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 March 31, 1994
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 May 2, 1994
$.33 1/3 par value 47,140,326
<PAGE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
INDEX
Part I. Financial Information Page No.
Condensed Consolidated Balance Sheet -
March 31, 1994 and September 30, 1993 2
Condensed Consolidated Statement of Income -
Three, Six and Twelve Months Ended
March 31, 1994 and 1993 3
Condensed Consolidated Statement of Cash Flows -
Six and Twelve Months Ended March 31, 1994 and
1993 4
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
Review by Independent Public Accountants 11
Report of Independent Public Accountants 12
Part II. Other Information
Item 1 - Legal Proceedings 13
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
<TABLE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, September 30,
1994 1993
(Unaudited) (Audited)
<S> <C> <C>
_____________ _____________
(Thousands of Dollars)
Assets
Property
Utility , at cost $ 1,554,897 $ 1,523,894
Accumulated depreciation (339,639) (333,468)
Gas exploration and production, at cost 250,991 205,328
Accumulated depletion (103,377) (90,237)
_____________ _____________
1,362,872 1,305,517
_____________ _____________
Investments in Energy Services 82,357 66,682
_____________ _____________
Current Assets
Cash 11,112 10,834
Temporary cash investments 39,325 10,425
Common stock proceeds receivable - 44,910
Accounts receivable 471,304 230,688
Allowance for uncollectible accounts (19,531) (14,212)
Gas in storage, at average cost 30,242 102,516
Materials and supplies, at average cost 11,696 11,084
Prepaid gas costs 643 13,725
Prepaid taxes and other 17,295 37,304
_____________ _____________
562,086 447,274
_____________ _____________
Deferred Charges 139,404 78,374
_____________ _____________
$ 2,146,719 $ 1,897,847
============= =============
Capitalization and Liabilities
Capitalization
Common stock,$.33 1/3 par value stated at $ 480,041 $ 465,097
Retained earnings 339,732 255,979
_____________ _____________
Total common equity 819,773 721,076
Preferred stock, redeemable 7,200 7,500
Long-term debt 702,842 689,300
_____________ _____________
1,529,815 1,417,876
_____________ _____________
Current Liabilities
Accounts payable 176,591 163,876
Dividends payable 16,459 15,868
Taxes accrued 69,342 15,345
Customer deposits 22,506 21,584
Customer budget plan credits - 17,296
Interest accrued and other 51,943 53,491
_____________ _____________
336,841 287,460
_____________ _____________
Deferred Credits
Federal income tax 221,648 139,289
Unamortized investment tax credit 22,486 23,074
Other 35,929 30,148
_____________ _____________
280,063 192,511
_____________ _____________
$ 2,146,719 $ 1,897,847
============= =============
See accompanying notes to condensed consolidated financial statements.
2
</TABLE>
<TABLE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Six Months Twelve Months
Ended March 31, Ended March 31, Ended March 31,
<S> <C> <C> <C> <C> <C> <C>
_________________________ __________________________ __________________________
1994 1993 1994 1993 1994 1993
___________ ___________ ___________ ___________ ___________ ___________
(Thousands of Dollars)
Operating Revenues
Utility sales $ 533,830 $ 472,618 $ 888,678 $ 808,533 1,225,461 $ 1,125,773
Gas production and other 15,140 15,603 31,770 28,117 63,841 47,869
___________ ___________ ___________ ___________ ___________ ___________
548,970 488,221 920,448 836,650 1,289,302 1,173,642
Operating Expenses
Cost of gas 246,682 206,606 392,306 344,794 514,084 461,302
Operation and maintenance 109,140 93,560 203,609 178,039 389,352 347,439
Depreciation and depletion 17,648 16,118 34,952 31,274 68,469 58,991
General taxes 55,607 52,142 94,956 91,188 148,594 143,536
Federal income tax 36,332 36,213 57,939 57,215 43,157 41,168
___________ ___________ ___________ ___________ ___________ ___________
Operating Income 83,561 83,582 136,686 134,140 125,646 121,206
Other Income
Gain on sale of investment in
Canadian gas company - - - - 20,462 -
Write-off of investment in
propane company - - - - (17,617) -
Income (Loss) from energy
services investments 1,018 711 2,627 2,316 1,472 (338)
Other income (loss), net 1,315 (749) 1,117 (834) (1,167) 451
Federal income tax benefit 66 564 158 432 409 1,441
___________ ___________ ___________ ___________ ___________ ___________
Income Before Interest Charges 85,960 84,108 140,588 136,054 129,205 122,760
___________ ___________ ___________ ___________ ___________ ___________
Interest Charges
Long-term debt 11,514 11,123 23,373 22,264 46,454 43,000
Other 892 1,156 1,498 1,434 2,827 2,927
___________ ___________ ___________ ___________ ___________ ___________
12,406 12,279 24,871 23,698 49,281 45,927
___________ ___________ ___________ ___________ ___________ ___________
Net Income 73,554 71,829 115,717 112,356 79,924 76,833
Dividends on Preferred Stock 89 92 178 185 358 371
___________ ___________ ___________ ___________ ___________ ___________
Income Available for
Common Stock $ 73,465 $ 71,737 $ 115,539 $ 112,171 $ 79,566 $ 76,462
=========== =========== =========== =========== =========== ===========
Per Share of Common Stock * $ 1.57 $ 1.63 $ 2.48 $ 2.56 $ 1.75 $ 1.76
=========== =========== =========== =========== =========== ===========
Dividends Declared per Share
of Common Stock * $ 0.338 $ 0.330 $ 0.675 $ 0.660 $ 1.335 $ 1.306
=========== =========== =========== =========== =========== ===========
Average Common Shares
Outstanding * 46,801,765 43,896,577 46,658,774 43,757,780 45,492,862 43,475,172
=========== =========== =========== =========== =========== ===========
* Restated for three for two stock split effective July 1993.
See accompanying notes to condensed consolidated financial statements.
3
</TABLE>
<TABLE>
THE BROOKLYN UNION GAS COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Twelve Months
Ended March 31, Ended March 31,
<S> <C> <C> <C> <C>
__________ __________ __________ __________
1994 1993 1994 1993
__________ __________ __________ __________
(Thousands of Dollars)
OPERATING ACTIVITIES
Net income $ 115,717 $ 112,356 $ 79,924 $ 76,833
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and depletion 37,777 35,816 73,959 65,503
Deferred Federal income tax 8,771 (771) 11,026 9,692
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 (588) (538) (1,124) (1,066)
Income from energy services investments (2,627) (2,316) (1,472) 338
Dividends received from energy services investments 2,365 1,256 8,530 1,947
Allowance for equity funds used during construction (1,066) (777) (1,960) (1,531)
__________ __________ __________ __________
160,349 145,026 166,038 151,716
__________ __________ __________ __________
Effect of changes in working capital and other
Accounts receivable,net (237,337) (230,453) (80,093) (96,384)
Accounts payable 15,009 6,871 34,006 29,959
Gas inventory and prepayments 85,356 62,286 (4,050) (1,998)
Other 61,972 40,668 26,651 5,610
__________ __________ __________ __________
(75,000) (120,628) (23,486) (62,813)
__________ __________ __________ __________
Cash provided by operating activities 85,349 24,398 142,552 88,903
__________ __________ __________ __________
FINANCING ACTIVITIES
Sale of common stock 15,021 12,586 74,300 24,225
Common stock proceeds receivable 44,910 - - -
Issuance of long-term debt 13,542 7,700 192,742 9,348
Commercial paper 11,500 - 62,000 -
__________ __________ __________ __________
84,973 20,286 329,042 33,573
Repayments
Preferred stock (300) (300) (300) (37,273)
Long-term debt - - (180,000) (100)
Commercial paper (11,500) - (62,000) -
__________ __________ __________ __________
73,173 19,986 86,742 (3,800)
Dividends on common and preferred stock (31,792) (29,160) (61,911) (57,375)
Trust funds, utility construction - 39,116 15,494 76,887
Other (146) 390 (244) (937)
__________ __________ __________ __________
Cash provided by financing activities 41,235 30,332 40,081 14,775
__________ __________ __________ __________
INVESTING ACTIVITIES
Capital expenditures (excluding allowance
for equity funds used during construction) (109,014) (77,493) (222,252) (157,682)
Proceeds from sale of investment in Canadian gas company 11,691 - 41,718 -
Other (83) 13,960 14,546 (7,237)
__________ __________ __________ __________
Cash used in investing activities (97,406) (63,533) (165,988) (164,919)
__________ __________ __________ __________
Change in Cash and Temporary Cash Investments $ 29,178 $ (8,803) $ 16,645 $ (61,241)
========== ========== ========== ==========
Cash and Temporary Cash Investments at
End of Period $ 50,437 $ 33,792 $ 50,437 $ 33,792
========== ========== ========== ==========
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 $ 17,400 $ 8,800 $ 36,200 $ 24,900
Interest $ 25,951 $ 25,075 $ 52,322 $ 44,567
See accompanying notes to condensed consolidated financial statements.
4
</TABLE>
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 March 31, 1994 and the results of
operations for the three, six and twelve months ended March
31, 1994 and 1993, and cash flows for the six and twelve
months ended March 31, 1994 and 1993. Certain
reclassifications were made to conform prior period financial
statements with the 1994 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 Company also adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," on October
1, 1993. Its adoption has not had a material effect on
consolidated net income because the Company had begun to
accrue and fund a portion of the cost of such benefits and, as
a result, utility rates in fiscal 1994 reflect full recovery
of the estimated annual SFAS-106 costs.
4. 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 $19.6 million at March 31, 1994.
In 1992, Iroquois was informed by the U.S. Attorney's Offices
of various districts 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 a propane company in December, 1993. As of
September 1993, the Company had recorded an impairment charge
of $11.5 million after Federal income taxes, which was
sufficient to reflect the anticipated effect of this
liquidation.
(c) Cogeneration Project Commitments
A Company subsidiary, through affiliates, owns a 50%
partnership interest, or approximately $38.4 million, as of
March 31, 1994, in a project to construct 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 $290 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 under construction. 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. Commercial operation is scheduled for the first quarter
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.
5. 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 March 31, 1994 vs. Three Months ended March
31, 1993.
(2) Six Months ended March 31, 1994 vs. Six Months ended March 31,
1993.
(3) Twelve Months ended March 31, 1994 vs. Twelve Months ended
March 31, 1993.
Consolidated income available for common stock for the three months
ended March 31, 1994 was $73.5 million, or $1.57 cents per share,
compared to $71.7 million, or $1.63 cents per share, for the same
period last year. Earnings for the six months ended March 31, 1994
were $115.5 million, or $2.48 per share, compared to $112.2
million, or $2.56 per share, in the six months ended March 31,
1993. The increase in income reflects continued growth in utility
gas heating sales and growth in domestic gas production from recent
acquisitions by the Company's gas exploration and production
subsidiary. The effect on utility earnings of variations in
revenues due to colder- or warmer-than-normal weather, based upon
degree days, is largely offset by the weather normalization
adjustment included in the Company's tariff. However, utility
earnings reflect higher operating expenses resulting from the cold
weather in the second quarter, which was 11.4% colder than normal
and 11.8% colder than the second quarter of last year.
Earnings for the twelve months ended March 31, 1994 were $79.6
million, or $1.75 per share, compared to $76.5 million, or $1.76
per share, for the twelve months ended March 31, 1993. Earnings for
the current period primarily 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.
The decline in earnings per share in all periods reflects the
higher number of shares outstanding.
Firm sales in the quarter ended March 31, 1994 were 61,679 MDTH,
compared to 57,283 MDTH in the quarter ended March 31, 1993.
Normalized for weather, firm sales continued to reflect growth in
large-volume markets, especially apartment buildings, where gas
service is provided under a volume-discount rate. Firm sales of
101,253 MDTH for the six months ended March 31, 1994 represent an
increase of 4.6% over the same period of last year. Weather in the
first six months of fiscal 1994 was 4.9% colder than the
corresponding period last year. Firm sales of 133,467 MDTH for the
twelve months ended March 31, 1994 increased 1.8% compared to sales
in the corresponding period last year.
Net revenues (utility operating revenues less cost of gas of
utility sales) increased $21.1 million, $32.6 million and $46.9
million in the three, six and twelve months ended March 31, 1994,
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, especially from recently
acquired properties in the Arkoma Basin and East Texas.
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. Moreover, operation and maintenance expense in all periods
ending March 31, 1994 reflects the effects of the severely cold
weather.
Depreciation and depletion expenses generally reflect charges
related to utility property additions and increased production from
gas exploration and production operations.
General taxes principally include state and local taxes on utility
revenues and property. Taxes for the three, six and twelve months
ended March 31, 1994 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, six and twelve months
ended March 31, 1994 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, six and twelve
months ended March 31, 1994 reflect higher levels of long-term
debt.
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, which reflects seasonal
weather variations, continues to be strong and is the principal
source for financing capital expenditures. Increased cash flows in
periods ending March 31, 1994 reflect, in part, recovery of take-
or-pay and GAC costs previously deferred. Capital expenditures for
fiscal 1994 are estimated to be approximately $217 million,
including $100 million related to subsidiaries principally for gas
exploration and development. In fiscal 1995, consolidated capital
expenditures are estimated to be approximately $175 million.
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 $71 million, which for the most part support borrowings
under revolving loan agreements.
In the twelve months ended March 1994, 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 March 31, 1994, the consolidated annualized cost of long-term
debt reflecting all refinancings was 6.95%. 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 a 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
Company has entered into settlement negotiations regarding key
issues with the Staff of the Public Service Commission and other
intervenors. The Company believes that these negotiations will
result in a satisfactory three-year settlement agreement. Any
agreement would require the approval of an administrative law
judge. A final decision by the Commission is expected in October
1994.
<PAGE>
REVIEW BY 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.
<PAGE>
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 March 31, 1994 and the related condensed
consolidated statements of income for the three, six and twelve
month periods ended March 31, 1994 and 1993, and the condensed
consolidated statement of cash flows for the six and twelve month
periods ended March 31, 1994 and 1993. 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 conducted
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
April 27, 1994<PAGE>
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.
Long-term site management studies are ongoing and an interim
response measure to address oil seepage has been submitted to the
Coast Guard. 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 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 March
31, 1994.<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 May 12, 1994 s/V. D. Enright
V.D. Enright
Senior Vice President and
Chief Financial Officer
Date May 12, 1994 s/R. M. Desmond
R.M. Desmond
Vice President, Comptroller and
Chief Accounting Officer<PAGE>
EXHIBIT INDEX
Page
(11) Statement re computation of per share earnings. 3
(15) Letter re unaudited interim financial information. 12
(24) Consents of experts and counsel. 17<PAGE>
May 9, 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.
33-66182, No. 33-61283 and No. 33-51561, its Form 10-Q for the
quarter ended March 31, 1994, which includes our report dated April
27, 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.
