which transports
gas from Canada to the Northeast. The subsidiary's investment
in Iroquois was $20.1 million at December 31, 1993.
In 1992, Iroquois was informed by the U.S. Attorney's Office
for the Northern District of New York of alleged violations of
the U.S. Army Corps of Engineers permit, a related State Water
Quality Certification and/or the Federal Clean Water Act.
Civil penalties could be imposed if such alleged violations
are shown to have occurred. No proceedings in connection with
this matter have been commenced. In 1992, a criminal
investigation of Iroquois was initiated and is being conducted
by Federal authorities pertaining to various matters related
to the construction of the pipeline. To date no criminal
charges have been filed and the Assistant U.S. Attorney in
charge of the investigation has stated that he is not yet
ready to meet with Iroquois' attorneys to discuss the
specifics of this matter.
Iroquois has publicly stated it believes that the pipeline
construction and right-of-way activities were conducted in a
legal and responsible manner, that its environmental program
complied with applicable standards, and that at the conclusion
of the aforementioned federal investigation it expects the
government will reach the same conclusion. Based on
information currently available, the Company does not believe
that the ultimate resolution of these matters will have a
material effect on the Company's consolidated financial
position.
(b) Star Gas Corporation
A Company subsidiary, Star Energy Inc. liquidated its
investment in propane operations, which have been fully
divested. In September 1993, the Company recorded an
impairment charge of $11.5 million after Federal income taxes,
which was sufficient to reflect the anticipated effect of the
liquidation.
(c) Cogeneration Project Commitments
A Company subsidiary, through affiliates, owns a 50%
partnership interest, or approximately $34.5 million, as of
December 31, 1993, in a project to construct, own, and operate
a 100-megawatt cogeneration plant at John F. Kennedy
International Airport in Queens, N.Y. The estimated cost of
the project is approximately $275 million, of which $175
million is being financed by proceeds of bonds issued by the
Port Authority of New York and New Jersey and guaranteed by an
international banking group. Construction of the project is
scheduled for completion in late summer of 1994.
In addition, a similar project to construct, own, and operate
a 40-megawatt cogeneration plant at the State University of
New York at Stony Brook, N.Y. is being developed. The
financing is being provided through $79 million of tax-exempt
Suffolk County Industrial Development Revenue Bonds and is
guaranteed by a letter of credit issued by Toronto Dominion
Bank. Construction has commenced and commercial operation is
scheduled for the first half of 1995. Another Company
subsidiary, through affiliates, owns a 50% partnership
interest in the project, estimated to cost $97.6 million, of
which $9.3 million would be funded by the subsidiary as its
share of the project.
6. Former Coal Gasification and Storage Plant Sites
The Company is subject to various Federal, state and local
laws and regulations relating to the environment. The Company
may become a potentially responsible party under relevant
environmental laws, which may mandate clean-up of certain
former gas manufacturing plants and other sites that the
Company, or its predecessors, currently operates or operated
in the past at properties currently or formerly owned by the
Company or its predecessors. Although potential clean-up costs
may be material, the Company cannot at this time determine its
cost for any of these sites if clean-up is ever required.
The Company deferred $4.1 million related to environmental
matters pursuant to a July 1993 Company filing and petition
with the Public Service Commission, which requested approval
of deferred accounting treatment for environmental site
assessment and response expenses related to former coal
gasification and storage plant sites. The Company believes,
based on prior PSC precedents and proceedings with respect to
similar expenses, that these costs will be recovered in rates.
Recovery of these expenses is addressed as part of the general
rate increase filing, which the Company submitted to the PSC
in November 1993.
<PAGE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Operating Results
The following is a summary of items affecting comparative earnings
and a discussion of the material changes in revenue and expenses
during the following periods.
(1) Three Months ended December 31, 1993 vs. Three Months ended
December 31, 1992.
(2) Twelve Months ended December 31, 1993 vs. Twelve Months ended
December 31, 1992.
Consolidated income available for common stock for the three months
ended December 31, 1993 was $42.1 million, or 90 cents per share,
compared to $40.4 million, or 93 cents per share, for the same
period last year. The increase in income reflects continued growth
in utility gas heating sales and significant growth in domestic gas
production by the Company's gas exploration and production
subsidiary. Also, utility earnings in last year's first quarter
reflected the benefit of cold weather at the beginning of the
heating season when the weather normalization adjustment is not
fully effective. The decrease in earnings per share reflects the
higher number of shares outstanding.
Earnings for the twelve months ended December 31, 1993 were $77.8
million, or $1.74 per share, compared to $62.3 million, or $1.44
per share, for the prior twelve months. Earnings for the current
period reflect higher income from exploration and production
operations and from energy-related investments in gas cogeneration
and pipeline projects. In addition, a gain of $12.5 million after
Federal income taxes from the sale of an investment in a Canadian
gas company was more than sufficient to offset a loss from the
liquidation of a subsidiary's investment in propane operations,
which have been fully divested. Earnings for the twelve months
ended December 31, 1992 included a noncash impairment charge of $13
million after Federal income taxes, or 30 cents per share, due to
low gas prices in March 1992.
Based upon degree days, weather in the first quarter of fiscal 1994
was 2.0% warmer than normal and 5.6% warmer than the first quarter
of last year. Firm sales in the quarter ended December 31, 1993
were 39,574 MDTH, approximately the same as in last year's first
quarter, which was colder. Weather for the twelve months ended
December 31, 1993 was 2.4% warmer than normal and was 3.2% warmer
than the twelve months ended December 31, 1992. Firm sales of
129,071 MDTH for the twelve months ended December 31, 1993
increased 1.6% compared to sales in the corresponding period last
year.
The weather normalization adjustment included in the Company's
tariff has largely offset the effect on utility earnings of
variations in revenues caused by abnormal weather during the
heating season.
Net revenues (utility operating revenues less cost of gas of
utility sales) increased $9.5 million and $30.3 million in the
three and twelve months ended December 31, 1993, respectively. The
increases generally reflect gas sales growth, primarily due to
conversions to gas from oil for heating and the 2.7% annual revenue
increase which became effective in October 1993.
Increases in gas production and other revenues were primarily
related to higher production volumes.
Increases in operation expense were due to higher labor and related
costs. Maintenance expense includes costs related to city and state
construction projects. Such costs are partially reimbursed by the
city.
Depreciation and depletion expenses generally reflect charges
related to utility property additions and increased production from
gas exploration and production operations. In March 1992, depletion
expense of $19.7 million was recorded to write down the value of
proved gas reserves and related properties in accordance with asset
ceiling test limitations applicable to gas exploration and
development operations accounted for under the full cost method.
General taxes principally include state and local taxes on utility
revenues and property. Taxes for the three and twelve months ended
December 31, 1993 have increased as compared to the corresponding
periods last year. The increase is primarily attributable to an
increase in utility revenues reflecting higher sales volume and
tariff rates.
Federal income tax expense in the three and twelve months ended
December 31, 1993 reflects changes in pre-tax income and an
increase in Federal income tax rates from 34% to 35%.
Interest charges on long-term debt in the three and twelve months
ended December 31, 1993 reflect higher levels of long-term debt.
Other interest charges reflect charges on regulatory settlement
items and borrowings to finance working capital requirements.
Dividends on preferred stock reflect reductions in preferred stock
outstanding due to sinking fund redemptions. Moreover, three series
of preferred stock were called on April 1, 1992 at optional
redemption prices plus accrued dividends. Premiums on reacquired
preferred stock are being amortized in accordance with a PSC order.
Financial Condition
Cash provided by operating activities continues to be strong and is
the principal source for financing capital expenditures.
Consolidated capital expenditures for the twelve months ended
December 31, 1993 were $230.1 million, of which $119.0 million was
related to subsidiaries. Capital expenditures for fiscal years 1994
and 1995 are estimated to be approximately $175 million in each
year, including $75 million per year related to subsidiaries,
principally for gas exploration and development.
The Company currently has bank lines of credit of $65 million,
which secure the issuance of commercial paper. The lines can be
increased to $160 million by December 31, 1994. Related borrowings
are primarily used to finance seasonal working capital requirements
and capital expenditures. In addition, subsidiaries have lines of
credit of $69 million, which for the most part support borrowings
under revolving loan agreements.
In the twelve months ended December 1993, the Company converted
$105 million variable rate gas facilities revenue bonds to fixed
rate bonds and also realized substantial savings by refunding $75
million of 9 1/8% Gas Facilities Revenue Bonds with 6.368%
refunding bonds.
At December 31, 1993, the consolidated annualized cost of long-term
debt reflecting all refinancings was 6.9%. All utility debt is tax-
exempt. The Company expects to be able to issue additional tax-
exempt debt in either fixed or variable rate form in the future.
In September 1993, the PSC approved a revenue increase of $31.3
million, including $3.0 million of deferred credits, to become
effective in fiscal 1994, the final year of a three-year rate
settlement.
In November 1993, the Company filed another comprehensive, three-
year rate settlement proposal which includes a request for a rate
increase of $26.8 million, or 2.1%, applicable to fiscal 1995. The
proposal includes an 11.4% return on utility common equity, a
reduction from 1994's rate due to lower interest rates and capital
costs. The rate of return can be exceeded through expanded
incentives and certain rate design features. If approved, utility
rate increases will have been kept under the rate of inflation for
six consecutive years while providing a fair return on capital.
REVIEW OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen & Co. has performed reviews in accordance with
standards established by the American Institute of Certified Public
Accountants of the Condensed Consolidated Financial Statements for
the periods set forth in their report shown on page 12.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Brooklyn Union Gas Company:
We have reviewed the accompanying condensed consolidated balance
sheet of The Brooklyn Union Gas Company (a New York corporation)
and subsidiaries as of December 31, 1993 and the related condensed
consolidated statements of income and cash flows for the three and
twelve month periods ended December 31, 1993 and 1992. These
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical review procedures to the financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet and consolidated
statement of capitalization of The Brooklyn Union Gas Company and
subsidiaries as of September 30, 1993, and the related consolidated
statements of income, retained earnings, and cash flows for the
year then ended (not presented herein) and, in our report dated
October 26, 1993, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information
set forth in the accompanying condensed consolidated balance sheet
as of September 30, 1993 is fairly stated in all material respects
in relation to the consolidated balance sheet from which it has
been derived.
ARTHUR ANDERSEN & CO.
New York, New York
January 25, 1993
Part II. Other Information
Item 1. Legal Proceedings
The City of New York notified the Company on January 11, 1993 that
it intends to bring suit against the Company under the Federal
Resource Conservation and Recovery Act (RCRA) seeking remediation
of contamination at a former coal gasification plant site located
in the Coney Island section of Brooklyn, New York and operated by
a predecessor to the Company and also seeking recovery of response
costs under the Federal Comprehensive Environmental Response,
Compensation and Liability Act, as amended. The City has not yet
initiated suit against the Company with respect to this site and
has indicated that it would prefer to enter into a consensual
settlement in lieu of litigation. The Company has met with the City
on several occasions to discuss this matter.
During the summer of 1993, a pollution incident occurred at the
above site due to seepage of oil into Coney Island Creek from a
bulkhead and/or bank. The Company notified governmental agencies
and took appropriate response actions. The U.S. Coast Guard has
taken lead agency responsibility regarding the incident, and the
Company is working with the Coast Guard to determine the source of
the seepage and to contain any future seepage.
Interim and long-term site management studies are ongoing and an
interim response measure to address oil seepage will be proposed to
the Coast Guard in the near future. The Company currently
anticipates that the cost of investigation and containment of the
oil seepage will not be material. It is not known, however, what
impact the oil seepage investigation will have on the City's
threatened RCRA action or long-term site management. Further, until
completion of the overall long-term site management studies, the
Company will be unable to determine whether remediation will be
required at the site and, if so, what the appropriate scope and
cost of such remediation will be.
On February 26, 1993, the Company received a letter from the
Department of Environmental Conservation requesting a preliminary
investigation of a release of potentially hazardous substances at
a Company facility on Staten Island. This facility is contiguous to
one of the Company's former manufactured gas plants. The
preliminary investigation has been completed and an initial report
has been provided to the DEC. The DEC has requested that the
Company conduct additional investigations, and the Company is
complying with this request. The Company is unable, however, to
determine at this time what remediation, if any, will be required.
The Company has recorded an estimated liability of $4.1 million
based on commitments for investigation and probable response costs,
and has petitioned the PSC for deferral and recovery of all related
costs and any future costs to be incurred at these and any other
sites.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held at the office of
the Company, One MetroTech Center, Borough of Brooklyn, in the
City of New York on Thursday, February 3, 1994.
(b) Andrea S. Christensen, Alan H. Fishman and James Q. Riordan
were elected to serve as directors for three-year terms
expiring in 1997. Edward D. Miller was elected to serve as a
director for a one-year term expiring in 1995. Robert B.
Catell and Kenneth I. Chenault will continue to serve as
directors until the next election in 1995. Donald H. Elliott
and Richardson Pratt, Jr. will continue to serve as directors
until the following election in 1996.
(c) The vote to elect Arthur Andersen & Co. as independent public
accountants was 36,809,259 shares in favor, or 99.1% of the
shares voted (20,583 proxies), and 342,361 shares against, or
.7% of the shares voted (416 proxies). Abstentions of 379,278
shares (495 proxies) were recorded.
(d) The proposal by a shareholder for cumulative voting for
directors was rejected by a vote of 14,828,654 shares against,
or 83.2% of the shares voted (17,386 proxies), and 5,000,858
shares in favor, or 16.8% of the shares voted (2,722 proxies).
Abstentions of 1,451,401 shares (1,386 proxies) were recorded.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re computation of per share earnings.
(15) Letter re unaudited interim financial information.
(24) Consents of experts and counsel.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter ended
December 31, 1993.<PAGE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
SIGNATURES
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.
THE BROOKLYN UNION GAS COMPANY
(Registrant)
Date February 11, 1994 s/C. G. Matthews
C.G. Matthews
Executive Vice President and
Chief Financial Officer
Date February 11, 1994 s/F. J. Gentile
F.J. Gentile
Senior Vice President
<PAGE>
EXHIBIT INDEX
Page
(11) Statement re computation of per share earnings. 3
(15) Letter re unaudited interim financial information. 14
(24) Consents of experts and counsel. 19
February 11, 1994
The Brooklyn Union Gas Company
One MetroTech Center
Brooklyn, New York 11201
Gentlemen:
We are aware that The Brooklyn Union Gas Company has incorporated
by reference in its previously filed Registration Statements No.
33-51561, No. 33-61283 and No. 33-66182, its Form 10-Q for the
quarter ended December 31, 1993, which includes our report dated
February 11, 1994 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the
registration statements prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of
Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN & CO.
