SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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 1-8369
CONNECTICUT ENERGY CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Connecticut 06-0869582
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
855 Main Street
Bridgeport, Connecticut 06604
(Address of Principal Executive Offices) (Zip Code)
(800) 760-7776
(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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
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PART I. FINANCIAL INFORMATION
CONNECTICUT ENERGY CORPORATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share)
(Unaudited)
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Three Months Ended Nine Months Ended
June 30, June 30,
----------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
Operating Revenues............................. $ 44,026 $ 43,954 $ 225,765 $ 233,918
Purchased gas.................................. 22,539 22,827 118,584 127,086
--------- --------- --------- ---------
Gross margin................................... 21,487 21,127 107,181 106,832
Operating Expenses:
Operations................................... 11,482 11,130 38,120 37,723
Maintenance.................................. 853 848 2,781 2,959
Depreciation................................. 3,988 3,639 11,810 11,113
Federal and state income taxes............... (865) (809) 11,330 11,811
Municipal, gross earnings and other taxes.... 3,568 3,582 13,873 14,134
--------- --------- --------- ---------
Total operating expenses....................... 19,026 18,390 77,914 77,740
--------- --------- --------- ---------
Operating income............................... 2,461 2,737 29,267 29,092
Other deductions (income), net................. 171 191 (420) 443
Interest Expense:
Interest on long-term debt and
amortization of debt issue costs........... 3,079 2,700 9,242 8,103
Other interest, net.......................... 416 530 1,030 1,566
--------- -------- --------- ---------
Total interest expense......................... 3,495 3,230 10,272 9,669
--------- -------- --------- ---------
Net (Loss) Income.............................. $ (1,205) $ (684) $ 19,415 $ 18,980
========= ========= ========= =========
Net (loss) income per share.................... $ (0.13) $ (0.08) $ 2.14 $ 2.13
========= ========= ========= =========
Dividends paid per share....................... $ 0.33 $ 0.33 $ 0.99 $ 0.98
--------- --------- --------- ---------
Weighted average number of common
shares outstanding during period............. 9,129,030 8,942,188 9,076,400 8,905,632
--------- --------- --------- ---------
See Notes to Consolidated Financial Statements.
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CONNECTICUT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share)
<S> <C> <C>
June 30, Sept. 30,
1997 1996
--------- ---------
(Unaudited)
Assets
------
Utility Plant:
Gross utility plant......................................... $390,699 $376,109
Less: accumulated depreciation.............................. 126,617 118,348
-------- --------
Net utility plant........................................... 264,082 257,761
Nonutility property, net...................................... 2,773 2,804
-------- --------
Net utility plant and other property.......................... 266,855 260,565
-------- --------
Current Assets:
Cash and cash equivalents................................... 7,073 5,121
-------- --------
Accounts receivable......................................... 43,613 33,615
Less: allowance for doubtful accounts....................... 1,605 2,742
-------- --------
Net accounts receivable................................... 42,008 30,873
-------- --------
Accrued utility revenues, net............................... 2,783 2,608
Inventories................................................. 11,543 15,331
Prepaid expenses............................................ 3,271 1,841
-------- --------
Total current assets.......................................... 66,678 55,774
-------- --------
Deferred Charges and Other Assets:
Unamortized debt expenses................................... 6,101 6,238
Unrecovered deferred income taxes........................... 42,371 41,435
Other....................................................... 42,542 35,216
-------- --------
Total deferred charges and other assets....................... 91,014 82,889
-------- --------
Total assets.................................................. $424,547 $399,228
======== ========
See Notes to Consolidated Financial Statements.
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CONNECTICUT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share)
<S> <C> <C>
June 30, Sept. 30,
1997 1996
---------- ---------
(Unaudited)
Capitalization and Liabilities
------------------------------
Common Shareholders' Equity:
Common Stock: authorized--20,000,000 shares, par value $1
per share, issued and outstanding--9,150,247 shares;
9,012,267 shares......................................... $ 9,150 $ 9,012
Capital in excess of par value............................. 94,048 91,079
Unearned compensation...................................... (1,104) ---
Retained earnings.......................................... 48,291 37,870
-------- --------
Total common shareholders' equity............................ 150,385 137,961
-------- --------
Long-term debt............................................... 134,528 138,727
-------- --------
Total capitalization......................................... 284,913 276,688
-------- --------
Current Liabilities:
Short-term borrowings...................................... 19,300 19,200
Current maturities of long-term debt....................... 4,654 595
Accounts payable........................................... 11,130 14,250
Refunds due customers...................................... 2,793 202
Federal, state and deferred income taxes................... 8,345 2,424
Property and other accrued taxes........................... 7,158 5,555
Interest payable........................................... 2,799 3,569
Customers' deposits........................................ 1,804 1,826
Refundable purchased gas costs............................. 1,601 520
Other...................................................... 4,439 3,545
-------- --------
Total current liabilities.................................... 64,023 51,686
-------- --------
Deferred Credits:
Deferred income taxes and investment tax credits........... 67,437 65,381
Other...................................................... 8,174 5,473
-------- --------
Total deferred credits....................................... 75,611 70,854
-------- --------
Total capitalization and liabilities......................... $424,547 $399,228
======== ========
See Notes to Consolidated Financial Statements.
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CONNECTICUT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
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Nine Months Ended
June 30,
-----------------
1997 1996
---- ----
Net cash provided by operating activities.............................. $26,255 $28,847
------- -------
Cash Flows from Investing Activities:
Capital expenditures................................................. (18,178) (15,931)
Contributions in aid of construction................................. 42 45
Payments for retirement of utility plant............................. (240) (26)
Energy ventures...................................................... --- (1,966)
------- -------
Net cash used by investing activities.................................. (18,376) (17,878)
------- -------
Cash Flows from Financing Activities:
Dividends paid on common stock....................................... (8,994) (8,732)
Issuance of common stock............................................. 3,107 2,208
Repayments of long-term debt......................................... (140) (140)
Increase (decrease) in short-term borrowings......................... 100 (4,500)
------- -------
Net cash used by financing activities.................................. (5,927) (11,164)
------- -------
Net increase (decrease) in cash and cash equivalents................... 1,952 (195)
Cash and cash equivalents at beginning of period....................... 5,121 4,635
------- -------
Cash and cash equivalents at end of period............................. $ 7,073 $ 4,440
======= =======
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest............................................................. $11,486 $10,402
Income taxes......................................................... $ 4,291 $ 4,325
See Notes to Consolidated Financial Statements.
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CONNECTICUT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
1. The unaudited consolidated financial statements presented
herein should be read in conjunction with the consolidated
financial statements of Connecticut Energy Corporation
("Connecticut Energy" or "Company") for the fiscal year ended
September 30, 1996 as presented in the Annual Report on Form 10-K.
In the opinion of management, the accompanying financial
information reflects all adjustments which are necessary to provide
a fair presentation of the interim periods shown. All such
adjustments are of a normal recurring nature.
In preparing the financial statements in conformity with
generally accepted accounting principles ("GAAP"), the Company uses
estimates. Estimates are disclosed when there is a reasonable
possibility for change in the near term. For this purpose, near
term is defined as a period of time not to exceed one year from the
date of the financial statements. The Company's financial
statements have been prepared based on management's estimates of
the impact of regulatory, legislative and judicial developments on
the Company or significant groups of its customers. The recorded
amounts of certain accruals, reserves, deferred charges and assets
could be materially impacted if circumstances change which affect
these estimates.
2. The Company's principal subsidiary, The Southern
Connecticut Gas Company ("Southern"), prepares its financial
statements in accordance with the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation" ("SFAS 71"), which requires a cost-
based, rate-regulated enterprise such as Southern to reflect the
impact of regulatory decisions in its financial statements. The
Connecticut Department of Public Utility Control's ("DPUC") actions
through the ratemaking process can create regulatory assets in
which costs are allowed for ratemaking purposes in a period other
than the period in which the costs would be charged to expense if
the reporting entity were unregulated.
In the application of SFAS 71, Southern follows
accounting policies that reflect the impact of the rate treatment
of certain events or transactions that are permitted to differ from
GAAP. The most significant of these policies include the recording
of deferred gas costs, deferred conservation costs, deferred
hardship heating customer accounts receivable arrearages, deferred
environmental evaluation costs and an unfunded deferred income tax
liability, with a corresponding unrecovered asset, to account for
temporary differences previously flowed through to ratepayers.
Southern had net regulatory assets as of June 30, 1997
and September 30, 1996 of $58,243 and $59,281, respectively. These
amounts are included in deferred charges and other assets and
deferred credits in the consolidated balance sheets and are solely
due to the application of the provisions of SFAS 71.
During fiscal 1996, the DPUC approved regulations
designed to increase competition in the natural gas industry in
Connecticut by giving commercial and industrial gas customers the
ability to purchase gas from independent brokers and marketers and
by allowing local gas distribution companies to charge firm
transportation rates for use of their distribution systems. The
firm transportation rates are designed to provide Southern with the
same margins provided by the bundled services.
While the DPUC's actions encourage a competitive
environment by deregulating certain activities, the Company
believes that it continues to meet the requirements of SFAS 71.
3. Due to the seasonal nature of gas sales for space heating
purposes by Southern, the results of operations for the nine months
ended June 30, 1997 are not indicative of the results to be
expected for the fiscal year ending September 30, 1997.
4. Certain prior year amounts have been reclassified to
conform with the current format of financial statement
presentation.
5. Deferred charges and other assets include amounts related
to the following:
June 30, Sept. 30,
As of 1997 1996
- -----------------------------------------------------------------------------
Hardship heating customer accounts receivable arrearages $13,400 $11,753
Hardship heating customer assistance grant program 1,494 0
Energy assistance funding shortfall 960 1,502
Prepaid pension and postretirement medical contributions 14,397 11,395
Conservation costs 4,583 3,954
Environmental evaluation costs 768 915
Nonqualified benefit plans 2,323 1,160
Gas holder costs 369 554
Investment in energy ventures 1,941 1,960
Other 2,307 2,023
------- -------
$42,542 $35,216
======= =======
Southern has been allowed to recover various deferred charges
in rates over periods ranging from three to five years in
accordance with the DPUC's Decision in Southern's latest rate case.
6. Deferred credits include amounts related to the
following:
June 30, Sept. 30,
As of 1997 1996
- -----------------------------------------------------------------------------
Interruptible margin sharing $ 429 $ 556
Nonqualified benefit plans 2,871 2,574
Insurance reserve 1,198 722
Hardship heating customer assistance grant program 0 75
Economic development initiatives 727 675
FERC Order No. 636 transition costs 1,820 187
Other 1,129 684
------ ------
$8,174 $5,473
====== ======
7. Southern has identified coal tar residue at three sites
in Connecticut resulting from coal gasification operations
conducted at those sites by Southern's predecessors from the late
1800s through the first part of this century. Many gas
distribution companies throughout the country carried on such gas
manufacturing operations during the same period. See section in
Management's Discussion and Analysis entitled "Environmental
Matters" for further detail.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Connecticut Energy Corporation ("Connecticut Energy" or "Company") and its
subsidiaries and their representatives may, from time to time, make written
or oral statements, including statements contained in the Company's filings
with the Securities and Exchange Commission ("SEC") and in its annual report
to shareholders, including its Form 10-K for the fiscal year ended
September 30, 1996 and this quarterly report on Form 10-Q, which constitute or
contain "forward-looking" information as that term is defined in the Private
Securities Litigation Reform Act of 1995.
All statements other than the financial statements and other statements of
historical facts included in this quarterly report regarding the Company's
financial position and strategic initiatives and addressing industry
developments are forward-looking statements. Where, in any forward-looking
statement, the Company, or its management, expresses an expectation or belief as
to future results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or
accomplished. Factors which could cause actual results to differ materially
from those stated in the forward-looking statements may include, but are not
limited to, general and specific economic, financial and business conditions;
federal and state regulatory, legislative and judicial developments which
affect the Company or significant groups of its customers; the impact of
competition on the Company's revenues; fluctuations in weather from normal
levels; changes in development and operating costs; the availability and cost of
natural gas; the availability and terms of capital; exposure to environmental
liabilities; the costs and effects of unanticipated legal proceedings;
the successful implementation and achievement of internal performance goals;
the impact of unusual items resulting from ongoing evaluations of business
strategies and asset valuations and changes in business strategy.
RESULTS OF OPERATIONS
Net Income
- ----------
Connecticut Energy's consolidated net income for the three and
nine months ended June 30, 1997 and 1996 is detailed below:
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
(in thousands, except per share) 1997 1996 1997 1996
---- ---- ---- ----
Net (Loss) Income $(1,205) $ (684) $19,415 $18,980
======= ====== ======= =======
Net (Loss) Income per Share $ (0.13) $(0.08) $ 2.14 $ 2.13
======= ====== ======= =======
Weighted Average Shares Outstanding 9,129 8,942 9,076 8,906
------- ------ ------- -------
Factors which affected the higher net loss for the three months
ended June 30, 1997 were lower interruptible margins and increased
expenses for operations, depreciation and long-term debt interest. Increased
firm margins and lower short-term interest expense compared to the corresponding
1996 period were partially offsetting.
Net income for the nine months ended June 30, 1997 increased
approximately 2% compared to the nine months ended June 30, 1996.
Factors which contributed to increased net income for the 1997
period included higher firm margins, lower maintenance expense,
lower provisions for federal and state income taxes, lower gross
earnings tax and lower short-term interest expense. Partially
offsetting these positive impacts on net income were slightly lower
interruptible margins, higher depreciation expense and higher long-
term debt interest.
Total Sales and Transportation Volumes
- --------------------------------------
Total volumes of gas sold and transported by the Company's
principal subsidiary, The Southern Connecticut Gas Company
("Southern"), for the three and nine months ended June 30, 1997 were
10,296 and 36,900 MMcf, respectively, representing increases of
approximately 42% and 17% compared to the corresponding 1996
periods. These increases were primarily attributable to increases
in off-system sales and off-system transportation volumes. Additionally,
this category includes volumes associated with service under Southern's
firm transportation tariffs, which commenced during the quarter
ended June 30, 1996.
Firm Sales and Transportation Volumes
- -------------------------------------
Firm sales and transportation volumes for the three months
ended June 30, 1997 increased approximately 9% compared to the
corresponding 1996 period. The increase was primarily due to
weather which was approximately 10% colder than the 1996 quarter and
growth in Southern's customer base.
Firm sales and transportation volumes for the nine months ended
June 30, 1997 decreased approximately 5% compared to the
corresponding 1996 period. The decrease was primarily due to
weather which was approximately 7% warmer than the nine months ended
June 30, 1996. Growth in Southern's customer base and the continued
conversions of nonheating customers to heating customers partially
offset the overall decrease in this category.
Interruptible Sales and Transportation Volumes
- ----------------------------------------------
Margins earned on volumes delivered to interruptible customers
vary depending upon the relationship of the market price for
alternate fuels to the cost of natural gas and related
transportation. Additionally, on-system margins earned, net of
gross earnings tax, from interruptible services in excess of an
annual target were being allocated through a margin sharing
mechanism between Southern and its firm customers. Beginning June
1, 1996, excess on-system margins earned that would have been
returned to Southern's firm customers have been redirected, with
Connecticut Department of Public Utility Control ("DPUC") approval,
to fund certain economic development and hardship assistance
programs.
The chart below depicts volumes of gas sold to and transported
for on-system interruptible customers, off-system sales volumes and
off-system transportation volumes under a special contract with The
Connecticut Light and Power Company for its Devon electric generating station
as well as gross margins earned and retained due to the margin
sharing mechanism on these services for the three and nine months
ended June 30, 1997 and 1996, respectively:
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
(dollars in thousands) 1997 1996 1997 1996
---- ---- ---- ----
Gross Margin Earned $2,690 $3,327 $9,736 $9,223
====== ====== ====== ======
Gross Margin Retained $2,435 $2,702 $6,385 $6,513
====== ====== ====== ======
Volumes Sold and Transported (MMcf) 6,581 3,866 16,873 10,351
------ ------ ------ ------
Gross margin earned by Southern was lower for the three months
ended June 30, 1997 compared to the corresponding 1996 period
principally due to lower average market prices of alternate fuels.
Gross margin retained represents the difference between gross margin
earned and margin to be returned through the margin sharing
mechanism. Gross margin retained for the three months ended June
30, 1997 compared to the 1996 quarter was lower principally due to
lower margin earned. Volumes sold and transported in the 1997 quarter were
approximately 70% higher than the 1996 quarter principally due to increases
in off-system transportation and sales activity.
Gross margin earned for the nine months ended June 30, 1997 was
higher than the comparable 1996 period principally due to increased
on-system interruptible sales, off-system transportation and off-
system sales activity for the period. Lower margin retained for the
nine months ended June 30, 1997 was principally due to the change in
sharing mechanism for certain off-system services as of April 1,
1996 which increased the allocation of margins to be returned to
firm customers from 50% to 85%.
Gross Margin
- ------------
Gross margin for the three months ended June 30, 1997 was
approximately 2% higher than gross margin for the three months ended
June 30, 1996. This variance in margins was primarily the result of
increased firm margins compared to the 1996 quarter due to customer
growth and conversions of nonheating customers to heating customers.
Gross margin for the nine months ended June 30, 1997 was
slightly higher compared to the corresponding 1996 period. Higher
firm margins earned due to growth in Southern's customer base were
partially offset by lower interruptible margins retained as well as
lower revenues earned on bailment activities.
Southern's firm rates include a Weather Normalization
Adjustment clause ("WNA") which allows Southern to charge or credit
the non-gas portion of its firm rates to reflect deviations from
normal weather. Because weather during the three months ended June
30, 1997 was approximately 13% colder than normal, the operation of
the WNA returned approximately $803,000 to firm customers. This
compares to a return to firm customers during the three months ended
June 30, 1996 of approximately $192,000. The operation of the WNA
collected approximately $2,369,000 during the nine months ended June
30, 1997 due to weather which was approximately 3% warmer than
normal. This compares to a return to firm customers of
approximately $2,709,000 during the corresponding 1996 period.
Southern's firm rates also include a Purchased Gas Adjustment
clause ("PGA") which allows Southern to flow through to its
customers, through periodic adjustments to amounts billed, increased
or decreased costs incurred for purchased gas compared to base rate
levels without affecting gross margin. The operation of Southern's
PGA increased revenues and gas costs for the three and nine months
ended June 30, 1997 by approximately $482,000 and $5,762,000,
respectively. For the three and nine months ended June 30, 1996,
PGA adjustments increased revenues and gas costs by approximately
$593,000 and $6,628,000, respectively.
Operations Expense
- ------------------
Operations expense for the three months ended June 30, 1997
increased approximately 3% compared to the corresponding 1996 period
primarily due to a higher provision for uncollectibles, which was
partially offset by the termination on December 31, 1996 of the amortization
of amounts relating to Southern's 3-Way Payment Plan.
Depreciation Expense
- --------------------
Depreciation expense for the three and nine months ended June
30, 1997 increased approximately 10% and 6%, respectively, compared
to the corresponding 1996 periods. The increases were primarily due
to additions to plant in service by Southern.
Federal and State Income Taxes
- ------------------------------
The total provision for federal and state income taxes for the
nine months ended June 30, 1997 decreased approximately
4% compared to the corresponding 1996 period. This decrease was
primarily due to a lower effective tax rate related to the flow-
through effect of deferred gas costs which decreased taxable income
as well as a reduction in the statutory state income tax rate.
Municipal, Gross Earnings and Other Taxes
- -----------------------------------------
Municipal, gross earnings and other taxes decreased
approximately 2% for the nine months ended June 30, 1997 compared to
the corresponding 1996 period primarily due to lower gross earnings
tax due to lower revenues.
Other (Income) Deductions, Net
- ------------------------------
Other income for the nine months ended June 30, 1997 was higher
compared to the corresponding 1996 period primarily due to the
receipt of approximately $974,000 in interest income from one of
Southern's interstate pipeline suppliers related to Southern's
prepayment of transition costs associated with Federal Energy
Regulatory Commission's Order No. 636.
Interest Expense
- ----------------
Total interest expense increased approximately 8% and 6% for
the three and nine months ended June 30, 1997, respectively,
compared to the corresponding 1996 periods primarily due to higher
long-term debt costs associated with the issuance of $20,000,000 in
secured Medium-Term Notes in August 1996.
For the quarter ended June 30, 1997 compared to the 1996
quarter, lower short-term interest expense on deferred gas cost
balances was partially offset by increased short-term debt costs due
to higher average short-term borrowings and a higher average
annualized interest rate as well as higher short-term interest
expense on pipeline refunds.
For the nine months ended June 30, 1997 compared to the
corresponding 1996 period, lower short-term interest expense on
deferred gas cost and margin sharing balances was partially offset
by higher interest expense for pipeline refunds and short-term
borrowings.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities
- --------------------
The seasonal nature of Southern's business creates large short-
term cash demands primarily to finance gas purchases, customer
accounts receivable and certain tax payments. To provide these
funds, as well as funds for capital expenditure programs and other
corporate purposes, Connecticut Energy and Southern have credit
lines with a number of banks as detailed below:
Shared
Connecticut Connecticut Energy/
Energy Southern Southern Total
----------- -------- ------------------- -----
Committed Lines $5,000,000 $32,000,000 $20,000,000 $57,000,000
Uncommitted Lines --- $10,000,000 $ 8,000,000 $18,000,000
At June 30, 1997, the Company had unused lines of credit of
$55,700,000. Because of the availability of short-term credit and
the ability to issue long-term debt and additional equity,
management believes it has adequate financial flexibility to meet
its anticipated cash needs.
Operating cash flows for the nine months ended June 30, 1997
were lower compared to the corresponding 1996 period principally due
to the effect of warmer weather on the operation of the PGA and the
timing of reductions in accounts payable balances. Partially
offsetting the overall reduction in operating cash flows were a
lower comparative increase in accounts receivable balances and a
lower comparative reduction in revenue sharing balances.
Investing Activities
- --------------------
Capital expenditures approximated $18,136,000 and $15,886,000
for the nine months ended June 30, 1997 and 1996, respectively.
Capital expenditures for the nine months ended June 30, 1997 were
approximately 14% higher than the 1996 period due to the impact of
less severe winter weather on construction activity. On an annual
basis, Southern relies upon cash flows from operating activities to
fund a portion of these expenditures, with the remainder funded by
short-term borrowings and, at some later date, long-term debt and
capital stock financings.
Regulatory Matters
- ------------------
In February 1997, the Company and Southern requested a
reopening of a DPUC Decision dated December 13, 1978, Docket No. 77-
08-28, Application of The Southern Connecticut Gas Company for
-------------------------------------------------------
Approval of Corporate Reorganization and Merger and Formation of a
- ------------------------------------------------------------------
Holding Company, for the purpose of addressing changed conditions in
- ---------------
the Company's operations since that time, which include the
dissolution of certain subsidiaries and deregulation of the natural
gas marketplace resulting from recent federal and state regulatory
actions. On May 21, 1997, the DPUC issued a Decision in the
reopened docket. The Decision modified or eliminated several conditions
relating to the Company's nonregulated subsidiaries. The Company believes
those subsidiaries will now have more flexibility to compete in the rapidly
changing energy market on both a financial and operational basis.
Environmental Matters
- ---------------------
Southern has identified coal tar residue at three sites in
Connecticut resulting from coal gasification operations conducted at
those sites by Southern's predecessors from the late 1800s through
the first part of this century. Many gas distribution companies
throughout the country carried on such gas manufacturing operations
during the same period. The coal tar residue is not designated a
hazardous material by any federal or Connecticut agency, but some of
its constituents are classified as hazardous.
On April 27, 1992, Southern notified the Connecticut Department
of Environmental Protection ("DEP") and the United States
Environmental Protection Agency of the presence of coal tar residue
at the sites. On November 9, 1994, the DEP informed Southern that
it had performed a preliminary review of the information provided to
it by Southern and had determined that, based on current priorities
and limited staff resources, a comprehensive review of site
conditions and subsequent participation by the DEP "are not possible
at this time." Until the DEP conducts a comprehensive review, no
discussions with it addressing the extent, timing and type of
remedial action, if any, can occur.
Given the DEP's response, management cannot at this time predict the
costs of any future site analysis and remediation, if any, nor can
it estimate when any such costs, if any, would be incurred. While
such future analytical and cleanup costs could possibly be
significant, management believes, based upon the provisions of the
Partial Settlement in Southern's latest rate order, that Southern
will be able to recover these costs through its customer rates.
Although the method, timing and extent of any recovery remain
uncertain, management currently does not expect that the incurrence
of such costs will materially adversely impact the Company's
financial condition or results of operations.
PART II- OTHER INFORMATION
Items 1, 2, 3, 4 and 5 are inapplicable.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
Submitted only in electronic format to the
Securities and Exchange Commission.
(b) Reports on Form 8-K:
Form 8-K, dated April 23, 1997, concerning the
Company's Form S-3 registration of 1,750,000
additional shares of common stock was filed
with the Commission on July 10, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
CONNECTICUT ENERGY CORPORATION
(Registrant)
Date: August 13, 1997 By:/s/ Vincent L. Ammann, Jr.
--------------- ------------------------
Vincent L. Ammann, Jr.
Vice President and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 264,082
<OTHER-PROPERTY-AND-INVEST> 2,773
<TOTAL-CURRENT-ASSETS> 66,678
<TOTAL-DEFERRED-CHARGES> 91,014
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 424,547
<COMMON> 9,150
<CAPITAL-SURPLUS-PAID-IN> 92,944
<RETAINED-EARNINGS> 48,291
<TOTAL-COMMON-STOCKHOLDERS-EQ> 150,385
0
0
<LONG-TERM-DEBT-NET> 134,528
<SHORT-TERM-NOTES> 19,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 4,654
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 115,680
<TOT-CAPITALIZATION-AND-LIAB> 424,547
<GROSS-OPERATING-REVENUE> 225,765
<INCOME-TAX-EXPENSE> 11,330
<OTHER-OPERATING-EXPENSES> 185,168
<TOTAL-OPERATING-EXPENSES> 196,498
<OPERATING-INCOME-LOSS> 29,267
<OTHER-INCOME-NET> 420
<INCOME-BEFORE-INTEREST-EXPEN> 29,687
<TOTAL-INTEREST-EXPENSE> 10,272
<NET-INCOME> 19,415
0
<EARNINGS-AVAILABLE-FOR-COMM> 19,415
<COMMON-STOCK-DIVIDENDS> 8,994
<TOTAL-INTEREST-ON-BONDS> 9,242
<CASH-FLOW-OPERATIONS> 26,255
<EPS-PRIMARY> 2.14
<EPS-DILUTED> 0
</TABLE>
