<PAGE>
=================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 10-Q
For the quarterly period ended
------------------------------
March 31, 1998
Commission File No. 1-6407
--------------------------
SOUTHERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-0571592
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
504 Lavaca Street, Eighth Floor 78701
Austin, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(512) 477-5852
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange in which registered
- ------------------- -----------------------------------------
Common Stock, par New York Stock Exchange
value $1 per share
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
--- ---
The number of shares of the registrant's Common Stock outstanding
on May 8, 1998 was 18,799,281.
=================================================================
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
FORM 10-Q
March 31, 1998
Index
PART I. FINANCIAL INFORMATION Page(s)
-------
Item 1. Financial Statements
Consolidated statements of operations -
three, nine and twelve months ended
March 31, 1998 and 1997
Consolidated balance sheet - March 31,
1998 and 1997 and June 30, 1997
Consolidated statement of stockholders'
equity - nine months ended March 31, 1998
and twelve months ended June 30, 1997
Consolidated statements of cash flows -
three, nine and twelve months ended
March 31, 1998 and 1997
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(See "CONTINGENCIES" under Notes to
Consolidated Financial Statements)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 -- Computation of basic
and diluted earnings per share
(b) Exhibit 27 -- Financial Data Schedule
(c) Reports on Form 8-K -- None
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended March 31,
----------------------------
1998 1997
------------ ------------
(thousands of dollars,
except shares and per
share amounts)
Operating revenues................. $ 265,176 $ 316,915
Gas purchase costs................. 170,500 215,994
----------- -----------
Operating margin................. 94,676 100,921
Revenue-related taxes.............. 15,240 16,975
----------- -----------
Net operating margin............. 79,436 83,946
Operating expenses:
Operating, maintenance and
general........................ 29,143 35,086
Depreciation and amortization.... 9,775 8,882
Taxes, other than on income and
revenues....................... 3,578 2,979
----------- -----------
Total operating expenses....... 42,496 46,947
----------- -----------
Net operating revenues......... 36,940 36,999
----------- -----------
Other income (expenses):
Interest......................... (8,970) (8,368)
Dividends on preferred
securities of subsidiary trust. (2,370) (2,370)
Other, net....................... 1,257 2,960
----------- -----------
Total other expenses, net...... (10,083) (7,778)
----------- -----------
Earnings before income taxes... 26,857 29,221
Federal and state income taxes..... 10,608 11,543
Net earnings available for common
stock............................ $ 16,249 $ 17,678
=========== ===========
Net earnings per share:
Basic............................ $ .86 $ .99
=========== ===========
Diluted.......................... $ .83 $ .95
=========== ===========
Weighted average shares
outstanding:
Basic.......................... 18,791,069 17,933,857
=========== ===========
Diluted........................ 19,467,236 18,621,615
=========== ===========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended March 31,
---------------------------
1998 1997
------------ ------------
(thousands of dollars,
except shares and per
share amounts)
Operating revenues.................. $ 560,377 $ 629,208
Gas purchase costs.................. 346,775 410,354
----------- -----------
Operating margin.................. 213,602 218,854
Revenue-related taxes............... 29,873 33,726
----------- -----------
Net operating margin.............. 183,729 185,128
Operating expenses:
Operating, maintenance and
general......................... 79,602 87,580
Depreciation and amortization..... 28,923 25,765
Taxes, other than on income and
revenues........................ 10,331 8,779
----------- -----------
Total operating expenses........ 118,856 122,124
----------- -----------
Net operating revenues.......... 64,873 63,004
----------- -----------
Other income (expenses):
Interest.......................... (26,544) (25,397)
Dividends on preferred
securities of subsidiary trust.. (7,110) (7,110)
Other, net........................ 3,619 5,758
----------- -----------
Total other expenses, net....... (30,035) (26,749)
----------- -----------
Earnings before income taxes.... 34,838 36,255
Federal and state income taxes...... 13,761 14,321
----------- -----------
Net earnings available for common
stock............................. $ 21,077 $ 21,934
=========== ===========
Net earnings per share:
Basic............................. $ 1.15 $ 1.22
=========== ===========
Diluted........................... $ 1.11 $ 1.18
=========== ===========
Weighted average shares outstanding:
Basic............................. 18,249,970 17,907,431
=========== ===========
Diluted........................... 18,950,419 18,611,495
=========== ===========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Twelve Months Ended March 31,
-----------------------------
1998 1997
------------ ------------
(thousands of dollars, except
shares and per share amounts)
Operating revenues............... $ 648,200 $ 723,404
Gas purchase costs............... 385,609 459,008
----------- -----------
Operating margin............... 262,591 264,396
Revenue-related taxes............ 35,649 39,126
----------- -----------
Net operating margin........... 226,942 225,270
Operating expenses:
Operating, maintenance and
general...................... 101,910 115,562
Depreciation and amortization.. 37,986 33,627
Taxes, other than on income
and revenues................. 13,706 12,247
----------- -----------
Total operating expenses..... 153,602 161,436
----------- -----------
Net operating revenues....... 73,340 63,834
----------- -----------
Other income (expenses):
Interest....................... (34,613) (33,929)
Dividends on preferred
securities of subsidiary
trust........................ (9,480) (9,480)
Other, net..................... 741 12,494
----------- -----------
Total other expenses, net.... (43,352) (30,915)
----------- -----------
Earnings before income taxes. 29,988 32,919
Federal and state income taxes... 11,814 13,843
Net earnings available for
common stock................... $ 18,174 $ 19,076
=========== ===========
Net earnings per share:
Basic.......................... $ 1.00 $ 1.07
=========== ===========
Diluted........................ $ .96 $ 1.03
=========== ===========
Weighted average shares
outstanding:
Basic........................ 18,181,238 17,901,661
=========== ===========
Diluted...................... 18,880,879 18,604,567
=========== ===========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, June 30,
---------------------- ----------
1998 1997 1997
---------- ---------- ----------
(unaudited)
(thousands of dollars)
Property, plant and
equipment:
Plant in service....... $1,033,862 $ 949,607 $ 963,269
Construction work in
progress............. 8,064 7,581 7,970
---------- ---------- ----------
1,041,926 957,188 971,239
Less accumulated
depreciation and
amortization......... (351,084) (328,957) (329,182)
---------- ---------- ----------
690,842 628,231 642,057
Additional purchase
cost assigned to
utility plant, net... 136,965 131,823 131,539
---------- ---------- ----------
Net property, plant
and equipment........ 827,807 760,054 773,596
---------- ---------- ----------
Current assets:
Cash and cash
equivalents............ 265 899 --
Accounts receivable,
billed and unbilled.... 118,828 120,372 58,659
Inventories, principally
at average cost........ 17,643 14,051 21,523
Deferred gas purchase
costs.................. -- 6,612 --
Investment securities.... -- -- 6,432
Prepayments and other.... 1,613 2,642 9,609
---------- ---------- ----------
Total current assets... 138,349 144,576 96,223
---------- ---------- ----------
Deferred charges........... 103,698 109,726 109,512
Investment securities...... 5,000 6,295 --
Real estate................ 9,762 9,098 9,046
Other...................... 5,321 2,397 2,026
---------- ---------- ----------
Total.................... $1,089,937 $1,032,146 $ 990,403
========== ========== ==========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
STOCKHOLDERS' EQUITY AND LIABILITIES
March 31, June 30,
---------------------- ----------
1998 1997 1997
---------- ---------- ----------
(unaudited)
(thousands of dollars)
Common stockholders' equity:
Common stock, $1 par
value; authorized
50,000,000 shares;
issued 18,848,009
shares.................. $ 18,848 $ 17,162 $ 17,171
Premium on capital stock.. 261,995 225,201 225,252
Less treasury stock,
at cost................. (794) (794) (794)
Retained earnings......... 25,588 28,071 25,169
Unrealized holding gain... -- 553 664
---------- ---------- ----------
Total common stockholders'
equity.................. 305,637 270,193 267,462
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trust holding
solely $103,093,000
principal amount of 9.48%
subordinated notes of
Southern Union due 2025... 100,000 100,000 100,000
Long-term debt.............. 398,217 385,856 386,157
---------- ---------- ----------
Total capitalization...... 803,854 756,049 753,619
Current liabilities:
Long-term debt due within
one year................ 1,367 701 687
Notes payable............. 17,000 20,800 1,600
Accounts payable.......... 61,515 52,316 33,827
Federal, state and local
taxes................... 29,890 27,398 13,699
Accrued interest.......... 5,190 5,320 12,840
Customer deposits......... 17,914 17,539 17,214
Deferred gas purchase
costs................... 2,191 -- 3,565
Other..................... 21,714 18,631 22,291
---------- ---------- ----------
Total current
liabilities........... 156,781 142,705 105,723
---------- ---------- ----------
Deferred credits and other.. 71,989 82,823 77,083
Accumulated deferred
income taxes.............. 57,313 50,569 53,978
Commitments and
contingencies............. -- -- --
---------- ---------- ----------
Total..................... $1,089,937 $1,032,146 $ 990,403
========== ========== ==========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Unrea-
Common Premium Trea- lized
Stock, on sury HOlding
$1 Par Capital Stock, Retained Gain
Value Stock at Cost Earnings (Loss) Total
------- -------- ------- -------- -------- ---------
(thousands of dollars)
Balance
July 1,
1996..... $16,275 $206,047 $(794) $ 25,631 $(1,244) $245,915
Net earn-
ings.... -- -- -- 19,032 -- 19,032
5% stock
divi-
dend.... 813 18,681 -- (19,494) -- --
Change in
unrea-
lized
holding
gain or
loss.... -- -- -- -- 1,908 1,908
Exercise
of stock
options. 83 524 -- -- -- 607
------- -------- ----- -------- ------- --------
Balance
June 30,
1997..... 17,171 225,252 (794) 25,169 664 267,462
Net earn-
ings -- -- -- 21,077 -- 21,077
5% stock
divi-
dend..... 856 19,802 -- (20,658) -- --
Issuance
of stock
for acqui-
sition... 755 17,285 -- -- -- 18,040
Change in
unrea-
lized
holding
gain or
loss..... -- -- -- -- (664) (664)
Exercise
of stock
options.. 66 (344) -- -- -- (278)
------- -------- ----- -------- ------- --------
Balance
March 31,
1998..... $18,848 $261,995 $(794) $ 25,588 $ -- $305,637
======= ======== ===== ======== ======= ========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
----------------------------
1998 1997
---------- ----------
(thousands of dollars)
Cash flows from operating
activities:
Net earnings................. $ 16,249 $ 17,678
Adjustments to reconcile net
earnings to net cash flows
from operating activities:
Depreciation and
amortization........... 9,775 8,882
Deferred income taxes.... 1,332 2,347
Provision for bad debts.. 2,259 7,142
Deferral of interest and
other expenses......... (574) (1,030)
Gain on sale of
investment securities.. -- (1,786)
Other.................... 259 364
Changes in assets and
liabilities, net of
acquisitions and
dispositions:
Accounts receivable,
billed and
unbilled........... 13,411 20,546
Accounts payable..... (10,766) 7,482
Taxes and other
liabilities........ 1,812 967
Customer deposits.... 394 324
Deferred gas
purchase costs..... 31,155 (46,902)
Inventories.......... 20,201 19,771
Other accounts....... 3,090 (30)
---------- ----------
Net cash flow from
operating activities... 88,597 35,755
---------- ----------
Cash flows from (used in)
investing activities:
Additions to property, plant
and equipment.............. (12,653) (11,443)
Acquisition of operations,
net of cash received....... 7,247 --
Proceeds from sale of
investment securities...... -- 9,784
Net change in customer
advances................... 567 (158)
Net change in deferred
charges and credits........ 555 6,502
Other........................ (793) 650
---------- ----------
Net cash flows from (used
in) investing activities. (5,077) 5,335
---------- ----------
Cash flows used in financing
activities:
Repayment of debt............ (341) (131)
Net payments under financing
facilities................. (76,800) (40,400)
Decrease in cash overdrafts.. (6,122) --
Other........................ 8 340
---------- ----------
Net cash flows used in
financing activities..... (83,255) (40,191)
---------- ----------
Increase in cash and cash
equivalents.................... 265 899
Cash and cash equivalents at
beginning of period............ -- --
---------- ----------
Cash and cash equivalents at
end of period.................. $ 265 $ 899
========== ==========
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest................. $ 15,744 $ 15,161
========== ==========
Income taxes............. $ 325 $ 101
========== ==========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended March 31,
---------------------------
1998 1997
---------- ----------
(thousands of dollars)
Cash flows from operating
activities:
Net earnings.................. $ 21,077 $ 21,934
Adjustments to reconcile net
earnings to net cash flows
from operating activities:
Depreciation and
amortization............ 28,923 25,765
Deferred income taxes..... 1,071 6,054
Provision for bad debts... 4,311 9,978
Deferral of interest and
other expenses.......... (1,246) (4,281)
Gain on sale of
investment securities... (1,088) (2,545)
Other..................... 759 697
Changes in assets and
liabilities, net of
acquisitions and
dispositions:
Accounts receivable,
billed and unbilled. (63,787) (79,489)
Accounts payable...... 27,739 13,078
Taxes and other
liabilities......... 8,511 3,204
Customer deposits..... 429 1,883
Deferred gas
purchase costs...... (1,374) (3,961)
Inventories........... 4,157 13,134
Other accounts........ 3,177 (57)
---------- ----------
Net cash flow from
operating activities.... 32,659 5,394
---------- ----------
Cash flows used in investing
activities:
Additions to property, plant
and equipment............... (51,828) (42,553)
Acquisition of operations,
net of cash received........ 6,502 (1,162)
Purchase of investment
securities.................. (5,000) (5,363)
Proceeds from sale of
investment securities....... 6,531 10,311
Net change in customer
advances.................... 2,823 1,756
Net change in deferred
charges and credits......... (3,195) 6,861
Other......................... (1,296) 1,873
---------- ----------
Net cash flows used in
investing activities...... (45,463) (28,277)
---------- ----------
Cash flows from financing
activities:
Repayment of debt............. (821) (452)
Net borrowings under
financing facilities........ 15,400 20,800
Decrease in cash overdrafts... (1,567) --
Other......................... 57 547
---------- ----------
Net cash flows from
financing activities...... 13,069 20,895
---------- ----------
Increase (decrease) in cash and
cash equivalents................ 265 (1,988)
Cash and cash equivalents at
beginning of period............. -- 2,887
---------- ----------
Cash and cash equivalents at end
of period....................... $ 265 $ 899
========== ==========
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest.................. $ 33,317 $ 32,103
========== ==========
Income taxes.............. $ 1,825 $ 5,101
========== ==========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Twelve Months Ended March 31,
-----------------------------
1998 1997
------------ ------------
(thousands of dollars)
Cash flows from operating
activities:
Net earnings................. $ 18,174 $ 19,076
Adjustments to reconcile net
earnings to net cash flows
from operating activities:
Depreciation and
amortization........... 37,986 33,627
Deferred income taxes.... 2,359 12,702
Provision for bad debts.. 5,631 11,498
Deferral of interest and
other expenses......... (694) (6,283)
Gain on sale of
investment securities.. (1,088) (2,545)
Other.................... 1,139 (209)
Changes in assets and
liabilities, net of
acquisitions and
dispositions:
Accounts receivable,
billed and
unbilled........... (6,409) (9,022)
Accounts payable..... 7,683 2,528
Taxes and other
liabilities........ 2,332 (9,379)
Customer deposits.... 104 1,868
Deferred gas
purchase costs..... 8,802 (22,778)
Inventories.......... (3,286) (8,247)
Other accounts....... 2,526 (9)
----------- -----------
Net cash flow from
operating activities... 75,259 22,827
----------- -----------
Cash flows used in investing
activities:
Additions to property, plant
and equipment.............. (73,738) (64,196)
Acquisition of operations,
net of cash received....... 5,803 (1,162)
Purchase of investment
securities................. (5,000) (5,363)
Proceeds from sale of
investment securities...... 9,547 10,311
Litigation settlement
proceeds................... -- 4,250
Net change in customer
advances................... 3,537 2,843
Net change in deferred
charges and credits........ (10,050) 6,146
Proceeds from sale of
distribution and
transmission properties.... 1,130 14,770
Other........................ (2,430) 2,779
----------- -----------
Net cash flows used in
investing activities..... (71,201) (29,622)
Cash flows used in financing
activities:
Repayment of debt............ (1,009) (52,148)
Net borrowings (payments)
under financing facilities. (3,800) 20,800
Other........................ 117 606
----------- -----------
Net cash flows used in
financing activities..... (4,692) (30,742)
----------- -----------
Decrease in cash and cash
equivalents.................... (634) (37,537)
Cash and cash equivalents at
beginning of period............ 899 38,436
----------- -----------
Cash and cash equivalents at
end of period.................. $ 265 $ 899
=========== ===========
Supplemental disclosures of
cash flow information:
Cash paid during the
period for:
Interest................. $ 33,496 $ 33,718
=========== ===========
Income taxes............. $ 5,595 $ 6,514
=========== ===========
See accompanying notes.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
The interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments (including both
normal recurring as well as any non-recurring) necessary for a
fair presentation of the results of operations for such periods.
Because of the seasonal nature of the Company's operations, the
results of operations for any interim period are not necessarily
indicative of results for the full year.
These financial statements should be read in conjunction with the
financial statements and notes thereto contained in Southern
Union Company's (Southern Union and, together with its wholly-
owned subsidiaries, the Company) Annual Report on Form 10-K for
the fiscal year ended June 30, 1997. Certain prior period
amounts have been reclassified to conform with the current period
presentation.
NEW PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued
Employers' Disclosures about Pensions and Other Postretirement
Benefits which revises employers' disclosures about pension and
other postretirement benefit plans. The Company is required to
adopt the provisions of this standard by June 30, 1999.
EARNINGS PER SHARE
The Financial Accounting Standards Board recently issued a
standard, Earnings Per Share, which replaces the previously
reported primary and fully diluted earnings per share with a
basic and diluted earnings per share presentation. Unlike
primary earnings per share, basic earnings per share excludes any
dilutive effects of options and warrants. Diluted earnings per
share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all
periods have been presented, and where necessary, restated to
conform to the new standard.
INVESTMENT SECURITIES
At March 31, 1998, all securities owned by the Company are
accounted for under the cost method. These securities consist of
preferred stock in a non-public company. Realized gains and
losses on sales of investments, as determined on a specific
identification basis, are included in the Consolidated Statement
of Operations when incurred, and dividends are recognized as
income when received.
ACQUISITION
On December 31, 1997, the Company issued 755,650 shares to the
owners of Atlantic Utilities Corporation and Subsidiaries
(Atlantic) in connection with the acquisition of Atlantic. As
the necessary regulatory approvals had not yet been received at
December 31, 1997 the transaction was recorded as a prepayment of
$18,041,000. In January 1998 regulatory approval was received
and cash of $4,436,000 was also given to the previous owners of
Atlantic. The assets of Atlantic were included in the Company's
consolidated balance sheet at January 1, 1998 as well as
Atlantic's results of operations which have been included in the
Company's statements of consolidated operations and cash flows
since January 1, 1998. The acquisition was accounted for using
the purchase method. The additional purchase cost to be assigned
to utility plant, pending final determination of assets acquired
and liabilities assumed, of approximately $8,000,000 reflects the
excess of the purchase price over the historical book carrying
value of the net assets acquired. The additional purchase cost
is amortized on a straight-line basis over forty years.
On July 23, 1997 Southern Union Company acquired a 42% equity
ownership in a natural gas distribution company serving 16,000
customers in Piedras Negras, Mexico for $2,700,000. This system
is across the border from the Company's Eagle Pass, Texas service
area. On September 8, 1997, the Company purchased a
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
45-mile intrastate pipeline for $305,000 which will augment the
Company's gas supply to the city of Eagle Pass and, subject to
necessary regulatory approvals, ultimately Piedras Negras.
PREFERRED SECURITIES OF SUBSIDIARY TRUST
On May 17, 1995, Southern Union Financing I (Subsidiary Trust), a
consolidated wholly-owned subsidiary of Southern Union, issued
$100,000,000 of 9.48% Trust Originated Preferred Securities
(Preferred Securities). In connection with the Subsidiary
Trust's issuance of the Preferred Securities and the related
purchase by Southern Union of all of the Subsidiary Trust's
common securities (Common Securities), Southern Union issued to
the Subsidiary Trust $103,092,800 principal amount of its 9.48%
Subordinated Deferrable Interest Notes, due 2025 (Subordinated
Notes). The sole assets of the Subsidiary Trust are the
Subordinated Notes. The interest and other payment dates on the
Subordinated Notes correspond to the distribution and other
payment dates on the Preferred Securities and the Common
Securities. Under certain circumstances, the Subordinated Notes
may be distributed to holders of the Preferred Securities and
holders of the Common Securities in liquidation of the Subsidiary
Trust. The Subordinated Notes are redeemable at the option of
the Company on or after May 17, 2000, at a redemption price of
$25 per Subordinated Note plus accrued and unpaid interest. The
Preferred Securities and the Common Securities will be redeemed
on a pro rata basis to the same extent as the Subordinated Notes
are repaid, at $25 per Preferred Security and Common Security
plus accumulated and unpaid distributions. Southern Union's
obligations under the Subordinated Notes and related agreements,
taken together, constitute a full and unconditional guarantee by
Southern Union of payments due on the Preferred Securities. As
of March 31, 1998 and 1997, 4,000,000 shares of Preferred
Securities were outstanding.
DEBT
March 31, June 30,
1998 1997
--------- ---------
(thousands of dollars)
7.60% Senior Notes due 2024.......... $ 384,515 $ 384,515
Other................................ 15,069 2,329
--------- ---------
Total debt........................... 399,584 386,844
Less current portion............... 1,367 687
--------- ---------
Total long-term debt................. $ 398,217 $ 386,157
========= =========
The Company has availability under a $100,000,000 revolving
credit facility (Revolving Credit Facility) underwritten by a
syndicate of banks. The Company has additional availability under
uncommitted line of credit facilities (Uncommitted Facilities)
with various banks. Covenants under the Revolving Credit
Facility allow for up to $35,000,000 of borrowings under
Uncommitted Facilities at any one time. Borrowings under these
facilities are available for Southern Union's working capital,
letter of credit requirements and other general corporate pur-
poses. Amounts outstanding under these facilities at March 31,
1998 and May 8, 1998 totalled $17,000,000 and nil, respectively.
The Company is installing an Automated Meter Reading (AMR) system
at Missouri Gas Energy. The installation of the AMR system will
involve an investment of $27,000,000. The Company is accounting
for this system as a capital lease obligation and has recorded an
increase in plant and long-term debt of $3,158,000 and
$13,061,000 during the three-and nine-month period ended
March 31, 1998, respectively.
UTILITY REGULATION AND RATES
Under the order of the Federal Energy Regulatory Commission, a
major transporter of gas to Missouri Gas Energy is allowed
recovery of certain unrecovered deferred gas costs with a
remaining balance of $6,237,000 at March 31, 1998. Missouri Gas
Energy is allowed to recover these costs from its customers
through the PGA mechanism which
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
is filed with and approved by the Missouri Public Service
Commission (MPSC). The receivable and liability associated with
these costs have been recorded as a deferred charge and a
deferred credit, respectively, on the consolidated balance sheet
as of March 31, 1998 and 1997.
STOCK DIVIDEND
On December 10, 1997, Southern Union distributed its annual 5%
common stock dividend to stockholders of record on November 21,
1997. Unless otherwise stated, all per share data included in
the accompanying consolidated financial statements and in these
Notes to Consolidated Financial Statements has been restated to
give effect to the stock dividend.
YEAR 2000
The Company has established a committee and project team to coor-
dinate the assessment, remediation, testing and implementation of
the necessary modifications to its key computer applications
(which consist of internally-developed computer applications,
third party software, hardware and embedded chip systems) to
assure that such systems and related processes will remain
functional. The Company has already determined that its critical
business computing systems, including both its customer informa-
tion and administrative systems, are year 2000 compliant.
It is the Company's goal to ensure that all of its other systems
and processes which are under its direct control remain functional.
However, because certain systems may be interrelated with systems
outside the control of the Company, there can be no assurances
that all implementations will be successful. Management does not
expect the costs to modify its systems or to correct any unsuc-
cessful system implementations to have a material adverse impact
on the Company's financial position, results of operations or
cash flows.
CONTINGENCIES
On December 30, 1997, Southern Union settled the claims
associated with the removal of hazardous substances from the site
of a former coal gasification plant (Pine Street Canal Site) in
Burlington, Vermont. The cost of the settlement did not have a
material adverse effect on the Company's financial position,
results of operations or cash flows.
Southern Union and Western Resources, Inc. entered into an
Environmental Liability Agreement (Environmental Liability Agree-
ment) at the closing of the Missouri Acquisition. Subject to the
accuracy of certain representations made by Western Resources in
the Missouri Asset Purchase Agreement, the Environmental
Liability Agreement provides for a tiered approach to the alloca-
tion of substantially all liabilities under environmental laws
that may exist or arise with respect to Missouri Gas Energy. At
the present time and based upon information available to manage-
ment, the Company believes that the costs of any remediation
efforts that may be required for these sites for which it may
ultimately have responsibility will not exceed the aggregate
amount subject to substantial sharing by Western Resources.
In addition to various Missouri Gas Energy sites described above,
the Company is investigating the possibility that the Company or
predecessor companies may have been associated with Manufactured
Gas Plant (MGP) sites in other of its former service territories,
principally in Arizona and New Mexico, and present service terri-
tories in Texas. At the present time, the Company is aware of
certain plant sites in some of these areas and is investigating
those and certain other locations.
The municipal owner of a property adjacent to one of the Com-
pany's service locations has raised concerns over the continued
operation of that property as a park due to its former use as a
portion of an MGP site. The Texas Water Commission (TWC), in
cooperation with the EPA, conducted a site inspection and pre-
liminary assessment of this MGP site. Correspondence received
from the TWC in 1989 concluded that the site "did not appear at
the time of our inspection to pose an apparent threat to the
public or the environment." Pending the performance of a risk
assessment report, in April 1996 the city closed the park and
subsequently permanently relocated the park recreational
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
activities. Based upon the health risk evaluation conclusions
contained in a risk assessment report completed in November,
1997, the city is proceeding with plans to utilize the property
for basketball courts and city parking. Based upon currently
available information, Southern Union does not believe the
outcome of this matter will have a material adverse effect on its
financial position, results of operations or cash flows.
While the Company's evaluation of these Texas, Arizona and New
Mexico MGP sites is in its preliminary stages, it is likely that
some compliance costs may be identified and become subject to
reasonable quantification. To the extent that such potential
costs are quantified, the Company expects to provide any
appropriate accruals and seek recovery for such remediation costs
through all appropriate means, including insurance and regulatory
relief. Although significant charges to earnings could be
required prior to rate recovery, management does not believe that
environmental expenditures for such MGP sites will have a
material adverse effect on the Company's financial position,
results of operations or cash flows.
Pursuant to a 1989 MPSC order, Missouri Gas Energy is engaged in
a major gas safety program in its service area. This program
includes replacement of company- and customer-owned gas service
and yard lines, the movement and resetting of meters, the
replacement of cast iron mains and the replacement and cathodic
protection of bare steel mains (Missouri Safety Program). In
connection with this program, the MPSC issued an accounting
authority order (AAO) in Case No. GO-94-234 in 1994 which autho-
rized MGE to defer depreciation expenses, property taxes and
carrying costs at a specified rate of 10.54% on the costs
incurred in the Missouri Safety Program. This AAO was consistent
with those which were issued by the MPSC from 1990 through 1993
to the predecessor owner of Missouri Gas Energy. Since
February 1, 1994, the Company has followed the specifications of
the AAO as provided for by generally accepted accounting
principles. The MPSC rate order of January 22, 1997, however,
retroactively reduced the carrying cost rate applied by the
Company on the expenditures incurred on the Missouri Safety
Program since early 1994 to an Allowance for Funds Used During
Construction (AFUDC) rate which ranged from 4% to 6% from October
1993 to January 1997. The Company is pursuing an appeal of that
portion of the rate order in the Missouri State Court of Appeals,
Western District. Absent a reversal of this part of the rate
order, the Company will have to record a one-time $5,600,000 pre-
tax write-off of the previously deferred carrying costs.
Associated carrying costs deferred by the Company were $671,000
and $1,592,000 for the three and nine months ended March 31,
1998, respectively. The Company has not provided for any
potential disallowance relative to this matter in its financial
statements because it believes this part of the order is not
lawful and that the related regulatory asset ultimately will be
recovered in the future. The Company believes it will ultimately
be successful in litigating this matter and, therefore, will not
have a material adverse effect on its financial position, results
of operations or cash flows.
Southern Union and its subsidiaries are parties to other legal
proceedings that its management considers to be the normal kinds
of actions to which an enterprise of its size and nature might be
subject, and not to be material to the Company's overall business
or financial condition, results of operations or cash flows.
As a result of the acquisition of Missouri Gas Energy, the
Company assumed certain obligations related to a 1990 settlement
of a Wyoming Tight Sands anti-trust claim. To secure the refund
of the settlement proceeds, the MPSC authorized the establishment
of an independently administered trust to collect cash receipts
under the Tight Sands settlement and repay credit-facility
borrowings used for the lump sum payment. In the event the trust
did not receive cash payments from the gas suppliers as provided
by the Tight Sands settlement agreements, the Company was com-
mitted to pay its applicable portion of the amount owed the
lender of the credit-facility borrowings. Due to excess cash
payments received from gas suppiers, the Company's allocable
portion of the credit-facility obligations have been fulfilled as
of March 31, 1998, two years ahead of the original payment
schedule. In accordance with the Wyoming Tight Sands agreement,
the Company's portion of the onging cash payments received from
the gas suppliers will be refunded to Missouri Gas Energy
customers as specifically defined in the Company's Purchased Gas
Adjustment tariff provisions.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's principal line of business is the distribution of
natural gas as a public utility through three divisions:
Southern Union Gas, Missouri Gas Energy and, effective January 1,
1998, Atlantic Utilities. In addition, subsidiaries of Southern
Union have been established to support and expand natural gas
sales and to capitalize on the Company's gas energy expertise.
These subsidiaries market natural gas to end-users, operate
natural gas pipeline systems, distribute propane and sell
commercial gas air conditioning and other gas-fired engine-driven
applications. By providing "one-stop shopping," the Company can
serve its various customers' specific energy needs, which
encompass substantially all of the natural gas distribution and
sales businesses from natural gas sales to specialized energy
consulting services. Certain subsidiaries own or hold interests
in real estate and other assets, which are primarily used in the
Company's utility business.
Several of these business activities are subject to regulation by
federal, state or local authorities where the Company operates.
Thus, the Company's financial condition and results of operations
have been and will continue to be dependent upon the receipt of
adequate and timely adjustments in rates. In addition, the
Company's business is affected by seasonal weather impacts,
competitive factors within the energy industry and economic
development and residential growth in its service areas.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
- ------------------------------------------
The Company recorded net earnings available for common stock of
$16,249,000 for the three-month period ended March 31, 1998 com-
pared with net earnings of $17,678,000 for the same period in
1997. Earnings per diluted share, based on weighted average com-
mon and common share equivalents outstanding during the period
were $.83 in 1998 compared with earnings per diluted share of
$.95 in 1997. Weighted average common and common share equiva-
lents increased 5% during the three-month period ended March 31,
1998 compared with 1997 due to the issuance of 755,650 shares of
common stock as of December 31, 1997 in connection with the
acquisition of Atlantic Utilities Corporation and Subsidiaries in
Florida.
Operating revenues were $265,176,000 for the three-month period
ended March 31, 1998, compared with operating revenues of
$316,915,000 in 1997. Gas purchase costs for the three-month
period ended March 31, 1998 were $170,500,000, compared with
$215,994,000 in 1997. The Company's operating revenues are
affected by the level of sales volumes and by the pass-through of
increases or decreases in the Company's gas purchase costs
through its purchased gas adjustment clauses. Additionally,
revenues are affected by increases or decreases in gross receipts
taxes (revenue-related taxes) which are levied on sales revenue
as collected from customers and remitted to the various taxing
authorities. The decrease in both operating revenues and gas
purchase costs between periods was primarily the result of a 13%
decrease in the average cost of gas from $4.13 per Mcf in 1997 to
$3.59 per Mcf in 1998. The decrease in the average cost of gas
was due to decreases in average spot market gas prices throughout
the Company's distribution system as a result of seasonal impacts
on demands for natural gas and the ensuing competitive pricing
within the industry. Additionally, operating revenues and gas
purchase costs were affected by a 10% decrease in gas sales
volume to 46,978 MMcf in 1998 from 52,331 MMcf in 1997. The
decrease in sales volumes was primarily due to significantly
warmer weather in both the Missouri and Texas service areas
during the three-month period ended March 31, 1998.
Weather for Missouri Gas Energy's service territories, which
include the city of Kansas City, Missouri, was 85% of a 30-year
measure for the three-month period ended March 31, 1998, compared
with 95% in 1997. Southern Union Gas service territories, which
include the cities of Austin and El Paso, experienced weather
that was 84% of a 30-year measure in 1998, compared with 89% in
1997. About half of the customers served by Southern Union Gas
are weather normalized.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net operating margin (operating margin less revenue-related
taxes) decreased 5% to $79,436,000 for the three-month period
ended March 31, 1998 compared with the same period in 1997. Net
operating margin decreased primarily from the reduction in gas
sales volumes as a result of warmer weather throughout the Com-
pany's service territories, as previously discussed. Addi-
tionally contributing to the decrease in net operating margin for
the three-month period ended March 31, 1998 were decreased
revenues of $2,372,000 under a gas supply incentive plan approved
by the Missouri Public Service Commission (MPSC) in July 1996.
Under the plan, Southern Union and its Missouri customers share
in certain savings below benchmark levels of gas costs incurred
as a result of the Company's gas procurement activities. These
items were partially offset by the Missouri rate increase,
effective as of February 1, 1997, approved by the MPSC. This
rate increase was for an $8,847,000 annual increase to revenues.
Operating expenses, which include operating, maintenance and
general expenses, depreciation and amortization and taxes, other
than on income and revenues, were $42,496,000 for the three-month
period ended March 31, 1998, a decrease of $4,451,000, compared
with $46,947,000 in 1997. The decrease is primarily a result of
a $4,883,000 decrease in bad debt expense. The increase in
natural gas prices during the three-month period ended March 31,
1997 caused many customers to receive significantly higher winter
heating bills and resulted in an increase in delinquent customer
accounts. Also contributing to the decrease in operating expenses
were decreased media, advertising, travel and call center labor
costs to inform customers of the significant price spikes in
natural gas which were incurred during the three-month period
ended March 31, 1997. These items were partially offset by an
increase of $893,000 in depreciation and amortization and a
$599,000 increase in taxes, other than on income and revenues, as
a result of including certain costs into rate base that had been
previously deferred.
Interest expense was $8,970,000 for the three-month period ended
March 31, 1998, compared with $8,368,000 in 1997. The increase
is primarily due to increased borrowings under the Company's
various financing facilities during the three-month period ended
March 31, 1998 compared to the same period in 1997. See "Debt"
in the Notes to the Consolidated Financial Statements included
herein.
Other income for the three-month period ended March 31, 1998 was
$1,257,000, compared with $2,960,000 in 1997. Other income for the
three-month period ended March 31, 1998 consisted principally of
$526,000 related to the deferral of interest and other expenses
associated with the Missouri Gas Energy Safety Program and net
rental income from Lavaca Realty Company (Lavaca Realty), the
Company's real estate subsidiary, of $269,000. Other income for
1997 included realized gains on the sale of investment securities
of $1,786,000, the deferral of interest and other expenses
associated with the Missouri Gas Energy Safety Program of
$1,030,000 and net rental income from Lavaca Realty of $370,000.
For the three-month period ended March 31, 1998, federal and
state income taxes decreased $935,000, or 8%, over the same
period in 1997 due to lower pre-tax earnings as discussed above.
The Company's consolidated federal and state effective income tax
rate was 39% for the three months ended March 31, 1998, compared
with 40% in 1997.
The three-month period ended March 31 is generally the Company's
most profitable quarter. Because Missouri Gas Energy's rate
structure collects a greater percentage of its margin in the
winter heating season months, operating losses are expected
during the upcoming quarters ended June 30 and September 30,
1998.
Nine Months Ended March 31, 1998 and 1997
- -----------------------------------------
The Company recorded net earnings available for common stock of
$21,077,000 for the nine-month period ended March 31, 1998,
compared with net earnings of $21,934,000 for the same period in
1997. Earnings per diluted share, based on weighted average
common and common share equivalents outstanding during the
period, were $1.11 in 1998 compared with earnings per diluted
share of $1.18 in 1997.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating revenues were $560,377,000 for the nine-month period
ended March 31, 1998, compared with operating revenues of
$629,208,000 in 1997. Gas purchase costs for the nine-month
period ended March 31, 1998 were $346,775,000 compared with
$410,354,000 in 1997. The decrease in both operating revenues
and gas purchase costs between periods was primarily the result
of a 9% decrease in the average cost of gas from $3.92 in 1997 to
$3.55 per Mcf in 1998, due to decreases in average spot market
gas prices. Additionally, operating revenues and gas purchase
costs were affected by a 7% decrease in gas sales volume to
96,791 MMcf in 1998 from 104,544 MMcf in 1997. The decrease in
sales volumes was primarily due to warmer weather in the Missouri
service areas during the nine-month period ended March 31, 1998.
Missouri Gas Energy's service territories experienced weather
which was 91% of a 30-year measure for the nine months ended
March 31, 1998 compared with 101% in 1997. Weather for Southern
Union Gas service territories for the nine-month period ended
March 31, 1998 was 97% of a 30-year measure compared with 89% in
1997.
Net operating margin decreased 1% to $183,729,000 for the nine-
onth period ended March 31, 1998 compared with the same period in
1997. Net operating margin decreased primarily from the reduc-
tion in volumes as a result of warmer weather in the Missouri
service territories, which was partially offset by the impact of
the Missouri rate increase, both previously discussed.
Operating expenses were $118,856,000 for the nine-month period
ended March 31, 1998, a decrease of $3,268,000, compared with
$122,124,000 in 1997. The decrease is primarily a result of a
$5,667,000 decrease in bad debt expense and decreases in
certain operating expenses associated with informing customers
about natural gas price increases in 1997, both previously
discussed. These items were partially offset by an increase of
$3,158,000 in depreciation and amortization and a $1,552,000
increase in taxes, other than on income and revenues as a result
of including certain costs into rate base that had been
previously deferred.
Interest expense was $26,544,000 for the nine-month period ended
March 31, 1998, compared with $25,397,000 in 1997. The increase
in interest expense is primarily from increased borrowings under
the Company's various financing facilities, previsouly discussed.
See "Debt" in the Notes to the Consolidated Financial Statements
for the quarter ended March 31, 1998.
Other income for the nine-month period ended March 31, 1998 was
$3,619,000 compared with $5,758,000 in 1997. Other income in 1998
included $1,246,000 related to the deferral of interest and other
expenses associated with the Missouri Gas Energy Safety Program,
realized gains on the sale of investment securities of $1,088,000
and net rental income from Lavaca Realty of $756,000. Other
income for 1997 included $4,281,000 related to the deferral of
interest and other expenses associated with the Missouri Gas
Energy Safety Program, realized gains on the sale of investment
securities of $2,545,000 and net rental income from Lavaca Realty
of $1,068,000. This was partially offset by the write-off of
$1,150,000 of acquisition-related costs as a result of termina-
tion of various acquisition activities.
For the nine-month period ended March 31, 1998, federal and state
income taxes decreased $560,000 over the same period in 1997.
The Company's consolidated federal and state effective income tax
rate was 39% and 40% for the nine months ended March 31, 1998 and
1997, respectively.
Twelve Months Ended March 31, 1998 and 1997
- -------------------------------------------
The Company recorded net earnings available for common stock of
$18,174,000 for the twelve-month period ended March 31, 1998
compared with net earnings of $19,076,000 in 1997. Earnings per
diluted share based on weighted average common and common share
equivalents outstanding during the period were $.96 in 1998
compared with earnings per diluted share of $1.03 in 1997.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operating revenues were $648,200,000 for the twelve-month period
ended March 31, 1998, compared with operating revenues of
$723,404,000 in 1997. Gas purchase costs for the twelve-month
period ended March 31, 1998 were $385,609,000, compared with gas
purchase costs of $459,008,000 in 1997. The decrease in both
operating revenues and gas purchase costs between periods was
primarily the result of a 13% decrease in the average cost of gas
from $3.85 in 1997 to $3.35 per Mcf in 1998, due to decreases in
average spot market gas prices. Additionally, operating revenues
and gas purchase costs were affected by a 4% decrease in gas
sales volume to 113,963 MMcf in 1998 from 119,087 MMcf in 1997.
The decrease in sales volumes was primarily due to warmer weather
in the Missouri service areas during the twelve-month period
ended March 31, 1998.
Missouri Gas Energy's service territories experienced weather
that was 95% of the 30-year measure for the twelve-month period
ended March 31, 1998 compared with 102% in 1997. Weather for
Southern Union Gas service territories for the twelve-month
period ended March 31, 1998 was 103% of a 30-year measure com-
pared with 93% in 1997.
Net operating margin increased 1% to $226,942,000 for the twelve-
month period ended March 31, 1998 compared with the same period
in 1997. Net operating margin increased primarily due to colder
weather and increased volumes in Texas service territories and
the Missouri rate increase, both previously discussed. This was
partially offset by a reduction in volumes in Missouri as a
result of the warmer winter weather in the Missouri service
territories.
Operating expenses were $153,602,000 for the twelve-month period
ended March 31, 1998, a decrease of $7,834,000, compared with
operating expenses of $161,436,000 in 1997. The decrease is
primarily a result of a $5,867,000 decrease in bad debt expense
and decreases in certain operating expenses associated with
informing customers about natural gas price increases in 1997,
both previously discussed. These items were partially offset by
an increase of $4,359,000 in depreciation and amortization and a
$1,459,000 increase in taxes, other than on income and revenues
as a result of including certain costs into rate base that had
been previously deferred.
Interest expense was $34,613,000 for the twelve-month period
ended March 31, 1998, compared with $33,929,000 in 1997. The
increase is primarily due to increased borrowings under the
various financing facilities during the twelve-month period ended
March 31, 1998 compared to the same period in 1997. See "Debt"
in the Notes to the Consolidated Financial Statements for the
quarter ended March 31, 1998.
Other income for the twelve-month period ended March 31, 1998 was
$741,000 compared with $12,494,000 in 1997. Other income for the
twelve-month period ended March 31, 1998 included $1,088,000 in
realized gains on the sale of investment securities, net rental
income from Lavaca Realty Company of $1,017,000 and $694,000
related to the deferral of interest and other expenses associated
with the Missouri Gas Energy Safety Program. This was partially
offset by $2,150,000 for the settlement of certain billing errors
at Missouri Gas Energy. Other income for 1997 included
$6,283,000 related to the deferral of interest and other expenses
associated with the Missouri Gas Energy Safety Program, realized
gains on the sale of investment securities of $2,545,000, a pre-
tax gain of $2,050,000 on the sale of Western Gas Interstate and
other operations, a $1,488,000 gain on the repurchase of Senior
Notes and net rental income from Lavaca Realty of $1,423,000.
This was partially offset by the write-off of $1,150,000 of
acquisition-related costs.
For the twelve-month period ended March 31, 1998, federal and
state income taxes decreased $2,029,000 over the same period in
1997 due to a reduction in pre-tax earnings as discussed above.
The Company's consolidated federal and state effective income tax
rate was 39% for the twelve-month period ended March 31, 1998
compared with 42% in 1997.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain information regarding the
Company's gas utility operations for the three- and twelve-month
periods ended March 31, 1998 and 1997:
Three Months Twelve Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
-------- -------- -------- --------
Average number of gas
sales customers served:
Residential.......... 892,732 872,757 876,136 861,244
Commercial........... 90,819 88,785 86,858 86,160
Industrial and
irrigation......... 560 650 569 618
Pipeline and
marketing.......... 226 193 223 232
Public authorities
and other.......... 2,841 2,644 2,743 2,689
-------- -------- -------- --------
Total average
customers
served......... 987,178 965,029 966,529 950,943
======== ======== ======== ========
Gas sales in millions of
cubic feet (Mmcf):
Residential.......... 31,351 34,333 64,791 69,103
Commercial........... 12,763 14,411 28,220 31,143
Industrial and
irrigation......... 504 586 1,658 2,296
Pipeline and
marketing.......... 5,113 6,098 16,707 16,772
Public authorities
and other.......... 1,280 1,375 2,714 2,791
-------- -------- -------- --------
Gas sales billed. 51,011 56,803 114,089 122,105
Net change in
unbilled gas sales. (4,033) (4,472) (127) (3,018)
-------- -------- -------- --------
Total gas sales.. 46,978 52,331 113,963 119,087
======== ======== ======== ========
Gas sales revenues
(thousands of dollars):
Residential.......... $181,858 $216,895 $397,670 $450,323
Commercial........... 72,435 89,821 153,509 181,421
Industrial and
irrigation......... 2,484 3,455 7,741 10,409
Pipeline and
marketing.......... 12,025 18,211 39,484 46,313
Public authorities
and other.......... 4,918 6,760 11,160 13,147
-------- -------- -------- --------
Gas sales reve-
nues billed.... 273,720 335,142 609,563 701,613
Net change in
unbilled gas sales
revenues........... (21,417) (31,463) 1,212 (13,406)
-------- -------- -------- --------
Total gas sales
revenues....... $252,303 $303,679 $610,776 $688,207
======== ======== ======== ========
Gas sales margin
(thousands of dollars). $ 83,571 $ 87,681 $228,337 $229,673
======== ======== ======== ========
Gas sales revenue per
thousand cubic feet
(Mcf) billed:
Residential.......... $ 5.801 $ 6.317 $ 6.138 $ 6.517
Commercial........... 5.675 6.233 5.440 5.825
Industrial and
irrigation......... 4.928 5.896 4.667 4.534
Pipeline and
marketing.......... 2.352 2.986 2.363 2.761
Public authorities
and other.......... 3.843 4.916 4.113 4.710
Weather effect:
Degree days:
Southern Union Gas
service
territories........ 1,055 1,092 2,131 1,919
Missouri Gas Energy
service
territories........ 2,388 2,661 4,982 5,353
Percent of normal,
based on 30-year
measure:
Southern Union Gas
service
territories...... 84% 89% 103% 93%
Missouri Gas
Energy service
territories...... 85% 95% 95% 102%
Gas transported in
millions of cubic feet
(Mmcf)................. 15,231 17,310 63,446 62,747
Gas transportation reve-
nues (thousands of
dollars)............... $ 6,221 $ 6,779 $ 20,066 $ 20,903
- --------------------
The above information does not include the operations of Atlantic
Utilities Corporation and Subsidiaries or the Company's 42%
equity ownership in a natural gas distribution company serving
Piedras Negras, Mexico.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REGULATORY MATTERS
Missouri Gas Energy filed a $27,800,000 request for a rate
increase with the MPSC on October 3, 1997. New rates will become
effective on September 2, 1998 unless the case is settled
earlier. The increase includes: recovery of the ongoing Missouri
Safety Program Costs; investments in customer service, including
the first phases of Automated Meter Reading technology; and
higher bad debt expense. The Company's proposed rates would
recover a larger percentage of fixed costs through the monthly
customer charge and a smaller percentage through the volumetric
charge.
On April 13, 1998 Southern Union Gas filed for a $2,228,000
request for a rate increase from the city of El Paso. In turn,
on April 21, 1998, the city council of El Paso voted to reduce
the Company's rates by $1,570,000 annually. The Company
intends to appeal the council's actions to the Texas Railroad
Commission, which has final authorization on natural gas rates
in the state.
FINANCIAL CONDITION
The Company's gas utility operations are seasonal in nature with
a significant percentage of the annual revenues and earnings
occurring in the traditional heating-load months. This
seasonality results in a high level of cash flow needs during the
peak winter heating season months, resulting from the required
payments to natural gas suppliers in advance of the receipt of
cash payments from the Company's customers. The Company has
historically used internally generated funds and its revolving
loan and credit facilities to provide funding for its seasonal
working capital, continuing construction and maintenance programs
and operational requirements.
The principal source of funds during the three-month period ended
March 31, 1998 included $7,247,000 from the acquisition of
operations, net of cash received and $88,597,000 in cash flow
from operations. These sources provided funds for additions to
property, plant and equipment of $12,653,000 and $76,800,000 in
net repayments under the Company's financing facilities.
The principal sources of funds during the nine-month period ended
March 31, 1998 included $32,659,000 in cash flow from operations,
$6,531,000 from the sale of investment securities, $6,502,000
from the acquisition of operations, net of cash received and
$15,400,000 from the Company's revolving and uncommitted credit
facilities. These sources provided funds for additions to
property, plant and equipment of $51,828,000, $5,000,000 for the
purchase of investment securities and other seasonal working
capital needs of the Company.
The effective interest rate under the Company's current debt
structure is 8.1% (including interest and the amortization of
debt issuance costs and redemption premiums on refinanced debt).
The Company has availability under a $100,000,000 revolving
credit facility (Revolving Credit Facility) underwritten by a
syndicate of banks. The Company had additional availability
under uncommitted line of credit facilities (Uncommitted
Facilities) with various banks. Covenants under the Revolving
Credit Facility allow for up to $35,000,000 of borrowings under
Uncommitted Facilities at any one time. Borrowings under these
facilities are available for Southern Union's working capital,
letter of credit requirements and other general corporate pur-
poses. Amounts outstanding under these facilities at March 31,
1998 and May 8, 1998 were $17,000,000 and nil, respectively.
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
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.
SOUTHERN UNION COMPANY
----------------------
(Registrant)
Date May 14, 1998 By: RONALD J. ENDRES
-------------- ----------------
Ronald J. Endres
Executive Vice President and
Chief Financial Officer
Date May 14, 1998 By: DAVID J. KVAPIL
------------- ---------------
David J. Kvapil
Senior Vice President and
Corporate Controller
(Principal Accounting Officer)
<PAGE>
SOUTHERN UNION COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS Exhibit 11
Three Months Nine Months Twelve Months
Ended Ended Ended
1998 1997 1998 1997 1998 1997
------- ------- ------- ------- ------- -------
(in thousands, except per share amounts)
Net earnings
available for
common stock.. $16,249 $17,678 $21,077 $21,934 $18,174 $19,076
======= ======= ======= ======= ======= =======
Basic earnings
per share:
Average
shares out-
standing.... 18,791 17,934 18,250 17,907 18,181 17,902
======= ======= ======= ======= ======= =======
Basic earnings
per share..... $ .86 $ .99 $ 1.15 $ 1.22 $ 1.00 $ 1.07
======= ======= ======= ======= ======= =======
Diluted earn-
ings per
share:
Average
shares out-
standing.... 18,791 17,934 18,250 17,907 18,181 17,902
Common stock
equivalents. 676 688 700 704 700 703
------- ------- ------- ------- ------- -------
Average
shares out-
standing.... 19,467 18,622 18,950 18,611 18,881 18,605
======= ======= ======= ======= ======= =======
Diluted earn-
ings per
share....... $ .83 $ .95 $ 1.11 $ 1.18 $ .96 $ 1.03
======= ======= ======= ======= ======= =======
- ------------------
Note: All periods have been adjusted to reflect the five percent
stock dividend distributed on December 10, 1997.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 827,807,000
<OTHER-PROPERTY-AND-INVEST> $ 14,762,000
<TOTAL-CURRENT-ASSETS> $ 138,349,000
<TOTAL-DEFERRED-CHARGES> $ 103,698,000
<OTHER-ASSETS> $ 5,321,000
<TOTAL-ASSETS> $1,089,937,000
<COMMON> $ 18,848,000
<CAPITAL-SURPLUS-PAID-IN> $ 261,995,000
<RETAINED-EARNINGS> $ 25,588,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 305,637,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 398,217,000
<SHORT-TERM-NOTES> $ 17,000,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 1,367,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 138,716,000
<TOT-CAPITALIZATION-AND-LIAB> $1,089,937,000
<GROSS-OPERATING-REVENUE> $ 560,377,000
<INCOME-TAX-EXPENSE> $ 13,761,000
<OTHER-OPERATING-EXPENSES> $ 79,602,000
<TOTAL-OPERATING-EXPENSES> $ 118,856,000
<OPERATING-INCOME-LOSS> $ 64,873,000
<OTHER-INCOME-NET> $ 3,619,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 47,621,000
<TOTAL-INTEREST-EXPENSE> $ 26,544,000
<NET-INCOME> $ 21,077,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 21,077,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 32,659,000
<EPS-PRIMARY> $ 1.15
<EPS-DILUTED> $ 1.11
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 748,646,000
<OTHER-PROPERTY-AND-INVEST> $ 10,742,000
<TOTAL-CURRENT-ASSETS> $ 126,613,000
<TOTAL-DEFERRED-CHARGES> $ 114,167,000
<OTHER-ASSETS> $ 2,334,000
<TOTAL-ASSETS> $1,002,502,000
<COMMON> $ 11,570,000
<CAPITAL-SURPLUS-PAID-IN> $ 198,819,000
<RETAINED-EARNINGS> $ 16,069,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 225,664,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 462,503,000
<SHORT-TERM-NOTES> $ 0
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 770,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 213,565,000
<TOT-CAPITALIZATION-AND-LIAB> $1,002,502,000
<GROSS-OPERATING-REVENUE> $ 480,046,000
<INCOME-TAX-EXPENSE> $ 10,974,000
<OTHER-OPERATING-EXPENSES> $ 104,072,000
<TOTAL-OPERATING-EXPENSES> $ 176,091,000
<OPERATING-INCOME-LOSS> $ 62,116,000
<OTHER-INCOME-NET> $ 5,970,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 55,953,000
<TOTAL-INTEREST-EXPENSE> $ 39,884,000
<NET-INCOME> $ 16,069,000
$ 1,159,000
<EARNINGS-AVAILABLE-FOR-COMM> $ 16,069,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 41,642,000
<EPS-PRIMARY> $ .91
<EPS-DILUTED> $ .89
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 744,454,000
<OTHER-PROPERTY-AND-INVEST> $ 9,513,000
<TOTAL-CURRENT-ASSETS> $ 82,353,000
<TOTAL-DEFERRED-CHARGES> $ 116,286,000
<OTHER-ASSETS> $ 11,854,000
<TOTAL-ASSETS> $ 964,460,000
<COMMON> $ 16,275,000
<CAPITAL-SURPLUS-PAID-IN> $ 206,047,000
<RETAINED-EARNINGS> $ 25,631,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 245,915,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 385,394,000
<SHORT-TERM-NOTES> $ 0
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 615,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 230,498,000
<TOT-CAPITALIZATION-AND-LIAB> $ 964,460,000
<GROSS-OPERATING-REVENUE> $ 620,391,000
<INCOME-TAX-EXPENSE> $ 14,979,000
<OTHER-OPERATING-EXPENSES> $ 107,521,000
<TOTAL-OPERATING-EXPENSES> $ 154,162,000
<OPERATING-INCOME-LOSS> $ 69,804,000
<OTHER-INCOME-NET> $ 11,326,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 56,671,000
<TOTAL-INTEREST-EXPENSE> $ 35,832,000
<NET-INCOME> $ 20,839,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 20,839,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 67,465,000
<EPS-PRIMARY> $ 1.17
<EPS-DILUTED> $ 1.13
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1996
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 750,446,000
<OTHER-PROPERTY-AND-INVEST> $ 9,258,000
<TOTAL-CURRENT-ASSETS> $ 92,129,000
<TOTAL-DEFERRED-CHARGES> $ 116,890,000
<OTHER-ASSETS> $ 22,111,000
<TOTAL-ASSETS> $ 990,834,000
<COMMON> $ 16,275,000
<CAPITAL-SURPLUS-PAID-IN> $ 206,047,000
<RETAINED-EARNINGS> $ 20,226,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 243,732,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 386,143,000
<SHORT-TERM-NOTES> $ 55,500,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 680,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 205,963,000
<TOT-CAPITALIZATION-AND-LIAB> $ 990,834,000
<GROSS-OPERATING-REVENUE> $ 80,830,000
<INCOME-TAX-EXPENSE> $ (3,078,000)
<OTHER-OPERATING-EXPENSES> $ 25,315,000
<TOTAL-OPERATING-EXPENSES> $ 37,066,000
<OPERATING-INCOME-LOSS> $ 439,000
<OTHER-INCOME-NET> $ 1,735,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 2,882,000
<TOTAL-INTEREST-EXPENSE> $ 8,287,000
<NET-INCOME> $ (5,405,000)
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ (5,405,000)
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ (38,691,000)
<EPS-PRIMARY> $ (.30)
<EPS-DILUTED> $ (.30)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 6-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 758,845,000
<OTHER-PROPERTY-AND-INVEST> $ 24,690,000
<TOTAL-CURRENT-ASSETS> $ 187,796,000
<TOTAL-DEFERRED-CHARGES> $ 115,738,000
<OTHER-ASSETS> $ 2,771,000
<TOTAL-ASSETS> $1,089,840,000
<COMMON> $ 17,121,000
<CAPITAL-SURPLUS-PAID-IN> $ 224,902,000
<RETAINED-EARNINGS> $ 10,393,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 253,112,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 385,988,000
<SHORT-TERM-NOTES> $ 61,200,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 700,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 288,046,000
<TOT-CAPITALIZATION-AND-LIAB> $1,089,840,000
<GROSS-OPERATING-REVENUE> $ 311,712,000
<INCOME-TAX-EXPENSE> $ 2,778,000
<OTHER-OPERATING-EXPENSES> $ 52,495,000
<TOTAL-OPERATING-EXPENSES> $ 75,177,000
<OPERATING-INCOME-LOSS> $ 25,424,000
<OTHER-INCOME-NET> $ 3,378,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 21,284,000
<TOTAL-INTEREST-EXPENSE> $ 17,028,000
<NET-INCOME> $ 4,256,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 4,256,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ (35,198,000)
<EPS-PRIMARY> $ .24
<EPS-DILUTED> $ .23
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 760,054,000
<OTHER-PROPERTY-AND-INVEST> $ 15,393,000
<TOTAL-CURRENT-ASSETS> $ 144,576,000
<TOTAL-DEFERRED-CHARGES> $ 109,726,000
<OTHER-ASSETS> $ 2,397,000
<TOTAL-ASSETS> $1,032,146,000
<COMMON> $ 17,162,000
<CAPITAL-SURPLUS-PAID-IN> $ 225,201,000
<RETAINED-EARNINGS> $ 28,071,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 270,193,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 385,856,000
<SHORT-TERM-NOTES> $ 20,800,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 701,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 254,355,000
<TOT-CAPITALIZATION-AND-LIAB> $1,032,146,000
<GROSS-OPERATING-REVENUE> $ 625,643,000
<INCOME-TAX-EXPENSE> $ 14,321,000
<OTHER-OPERATING-EXPENSES> $ 87,580,000
<TOTAL-OPERATING-EXPENSES> $ 122,124,000
<OPERATING-INCOME-LOSS> $ 59,439,000
<OTHER-INCOME-NET> $ 9,323,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 47,331,000
<TOTAL-INTEREST-EXPENSE> $ 25,397,000
<NET-INCOME> $ 21,934,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 21,934,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 5,394,000
<EPS-PRIMARY> $ 1.22
<EPS-DILUTED> $ 1.18
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 773,596,000
<OTHER-PROPERTY-AND-INVEST> $ 9,046,000
<TOTAL-CURRENT-ASSETS> $ 96,223,000
<TOTAL-DEFERRED-CHARGES> $ 109,512,000
<OTHER-ASSETS> $ 2,026,000
<TOTAL-ASSETS> $ 990,403,000
<COMMON> $ 17,171,000
<CAPITAL-SURPLUS-PAID-IN> $ 225,252,000
<RETAINED-EARNINGS> $ 25,169,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 267,462,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 386,157,000
<SHORT-TERM-NOTES> $ 1,600,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 687,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 234,367,000
<TOT-CAPITALIZATION-AND-LIAB> $ 990,403,000
<GROSS-OPERATING-REVENUE> $ 717,031,000
<INCOME-TAX-EXPENSE> $ 12,373,000
<OTHER-OPERATING-EXPENSES> $ 109,888,000
<TOTAL-OPERATING-EXPENSES> $ 156,871,000
<OPERATING-INCOME-LOSS> $ 71,470,000
<OTHER-INCOME-NET> $ 2,880,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 52,497,000
<TOTAL-INTEREST-EXPENSE> $ 33,465,000
<NET-INCOME> $ 19,032,000
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ 19,032,000
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ 47,994,000
<EPS-PRIMARY> $ 1.06
<EPS-DILUTED> $ 1.02
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 3-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $ 787,968,000
<OTHER-PROPERTY-AND-INVEST> $ 9,192,000
<TOTAL-CURRENT-ASSETS> $ 102,175,000
<TOTAL-DEFERRED-CHARGES> $ 107,591,000
<OTHER-ASSETS> $ 1,823,000
<TOTAL-ASSETS> $1,008,749,000
<COMMON> $ 17,174,000
<CAPITAL-SURPLUS-PAID-IN> $ 225,267,000
<RETAINED-EARNINGS> $ 20,260,000
<TOTAL-COMMON-STOCKHOLDERS-EQ> $ 261,907,000
$ 0
$ 100,000,000
<LONG-TERM-DEBT-NET> $ 392,921,000
<SHORT-TERM-NOTES> $ 60,300,000
<LONG-TERM-NOTES-PAYABLE> $ 0
<COMMERCIAL-PAPER-OBLIGATIONS> $ 0
<LONG-TERM-DEBT-CURRENT-PORT> $ 797,000
$ 0
<CAPITAL-LEASE-OBLIGATIONS> $ 0
<LEASES-CURRENT> $ 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $ 192,701,000
<TOT-CAPITALIZATION-AND-LIAB> $1,008,749,000
<GROSS-OPERATING-REVENUE> $ 74,039,000
<INCOME-TAX-EXPENSE> $ (2,737,000)
<OTHER-OPERATING-EXPENSES> $ 23,789,000
<TOTAL-OPERATING-EXPENSES> $ 37,208,000
<OPERATING-INCOME-LOSS> $ 1,405,000
<OTHER-INCOME-NET> $ 1,769,000
<INCOME-BEFORE-INTEREST-EXPEN> $ 3,541,000
<TOTAL-INTEREST-EXPENSE> $ 8,450,000
<NET-INCOME> $ (4,909,000)
$ 0
<EARNINGS-AVAILABLE-FOR-COMM> $ (4,909,000)
<COMMON-STOCK-DIVIDENDS> $ 0
<TOTAL-INTEREST-ON-BONDS> $ 0
<CASH-FLOW-OPERATIONS> $ (43,132,000)
<EPS-PRIMARY> $ (.27)
<EPS-DILUTED> $ (.27)
</TABLE>
