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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 1-7727
-----------------------------------------------------
CONNECTICUT NATURAL GAS CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0383860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(203) 727-3000
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(Registrant's telephone number, including area code)
----------------------------------------------------------------------------
(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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on April 27, 1994: 9,539,078.
<PAGE>
FINANCIAL STATEMENTS
CONNECTICUT NATURAL GAS CORPORATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K. In the opinion
of the Company, all adjustments necessary to present fairly the consolidated
financial position of the Connecticut Natural Gas Corporation as of March
31, 1994 and 1993 and the results of its operations and its cash flows for
the three months, six months and twelve months ended March 31, 1994 and 1993
have been included. The results of operations for such interim periods are
not necessarily indicative of the results for the full year.
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
March 31, Sept. 30, March 31,
ASSETS 1994 1993 1993
------ --------- --------- ---------
<S> <C> <C> <C>
Plant and Equipment:
Regulated energy $ 350,008 $ 340,728 $ 312,118
Nonregulated energy 61,907 61,447 59,133
Construction work in progress 1,262 1,355 1,759
--------- --------- ---------
413,177 403,530 373,010
Less-Allowance for depreciation 113,003 106,919 101,545
--------- --------- ---------
300,174 296,611 271,465
--------- --------- ---------
Investments, at equity 4,974 4,874 5,374
--------- --------- ---------
Current Assets:
Cash and cash equivalents 1,399 1,546 1,643
Accounts and notes receivable 67,961 29,979 62,108
Allowance for doubtful accounts (6,280) (3,068) (3,219)
Accrued utility revenue 12,576 4,632 10,988
Inventories 7,330 20,413 4,592
Prepaid expenses 2,488 3,379 1,176
--------- --------- ---------
85,474 56,881 77,288
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 53,181 51,023 50,798
Recoverable transition costs 14,903 15,000 -
Other assets 20,067 20,196 26,174
--------- --------- ---------
88,151 86,219 76,972
--------- --------- ---------
$ 478,773 $ 444,585 $ 431,099
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
March 31, Sept. 30, March 31,
CAPITALIZATION AND LIABILITIES 1994 1993 1993
------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Capitalization:
Common Stock $ 29,820 $ 29,820 $ 29,820
Capital in excess of par value 66,816 66,915 66,840
Retained Earnings 54,368 39,744 49,480
--------- --------- ---------
151,004 136,479 146,140
Unearned compensation -
Restricted stock awards (593) (157) (399)
Treasury stock (103) - (2)
--------- --------- ---------
Common stock equity 150,308 136,322 145,739
Preferred stock, not subject to
mandatory redemption 940 944 952
Long-term debt 136,793 137,984 120,062
--------- --------- ---------
288,041 275,250 266,753
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements - 4,500 5,900
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 4,222 4,653 4,508
Notes payable and commercial paper 16,600 10,000 3,600
Accounts payable and accrued expenses 35,068 42,084 29,383
Refundable purchased gas costs 15,859 3,758 13,741
Accrued liabilities 11,173 4,528 8,154
--------- --------- ---------
82,922 65,023 59,386
--------- --------- ---------
Deferred Credits:
Deferred income taxes 37,591 27,450 34,198
Unfunded deferred income taxes 55,339 51,023 50,798
Investment tax credits 3,754 3,864 3,975
Refundable taxes 3,943 4,024 4,308
Accrued transition costs 4,236 7,678 -
Other 2,947 5,773 5,781
--------- --------- ---------
107,810 99,812 99,060
--------- --------- ---------
$ 478,773 $ 444,585 $ 431,099
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
March 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Operating Revenues $ 122,565 $ 106,397
Less: Cost of Energy 66,126 58,565
State Gross Receipts Tax 5,454 4,501
---------- ----------
Operating Margin 50,985 43,331
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 15,051 11,876
Depreciation 4,002 3,137
Income taxes 11,626 9,984
Other taxes 2,050 1,797
---------- ----------
32,729 26,794
---------- ----------
Operating Income 18,256 16,537
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 17 34
Equity in partnership earnings 226 121
Other deductions (517) (292)
Income Taxes 133 (69)
---------- ----------
(141) (206)
---------- ----------
Interest and Debt Expense 3,079 2,981
---------- ----------
Net Income 15,036 13,350
Less-Dividends on Preferred Stock 16 17
---------- ----------
Net Income Applicable to Common Stock $ 15,020 $ 13,333
========== ==========
Income Per Average Share of
Common Stock $ 1.57 $ 1.40
========== ==========
Dividends Per Share of Common Stock $ 0.37 $ 0.36
========== ==========
Average Common Shares Outstanding
During the Period 9,539,078 9,542,055
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Six Months Ended
March 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Operating Revenues $ 202,705 $ 182,948
Less: Cost of Energy 110,862 100,919
State Gross Receipts Tax 8,475 7,856
---------- ----------
Operating Margin 83,368 74,173
---------- ----------
Operating Expenses:
Operations & maintenance expenses 27,642 22,804
Depreciation 7,365 6,301
Income taxes 16,335 15,792
Other taxes 3,850 3,623
---------- ----------
55,192 48,520
---------- ----------
Operating Income 28,176 25,653
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 31 61
Equity in partnership earnings 452 286
Other deductions (904) (320)
Income Taxes 188 (110)
---------- ----------
(233) (83)
---------- ----------
Interest and Debt Expense 6,227 6,074
---------- ----------
Net Income 21,716 19,496
Less-Dividends on Preferred Stock 33 34
---------- ----------
Net Income Applicable to Common Stock $ 21,683 $ 19,462
========== ==========
Income Per Average Share of
Common Stock $ 2.27 $ 2.05
========== ==========
Dividends Per Share of Common Stock $ 0.74 $ 0.72
========== ==========
Average Common Shares Outstanding
During the Period 9,540,315 9,513,209
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
March 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Operating Revenues $ 285,094 $ 259,484
Less: Cost of Energy 155,082 137,503
State Gross Receipts Tax 11,714 11,247
---------- ----------
Operating Margin 118,298 110,734
---------- ----------
Operating Expenses:
Operations & maintenance expenses 52,781 47,884
Depreciation 13,713 12,102
Income taxes 13,981 14,679
Other taxes 7,114 7,426
---------- ----------
87,589 82,091
---------- ----------
Operating Income 30,709 28,643
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 576 69
Equity in partnership earnings 1,136 435
Other income (deductions) (1,197) 103
Income Taxes (255) (67)
---------- ----------
260 540
---------- ----------
Interest and Debt Expense 11,894 13,253
---------- ----------
Net Income 19,075 15,930
Less-Dividends on Preferred Stock 66 68
---------- ----------
Net Income Applicable to Common Stock $ 19,009 $ 15,862
========== ==========
Income Per Average Share of
Common Stock $ 1.99 $ 1.74
========== ==========
Dividends Per Share of Common Stock $ 1.48 $ 1.44
========== ==========
Average Common Shares Outstanding
During the Period 9,541,288 9,114,019
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operations $ 36,410 $ 23,409
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (4,887) (3,912)
Other investing activities (1,520) (3,906)
-------- --------
Net cash used in investing activities (6,407) (7,818)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (3,546) (3,452)
Issuance of common stock 78 (73)
Other stock activity, net (3) (10)
Issuance of long-term debt - -
Principal retired on long-term debt (4,410) (472)
Short-term debt (21,391) (10,200)
-------- --------
Net cash provided (used) by
financing activities (29,272) (14,207)
-------- --------
Increase (Decrease) in Cash and
Cash Equivalents 731 1,384
Cash and Cash Equivalents at
Beginning of Period 668 259
-------- --------
Cash and Cash Equivalents at
End of Period $ 1,399 $ 1,643
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 15,036 $ 13,350
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,108 3,227
Deferred income taxes, net 8,381 7,030
Undistributed affiliate earnings (226) (121)
Change in assets and liabilities:
Accounts receivable (21,864) (19,378)
Accrued utility revenue 4,252 3,889
Inventories 11,439 6,532
Unrecovered/(refundable)
purchased gas costs 14,456 10,774
Prepaid expenses (593) (560)
Accounts payable and accrued expenses 4,304 (1,442)
Other assets/liabilities (2,883) 108
-------- --------
Total adjustments 21,374 10,059
-------- --------
Cash flows from operations $ 36,410 $ 23,409
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $ 1,153 $ 1,224
======== ========
Income taxes $ (2,496) $ 1,100
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Six Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operations $ 21,115 $ 12,282
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (8,893) (9,132)
Other investing activities (5,113) (758)
-------- --------
Net cash used in investing activities (14,006) (9,890)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (7,092) (6,904)
Issuance of common stock 73 16,596
Other stock activity, net (715) (10)
Principal retired on long-term debt (1,622) (2,321)
Short-term debt 2,100 (8,450)
-------- --------
Net cash provided by
financing activities (7,256) (1,089)
-------- --------
Decrease in Cash and
Cash Equivalents (147) 1,303
Cash and Cash Equivalents at
Beginning of Period 1,546 340
-------- --------
Cash and Cash Equivalents at
End of Period $ 1,399 $ 1,643
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Six Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 21,716 $ 19,496
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 7,579 6,491
Deferred income taxes, net 12,149 7,549
Undistributed affiliate earnings (452) (286)
Change in assets and liabilities:
Accounts receivable (34,770) (31,776)
Accrued utility revenue (7,944) (6,695)
Inventories 13,083 8,748
Unrecovered/(refundable)
purchased gas costs 12,101 1,419
Prepaid expenses 891 1,182
Accounts payable and accrued expenses (371) 5,936
Other assets/liabilities (2,867) 218
-------- --------
Total adjustments (601) (7,214)
-------- --------
Cash flows from operations $ 21,115 $ 12,282
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $ 4,825 $ 4,110
======== ========
Income taxes $ 2,706 $ 4,655
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operations $ 32,732 $ 26,397
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (25,292) (24,638)
Other investing activities (16,711) (10,381)
-------- --------
Net cash used in investing activities (42,003) (35,019)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (14,187) (13,247)
Issuance of common stock 390 18,358
Other stock activity, net (721) (14)
Issuance of long-term debt 35,100 45,000
Principal retired on long-term debt (18,655) (45,269)
Short-term debt 7,100 4,800
-------- --------
Net cash provided by
financing activities 9,027 9,628
-------- --------
Increase (decrease) in Cash and
Cash Equivalents (244) 1,006
Cash and Cash Equivalents at
Beginning of Period 1,643 637
-------- --------
Cash and Cash Equivalents at
End of Period $ 1,399 $ 1,643
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
March 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 19,075 $ 15,930
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 14,116 12,507
Deferred income taxes, net 5,006 (1,328)
Undistributed affiliate earnings (1,136) (435)
Cash distributions received from
investments 1,154 -
Change in assets and liabilities:
Accounts receivable (2,792) (10,471)
Accrued utility revenue (1,588) 1,629
Inventories (2,738) 2,002
Unrecovered/(refundable)
purchased gas costs 2,118 (1,995)
Prepaid expenses (1,312) 785
Accounts payable and accrued expenses 3,704 7,493
Other assets/liabilities (2,875) 280
-------- --------
Total adjustments 13,657 10,467
-------- --------
Cash flows from operations $ 32,732 $ 26,397
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest (net of amount capitalized) $ 9,509 $ 8,607
======== ========
Income taxes $ 7,888 $ 11,792
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1994
(Thousands of Dollars)
(1) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 1994
RESULTS OF OPERATIONS
The Company has recorded an increase in net income and earnings per share
for the periods ending March 31, 1994 as compared to 1993.
Operating Margin
Higher 1994 earnings are a result of higher operating margin, overall. New,
higher firm natural gas rates, effective December 16, 1993 in compliance
with the rate decision received from the Connecticut Department of Public
Utility Control, contributed to the increase in operating margin.
Additional contributions have come from higher firm sales, because of colder
weather, lower gas costs, and higher margins on off-system contract sales.
Interruptible margins were lower in 1994 for the comparable quarters due to
higher gas costs associated with these sales. The six months and twelve
months ended periods, however, benefited from higher margins earned on
interruptible sales in fiscal 1994.
The contribution to operating margin from nonregulated district heating and
cooling operations is greater in fiscal 1994 because of higher rates from
the last year of the three-year phase-in of higher steam and hot water
rates, implemented in January, 1994, and from lower variable costs
associated with purchased steam and hot water.
Income Taxes
Additional flow-through depreciation deductions associated with a major
capitalized system enhancement offset higher Federal and State income taxes
related to improved results of operations during fiscal 1994 and resulted in
a decrease in income taxes from 1993 to 1994 in the twelve months ended
periods.
Operations and Maintenance Expenses
General operations and maintenance expenses are greater in 1994 than in 1993
for all comparable periods. The most significant factor for this increase
is the recording of additional uncollectibles expenses, a function of higher
revenues and anticipated bad debt levels. Increases also occurred in costs
for computer rentals, labor, workers compensation (due to premium credits
received in 1993), conservation programs, environmental monitoring services,
regulatory commission expenses and outside purchased services. These were
partially offset by lower costs for insurance premiums and other
administrative and general expenses and by higher net charge service
revenues.
Other Income (Deductions)
Net other income (deductions) includes higher promotional advertising
expenses and lower income from merchandising and jobbing activities in
fiscal 1994.
<PAGE>
Interest and Debt Expense
The benefits of lower long-term debt interest rates, resulting from the debt
restructuring transactions completed in fiscal 1993, offset by higher
short-term debt interest because of both higher average borrowing levels and
a small rise in borrowing rates, are reflected in the change in interest and
debt expense between 1994 and 1993.
MATERIAL CHANGES IN FINANCIAL CONDITION
Higher cash flows from operating activities recorded for the three, six and
twelve months ended March, 1994, as compared to 1993, are indicative of the
higher operating margins, the timing of the receipt of cash payments from
customers, and the amount and timing of payments of invoices for volumes of
gas purchased to serve customers. In the quarter and fiscal year-to-date
1994, cash flows from operations provided working capital and funding for
construction and other investing and financing activities. In the twelve
months ended March 1994, cash flows from operations and from financing
activities together provided working capital and funding for construction
and other investing activities.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
None
(b) No reports on Form 8-K were filed for the three months ended March 31,
1994.
<PAGE>
SIGNATURE
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.
CONNECTICUT NATURAL GAS CORPORATION
Date 04/28/94 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)
<PAGE>
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