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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ------
to --------------Commission File Number 1-2297
------
EASTERN ENTERPRISES
-------------------
(Exact Name of Registrant As Specified In Its Charter)
MASSACHUSETTS 04-1270730
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
9 RIVERSIDE ROAD
WESTON, MASSACHUSETTS 02193 (617) 647-2300
(Address of Principal Executive Offices) (Registrant's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
--------- --------------------
Common Stock, par value $1.00 per share New York Stock Exchange
Common Stock Purchase Rights, no par value Boston Stock Exchange
Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by non-
affiliates of the registrant as of March 10, 1994.
COMMON STOCK, PAR VALUE $1.00 PER SHARE -- $550,397,558
Indicate the number of shares outstanding of the registrant's class of
common stock as of March 10, 1994.
COMMON STOCK, PAR VALUE $1.00 PER SHARE -- 20,967,526 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to shareholders for the year ended December
31, 1993 are incorporated by reference into Parts I and II.
Portions of the 1994 definitive Proxy Statement are incorporated by
reference into Part III.
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<PAGE>
PART I
ITEM 1. BUSINESS
1(A) GENERAL DEVELOPMENT OF BUSINESS
Eastern Enterprises ("Eastern") is an unincorporated voluntary association
(commonly referred to as a "Massachusetts business trust") established and
existing under a Declaration of Trust dated July 18, 1929, as from time to
time amended.
Eastern's principal subsidiaries are Boston Gas Company ("Boston Gas"),
Midland Enterprises Inc. ("Midland") and WaterPro Supplies Corporation
("WaterPro"). Another subsidiary, Ionpure Technologies Corporation
("Ionpure"), was sold on December 1, 1993 for an equity interest in United
States Filter Corporation, as described in Note 10 of Notes to Financial
Statements.
Boston Gas distributes natural gas in Boston and 73 other Massachusetts
communities. Midland is engaged in barge transportation, principally on the
Ohio and Mississippi river systems. WaterPro is a wholesale distributor of
water and wastewater system components to contractors and municipal customers
in 23 states.
Eastern provides management and staff services to its operating
subsidiaries. Boston Gas and Midland are financed primarily through their own
funded debt, which is not guaranteed by Eastern. Many of the debt instruments
relating to these borrowings contain restrictive covenants applicable to
Boston Gas and Midland, including restrictions on the payment of dividends to
Eastern. In the opinion of management, none of these restrictions has any
material impact upon the operations of Eastern and its subsidiaries.
1(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information with respect to this item may be found in Note 2 of Notes to
Financial Statements for the year ended December 31, 1993, appearing on pages
36 and 37 of the annual report to shareholders for such year. Such
information is incorporated herein by reference.
1(C) NARRATIVE DESCRIPTION OF BUSINESS
BOSTON GAS COMPANY
Boston Gas is engaged in the distribution, sale and transportation of
natural gas to residential, commercial and industrial customers in the city of
Boston, Massachusetts and 73 other Massachusetts communities.
Gas is sold and transported to "firm" and "non-firm" customers for a
variety of applications. In most cases, firm sales and transportation services
are provided under rate schedules or contracts with customers that do not
contemplate service interruption at any time during the year. Firm sales of
natural gas used for space heating are directly related to weather conditions.
Consequently, variations in weather patterns can have a significant impact on
Boston Gas' revenues and earnings. Boston Gas also provides seasonal firm
sales and transportation services for terms less than 365 days.
Non-firm services include sales and transportation to customers who
typically can use oil or gas interchangeably and special sales for resale to
other gas companies for distribution to their customers. Non-firm sales depend
on gas supply availability, weather conditions and the price of gas in
relation to the price of alternate fuels. Availability of gas supply and
price competition from residual oil are important factors in retaining non-
firm gas sales. Gross margins from non-firm sales and transportation services
are passed back to firm customers through the cost of gas adjustment clause.
This practice enhances Boston Gas' competitive position by reducing gas costs
to firm customers. As an additional incentive to Boston Gas, beginning
November 1, 1993, a portion of gross margins from non-firm sales and
transportation services will be retained if certain levels are attained.
Because the volume of gas sold to firm customers varies greatly between
winter and summer months, Boston Gas customarily incurs seasonal borrowings.
Boston Gas purchases approximately 70% of its pipeline gas supplies
directly from producers and marketers pursuant to long term contracts which
are subject to review and approval by the Massachusetts Department of Public
Utilities ("DPU"). The balance of its pipeline supplies is purchased under
short-term, firm winter service agreements and on a spot basis. These pipeline
supplies are transported on interstate pipeline systems to Boston Gas' service
territory on terms and conditions of service approved by the Federal Energy
Regulatory Commission ("FERC"). Boston Gas has also contracted with pipeline
companies and others for the storage of natural gas and related transportation
from underground storage fields in New York and Pennsylvania. Supplemental
supplies of liquefied natural gas and propane are purchased and produced from
foreign and domestic sources, primarily on a spot basis.
All interstate pipelines serving Boston Gas have implemented service
restructuring plans on terms and conditions approved by FERC pursuant to Order
636, issued in April 1992, which required interstate pipeline companies to
unbundle existing gas service contracts into separate gas sales,
transportation and storage services. Accordingly, Boston Gas' firm bundled
service contract with Tennessee Gas Pipeline Company ("Tennessee") has been
converted to an annual transportation and storage entitlement of 77,800
million cubic feet ("MMCF"). Similarly, its firm bundled service contracts
with Algonquin Gas Transmission Company ("Algonquin") and Texas Eastern
Transmission Corporation ("Texas Eastern") have been converted to annual firm
transportation entitlements of 65,600 MMCF and 100,100 MMCF, respectively.
This transportation capacity is used to transport natural gas from both
producing regions and underground storage facilities. As a result of the
restructuring, Boston Gas holds entitlements to 16,500 MMCF of storage
capacity with Tennessee, Texas Eastern and others. These new transportation
and storage agreements with Algonquin, Tennessee and Texas Eastern have terms
generally expiring no earlier than 1996, 2000 and 2012. In addition, as a
result of industry restructuring, Boston Gas has firm entitlements on
interstate pipelines upstream of these three pipelines with direct access to
supply areas.
In addition to its domestic supply arrangements, Boston Gas has long term
contracts with Canadian gas suppliers for the annual purchase of up to 22,862
MMCF. These contracts expire between 2003 and 2007. Boston Gas has contracted
with Iroquois Gas Transmission System, Tennessee and Algonquin for the
transportation of these supplies to its service territory.
Boston Gas considers the service reliability of its natural gas portfolio
after industry restructuring to be comparable to that existing prior to Order
636. As a result of these changes in federal energy regulation, Boston Gas has
assumed more direct operational responsibility for procuring and arranging
transportation of natural gas supplies. Boston Gas expects that this new
operational responsibility will provide additional opportunities to benefit
from low cost gas and competitive transportation options.
<PAGE>
The following table provides statistical information with respect to
Boston Gas' sources of supply and sales during 1991-1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Gas supply
(Millions of cubic feet @ 1,000 B.T.U.)
Natural gas purchased .................................. 86,276 94,086 77,283
Propane and manufactured gas ........................... 18 50 77
LNG purchased .......................................... 13,375 12,344 11,412
------ ------- ------
Total manufactured and purchased ................... 99,669 106,480 88,772
Deduct:
Net increase (decrease) in storage gas ............. 4,021 5,195 1,034
Company use, unbilled and other .................... 2,552 3,665 3,190
------ ------- ------
Total gas billed ........................................... 93,096 97,620 84,548
------ ------- ------
------ ------- ------
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
---- ---- ----
Gas sales and transportation
(Millions of cubic feet @ 1,000 B.T.U.)
Residential
Heating (A)<F1> .................................... 38,126 37,923 32,731
Non-heating ........................................ 3,793 3,906 3,847
Commercial (B)<F2> ..................................... 26,011 25,796 23,614
Industrial -- firm ..................................... 4,955 4,914 4,150
Seasonal firm contracts ................................ 10,022 6,379 --
------- ------- -------
Total firm sales ................................... 82,907 78,918 64,342
Interruptible sales .................................... 8,106 14,456 20,206
Special sales for resale ............................... 2,083 4,246 --
------- ------- -------
Total gas sales ............................................ 93,096 97,620 84,548
Firm transportation .................................... 12,351 7,369 --
Interruptible transportation ........................... 39,304 27,270 31,424
------- ------- -------
Total throughput ........................................... 144,751 132,259 115,972
------- ------- -------
------- ------- -------
Percent of normal billing degree days ...................... 99% 104% 87%
<FN>
- ---------
<F1>(A) The heating classification includes all gas sold to customers having
central or space heating.
<F2>(B) The commercial classification includes central-metered apartment houses
and condominiums with five or more units.
</TABLE>
Boston Gas relies on supplemental supplies to meet firm sendout
requirements which are greater than its firm pipeline capacity entitlements.
The number of days that peak sendout can be maintained is limited by the
capacity of Boston Gas' storage facilities for supplemental gas supplies and
the rate at which these supplies can be sent out and subsequently replenished.
Boston Gas considers its peak sendout capability fully adequate to meet the
requirements of its firm customers.
During 1993, Boston Gas continued to increase its firm sales and customer
base through marketing programs that emphasize natural gas' competitive price,
efficiency and environmental advantages. Despite the 17-week work stoppage, in
1993 Boston Gas added approximately 1,812 MMCF in firm annual sales to the
commercial and industrial sectors. Clean-burning properties and the absence of
on-site storage problems make natural gas attractive in these sectors, where
Boston Gas' market share is only 22% as compared to a national average of 39%.
Approximately 4,400 residential customers converted to gas for central heating
last year. Approximately 46% of Boston Gas' existing residential customers do
not use gas for central heating.
Boston Gas faces competition with fuel oil and electricity for
residential, commercial and industrial applications. Regulatory changes
affecting pipeline transportation have created the potential for increased
competition among existing and new suppliers of natural gas within Boston Gas'
service area. Boston Gas is well positioned to provide transportation services
to customers who engage in direct purchases of natural gas from others. Rate
design changes approved by the DPU in 1993 provide for margin neutrality
regardless of the customer's decision to purchase gas directly from Boston Gas
or to purchase third-party gas for transportation by Boston Gas.
Boston Gas' operations are subject to Massachusetts statutes applicable to
gas utilities. Rates, the territorial limits of Boston Gas' service area, the
issuance of securities, affiliated party transactions, the purchase of gas and
pipeline safety are regulated by the DPU. Construction of certain facilities
is regulated by the Massachusetts Energy Facilities Siting Board of the DPU.
Municipal, state and federal authorities have jurisdiction over the use of
public ways, land and waters for gas mains and other distribution facilities.
The DPU allowed Boston Gas an annual revenue increase of $37.7 million,
effective November 1, 1993, and also approved several rate design changes that
will reduce the volatility of margins attributable to weather.
The DPU has approved conservation and load management programs for Boston
Gas' residential, commercial and industrial customers. These programs
encourage more efficient gas consumption by subsidizing various conservation
measures. Recovery of costs related to these programs and financial incentives
were authorized by the DPU.
Boston Gas is subject to local, state and federal environmental regulation
of its operations and properties. As described in Note 13 of Notes to
Financial Statements, there are 37 identified former manufactured gas plant
("MGP") sites located within Boston Gas' service territory. Massachusetts
Electric Company, a wholly-owned subsidiary of New England Electric System
("NEES"), has assumed responsibility for remediating one such MGP site in
Lynn, Massachusetts, pursuant to the decision of the First Circuit Court of
Appeals in John S. Boyd, Inc. et. al. v. Boston Gas Company, et al., which
affirmed that NEES and/or its subsidiaries are responsible for remediating the
site as prior owners and operators and that Boston Gas did not assume any
liability for such remediation when it acquired the property from NEES in
1973. Thirteen other former MGP sites within Boston Gas' service territory are
currently owned by Boston Gas, and 10 of such 13 sites were also acquired from
NEES and its subsidiaries. Boston Gas is currently working with the
Massachusetts Department of Environmental Protection to determine the extent
of remediation which may be required at such 13 sites. A 1990 settlement
agreement with the DPU provides for recovery through the cost of gas
adjustment clause of all environmental response costs associated with former
MGP sites over separate, seven-year amortization periods without a return on
the unamortized balance.
Boston Gas and Eastern were granted an intrastate exemption from the
provisions of the Public Utility Holding Company Act of 1935 ("Act") under
Section 3(a)(1) thereof pursuant to an order of the Securities and Exchange
Commission ("SEC") dated February 28, 1955, as amended by orders dated
November 3, 1967 and August 28, 1975. On February 7, 1989, the SEC issued a
proposed rule under the Act which would provide limits for non-utility related
diversification by intrastate public utility holding companies, such as
Eastern, that are exempt under the Act. Since its proposal in 1989, the SEC
has taken no further public action with respect to this proposed rule.
Eastern and Boston Gas cannot predict whether this proposed rule will be
adopted or, if adopted, whether it will affect their exemption under the Act.
Boston Gas has approximately 1,720 employees, of whom 71% are represented
by six local labor unions. In 1993, after a 17-week work stoppage, Boston Gas
entered into a new six-year labor contract with the bargaining units which,
among other things, provides for annual general wage increases of
approximately 4%, updates work rules and changes health care coverage to a
managed program with cost sharing.
Boston Gas' property consists almost entirely of utility property and
franchises, a portion of which is pledged as security for Boston Gas' first
mortgage bonds. Capital expenditures for 1993 totaled $47.1 million,
principally for replacements of and additions to mains, services and meters
and for computer systems.
MIDLAND ENTERPRISES INC.
Midland is primarily engaged through wholly owned subsidiaries in the
operation of a fleet of barges and towboats, principally on the Ohio and
Mississippi rivers and other parts of the inland waterway system, the Gulf
Intracoastal Waterway and the Gulf of Mexico. Midland transports bulk
commodities, a major portion of which is coal. In December 1993 Midland
disposed of its liquid cargo business through the sale of its tank barges, its
liquid transportation contract and the Chotin trade name. Through other
wholly-owned subsidiaries, Midland also performs repair work on marine
equipment and operates two coal terminals, a phosphate terminal and a marine
fuel supply facility. It suspended operations at its barge construction
facility in late 1993.
The following table indicates tonnages and ton miles transported by
Midland for the years 1991-1993:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tonnages (in millions) ........................... 62.5 62.4 60.6
Ton miles (in billions) .......................... 32.2 32.4 32.2
</TABLE>
The record tonnage in 1993 increased slightly over 1992 with reduced
tonnage in coal, grain and phosphate more than offset by increased tonnage in
all other commodities. The 3% tonnage increase in 1992 reflected increased
spot coal, iron, scrap and steel and grain volumes. Approximately 2.6% of the
tonnage and 4.7% of the ton miles in 1993 were attributable to the liquid
cargo business sold in December 1993.
Ton miles are the product of tons and distance transported. The small
decrease in ton miles in 1993 reflected lower ton miles from coal, grain and
phosphate, mostly offset by higher ton miles in all other commodities. The
record ton miles in 1992 reflected increased ton miles from grain, aggregates
and ores, partially offset by lower coal ton miles. In addition to changes in
ton miles transported, Midland's revenues and net earnings are affected by
competitive conditions and weather. Due to the freezing of some northern
rivers and waterways during the winter months and increased coal consumption
by electric utilities during the summer months, average winter month revenues
tend to be lower than revenues for the remainder of the year.
The only significant raw material required to operate towboats is diesel
fuel. Diesel fuel is purchased from a variety of sources, and Midland regards
the availability of diesel fuel as adequate for presently planned operations.
Due to the capital-intensive, high-fixed-cost nature of Midland's
business, the negotiation of long-term contracts which facilitate steady and
efficient utilization of equipment is important to profitable operations.
Midland has long-term transportation and terminaling contracts which expire at
various dates from January 1995 through December 2007. During 1993
approximately 41% of Midland's revenues resulted from these contracts. No
customer accounted for 10% or more of Midland's 1993 revenues. A substantial
portion of the contracts provide for rate adjustments based on changes in
various costs, including diesel fuel costs, and contain "force majeure"
clauses which excuse performance by the parties to the contracts when
performance is prevented by circumstances beyond their reasonable control.
Many of these contracts have provisions for termination for specified causes
such as material breach of the contract, environmental restrictions on the
burning of coal, or loss by the customer of an underlying commodity supply
contract. Penalties for termination for such causes are not generally
specified. However, some contracts provide that in the event of an uncured
material breach by Midland which results in the termination of the contract,
Midland would be responsible for reimbursing its customer for the differential
between the contract price and the substituted performance.
The backlog of transportation and terminaling business under long-term
contract is summarized in the next table:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1993 1992
---- ----
<S> <C> <C>
Tons (in millions) ....................................... 165.5 184.5
Revenues (in millions) ................................... $585.5 $773.2
Portions of revenue backlog not expected to be filled
within the current fiscal year ......................... 80% 81%
</TABLE>
The 1993 revenue backlog (which is based on contracts that extend beyond
December 31, 1994) is shown at prices current as of December 31, 1993 which
are subject to escalation/de-escalation provisions. Since services under many
of the long-term contracts are based on customer requirements, Midland has
estimated its backlog based on its forecast of the requirements of these long-
term contract customers. About 50% of the decrease in the tonnage backlog is
due to the sale of the liquid barge business and its contract. About 40% of
the revenue backlog at December 31, 1993 is associated with a disputed
contract with Gulf Power Company, for which shipments have been curtailed.
The Interstate Commerce Act, as amended, exempts from regulation water
transportation of dry commodities which were transported in bulk as of June 1,
1939 (including coal, grain, phosphate rock, stone, sand and gravel and ores).
In addition, the Interstate Commerce Act exempts from regulation water
transportation of liquid cargoes in bulk. Approximately 96% of Midland's 1993
tonnage was exempt from regulation by the Interstate Commerce Commission
("ICC"). Regulated commodities include iron and steel products, other
manufactured products, packaged goods and scrap.
Improvements in operating efficiencies have permitted barge operators to
maintain competitive rate structures. Consequently, the barge industry has
been able to retain its competitive position relative to alternate methods of
transportation for bulk commodities when the origin and destination of such
movements are near or contiguous to navigable waterways.
Primary competitors of Midland's barge line subsidiaries include other
barge lines and railroads, including one integrated rail-barge carrier. There
are a number of companies offering transportation services on the waterways
served by Midland, including carriers licensed by the ICC and carriers not so
regulated. Railroads operating in areas served by the inland waterways compete
for cargoes carried by river barges. In many cases, these railroads offer unit
train service (an entire train committed to one customer) and dedicated
equipment service (equipment set aside for the exclusive use of a particular
customer) for coal, grain and other bulk commodities. In addition, rates
charged by both railroads and river barge operators are sometimes designed to
reflect special circumstances and requirements of the individual shippers. As
a result, it is difficult to compare rates charged for movements of the
various commodities between specific points.
Modern diesel-powered towboats such as those which comprise Midland's
towboat fleet are capable of moving approximately 22,500 tons in one tow
(equivalent to 225 one-hundred-ton-capacity railroad cars) on the Ohio River
and the Upper Mississippi River and approximately 60,000 tons (equivalent to
600 one-hundred-ton-capacity railroad cars) on the Lower Mississippi River,
where there are no locks, at average rates per ton mile which are generally
below those charged by Class 1 railroads.
Midland is subject to the provisions of the Federal Water Pollution
Control Act, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendment and Reauthorization Act, the
Resource Conservation and Recovery Act of 1976 and the Oil Pollution Act of
1990, which permit the Coast Guard and the Environmental Protection Agency to
assess penalties for oil, hazardous substance, and hazardous waste discharges.
Compliance with these acts has had no material effect on Midland's capital
expenditures, earnings, or competitive position, and no such effect is
anticipated.
Midland and its subsidiaries have approximately 1,500 employees, of whom
28% are represented by labor unions.
As of December 31, 1993, Midland's floating equipment consisted of 2,461
barges and 91 boats. A substantial portion of this equipment is either
mortgaged to secure Midland's equipment financing obligations or chartered
under long term leases from third parties.
Capital expenditures for Midland in 1993 totaled $14.2 million. These
expenditures were made principally for renewal and replacement of the barge
fleet.
WATER PRODUCTS GROUP
Eastern's Water Products Group consisted of WaterPro Supplies Corporation
and Ionpure Technologies Corporation until December 1, 1993, when Ionpure was
sold to United States Filter Corporation ("U.S. Filter"). Ionpure designs,
manufactures and services ultrapure water purification systems for commercial
and industrial customers worldwide. Since Ionpure was operated for the
account of U.S. Filter after October 1, 1993, its subsequent operating results
have been excluded from Eastern's consolidated results. Eastern's interest in
U.S. Filter is accounted for as a Headquarters investment.
WATERPRO is a wholesale distributor of components for the repair,
improvement and expansion of municipal water supply and wastewater collection
systems. Effective late March, 1994 WaterPro is headquartered in Edina,
Minnesota. It operates 26 branches serving 23 states and has approximately 320
employees.
Pipe, fire hydrants, valves, fittings, meters and other components are
purchased from a variety of sources, including nationally branded products
made by prominent manufacturers. WaterPro regards these sources as adequate
for presently planned operations. Components are warehoused by WaterPro and
then sold to contractors, as well as cities, towns and private water utilities
for new systems, rehabilitation and improvement to existing lines and system
expansion. WaterPro's business is affected by housing starts and related
construction activity, municipal infrastructure spending levels and seasonal
weather conditions.
Competition in WaterPro's business is intense and is based principally on
price, service and product offering.
GENERAL
Certain information with respect to Eastern's compliance with Federal and
state environmental statutes may be found in Item 1(c) under "Boston Gas
Company" and "Midland Enterprises Inc." and Note 13 of the Notes to Financial
Statements of Eastern appearing on pages 42 and 43 of the annual report to
shareholders for the year ended December 31, 1993. Such information is
incorporated herein by reference.
Eastern and its wholly owned subsidiaries employed approximately 3,600
employees at December 31, 1993.
ITEM 2. PROPERTIES
Information with respect to this item may be found in Item 1(c) under
"Boston Gas Company," "Midland Enterprises Inc." and "Water Products Group".
Such information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
Information with respect to certain legal proceedings may be found in
Notes 13 and 14 of the Notes to Financial Statements of Eastern appearing on
pages 42 through 43 of the annual report to shareholders for the year ended
December 31, 1993 and in Item 1(c) hereof under "Boston Gas Company" and
"Midland Enterprises, Inc." Such information is incorporated herein by
reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the fourth
quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
GENERAL
The table below identifies the executive officers of Eastern, who are
appointed annually and serve at the pleasure of the company's trustees.
<TABLE>
<CAPTION>
OFFICE HELD
NAME TITLE AGE SINCE
---- ----- --- -----------
<S> <C> <C> <C>
J. Atwood Ives ............ Chairman and Chief Executive Officer 57 1991
Richard R. Clayton ........ President and Chief Operating Officer 55 1991
Walter J. Flaherty ........ Senior Vice President and
Chief Financial Officer 45 1992
Richard J. Klau ........... Senior Vice President - President of
WaterPro Supplies Corporation 45 1991
Chester R. Messer ......... Senior Vice President - President of
Boston Gas Company 52 1988
Fred C. Raskin ............ Senior Vice President - President of
Midland Enterprises Inc. 45 1991
L. William Law, Jr. ....... General Counsel and Secretary 49 1987
</TABLE>
BUSINESS EXPERIENCE
Prior to joining Eastern in 1991, J. Atwood Ives was Vice Chairman, Chief
Financial Officer and a member of the Office of the Chairman of General Cinema
Corporation (now Harcourt General, Inc.) and The Neiman Marcus Group, Inc.
Prior to joining Eastern in 1987 as Executive Vice President and Chief
Administrative Officer, Richard R. Clayton was Chairman, President and Chief
Executive Officer of Vermont Castings, Inc. He was Executive Vice President
and Chief Operating Officer of Eastern from 1990 to 1991.
Walter J. Flaherty was Vice President-Marketing, Public Relations and
Rates of Boston Gas from 1986 to 1988 and Senior Vice President-Administration
of Boston Gas from 1988 until joining Eastern in 1991 as its Senior Vice
President and Chief Administrative Officer. He has been an employee of Eastern
or its subsidiaries since 1971.
Richard J. Klau was President of Ionpure from 1989 to 1991. Prior to
joining Ionpure in 1989, he was Vice President and General Manager of the
Process Water Division of Millipore Corporation.
Chester R. Messer was Senior Vice President-Administration of Boston Gas
from 1986 to 1988 and Executive Vice President of Boston Gas in 1988. He was
elected a Senior Vice President of Eastern in 1988, when he became President
of Boston Gas. He has been an employee of Boston Gas since 1963.
Fred C. Raskin was Senior Vice President-Administration of Midland from
1987 to 1988 and Executive Vice President of Midland from 1988 to 1991. He was
elected a Senior Vice President of Eastern in 1991, when he became President
of Midland. He has been an employee of Eastern or its subsidiaries since 1978.
Prior to joining Eastern in 1987 as General Counsel and Secretary, L.
William Law, Jr. was General Counsel and Secretary of Boston Gas. He has been
an employee of Eastern or its subsidiaries since 1975.
<PAGE>
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York, Boston and Pacific
Stock Exchanges (ticker symbol EFU). The approximate number of shareholders at
December 31, 1993 was 6,600.
Information with respect to this item may be found in the sections
captioned "Cash Dividends Per Share" and "Stock Price Range" appearing on page
50 of the annual report to shareholders for the year ended December 31, 1993.
Such information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item may be found in the section
captioned "Summary of Operations" appearing on page 48 of the annual report to
shareholders for the year ended December 31, 1993. Such information is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information with respect to this item may be found under the captions,
"1993 Compared to 1992", "1992 Compared to 1991", "Liquidity and Capital
Resources" and "Other Matters" on pages 26 through 30 of the annual report to
shareholders for the year ended December 31, 1993. Such information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item appears on page F-1 of this report.
Such information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item may be found in the section
captioned "Information With Respect to Nominees and Trustees" appearing on
pages 4 through 6 of the 1994 definitive Proxy Statement. Such information is
incorporated herein by reference. See also the item captioned "Executive
Officers of the Registrant" at the end of Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item may be found in the section
captioned "Compensation of Executive Officers" appearing on pages 8 through 12
of the 1994 definitive Proxy Statement. Such information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item may be found in the sections
captioned "Information With Respect to Certain Shareholders" appearing on
pages 2 and 3 and "Stock Ownership of Trustees and Executive Officers"
appearing on page 7 of the 1994 definitive Proxy Statement. Such information
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item may be found in the last paragraph
in the section captioned "Compensation of Trustees" appearing on page 11 of
the 1994 definitive Proxy Statement. Such information is incorporated herein
by reference.
<PAGE>
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) AND (2) LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Information with respect to these items appears on page F-1 of this report.
Such information is incorporated herein by reference.
<TABLE>
(3) LIST OF EXHIBITS
<S> <C>
3.1 --Declaration of Trust of Eastern Enterprises, as amended through April 27,
1989 (filed as Exhibit 3.1 to Quarterly Report of Eastern Enterprises on Form
10-Q for the quarter ended June 30, 1989).*<F1>
3.2 --By-Laws of Eastern Enterprises, as amended through July 23, 1992 (filed as
Exhibit 3.1 to Quarterly Report of Eastern on Form 10-Q for the quarter ended
June 30, 1992).*<F1>
(NOTE: Eastern agrees to furnish to the Securities and Exchange Commission
upon request a copy of any instrument with respect to long-term debt of
Eastern or any of its subsidiaries. Such instruments are not filed herewith
since no such instrument authorizes securities in an amount greater than 10%
of the total assets of Eastern and its subsidiaries on a consolidated basis.)
4.1 --Common Stock Rights Agreement between Eastern and The Bank of New York, dated
as of February 22, 1990, and Exhibits attached thereto (filed as Exhibits to
Form 8-K dated March 1, 1990).*<F1>
10.1 --Gas Transportation Contract between Boston Gas Company and Tennessee Gas
Pipeline Company dated as of September 1, 1993 (filed as Exhibit 10.1 to
Annual Report of Boston Gas Company on Form 10-K for the year ended December
31, 1993 (File no. 2-23416)).*<F1>
10.2 --Gas Transportation Contracts between Boston Gas Company and Texas Eastern
Transmission Corporation dated December 30, 1993 (filed as Exhibits 10.2 and
10.3 to Annual Report of Boston Gas Company on Form 10-K for the year ended
December 31, 1993 (File no. 2-23416)).*<F1>
10.3 --Gas Transportation Contracts between Boston Gas Company and Algonquin Gas
Transmission Company dated December 30, 1993 (filed as Exhibits 10.4 and 10.5
to Annual Report of Boston Gas Company on Form 10-K for the year ended
December 31, 1993 (File no. 2-23416)).*<F1>
10.4 --Gas Sales Contract between Boston Gas Company and Esso Resources Canada,
Limited, dated as of May 1, 1989, as amended, (filed as Exhibits 10.12 and
10.12.1 to the Annual Report of Boston Gas Company on Form 10-K for the year
ended December 31, 1989 (File no. 2-23416)).*<F1>
10.5 --Gas Sales Agreement between Boston Gas Company and Alberta Northeast Gas
Limited, dated as of February 7, 1991 (filed as Exhibit 10.16 to the Annual
Report of Boston Gas Company on Form 10-K for the year ended December 31,
1990 (File no. 2-23416)).*<F1>
10.6 --Firm Gas Transportation Agreement between Boston Gas Company and Iroquois Gas
Transmission System, L.P., dated as of February 7, 1991 (filed as Exhibit
10.17 to the Annual Report of Boston Gas Company on Form 10-K for the year
ended December 31, 1990 (File no. 2-23416)).*<F1>
10.7 --Eastern's Deferred Compensation Plan for Trustees, as amended .(a)<F2>
10.8 --Eastern's 1982 Stock Option Plan, as amended (filed as Exhibit 10.2 to
Quarterly Report of Eastern on Form 10-Q for the quarter ended March 31,
1992).*(a)<F1><F2>
10.9 --Eastern's Supplemental Executive Retirement Plan, as amended.(a)<F2>
10.10 --Trust Agreement between Eastern and Shawmut Bank of Boston, N.A., as amended
(filed as Exhibit 10.12 to the Annual Report of Eastern on Form 10-K for the
year ended December 31, 1990).*(a)<F1><F2>
10.11 --Eastern's Executive Incentive Compensation Plan, as amended (filed as Exhibit
10.3 to Quarterly Report of Eastern on Form 10-Q for the quarter ended March
31, 1992).*(a)<F1><F2>
10.12 --Salary Continuation Agreements between Eastern and certain officers, as
amended (filed as Exhibit 10.13 to the Annual Report of Eastern on Form 10-K
for the year ended December 31, 1991).*(a)<F1><F2>
10.13 --Agreement dated November 27, 1991 between Eastern and J. Atwood Ives (filed
as Exhibit 10.14 to the Annual Report of Eastern on Form 10-K for the year
ended December 31, 1991).*(a)<F1><F2>
10.14 --Agreement dated October 25, 1991 between Eastern and Richard R. Clayton
(filed as Exhibit 10.15 to the Annual Report of Eastern on Form 10-K for the
year ended December 31, 1991).*(a)<F1><F2>
10.15 --Eastern's Headquarters Retirement Plan, as amended and restated (filed as
Exhibit 10.1 to Quarterly Report of Eastern on Form 10-Q for the quarter
ended September 30, 1991).*(a)<F1><F2>
10.16 --Midland Enterprises Inc. Salaried Retirement Plan, as amended and restated
(filed as Exhibit 10.2 to Quarterly Report of Eastern on Form 10-Q for the
quarter ended September 30, 1991).*(a)<F1><F2>
10.17 --Boston Gas Company Retirement Plan, as amended and restated (filed as Exhibit
10.3 to Quarterly Report of Eastern on Form 10-Q for the quarter ended
September 30, 1991).*(a)<F2><F1>
10.18 --Trust Agreement made as of October 2, 1987 between Eastern and The Bank of
New York, as amended (filed as Exhibit 10.19 to the Annual Report of Eastern
on Form 10-K for the year ended December 31, 1990).*(a)<F1><F2>
10.19 --Eastern's Retirement Plan for Non-Employee Trustees, as amended (filed as
Exhibit 10.22 to Annual Report of Eastern on Form 10-K for the year ended
December 31, 1992).*(a)<F1><F2>
10.20 --Eastern's 1992 Restricted Stock Plan (filed as Exhibit 10.1 to Quarterly
Report of Eastern on Form 10-Q for the quarter ended March 31, 1992).*(a)<F1><F2>
10.21 --Eastern's Restricted Stock Plan for Non-Employee Trustees (filed as Exhibit
10.24 to Annual Report of Eastern on Form 10-K for the year ended December
31, 1992).*(a)<F1><F2>
10.22 --Eastern's 1994 Deferred Compensation Plan.(a)<F2>
13.1 --Portions incorporated herein of annual report to shareholders for the year
ended December 31, 1993. With the exception of the information incorporated
by reference in Items 1, 3, 5, 6, 7 and 8 of this Form 10-K, the annual
report to shareholders for the year ended December 31, 1993 is not deemed
filed as a part of this report.
21.1 --Subsidiaries of the registrant.
Eastern will furnish a copy of any exhibit not included herewith to any
holder of Eastern's common stock upon payment of the cost of reproduction and
mailing.
(B) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed in the fourth quarter of 1993.
<F1>
- -------------
<F1> *Not filed herewith. In accordance with Rule 12b-32 of the General Rules
and Regulations under the Securities and Exchange Act of 1934, reference is
made to the document previously filed with the Commission.
<F2> (a) Indicates a Management Contract or Compensatory Plan or Arrangement.
</TABLE>
<PAGE>
<TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
EASTERN ENTERPRISES
Registrant
By JAMES J. HARPER
-------------------------------------
JAMES J. HARPER
Vice President and Controller
(Chief Accounting Officer)
Date: March 14, 1994.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 14th day of March, 1994.
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
J. ATWOOD IVES Chairman and Chief Executive Officer
- ---------------------------------------------------- and Trustee
J. ATWOOD IVES
RICHARD R. CLAYTON President and Chief Operating Officer
- ---------------------------------------------------- and Trustee
RICHARD R. CLAYTON
WALTER J. FLAHERTY Senior Vice President and
- ---------------------------------------------------- Chief Financial Officer
WALTER J. FLAHERTY
NELSON J. DARLING, JR. Trustee
- ----------------------------------------------------
NELSON J. DARLING, JR.
SAMUEL FRANKENHEIM Trustee
- ----------------------------------------------------
SAMUEL FRANKENHEIM
DEAN W. FREED Trustee
- ----------------------------------------------------
DEAN W. FREED
ROBERT P. HENDERSON Trustee
- ----------------------------------------------------
ROBERT P. HENDERSON
LEONARD R. JASKOL Trustee
- ----------------------------------------------------
LEONARD R. JASKOL
THOMAS W. JONES Trustee
- ----------------------------------------------------
THOMAS W. JONES
HAROLD T. MILLER Trustee
- ----------------------------------------------------
HAROLD T. MILLER
WILLIAM J. PRUYN Trustee
- ----------------------------------------------------
WILLIAM J. PRUYN
WILLIAM G. SALATICH Trustee
- ----------------------------------------------------
WILLIAM G. SALATICH
RINA K. SPENCE Trustee
- ----------------------------------------------------
RINA K. SPENCE
LAWRENCE E. THOMPSON Trustee
- ----------------------------------------------------
LAWRENCE E. THOMPSON
</TABLE>
<PAGE>
(Page F-1)
<TABLE>
EASTERN ENTERPRISES AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1993
(SUBMITTED IN ANSWER TO ITEMS 8 AND 14(A)(1) AND (2) OF FORM 10-K,
SECURITIES AND EXCHANGE COMMISSION)
FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
EASTERN ENTERPRISES AND SUBSIDIARIES:
Report of independent public accountants ............................................ 47*<F1>
Report of independent public accountants on schedules ............................... F-2
Consent of independent public accountants ........................................... F-2
Consolidated:
Statements of operations for each of the three years ended December 31, 1993 ...... 31*<F1>
Balance sheets as of December 31, 1993 and 1992 ................................... 32*<F1>
Statements of cash flows for each of the three years ended December 31, 1993 ...... 34*<F1>
Statements of shareholders' equity for each of the three years ended
December 31, 1993 ............................................................... 35*<F1>
Notes to financial statements ..................................................... 36*<F1>
Unaudited interim financial information for the two years ended December 31, 1993 . 46*<F1>
SCHEDULES (PAGES F-3 THROUGH F-13)
V Property and equipment
VI Accumulated depreciation and amortization of property and equipment
VIII Valuation and qualifying accounts and reserves
IX Short-term borrowings
X Supplementary earnings statement information
Schedules not listed above are omitted as not applicable or not required under
the rules of Regulation S-X.
<FN>
- ---------
<F1>*Incorporated herein by reference to Eastern's annual report to shareholders
for the year ended Decem- ber 31, 1993, incorporated portions of which are
attached to this Form 10-K as Exhibit 13.1. Page references are to such
annual report.
</TABLE>
<PAGE>
(Page F-2)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
TO EASTERN ENTERPRISES:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in Eastern Enterprises Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 4, 1994. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedules listed in the index on page F-1 are the responsibility of Eastern's
management and are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
February 4, 1994
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference of our reports, dated February 4, 1994, included in, and
incorporated by reference into, Eastern Enterprises Annual Report on this Form
10-K for the year ended December 31, 1993, into Eastern's previously filed
Post-Effective Amendment No. 1 to Form S-16 Registration Statement No. 2-71614
on Form S-3 and Form S-8 Registration Statements No. 2-77146, No. 33-19990,
No. 33-40862 and No. 33-56424.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts
March 14, 1994
<PAGE>
(Page F-3)
<TABLE>
SCHEDULE V
EASTERN ENTERPRISES AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS)
<CAPTION>
BALANCE SALES BALANCE
DECEMBER 31, ADDITIONS AND DECEMBER 31,
CLASSIFICATION 1992 AT COST RETIREMENTS OTHER(1)<F1> 1993
-------------- ------------ --------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Gas utility --
Land and rights-of-way ....... $ 4,223 $ (161) $ -- $ -- $ 4,062
Structures ................... 29,284 2,462 (516) -- 31,230
Street mains ................. 253,110 13,104 (565) -- 265,649
Transportation equipment ..... 4,761 126 (152) -- 4,735
Other equipment .............. 293,834 21,499 (10,952) -- 304,381
Improvements and replacements
in progress ................ 186 7,945 -- -- 8,131
Miscellaneous property ....... 38,513 2,082 (1,072) -- 39,523
--------- ------ -------- -------- ---------
$ 623,911 $47,057 $(13,257) $ -- $ 657,711
--------- ------ -------- -------- ---------
Marine fleet and facilities --
Land ......................... $ 5,188 $ -- $ (52) $ 23 $ 5,159
Towboats and barges .......... 556,753 13,861 (22,687) 5,278) 542,649
Terminals and other facilities 59,698 330 (2,005) (684) 57,339
--------- ------ -------- -------- ---------
$ 621,639 $14,191 $(24,744) $ (5,939) $ 605,147
--------- ------ -------- -------- ---------
Water products distribution and
manufacturing --
Land ......................... $ 140 $ 172 $ -- $ -- $ 312
Buildings, machinery and
equipment .................. 20,643 891 (24) (16,283) 5,227
Furniture and fixtures ....... 2,231 130 (4) (1,646) 711
Autos and trucks ............. 1,530 118 (114) (595) 939
Improvements and replacements
in progress .................. 460 1,630 -- (2,090) --
--------- ------ -------- -------- ---------
$ 25,004 $ 2,941 $ (142) $(20,614) $ 7,189
--------- ------ -------- -------- ---------
Headquarters --
Land and land improvements ... $ 2,000 $ -- $ -- $ -- $ 2,000
Buildings, machinery and
equipment .................. 2,176 48 (6) 19 2,237
Furniture and fixtures ....... 663 31 (23) (4) 667
Autos and trucks ............. 180 123 (93) -- 210
--------- ------ -------- -------- ---------
$ 5,019 $ 202 $ (122) $ 15 $ 5,114
--------- ------ -------- -------- ---------
Total consolidated ....... $1,275,573 $64,391 $(38,265) $(26,538) $1,275,161
--------- ------ -------- -------- ---------
--------- ------ -------- -------- ---------
<FN>
- ---------
<F1>(1)Water products decreases reflect sale of Ionpure.
</TABLE>
<PAGE>
(Page F-4)
<TABLE>
SCHEDULE V
EASTERN ENTERPRISES AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS)
<CAPTION>
BALANCE SALES BALANCE
DECEMBER 31, ADDITIONS AND DECEMBER 31,
CLASSIFICATION 1991 AT COST RETIREMENTS OTHER 1992
-------------- ------------ --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C>
Gas utility --
Land and rights-of-way ........ $ 3,920 $ 303 $ -- $ -- $ 4,223
Structures .................... 23,412 6,065 (193) -- 29,284
Street mains .................. 228,599 25,619 (1,108) -- 253,110
Transportation equipment ...... 6,126 48 (1,413) -- 4,761
Other equipment ............... 271,081 27,639 (4,886) -- 293,834
Improvements and replacements
in progress ................. 35,839 (35,653) -- -- 186
Miscellaneous property ........ 11,398 27,115 -- -- 38,513
--------- ------ ------- ------ ---------
$ 580,375 $51,136 $ (7,600) $ -- $ 623,911
--------- ------ ------- ------ ---------
Marine fleet and facilities --
Land .......................... $ 5,188 $ -- $ -- $ -- $ 5,188
Towboats and barges ........... 538,271 27,634 (2,799) (6,353) 556,753
Terminals and other facilities 59,350 1,693 (403) (942) 59,698
--------- ------ ------- ------ ---------
$ 602,809 $29,327 $ (3,202) $ (7,295) $ 621,639
--------- ------ ------- ------ ---------
Water products distribution and
manufacturing --
Land .......................... $ 140 $ -- $ -- $ -- $ 140
Buildings, machinery and
equipment ................... 14,366 167 (23) 6,133 20,643
Furniture and fixtures ........ 1,858 107 (2) 268 2,231
Autos and trucks .............. 1,522 161 (66) (87) 1,530
Improvements and replacements
in progress ................. 4,695 1,918 -- (6,153) 460
--------- ------ ------- ------ ---------
$ 22,581 $ 2,353 $ (91) $ 161 $ 25,004
--------- ------ ------- ------ ---------
Headquarters --
Land and land improvements .... $ 2,000 $ -- $ -- $ -- $ 2,000
Buildings, machinery and
equipment ................... 2,149 75 (48) -- 2,176
Furniture and fixtures ........ 665 -- (2) -- 663
Autos and trucks .............. 231 -- (51) -- 180
--------- ------ ------- ------ ---------
$ 5,045 $ 75 $ (101) $ -- $ 5,019
--------- ------ ------- ------ ---------
Total consolidated ........ $1,210,810 $82,891 $ (10,994) $(7,134) $1,275,573
--------- ------ ------- ------ ---------
--------- ------ ------- ------ ---------
</TABLE>
<PAGE>
(Page F-5)
<TABLE>
SCHEDULE V
EASTERN ENTERPRISES AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS)
<CAPTION>
BALANCE SALES BALANCE
DECEMBER 31, ADDITIONS AND DECEMBER 31,
CLASSIFICATION 1990 AT COST RETIREMENTS OTHER 1991
-------------- ------------ --------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C>
Gas utility --
Land and rights-of-way ....... $ 3,920 $ -- $ -- $ -- $ 3,920
Structures ................... 21,828 1,624 (40) -- 23,412
Street mains ................. 210,690 18,890 (981) -- 228,599
Transportation equipment ..... 8,285 155 (2,314) -- 6,126
Other equipment .............. 251,345 26,435 (6,699) -- 271,081
Improvements and replacements
in progress ................ 25,993 9,846 -- -- 35,839
Miscellaneous property ....... 10,977 450 (29) -- 11,398
---------- -------- -------- ------- ----------
$ 533,038 $ 57,400 $(10,063) $ -- $ 580,375
---------- -------- -------- ------- ----------
Marine fleet and facilities --
Land ......................... $ 5,225 $ -- $ (37) $ -- $ 5,188
Towboats and barges .......... 498,892 47,184 (3,804) (4,001) 538,271
Terminals and other facilities 58,211 1,347 (208) -- 59,350
---------- -------- -------- ------- ----------
$ 562,328 $ 48,531 $ (4,049) $(4,001) $ 602,809
---------- -------- -------- ------- ----------
Water products distribution and
manufacturing --
Land ......................... $ 140 $ -- $ -- $ -- $ 140
Buildings, machinery and
equipment .................. 6,669 1,735 13 5,949 14,366
Furniture and fixtures ....... 903 59 (33) 929 1,858
Autos and trucks ............. 926 142 (76) 530 1,522
Improvements and replacements
in progress ................ 7,133 4,015 -- (6,453) 4,695
---------- -------- -------- ------- ----------
$ 15,771 $ 5,951 $ (96) $ 955 $ 22,581
---------- -------- -------- ------- ----------
Headquarters --
Land and land improvements ... $ 2,400 $ -- $ -- $ (400) $ 2,000
Buildings, machinery and
equipment .................. 2,053 96 -- -- 2,149
Furniture and fixtures ....... 616 49 -- -- 665
Autos and trucks ............. 256 58 (83) -- 231
---------- -------- -------- ------- ----------
$ 5,325 $ 203 $ (83) $ (400) $ 5,045
---------- -------- -------- ------- ----------
Total consolidated ....... $1,116,462 $112,085 $(14,291) $(3,446) $1,210,810
---------- -------- -------- ------- ----------
---------- -------- -------- ------- ----------
</TABLE>
<PAGE>
(Page F-6)
<TABLE>
SCHEDULE VI
EASTERN ENTERPRISES AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS)
<CAPTION>
ADDITIONS
------------------------
CHARGED
BALANCE TO COSTS CHARGED BALANCE
DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31,
CLASSIFICATION 1992 EXPENSES ACCOUNTS RETIREMENTS OTHER\1/<F1> 1993
-------------- ------------ -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gas utility ................... $182,550 $27,566 $1,921 $(12,426) $ (4,327) $195,284
------- ------ ----- -------- -------- -------
Marine fleet and facilities --
Towboats and barges ......... $248,087 $22,850 $ 693 $(21,533) $ -- $250,097
Terminals and other
facilities................. 36,407 2,439 96 (538) -- 38,404
------- ------ ----- -------- -------- -------
$284,494 $25,289 $ 789 $(22,071) $ -- $288,501
------- ------ ----- -------- -------- -------
Water products distribution and
manufacturing --
Buildings, machinery and
equipment .................. $ 5,363 $ 2,444 $ -- $ (18) $ (5,395) $ 2,394
Furniture and fixtures ...... 822 389 -- (2) (801) 408
Autos and trucks ............ 762 275 -- (80) (390) 567
------- ------ ----- -------- -------- -------
$ 6,947 $ 3,108 $ -- $ (100) $ (6,586) $ 3,369
------- ------ ----- -------- -------- -------
Headquarters --
Buildings, machinery and
equipment .................. $ 1,195 $ 232 $ -- $ -- $ -- $ 1,427
Furniture and fixtures ...... 476 61 (12) -- -- 525
Autos and trucks ............ 132 50 -- (92) -- 90
------- ------ ----- -------- -------- -------
$ 1,803 $ 343 $ (12) $ (92) $ -- $ 2,042
------- ------ ----- -------- -------- -------
Total consolidated ...... $475,794 $56,306 $2,698 $(34,689) $(10,913) $489,196
------- ------ ----- -------- -------- -------
------- ------ ----- -------- -------- -------
<FN>
- ------------
<F1>\1/ Water products decreases reflect sale of Ionpure.
</TABLE>
<PAGE>
(Page F-7)
<TABLE>
SCHEDULE VI
EASTERN ENTERPRISES AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS)
<CAPTION>
ADDITIONS
-----------------------------
CHARGED
BALANCE TO COSTS CHARGED BALANCE
DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31,
CLASSIFICATION 1991 EXPENSES ACCOUNTS RETIREMENTS OTHER 1992
-------------- ------------ -------- -------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Gas utility ............... $173,927 $22,493 $2,018 $ (7,600) $ (8,288) $182,550
-------- ------- ------ --------- --------- --------
Marine fleet and facilities --
Towboats and barges ..... $234,411 $22,143 $ 645 $ (2,759) $ (6,353) $248,087
Terminals and other
facilities ............ 34,250 2,464 104 (411) -- 36,407
-------- ------- ------ --------- -------- --------
$268,661 $24,607 $ 749 $ (3,170) $ (6,353) $284,494
-------- ------- ------ --------- -------- --------
Water products distribution
and manufacturing --
Buildings, machinery and
equipment ............. $ 2,791 $ 2,569 $ 9 $ (6) $ -- $ 5,363
Furniture and fixtures .. 433 380 9 -- -- 822
Autos and trucks ........ 522 287 (15) (32) -- 762
-------- ------- ------ --------- -------- --------
$ 3,746 $ 3,236 $ 3 $ (38) $ -- $ 6,947
-------- ------- ------ --------- -------- --------
Headquarters --
Buildings, machinery and
equipment ............. $ 950 $ 284 $ -- $ (39) $ -- $ 1,195
Furniture and fixtures .. 366 111 -- (1) -- 476
Autos and trucks ........ 116 50 8 (42) -- 132
-------- ------- ------ --------- -------- --------
$ 1,432 $ 445 $ 8 $ (82) $ -- $ 1,803
-------- ------- ------ --------- -------- --------
Total consolidated .... $447,766 $50,781 $2,778 $ (10,890) $(14,641) $475,794
-------- ------- ------ --------- -------- --------
-------- ------- ------ --------- -------- --------
</TABLE>
<PAGE>
(Page F-8)
<TABLE>
SCHEDULE VI
EASTERN ENTERPRISES AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS)
<CAPTION>
ADDITIONS
-----------------------
CHARGED
BALANCE TO COSTS CHARGED BALANCE
DECEMBER 31, AND TO OTHER SALES AND DECEMBER 31,
CLASSIFICATION 1990 EXPENSES ACCOUNTS RETIREMENTS OTHER 1991
-------------- ------------ -------- -------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
Gas utility ..................... $167,012 $18,685 $1,866 $(10,063) $(3,573) $173,927
------- ------ ----- ------- ------ -------
Marine fleet and facilities --
Towboats and barges ........... $221,025 $19,868 $ 665 $ (3,146) $(4,001) $234,411
Terminals and other facilities 31,946 2,372 113 (181) -- 34,250
------- ------ ----- ------- ------ -------
$252,971 $22,240 $ 778 $ (3,327) $(4,001) $268,661
------- ------ ----- ------- ------ -------
Water products distribution and
manufacturing --
Buildings, machinery and
equipment .................... $ 1,155 $ 1,795 $ -- $ (163) $ 4 $ 2,791
Furniture and fixtures ........ 115 327 -- (5) (4) 433
Autos and trucks .............. 201 338 -- (17) -- 522
------- ------ ----- ------- ------ -------
$ 1,471 $ 2,460 $ -- $ (185) $ -- $ 3,746
------- ------ ----- ------- ------ -------
Headquarters --
Buildings, machinery and
equipment ................... $ 678 $ 272 $ -- $ -- $ -- $ 950
Furniture and fixtures ........ 260 106 -- -- -- 366
Autos and trucks .............. 162 43 5 (94) -- 116
------- ------ ----- ------- ------ -------
$ 1,100 $ 421 $ 5 $ (94) $ -- $ 1,432
------- ------ ----- ------- ------ -------
Total consolidated ........ $422,554 $43,806 $2,649 $(13,669) $(7,574) $447,766
------- ------ ----- ------- ------ -------
------- ------ ----- ------- ------ -------
</TABLE>
<PAGE>
(Page F-9)
<TABLE>
SCHEDULE VIII
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1993
(THOUSANDS)
<CAPTION>
ADDITIONS DEDUCTIONS
--------------------------- ------------
CHARGES
CHARGED FOR WHICH
BALANCE TO COSTS CHARGED RESERVES BALANCE
DECEMBER 31, AND TO OTHER WERE DECEMBER 31,
DESCRIPTION 1992 EXPENSES ACCOUNTS CREATED 1993
----------- ------------ -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets --
Reserves for doubtful accounts . $ 12,630 $ 13,893 $ (402) $(11,655) $ 14,466
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Reserves for inventory ......... $ 3,214 $ 1,169 $(2,843) $ (897) $ 643
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Reserves for loss on investments $ 19 $ -- $ -- $ -- $ 19
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
Reserves included in liabilities --
Reserve for post-retirement
health care .................. $103,760 $ 1,364 $ 5,233 $ (5,627) $104,730
Reserve for coal miners retiree
health care .................. -- 70,000 -- -- 70,000
Reserves for employee benefits . 12,425 8,969 (1,978) (8,755) 10,661
Reserves for environmental
expenses ..................... 6,746 5,639 (159) (1,360) 10,866
Reserves for insurance claims .. 9,202 6,369 1,098 (7,502) 9,167
Other .......................... 25,367 8,027 (6,887) (5,253) 21,254
-------- -------- ------- -------- --------
Total liability reserves ... $157,500 $100,368 $(2,693) $(28,497) $226,678
-------- -------- ------- -------- --------
-------- -------- ------- -------- --------
</TABLE>
<PAGE>
(Page F-10)
<TABLE>
SCHEDULE VIII
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1992
(THOUSANDS)
<CAPTION>
ADDITIONS DEDUCTIONS
-------------------------------- ---------------
CHARGES
CHARGED FOR WHICH
BALANCE TO COSTS CHARGED RESERVES BALANCE
DECEMBER 31, AND TO OTHER WERE DECEMBER 31,
DESCRIPTION 1991 EXPENSES ACCOUNTS CREATED 1992
----------- ------------ -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets --
Reserves for doubtful accounts ... $ 11,274 $12,739 $ 150 $(11,533) $ 12,630
-------- ------- ------- -------- -------
-------- ------- ------- -------- -------
Reserves for inventory ........... $ 2,712 $ 554 $ -- $ (52) $ 3,214
-------- ------- ------- -------- -------
-------- ------- ------- -------- -------
Reserve for loss on investments .. $ 19 $ -- $ -- $ -- $ 19
-------- ------- ------- -------- -------
-------- ------- ------- -------- -------
Reserves included in liabilities --
Reserves for post-retirement
health care .................... $103,502 $10,258 $ 432 $(10,432) $103,760
Reserves for employee benefits ... 11,608 9,723 (144) (8,762) 12,425
Reserves for environmental
expenses ....................... 7,367 2,500 282 (3,403) 6,746
Reserves for insurance claims .... 10,235 7,032 232 (8,297) 9,202
Other ............................ 14,778 4,783 15,844\1/<F1> (10,038) 25,367
-------- ------- ------- -------- -------
Total liability reserves ..... $147,490 $34,296 $16,646 $(40,932) $157,500
-------- ------- ------- -------- -------
-------- ------- ------- -------- -------
<FN>
- ---------
<F1>\1/SFAS 109 gross up for deferred taxes on regulatory liabilities of Boston
Gas Company.
</TABLE>
<PAGE>
(Page F-11)
<TABLE>
SCHEDULE VIII
EASTERN ENTERPRISES AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEAR ENDED DECEMBER 31, 1991
(THOUSANDS)
<CAPTION>
DEDUCTIONS
ADDITIONS --------------
------------------------------ CHARGES
CHARGED FOR WHICH
BALANCE TO COSTS CHARGED RESERVES BALANCE
DECEMBER 31, AND TO OTHER WERE DECEMBER 31,
DESCRIPTION 1990 EXPENSES ACCOUNTS CREATED 1991
----------- ------------ -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets --
Reserves for doubtful accounts ..... $ 7,155 $14,152 $ 880 $(10,913) $ 11,274
------- ------- -------- -------- -------
------- ------- -------- -------- -------
Reserves for inventory $ 1,027 $ 1,600 $ 293 $ (208) $ 2,712
------- ------- -------- -------- -------
------- ------- -------- -------- -------
Reserve for loss on investments .... $ 19 $ -- $ -- $ -- $ 19
------- ------- -------- -------- -------
------- ------- -------- -------- -------
Reserves included in liabilities --
Reserves for post-retirement
health care ...................... $ 1,515 $13,266 $ 94,250\1/<F1> $ (5,529) $103,502
Reserves for employee benefits ..... 24,662 9,120 (11,286)\2/<F2> (10,888) 11,608
Reserves for environmental expenses. 4,601 5,410 140 (2,784) 7,367
Reserves for insurance claims ...... 11,141 6,149 1,339 (8,394) 10,235
Other .............................. 15,610 7,493 4,382 (12,707) 14,778
------- ------- -------- -------- -------
Total liability reserves ....... $57,529 $41,438 $ 88,825 $(40,302) $147,490
------- ------- -------- -------- -------
------- ------- -------- -------- -------
<FN>
- ---------
<F1>\1/Health care costs deferred by Boston Gas Company.
<F2>\2/Decrease in pension minimum funding liability.
</TABLE>
<PAGE>
(Page F-12)
<TABLE>
SCHEDULE IX
EASTERN ENTERPRISES AND SUBSIDIARIES
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(THOUSANDS)
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
BALANCE WEIGHTED AMOUNT AMOUNT AVERAGE
AT END AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
OF INTEREST DURING THE DURING THE DURING THE
YEAR DESCRIPTION PERIOD RATE PERIOD PERIOD(1)<F1> PERIOD(2)<F2>
- ---- ----------- ------ -------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
1993 ....... Notes payable ................... $106,300 3.5% $110,869 $56,746 3.7%
-------- ---- -------- ------- ----
-------- ---- -------- ------- ----
1992 ....... Notes payable ................... $ 54,944 4.3% $ 73,612 $35,785 5.0%
-------- ---- -------- ------- ----
-------- ---- -------- ------- ----
1991 ....... Notes payable ................... $ 56,418 5.7% $ 56,418 $27,825 7.3%
-------- ---- -------- ------- ----
<FN>
- ---------
<F1>(1) Average daily balances.
<F2>(2) Actual interest incurred divided by average principal amount outstanding
during the period.
</TABLE>
<PAGE>
(Page F-13)
<TABLE>
SCHEDULE X
EASTERN ENTERPRISES AND SUBSIDIARIES
SUPPLEMENTARY EARNINGS STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(THOUSANDS)
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Maintenance and repairs ............................. $49,903 $44,917 $43,536
Taxes, other than payroll and
income taxes:
Real estate and personal property ............... $11,016 $ 7,001 $ 6,151
Other ........................................... $ 8,425 $ 6,969 $ 6,695
</TABLE>
<PAGE>
<TABLE>
EXHIBIT INDEX
See Item 14(a)(3), "List of Exhibits," for statement of the location of
exhibits incorporated by reference.
<CAPTION>
EXHIBIT
-------
<S> <C>
3.1 --Declaration of Trust of Eastern Enterprises, as amended through April 27,
1989 (incorporated by reference).
3.2 --By-Laws of Eastern Enterprises, as amended through July 23, 1992
(incorporated by reference).
4.1 --Common Stock Rights Agreement between Eastern and The Bank of New York, dated
as of February 22, 1990, and Exhibits attached thereto (incorporated by
reference).
10.1 --Gas Transportation Contract between Boston Gas Company and Tennessee Gas
Pipeline Company dated as of September 1, 1993 (incorporated by reference).
10.2 --Gas Transportation Contracts between Boston Gas Company and Texas Eastern
Transmission Corporation dated December 30, 1993 (incorporated by reference).
10.3 --Gas Transportation Contracts between Boston Gas Company and Algonquin Gas
Transmission Company dated December 30, 1993 (incorporated by reference).
10.4 --Gas Sales Contract between Boston Gas Company and Esso Resources Canada,
Limited, dated as of May 1, 1989, as amended (incorporated by reference).
10.5 --Gas Sales Agreement between Boston Gas Company and Alberta Northeast Gas
Limited, dated as of February 7, 1991 (incorporated by reference).
10.6 --Firm Gas Transportation Agreement between Boston Gas Company and Iroquois Gas
Transmission System, L.P., dated as of February 7, 1991 (incorporated by
reference).
10.7 --Eastern's Deferred Compensation Plan for Trustees, as amended.
10.8 --Eastern's 1982 Stock Option Plan, as amended (incorporated by reference).
10.9 --Eastern's Supplemental Executive Retirement Plan, as amended.
10.10 --Trust Agreement between Eastern and Shawmut Bank of Boston, N.A., as amended
(incorporated by reference).
10.11 --Eastern's Executive Incentive Compensation Plan, as amended (incorporated by
reference).
10.12 --Salary Continuation Agreements between Eastern and certain officers, as
amended (incorporated by reference).
10.13 --Agreement dated November 27, 1991 between Eastern and J. Atwood Ives
(incorporated by reference).
10.14 --Agreement dated October 25, 1991 between Eastern and Richard R. Clayton
(incorporated by reference).
10.15 --Eastern's Headquarters Retirement Plan, as amended and restated (incorporated
by reference).
10.16 --Midland Enterprises Inc. Salaried Retirement Plan, as amended and restated
(incorporated by reference).
10.17 --Boston Gas Company Retirement Plan, as amended and restated (incorporated by
reference).
10.18 --Trust Agreement made as of October 2, 1987 between Eastern and The Bank of
New York, as amended (incorporated by reference).
10.19 --Eastern's Retirement Plan for Non-Employee Trustees, as amended (incorporated
by reference).
10.20 --Eastern's 1992 Restricted Stock Plan (incorporated by reference).
10.21 --Eastern's Restricted Stock Plan for Non-Employee Trustees (incorporated by
reference).
10.22 --Eastern's 1994 Deferred Compensation Plan.
13.1 --Portions incorporated herein of annual report to shareholders for the year
ended December 31, 1993.
21.1 --Subsidiaries of the registrant.
</TABLE>
EXHIBIT 10.7
EASTERN ENTERPRISES
DEFERRED COMPENSATION PLAN FOR TRUSTEES
1. Purpose
The purpose of this plan (the "Plan") is to assist members of
the Board of Trustees of
Eastern Enterprises ("Eastern") who are not employees of Eastern
in making more
satisfactory provision for their income following their retirement
from the Board. To
accomplish this purpose, the Plan establishes arrangements under
which certain cash amounts
payable by Eastern to such members may be deferred until after the
retirement of such
members from the Board of Trustees. In addition, the Plan gives
such Trustees the option to
have all or a portion of their deferred payments credited to Share
Units, as hereinafter
provided.
2. Administration
The Plan will be administered by the Treasurer of Eastern.
3. Deferral of Retainers and of Fees for Attendance at Meetings
Each member of the Board of Trustees of Eastern who is not an
employee of Eastern
will have the right to defer receipt of payments on account of all
cash retainers and fees for
attendance at meetings ("meeting fees") to which he or she may be
entitled for any calendar
year as a member of the Board of Trustees, including those to
which he or she is entitled as
a member of any Committee of the Board of Trustees or as Chairman
of any such
Committee. In order to exercise his or her right to defer receipt
of such cash payments for
any calendar year, the member must make an election in accordance
with the provisions of
paragraph 4 below. Such election must also set forth the method
by which the deferred
amounts will be paid, subject to the provisions of paragraph 6
below.
Any election to defer receipt of payments on account of
retainers and meeting fees
payable in cash will apply to all such payments for the calendar
year to which the election
relates.
4. Election to Defer
a. Except as provided in 4.b and 4.c below, any member of
the Board of
Trustees who wishes to defer receipt of payments on
account of retainers or
meeting fees payable in cash for any calendar year must
make an irrevocable
election on a form satisfactory to the Treasurer prior
to the beginning of the
calendar year in which the amounts would be paid if no
such election were
made.
b. In the case of payments on account of retainers or
meeting fees for 1980, the
election must be made prior to the 1980 annual meeting
of shareholders of
Eastern and must be on a form satisfactory to the
Treasurer. Any such
election will apply to all such amounts which would be
paid during 1980 after
the date of such election if no such election were made.
c. In the case of the first calendar year in which an
individual becomes a member
of the Board of Trustees, or becomes entitled to
retainers and meeting fees,
the election must be made prior to the date on which
such individual becomes
a member of the Board of Trustees or becomes so
entitled. Such election will
apply to all such amounts which would be paid in cash
during such year if no
such election were made.
5. Cash Accounts; Share Unit Accounts
a. Each member who elects to defer under the Plan receipt
of payments for a
calendar year after 1992 shall, on the form referred to
in paragraph 4. hereof,
make an irrevocable election to credit each such
deferred payment entirely to
his or her Cash Account or entirely to his or her Share
Unit Account, or to
have a fixed percentage of each such deferred payment
credited to his or her
Share Unit Account and the balance to his or her Cash
Account. For members
who participated in the Plan for any year prior to 1993,
the accounts to which
their deferred payments for such year(s) have been
credited are their Cash
Accounts. Each such member shall have the right to make
a one-time
irrevocable election, on or prior to December 31, 1992,
to transfer from his or
her Cash Account to his or her Share Unit Account all or
a portion of amounts
deferred from years prior to 1993.
b. If a member has a balance in his or her Cash Account,
then amounts will be
credited to such Cash Account as of the end of each
calendar year based upon
the average balance therein during such year (including
any prior interest
credits) and upon a rate, as determined by the Treasurer
of Eastern, equal to
the prime rate* of interest charged by The First <F1>
National Bank of Boston as of
the first day of such year or upon a rate based on such
other indices as the
Treasurer of Eastern in his or her sole discretion from
time to time selects.
Such credits will be made as long as there is any amount
credited to such Cash
Account.
[FN]
- ----------
<F1> * Amended on January 27, 1994 to increase rate to prime rate plus
one percent.
c. If a member elects to have all or a portion of his or
her deferred payments for
any year after 1992 credited to his or her Share Unit
Account, a number of
whole and fractional Share Units shall be credited to
such Account, as of the
date when each deferred payment or portion thereof would
have been payable,
equal to the amount of such deferred payment or portion
thereof divided by the
Fair Market Value of a share of Common Stock, $1.00 par
value, of Eastern
("Common Stock") on such date. If a member elects
pursuant to paragraph
5.a. to transfer from his or her Cash Account to his or
her Share Unit Account
an amount deferred from any year(s) prior to 1993, a
number of whole and
fractional Share Units shall be credited to such Share
Unit Account on January
4, 1993, equal to such transferred amount divided by the
Fair Market Value of
a share of Common Stock on such date. In addition, on
the date of payment
of each cash dividend declared on the Common Stock,
there shall be credited
to each Share Unit Account with Share Units therein on
such date a number of
additional Share Units, such number to be determined by
dividing the dollar
amount of dividends that would be payable on the number
of shares of
Common Stock represented by the Share Units in such
Account on the record
date for such dividend, by the Fair Market Value of a
share of Common Stock
on the payment date of such dividend. The number of
Share Units in each
Share Unit Account shall be appropriately adjusted by
the Treasurer of Eastern
in the event of any stock dividend or split,
recapitalization, merger in which
Eastern is the surviving entity, combination or exchange
of shares or similar
corporate change affecting the number or type of shares
of Eastern stock
outstanding. For purposes of this Plan, the "Fair
Market Value" of a share of
Common Stock on any day shall be the average of the high
and low prices of
the Common Stock as published in the New York Stock
Exchange Composite
Transactions listing for such day (or, if the New York
Stock Exchange is not
open for trading on such day, the last previous day on
which such trading
occurred); provided that, in the event that such prices
for the Common Stock
shall not be so published, the Fair Market Value of the
Common Stock shall
be reasonably determined by the Treasurer of Eastern.
d. Commencing six months and one day following the date on
which a member
ceases to be a member of the Board of Trustees, such
former member may
elect to make annual transfers of all or a portion of
amounts in his or her Cash
Account to his or her Share Unit Account, and vice
versa. Each such transfer
shall be effected on the first business day of January
of the year following the
year in which the transfer election is made. In the
event of such a transfer to
a Share Unit Account, such Account shall be credited
with Share Units based
on the Fair Market Value of the Common Stock on the date
of transfer. In the
event of such a transfer from a Share Unit Account, the
Share Units in such
account shall be converted to cash based on the Fair
Market Value of the
Common Stock on the date of transfer. On the date of
any payment from a
Share Unit Account pursuant to paragraph 6.a., 6.b. or
6.c. hereof, the
number of whole and fractional Share Units required to
make such payment
shall be converted to cash based on the Fair Market
Value of the Common
Stock on such date. Payments from Share Unit Accounts
shall be made in
cash only, and members, former members and beneficiaries
shall in no event
have any right to receive Share Units or shares of
Common Stock under the
Plan. In the event that any installment payment under
paragraph 6.a., 6.b. or
6.c. is to be made from both a member's or former
member's Share Unit
Account and Cash Account, an amount shall be paid from
each Account in
proportion to the value of such Account on the payment
date.
6. Payment of Amounts Deferred
a. Amounts in a member's Cash Account and/or Share Unit
Account will be paid
in cash only, in either of the following ways, as
elected by the member prior
to the beginning of the first calendar year in which he
or she defers receipt of
payments under this Plan:
(i) in a lump sum, with adjustments as referred to in
paragraph 6.b below,
on the first business day in January of the year
following the year in which the
member ceases to be a member of the Board of Trustees;
or
(ii) in a number of consecutive annual installments as
elected by the
member, not to exceed 10, beginning in the calendar year
following the
calendar year in which the member ceases to be a member
of the Board of
Trustees, the installment in each year to be paid on the
first business day of
January in such year, and each installment to equal an
amount determined by
dividing (x) the total amount in the member's Cash
Account and Share Unit
Account on the payment date (valuing the Share Unit
Account based on the
Fair Market Value of the Common Stock on such date), by
(y) the number of
annual installments elected by the member that remain
unpaid (including the
installment to be paid on such date).
Except as provided in paragraph 6.b below, once filed
with the Treasurer, a
member's election under this paragraph 6 as to the
method by which deferred
amounts will be paid to him or her will be irrevocable.
b. If a member or former member of the Board of Trustees,
or any beneficiary of
the member after the member's death, incurs a severe
financial hardship, the
Treasurer, in his or her sole discretion, may revise the
schedule for payments
from his or her Cash Account (including the making of
immediate payments)
to the extent reasonably necessary to eliminate the
severe financial hardship;
provided that no revision shall be made with respect to
the schedule for
payments from the member's or former member's Share Unit
Account. Any
such severe financial hardship must have been caused by
an accident, illness,
or event beyond the control of the member, former
member, or beneficiary.
c. If at the time of death of a member or former member of
the Board of
Trustees, there is any balance in his or her individual
Cash Account and/or
Share Unit Account under the Plan, Eastern will pay such
balance (as adjusted
under paragraph 6.b above) in cash only to the
beneficiary or beneficiaries
designated by the member on a form satisfactory to the
Treasurer. At the
member's election, such payment will be made in a lump
sum on the first
business day of January of the year following the year
of the member's death
or in a number of consecutive annual installments as
elected by the member,
not to exceed 10, beginning in the calendar year
following the year of the
member's death, each annual installment to be paid on
the first business day of
January in such year, and the amount of each installment
to be calculated in
the manner provided in paragraph 6.a above. The member
may at any time
change his or her designation of beneficiary or
beneficiaries and the schedule
for payments to such beneficiary or beneficiaries with
respect to amounts in
his or her Cash Account by filing an additional form
with the Treasurer. The
member may at any time change his or her designation of
beneficiary or
beneficiaries with respect to amounts in his or her
Share Unit Account by
filing an additional form with the Treasurer. However,
the member's election
as to the schedule for payments to his or her
beneficiary or beneficiaries from
a Share Unit Account must be made prior to the beginning
of the first calendar
year in which he or she defers receipt of payments into
a Share Unit Account
under the Plan, and shall be irrevocable thereafter
until six months and one
day following the date on which such member ceases to be
a member of the
Board of Trustees, after which time such former member
may at any time
change the schedule for payments to such beneficiary or
beneficiaries with
respect to amounts in his or her Share Unit Account.
7. Payments Under the Plan
Eastern will comply with any requirements which may be
established by law with
respect to payments under the Plan, including the filing of any
notices and the withholding of
any taxes which may be required.
8. Rights of Members and Other Persons
Any rights accruing to any member of the Board of Trustees of
Eastern or other
person under the Plan will be solely those of an unsecured general
creditor of Eastern. Such
rights may not be assigned or otherwise transferred by such member
or person and will not
be subject to be taken by creditors of such member or person by
any process whatsoever,
and any attempt to cause such interest to be so subjected will not
be recognized, except to
such extent as may be required by law.
9. Modification and Termination of the Plan
The Plan may be amended or terminated by the Board of
Trustees of Eastern at any
time, in whole or in part, such amendment or termination to become
effective on the date
specified by the Board of Trustees.
10. Effective Date of the Plan
The Plan is effective as of April 1, 1980.
____________________
As Amended by the Board of Trustees January 27, 1994
EXHIBIT 10.9
Amended as of February 24, 1994
Eastern Enterprises
Supplemental Executive Retirement Plan
1. Purpose. The purpose of this Plan is to provide key management
personnel of Eastern Enterprises and its subsidiaries with an appropriate
level of retirement income by supplementing the retirement benefits provided
under the Eastern Enterprises Headquarters Retirement Plan, the Boston Gas
Company Retirement Plan, and the Midland Enterprises Inc. Salaried Retirement
Plan, as applicable.
2. Definitions. For purposes of this Plan, the following terms will
have the following meanings:
(a) The word "Eastern" will mean Eastern Enterprises and any successor
to all or a major portion of its assets or business which assumes
the obligations of Eastern Enterprises under the Plan.
(b) The word "Plan" will mean the Eastern Enterprises Supplemental
Executive Retirement Plan set forth herein, together with all
amendments hereto.
(c) The words "Retirement Plan" will mean the Eastern Enterprises
Headquarters Retirement Plan, the Boston Gas Company Retirement
Plan, and the Midland Enterprises Inc. Salaried Retirement Plan,
as from time to time amended, as applicable.
(d) The words "Participating Subsidiary" will mean any Participating
Employer (as defined in the Retirement Plan), other than Eastern.
(e) The word "Compensation" will mean:
(i) except as otherwise provided in Section 2(e)(ii) below, with
respect to any Officer for any year, the salary paid by
Eastern or by a Participating Subsidiary to such Officer for
such year (calculated as of his Earnings Measurement Date,
as defined in the Retirement Plan) and fifty percent (50%)
of bonuses and incentive awards paid (whether in cash or
stock) by Eastern or by a Participating Subsidiary to such
Officer in such year; provided, that amounts deferred by
such Officer under Eastern's Deferred Compensation Plan for
Certain Management Employees shall be treated as paid in the
year they would have been payable but for such deferral;
further provided, that in determining for the purposes
hereof the amount of an incentive award paid (whether in
cash or stock) under Eastern's Executive Incentive
Compensation Plan (x) there shall be included only the
lesser of the amount paid or the target award amount
established in creating the incentive opportunity to earn
such award and (y) awards based on a fixed number of shares
of Eastern stock shall be valued at the price for Eastern
stock utilized in creating the incentive opportunity to earn
such award; and, further provided, that no amount will be
included with respect to stock options or stock appreciation
rights; and
(ii) with respect to any Officer first receiving benefits
hereunder on or after January 1, 1994, for any calendar
year, the salary paid by Eastern or by a Participating
Subsidiary to such Officer for such calendar year
(calculated as of his Earnings Measurement Date, as defined
in the Retirement Plan) and fifty percent (50%) of bonuses
and incentive awards (whether payable in cash or stock)
earned by such Officer with respect to such calendar year
under Eastern's Executive Incentive Compensation Plan or any
similar executive incentive plan adopted by Eastern after
January 1, 1994; provided, that amounts deferred by such
Officer under any deferred compensation and/or savings plan
maintained by Eastern or any Participating Subsidiary from
time to time shall be treated as paid in the calendar year
they would have been payable but for such deferral, and such
deferrals shall be disregarded for purposes of determining
amounts earned; further provided, that in determining for
purposes hereof the amount of an incentive award earned
(whether payable in cash or stock), (a) a bonus or award
that relates to a plan period of more than one calendar
year, when earned in accordance with such Plan at the end of
such period, shall be deemed to have been earned in equal
annual installments during such period, and (b) awards based
on a fixed number of shares of Eastern stock shall be valued
at the price for Eastern stock utilized in creating the
incentive opportunity to earn such award; and, further
provided, that no amounts will be included with respect to
stock options, stock appreciation rights or restricted stock
awards.
(f) The word "Officer" will mean any active employee of Eastern or a
Participating Subsidiary employed as a Chairman, a President, a
Vice President, a General Counsel, an Assistant Vice President, a
Treasurer, a Secretary, or a Controller. In addition to the
offices named in the preceding sentence, the Compensation
Committee may from time to time designate other offices of Eastern
or a Participating Subsidiary, the holders of which will be
Officers within the meaning of this Section 2(f).
(g) The words "Eligible Officer" will mean any Officer who satisfies
the eligibility requirements set forth in Section 4 of the Plan.
(h) The words "Executive Service" will mean the period of service
which an employee serves as an Officer, except that no service
after age sixty-five (65) will be counted as Executive Service.
(i) The words "Break in Service" will have the same meaning as in the
Retirement Plan.
(j) The words "Computation Period" will have the same meaning as in
the Retirement Plan.
(k) The words "Hour of Service" will have the same meaning as in the
Retirement Plan.
(l) The words "Social Security Benefit" will have the same meaning as
in the Retirement Plan.
(m) A "Change of Control" will be deemed to have occurred if
(i) after January 1, 1987 any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934), other than Eastern, becomes a beneficial owner
directly or indirectly of securities representing
twenty-five percent (25%) or more of the combined voting
power of the then outstanding voting securities of Eastern;
or
(ii) within two years after the commencement of a tender offer or
exchange offer for the voting securities of Eastern (other
than by Eastern), or as a result of a merger, consolidation,
sale of assets or contested election of trustees or
directors, or any combination of the foregoing, the
individuals who were trustees of Eastern immediately prior
thereto shall cease to constitute a majority of the Board of
the Trustees of Eastern or of the board of trustees or
directors of its successor by merger, consolidation or sale
of assets.
Wherever used in the Plan, the masculine pronoun will include the
feminine.
3. Administration. The Plan will be administered by the Compensation
Committee of Eastern, which will have full power and authority to construe,
interpret and administer the Plan. Decisions of the Compensation Committee
will be final and binding on all persons. The Compensation Committee may, in
its discretion, adopt, amend and rescind rules and regulations, not
inconsistent with the Plan, relating to the administration thereof. In
individual cases, the Compensation Committee may also credit any Officer for
either eligibility or benefit-determination purposes, or both, with periods
of service in addition to those otherwise taken into account under the Plan,
whether or not such Officer has actually performed service for Eastern or its
subsidiaries in such periods.
4. Eligibility. All Officers fifty-five (55) years of age or older
who (i) are serving in those positions of responsibility that most greatly
influence Eastern's performance (such positions to be designated from time to
time by the Compensation Committee with reference to this Section 4); (ii)
have completed at least twenty-four (24) consecutive months of service in one
or more of the positions so designated by the Compensation Committee; and
(iii) are Members in the Retirement Plan (as defined therein) will be covered
by the Plan and will be eligible to receive benefits hereunder, subject to the
provisions of the Plan. The Compensation Committee may extend eligibility
under the Plan on an individual basis to other employees of Eastern or of its
subsidiaries; provided, however, that no individual (other than a spouse or
beneficiary of an Eligible Officer) who is not a Member in the Retirement Plan
will be eligible to receive benefits under the Plan.
5. Amount of Benefit. Subject to the offset described in Section 7
below, the actuarial adjustments described in Section 8 below and the off-sets
described in Section 9 below, the benefit provided under the Plan with respect
to any Eligible Officer will be determined as follows:
(a) Termination of Employment At or After Age 62.
(i) Except as otherwise provided in Section 5(a)(ii) below,
every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age sixty-two will be eligible to receive an
annual amount which is the product of (i) his average annual
Compensation for those five (5) years, selected from among
the last ten (10) years of his Executive Service, in which
his aggregate Compensation was highest, and (ii) a
percentage determined according to the following table:
<TABLE>
<CAPTION>
Years of Executive
Service Percentage
<S> <C>
Less than 10 None
10 35
11 36.5
12 38
13 39.5
14 41
15 42.5
16 44
17 45.5
18 47
19 48.5
20 or more 50
</TABLE>
For purposes of this Section 5(a)(i), a Computation Period
in which an Officer has one thousand (1,000) or more Hours
of Service as an Officer will be deemed to be a "year of
Executive Service," except that years of Executive Service
prior to any Break in Service will be disregarded to the
extent that Years of Vesting Service (within the meaning of
the Retirement Plan) prior to such Break in Service would be
disregarded for purposes of the Retirement Plan.
(ii) Every Eligible Officer whose employment by Eastern and its
subsidiaries terminates (other than by death) upon or after
his attaining age sixty-two (62) and who first receives
benefits hereunder on or after January 1, 1994 will be
eligible to receive an annual amount which is the product of
(i) his average annual Compensation for those five (5)
calendar years, selected from among the last ten (10)
calendar years of his Executive Service, in which his
aggregate Compensation was highest, and (ii) a percentage
determined according to the following table:
<PAGE>
<TABLE>
<CAPTION>
Non-Calendar Years of
Executive Service Percentage
<S> <C>
Less than 10 None
10 35
11 36.5
12 38
13 39.5
14 41
15 42.5
16 44
17 45.5
18 47
19 48.5
20 or more 50
</TABLE>
For purposes of this Section 5(a)(ii), a Computation Period
in which an Officer has one thousand (1,000) or more Hours
of Service as an Officer will be deemed to be a "non-
calendar year of Executive Service," and a calendar year in
which an Officer has one thousand (1,000) or more Hours of
Service as an Officer will be deemed to be a "calendar year
of Executive Service", except that if any Years of Vesting
Service (within the meaning of the Retirement Plan) prior to
any Break in Service with respect to such Officer would be
disregarded for purposes of the Retirement Plan, an
equivalent number of non-calendar years of Executive Service
and an equivalent number of calendar years of Executive
Service will be disregarded hereunder.
(b) Termination of Employment Before Age 62. Every Eligible Officer
whose employment by Eastern and its subsidiaries terminates (other
than by death) upon or after his attaining age fifty-five (55),
but before his attaining age sixty-two (62), will be eligible to
receive an annual amount equal to the amount calculated under
Section 5(a) above multiplied by a percentage determined according
to the following table:
<TABLE>
<CAPTION>
Age at Commencement
of Benefit Percentage
<S> <C>
61 95
60 90
59 85
58 80
57 75
56 70
55 65
</TABLE>
(c) Death Benefits. If an Eligible Officer dies while serving (or
deemed to be serving under Section 6 below) as an Eligible Officer
and leaves a surviving spouse, the spouse will be eligible to
receive an annual amount equal to the amount, if any, the Eligible
Officer would have been entitled to receive under (a) or (b)
above, whichever is applicable, had he retired with the prior
written permission of the Compensation Committee on the day before
his death.
(d) Conditions and Limitations. No officer whose employment
terminates upon or after his attaining age fifty-five (55), but
before his attaining age sixty-five (65), will be eligible for
benefits under the Plan unless:
(i) the Compensation Committee has given the Officer its prior
written permission (any Officer who dies shall be deemed to
have retired with the prior written permission of the
Compensation Committee); or
(ii) the Officer has given written notification to the
Compensation Committee at least six months in advance of the
termination; or
(iii) the Officer is terminated by Eastern, or a subsidiary of
Eastern, and such termination is not determined by the
Compensation Committee to be a discharge for cause which
casts such discredit on the Officer or Eastern, or a
division or subsidiary of Eastern, as to justify forfeiture
of any benefits under this Plan.
No benefit with respect to any Eligible Officer under the Plan
will exceed, after adjustment for the offset described in Section
7 below but before actuarial adjustment under Section 8 below and
before adjustment for the offsets described in Section 9 below, an
amount equal to three (3) times the greater of (i) $90,000 or (ii)
the maximum benefit that could be paid with respect to such
Eligible Officer under section 415(b)(1)(A) of the Internal
Revenue Code of 1986, as from time to time amended (the "Code"),
as adjusted pursuant to section 415(d) of the Code and as in
effect on the date of such Eligible Officer's termination of
employment.
Except as otherwise provided herein, an Officer's employment will
terminate for purposes of the Plan as of the date on which such Officer (i)
retires, resigns or is dismissed from service as an Officer; (ii) dies while
serving as an Officer; or (iii) departs from the service of Eastern and its
subsidiaries for any reason; provided, that an Officer will not be deemed to
have terminated his employment solely by reason of a duly approved leave of
absence. For purposes of this Section 5 only, the age at which an Officer's
employment terminates or his benefits commence will be calculated in all cases
as of such Officer's nearest birthday.
Notwithstanding any other provision of this Plan, an Eligible Officer's
surviving spouse shall not be entitled to any benefits hereunder unless such
spouse was the person to whom the Eligible Officer was married at the time
benefit payments commenced under this Plan (or at the time of the Eligible
Officer's death, if earlier).
<PAGE>
6. Disability. For purposes of satisfying the length-of-service
requirements set forth in Section 4 and Section 5 above, an Officer who is
unable to work because of a disability for which he is eligible to receive
benefits under a long-term disability program sponsored by Eastern or by a
Participating Subsidiary will be deemed to continue to serve as an Officer
at the same salary he was receiving when forced to stop working by reason of
his disability, until such time as he returns to active employment or his
employment terminates.
7. Offset for Social Security payments. The annual benefit
calculated with respect to any Eligible Officer under Section 5 above shall be
reduced (but not below zero), before the adjustments described in Section 8
and Section 9 below, by a percentage of the Eligible Officer's Social Security
Benefit for any year in which such Eligible Officer is eligible to receive a
Social Security benefit (or, if the benefit hereunder becomes payable under
Section 5(c) by reason of the Eligible Officer's death, by a percentage of the
Social Security Benefit to which the Eligible Officer would have been
entitled, but only for those years in which such Eligible Officer, had he
lived, would have been eligible for Social Security benefits), as follows: for
Officers first receiving benefits hereunder prior to January 1, 1994, such
percentage shall be one hundred percent (100%); for Officers first receiving
benefits hereunder on or after January 1, 1994, such percentage shall be fifty
percent (50%).
8. Actuarial adjustment. For purposes of determining the benefit
provided under this Plan with respect to any Eligible Officer, the amount
calculated under Section 5 above with respect to such Eligible Officer, after
adjustment for the offset described in Section 7 above, will be actuarially
adjusted as necessary to reflect payment in the form specified in Section 10,
in the same manner and using the same actuarial assumptions as would apply in
determining how an accrued benefit of like amount payable (with the same
commencement date) under the Retirement Plan would be actuarially adjusted (if
at all) to reflect payment under the Retirement Plan in such specified form.
9. Offset for other benefits. The annual benefit calculated with
respect to any Eligible Officer under Section 5(a) or Section 5(b) above, as
adjusted for the offset described in Section 7 above and as further adjusted
actuarially under Section 8 above, will be reduced (but not below zero) by the
sum of the following amounts:
(a) the amount payable annually with respect to such Eligible Officer
(1) under the Retirement Plan, assuming commencement on the
commencement date hereunder and payment (i) if the Eligible
Officer is unmarried on such commencement date, in the form of a
single life annuity over the life of the Eligible Officer but with
sixty (60) monthly payments guaranteed, or (ii) in every other
case, in the form of a joint and survivor annuity under which
reduced payments will be made to the Eligible Officer for his
lifetime and, following his death, if his spouse survives him,
payments equal to one-half the amount payable to the Eligible
Officer during his lifetime will be paid to such surviving spouse
for the remainder of such spouse's lifetime, or (2) under any
other retirement plan to which Eastern or any of its subsidiaries
or affiliates has contributed (payments under any such other plan
to be determined, for purposes of this Section 9, as though
payable in the form described in (1)(i) or (1)(ii) above,
whichever is applicable); and
(b) the amount, if any, which the Compensation Committee reasonably
determines, in its sole discretion, to be the annual retirement
income or the equivalent thereof to which the Eligible Officer is
entitled by reason of any prior employment (including for this
purpose any service as a fiduciary or director), assuming the same
form of payment as the applicable benefit form under (a) above.
If an Eligible Officer dies while employed (or deemed to be employed
under Section 6 above) as an Eligible Officer, and leaves a surviving spouse,
the death benefit payable to his spouse each year under Section 5(c) above, as
adjusted for the offset described in Section 7 above and as further adjusted
actuarially pursuant to Section 8 above, will be reduced (but not below zero)
by the sum of the following amounts:
(aa) the death benefit provided the spouse each year under the
Retirement Plan, assuming commencement on the same commencement
date as hereunder, or under any other retirement plan to which
Eastern or any of its subsidiaries or affiliates has contributed
(payments under any such other plan to be determined, for purposes
of this Section 9, as though payable in the same form and
commencing at the same time as the death benefit hereunder); and
(bb) the amount, if any, which the Compensation Committee reasonably
determines, in its sole discretion, to be the annual income to
which the spouse of such Eligible Officer is entitled under any
plan, agreement or arrangement maintained by a prior employer of
such Eligible Officer (or in connection with any service of such
Eligible Officer as a fiduciary or director), assuming the same
form of payment and benefit commencement date as hereunder.
10. Form and Timing of Benefits for Eligible Officers. Benefits
provided to an Eligible Officer under the Plan upon the termination of his
employment will be payable (a) if the Eligible Officer is unmarried on the
commencement date of benefits hereunder, in the form of a single-life annuity
over the life of the Eligible Officer but with sixty (60) monthly payments
guaranteed, or (b) in every other case, in the form of a joint and survivor
annuity under which reduced payments will be made to the Eligible Officer for
his lifetime and, following his death, if his spouse survives him, payments
equal to one-half the amount payable to the Eligible Officer during his
lifetime will be paid to such surviving spouse for the remainder of such
spouse's lifetime. Benefits payable to a surviving spouse under Section 5(c)
above will be payable in the form of a single-life annuity over the life of
such surviving spouse. Solely for purposes of determining the amount payable
to a surviving spouse under Section 5(c), the benefit the deceased Eligible
Officer would have been entitled to receive had such Eligible Officer retired
with the written permission of the Compensation Committee on the day before
his death shall be assumed to have been payable in the form of a joint and
survivor annuity under which reduced payments are payable to the Eligible
Officer for his lifetime and, following his death, reduced payments in the
same amount are payable to the Eligible Officer's surviving spouse for the
remainder of such spouse's lifetime. Benefits provided hereunder will
commence as of the first day of the month next following the Eligible
Officer's termination of employment (or the Eligible Officer's death, in the
case of benefits described in Section 5(c)), irrespective of the form and
timing of benefit payments under the Retirement Plan.
11. No Vesting; Requirement of Non-Competition. Subject to the
provisions of Section 14 below, nothing in this Plan will be construed as
vesting in any person rights to any benefits hereunder. If at any time the
Compensation Committee determines that a person receiving benefits hereunder
is competing, directly or indirectly, with the business of Eastern, it may
discontinue the payment of such benefits to such person. For purposes of this
paragraph, the phrase "competing, directly or indirectly, with the business of
Eastern" will be deemed to include (without limiting the generality of the
same) engaging or being interested, directly or indirectly, as owner,
director, officer, employee, partner, through stock ownership (other than
ownership of less than two (2%) percent of the outstanding stock of any
publicly owned company), investment of capital, lending of money or property,
rendering of services or otherwise, either alone or in association with
others, in the operation of any type of business or enterprise in any way
competitive with the business of Eastern or of any of its subsidiaries.
Notwithstanding the foregoing, the Compensation Committee may waive or modify
its right to discontinue payments to any person by written agreement with such
person.
12. Limitation of Rights; Special Provision in the Event of Change in
Control. Nothing in this Plan will be construed to create a trust or to
obligate Eastern or any other person to segregate a fund, purchase an
insurance contract, or in any other way currently to fund the future payment
of any benefits hereunder, nor will anything herein be construed to give any
employee or any other person rights to any specific assets of Eastern or of
any other person.
Notwithstanding the foregoing, Eastern in its sole discretion may
establish a trust of which it is treated as the owner under Subpart E of
Subchapter J, Chapter 1 of the Code to provide for the payment of benefits
hereunder, subject to the claims of general creditors in the event of
insolvency and subject to such other terms and conditions as Eastern may deem
necessary or advisable to ensure that benefits are not includable, by reason
of the Trust, in the income of trust beneficiaries prior to actual
distribution and that the existence of the trust does not cause the Plan or
any other arrangement to be considered funded for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended (a "grantor
trust"). In the event Eastern establishes a grantor trust in respect of the
Plan and at the time of a Change of Control such trust (i) has not been
terminated or revoked and (ii) is not "fully funded" (as hereinafter defined),
Eastern shall promptly deposit in such grantor trust cash sufficient to cause
the trust to be "fully funded" as of the date of the deposit. For purposes of
this paragraph, the aforesaid grantor trust shall be deemed "fully funded" as
of any date if, as of that date, the fair market value of the assets held in
trust is not less than the aggregate present value as of that date of (1) all
benefits then in pay status under the Plan (including benefits not yet
commenced but in respect of Eligible Officers who have retired, died or
otherwise terminated employment under circumstances entitling them to benefits
hereunder) plus (2) all benefits that would be payable under the Plan if all
other Eligible Officers were deemed to have retired with the prior written
permission of the Compensation Committee on that date plus (3) all benefits
payable (as determined under rules similar to the rules described in (1) and
(2)) under all other plans and arrangements, to the extent provided for
through the grantor trust. In applying the preceding sentence, present value
shall be determined by using the interest and mortality assumptions used in
determining lump sum present values under the Retirement Plan.
13. Rights Non-Assignable. No employee or beneficiary or any other
person will have any right to assign or otherwise to alienate the right to
receive payments under the Plan, in whole or in part.
14. Amendment. Eastern reserves the right at any time by action of
its Board of Trustees to terminate the Plan or to amend its provisions in any
way, except that following a Change of Control no such amendment or
termination shall reduce the amount of Eastern's obligations under Section 12
or extend the period within which Eastern may satisfy such obligations. In
addition, the Plan will automatically terminate if at any time (and as of the
date that) the Retirement Plan is terminated. Notwithstanding the foregoing,
no termination or amendment of the Plan (a "Plan amendment") will reduce the
benefit payable under the Plan to any person with respect to an Eligible
Officer whose employment with Eastern and its subsidiaries was terminated
prior to such Plan amendment, nor shall any Plan amendment reduce the benefit
to be paid with respect to a person who is an Eligible Officer on the date of
such Plan amendment below the amount which such Eligible Officer would have
received if his employment had terminated with the prior written permission of
the Compensation Committee on the day before such Plan amendment.
EXHIBIT 10.22
EASTERN ENTERPRISES
1994 DEFERRED COMPENSATION PLAN
I. In General.
Eastern Enterprises (the "Company") has established the
deferred compensation plan hereinafter set forth (as the same may
from time to time be amended, the "Plan") in order to provide an
incentive for eligible key management employees by enabling them
to defer compensation until termination of employment. The Plan
provides for deferral of amounts that would otherwise have been
received currently by the eligible employee as well as for the
crediting of additional deferred amounts. The Plan is intended,
in part, to make up for deferrals that cannot be made under the
Company's tax-qualified Retirement Savings Plan by reason of the
limitations imposed under Section 401(a)(17), Section 401(k)(3),
Section 401(g) or Section 415 of the Internal Revenue Code, and
shall be construed consistent with that purpose, including
without limitation consistency with the anti-conditioning rules
of Section 401(k)(4) of the Internal Revenue Code and the
regulations thereunder.
II. Defined Terms.
The following terms shall have the meanings set forth below
whenever such terms are used in the Plan, unless a different
meaning is clearly indicated by the context:
(a) "Account": Either the Elective Account
established pursuant to Article IV of the Plan or the
Matching Account established pursuant to Article V of the
Plan, including any sub-accounts.
(b) "Administrator": The Compensation Committee of
the Board of Trustees of the Company, or its delegates.
(c) "Base Salary": A Participant's basic or regular
salary, excluding bonuses and other forms of extraordinary
compensation, determined before reduction for deferrals
under this Plan or any other employee benefit plan of the
Company or its subsidiaries.
(d) "Bonus": A cash bonus or the cash portion of any
other incentive award payable to a Participant, determined
before reduction for deferrals under the Plan or any other
employee benefit plan of the Company or its subsidiaries.
The term "Bonus" does not include amounts paid upon the
exercise or settlement of a stock option or stock
appreciation right.
(e) "Code": The Internal Revenue Code of 1986, as
amended.
(f) "Company": Eastern Enterprises, a Massachusetts
business trust with its principal place of business at
Weston, MA.
(g) "Compensation": In the case of any Participant,
the sum of his or her Base Salary and Bonuses, if any.
(h) "Eligible Employee": An employee of the Company
or any of its subsidiaries who is, or who belongs to a
classification of employees that is, from time to time
designated by the Administrator as eligible to participate
in the Plan. The Administrator shall select Eligible
Employees from among those employees of the Company and its
subsidiaries who are considered "management or highly
compensated employees" for purposes of Title I of ERISA.
(i) "ERISA": The Employee Retirement Income Security
Act of 1974, as amended.
(j) "Participant": An Eligible Employee who
participates in the Plan.
(k) "Plan": The Eastern Enterprises 1994 Deferred
Compensation Plan set forth herein, as the same may from
time to time be amended and in effect.
(l) "Plan Year": The 12-month period designated as
the plan year for purposes of the Savings Plan.
(m) "Savings Plan": The Company's Retirement Savings
Plan as from time to time amended and in effect.
III. Elective Deferrals.
(a) Each Participant may elect to have the cash portion of
his or her Compensation for a Plan Year reduced and an equivalent
amount credited to an Account hereunder. Each such election must
be made at the time or times specified in (b) below and in the
manner specified in (c) below, and shall be irrevocable once
made. Separate elections may be made with respect to Base Salary
and Bonuses. If only one election (with respect to total
Compensation) is made, deferrals will be taken proportionately
from Base Salary and Bonuses. The amount, if any, deferred with
respect to Base Salary or Bonuses (or with respect to total
Compensation if separate elections are not made) shall be the sum
of (i) a whole percentage from 0% to 20% of the Participant's
Base Salary, plus (ii) a whole percentage from 0% to 100% of the
Participant's Bonuses.
(b) Elections under this Article III shall be made prior to
the beginning of a Plan Year and shall be effective as to Base
Salary payable with respect to periods beginning in such Plan
Year and to Bonuses earned in such Plan Year. Notwithstanding
the foregoing: (i) an individual who becomes an Eligible
Employee during a Plan Year may, within 30 days of becoming
eligible, elect to defer Base Salary with respect to subsequent
pay periods in that year and, if the Administrator so permits,
Bonuses to be earned in that year, and (ii) for the 1994 Plan
Year, initial elections to defer may be made within 30 days after
the Plan is communicated to Eligible Employees, effective as to
Base Salary with respect to subsequent pay periods in 1994 and to
Bonuses to be earned in 1994. The Administrator may, but need
not, provide that deferral elections with respect to a Plan Year
shall carry over and be effective with respect to subsequent Plan
Years unless affirmatively and timely modified by the
Participant.
(c) Elections under Article III shall be in writing on a
form approved or prescribed by the Administrator and shall be
effective when received by the Administrator care of the Company
at the Company's principal place of business in Weston,
Massachusetts.
IV. Crediting of Elective Deferrals.
The Administrator shall credit to a Participant's Elective
Account the amount, if any, deferred by the Participant under
Article III. Amounts shall be credited to a Participant's
Elective Account as of the date they would have been paid in cash
to the Participant, absent the deferral.
V. Matching Credits.
Effective as of the last day of each pay period, the
Administrator shall credit to each Participant's Matching Account
an amount equal to the sum of (a) and (b) below, where:
(a) is an amount equal to the excess of (1) 25% of the
sum for such period of the Participant's deferrals of Base
Salary hereunder plus the Participant's elective deferrals
under the Savings Plan, over (2) matching contributions for
the benefit of the Participant with respect to such period
under the Savings Plan; provided, that the amount described
in (1) above shall in no event exceed 1.5% of the Participant's
Base Salary for such period; and
(b) is an amount equal to 25% of the Participant's
elective deferrals of any Bonus under paragraph (a)(ii) of
Article III above to the extent such elective deferrals do
not exceed 6% of the Bonus.
VI. Notional Earnings.
At least annually, the Administrator shall credit to each
Participant's Elective Account and Matching Account an additional
amount representing notional earnings with respect to the
balances of such Accounts. Except as may otherwise be determined
by the Administrator, notional earnings shall be based on an
interest rate equal to the prime rate of interest charged by The
First National Bank of Boston as of the first day of the calendar
year, plus one (1%) percentage point. In lieu of or in addition
to the notional earnings measure described in the preceding
sentence, the Administrator may from time to time specify other
measure or measures by which notional earnings hereunder shall be
determined and may change or eliminate any measure at any time.
The Administrator may, but need not, permit Participants to
choose the measure or measures (from among those specified as
hereinabove provided) that will form the basis for crediting
notional earnings to their Accounts under this Article VI.
Notional earnings shall continue to be credited with respect to a
Participant's Accounts until such Accounts have been fully
distributed.
VII. Vesting; Rights Unsecured.
A Participant's Accounts shall be fully vested and
nonforfeitable at all times. Nevertheless, each Participant's
rights against the Company and its subsidiaries for benefits, if
any, under the Plan shall be solely those of an unsecured general
creditor. Nothing herein shall be construed as giving any
Participant rights to or in any specific assets of the Company or
its subsidiaries, nor shall anything herein be deemed to require
the Company or any of its subsidiaries to set aside assets or
create a trust or other fiduciary relationship for the purpose of
funding benefits hereunder. Notwithstanding the foregoing, the
Administrator may (but need not) establish a so-called "rabbi
trust", whether or not conforming to the requirement of Revenue
Procedure 92-64 but in any event intended to be a "grantor trust"
for purposes of the Code and an unfunded arrangement under ERISA,
to assist in providing for payment of benefits hereunder.
VIII. Distribution of Accounts.
(a) Except as provided below, each Participant's Accounts
shall be distributed in a single lump sum cash payment as soon as
practicable following the Participant's termination of employment
with the Company and its subsidiaries. For purposes of the
preceding sentence, a Participant employed by a direct or
indirect subsidiary of the Company shall be treated as having
terminated employment if such subsidiary is (or substantially all
its assets are) acquired by another person or persons and the
Participant continues to work for the acquiring entity, unless
such acquiring entity expressly assumes the obligation to make
the deferred payments to which the Participant is entitled
hereunder upon termination of the Participant's employment with
such acquiring entity.
(b) Distribution under (a) above shall be made to the
Participant if living. If the Participant's termination of
employment occurs by reason of death, distribution shall be made
to the Participant's beneficiary or beneficiaries designated in
writing for purposes of the Plan on a form prescribed or approved
by the Administrator, or in the absence of such a designation to
the Participant's estate. If the Participant's termination of
employment occurs other than by reason of death but the
Participant dies prior to actual payment, distribution shall be
made to the Participant's beneficiary or beneficiaries (or to the
Participant's estate) as provided in the foregoing sentence.
(c) The Administrator may prescribe rules under which total
and permanent disability of the Participant, as determined by the
Administrator, shall be treated as a termination of employment
for purposes of the Plan even if the Participant would not be
treated as having terminated employment for other purposes.
(d) If a Participant so elects with respect to elective
deferrals and/or matching credits for a Plan Year, that portion
of the Participant's Accounts attributable to such deferrals and
credits and the notional earnings with respect thereto shall be
distributed in annual cash installments rather than in a single
cash lump sum. The election to receive distribution in
installments rather than in a single lump sum shall be made as
part of the Participant's deferral election under Article III.
The Administrator may specify the number or maximum number of
years over which installments will be paid. The amount of each
installment shall be determined by dividing that portion of the
Participant's Accounts payable in such installments by the number
of remaining installments. Where an Account is payable in
installments, notional earnings shall continue to be credited to
the balance of the Account until the Account is distributed in
full. If a Participant who has elected installment distributions
dies prior to the commencement or completion of the
distributions, remaining payments shall be made to the
Participant's beneficiary or beneficiaries (or to the
Participant's estate) as provided under (b) above in accordance
with the schedule of installment distributions elected by the
Participant, except that the Administrator at any time following
the Participant's death may commute the remaining installment
distributions to a single cash lump sum payment.
(e) Notwithstanding the preceding provisions of this
Article VIII, the Administrator may distribute any Account at any
time in full, in satisfaction of all remaining liabilities under
the Plan to the affected Participant, if the Administrator in its
discretion determines that exclusion of the Participant from the
Plan is necessary to preserve the Plan's status as a plan
maintained primarily for the benefit of "management or highly
compensated employees" (as those words are used in Title I of
ERISA). In addition, the Administrator in its discretion may
make distributions under the Plan, including lump sum
distributions representing the entirety of a Participant's
Accounts, upon termination of the Plan even if the Participant is
then still employed or had elected an installment distribution.
IX. Hardship Distributions.
A Participant may apply for a distribution prior to
termination of employment if he or she has suffered an
unanticipated emergency caused by an event beyond the
Participant's control and likely to result in severe financial
hardship. The Administrator shall determine if such an emergency
exists and its determination shall be final and binding on all
persons. If the Administrator determines that such an emergency
exists it shall distribute to the Participant such portion of his
or her Accounts as the Administrator deems necessary to meet the
financial emergency.
X. Administration.
(a) The Plan shall be administered by the Administrator,
which shall have full discretionary authority to interpret the
Plan, determine eligibility for participation and benefits,
prescribe rules, prescribe forms of election and other forms, and
generally do all things necessary to carry out the terms of the
Plan. Determinations by the Administrator shall be binding on
all persons.
(b) The Administrator shall prescribe such procedures as it
deems appropriate for claiming benefits under the Plan. If any
Participant or beneficiary claims benefits hereunder and the
Administrator determines that the claim should be denied, the
Administrator will provide to the claimant written notice of the
denial, setting forth such information as is required under
Section 503 of ERISA. If the claimant within 60 days of receipt
of such notice requests in writing that the decision be reviewed,
the Administrator shall afford the claimant (and his or her
representative) an opportunity for review and within 60 days of
receiving the request for review shall render a written decision,
including specific reasons for the decision. The Administrator
may extend the time for making a decision to the extent
consistent with Section 503 of ERISA. Any failure by the
Administrator to provide written notice of its decision within
the 90-day or 60-day periods hereinabove described (or within
such extensions of those periods as may apply in the particular
case) shall be deemed a denial by the Administrator.
XI. Amendment and Termination.
The Board of Trustees of the Company may terminate the Plan
at any time. Following Plan termination no further deferrals or
other amounts shall be credited to Participant Accounts, except
for notional earnings which shall continue to be credited until
the Accounts have been distributed.
The Board of Trustees of the Company may amend the Plan at
any time and in any manner, including with respect to amounts
already credited to Participant Accounts; provided, that no such
amendment shall reduce the dollar amount credited to a
Participant's Accounts as of the effective date of the amendment.
XII. Miscellaneous.
(a) Nothing in the Plan shall be construed as giving any
Eligible Employee or other person the right to continued
employment with the Company and its subsidiaries.
(b) Rights to benefits under the Plan are nonassignable and
shall not be subject to pledge, encumbrance, attachment,
garnishment or alienation of any kind whatsoever. However, each
Participant may designate a beneficiary or beneficiaries to
receive any benefits payable hereunder upon the Participant's
death.
(c) All distributions under the Plan shall be subject to
reduction for applicable tax withholding.
(d) The Plan shall be construed in accordance with the laws
of the Commonwealth of Massachusetts except to the extent such
laws are preempted by ERISA.
(e) Reference is hereby made to the trust establishing
Eastern Enterprises (formerly Eastern Gas and Fuel Associates)
dated July 29, 1929, as amended, a copy of which is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
The name "Eastern Enterprises" refers to the trustees under said
declaration of trust as trustees and not personally, and no
trustee, shareholder, officer or agent of Eastern shall be held
to any personal liability in connection with the affairs of said
Eastern Enterprises, but the trust estate only is liable.
Approved by the Board of Trustees: January 27, 1994
EXHIBIT 13.1
(Page 26)
1993 COMPARED TO 1992
The reported net loss in 1993 included the effects of three substantial
charges of a non-recurring nature totaling $99.8 million, net of tax, or
$4.43 per share. In addition, a number of unusual external factors such as
floods and strikes negatively impacted each of Eastern's operating
businesses during 1993.
A management reevaluation of the Water Products Group resulted in the
sale of Ionpure Technologies at a loss and a writedown of WaterPro
Supplies' goodwill. On December 1, 1993, Eastern completed the sale of
Ionpure for a 22% equity interest in U.S. Filter Corporation, as described
in Note 10 of Notes to Financial Statements ("Notes"). This sale resulted
in a pretax charge of $13.0 million ($9.3 million net of tax, or $.41 per
share). In addition, in consideration of the continuing pressures on
operating margins, diminished expectations for growth and other factors,
Eastern revalued WaterPro and in the fourth quarter of 1993 recorded a
pre- and post-tax charge against goodwill of $45.0 million, or $2.00 per
share, as described in Note 12 of Notes.
Also in the fourth quarter of 1993, Eastern accrued a pretax charge of
$70.0 million representing the estimated undiscounted liability for health
care and death benefit premiums imposed by the Coal Industry Retiree
Health Benefit Act of 1992 ("Coal Act"). As described in Note 14 of Notes,
this charge has been reported as an extraordinary item of $45.5 million
net of tax, or $2.02 per share. On November 1, 1993 Eastern filed a
lawsuit in the Federal District Court for Massachusetts challenging the
constitutionality of the Coal Act, as applied to it, and asserting a claim
against Peabody Holding Company, Inc., to which Eastern sold its coal
subsidiaries in 1987, that any liability under the Coal Act should be
borne by Peabody and such subsidiaries. Eastern has posted security to
delay payment of premiums pending the outcome of its constitutional
challenge. Eastern's ultimate obligation under the Coal Act could range
from zero to more than $100 million depending on a number of factors,
including the outcome of such challenge, its claim against Peabody,
Medicare reimbursements, administrative review of assigned individuals,
medical inflation rates and changes in government health care programs.
<PAGE>
(Page 27)
<TABLE>
REVENUES:
<CAPTION>
(In millions)
--------------------------------------------------------------------------
1993 1992 Change
<S> <C> <C> <C>
Boston Gas $ 614.3 $ 594.3 3 %
Midland 254.9 263.6 (3)%
Water Products Group 230.6 233.5 (1)%
----------------------
Total $1,099.8 $1,091.4 1 %
----------------------------------
----------------------------------
</TABLE>
Consolidated revenues increased slightly in 1993. Although a variety of
market and economic factors affected the change, in general, continued
growth to the Boston Gas firm customer base offset decreases in coal and
grain transportation at Midland.
<TABLE>
OPERATING EARNINGS:
<CAPTION>
(In millions)
--------------------------------------------------------------------------
1993 1992 Change
<S> <C> <C> <C>
Boston Gas $49.1 $63.1 (22)%
Midland 33.0 38.3 (14)%
Water Products Group (0.4) (0.3) nm
Headquarters (4.7) (5.1) 8%
--------------
Operating earnings before writedown 77.0 96.0 (20)%
Writedown of WaterPro goodwill (45.0) -- nm
--------------
Total $32.0 $96.0 nm
--------------
--------------
</TABLE>
Consolidated operating earnings decreased from 1992, due primarily to the
writedown of WaterPro goodwill and the absence of a one-time benefit in
1992 that resulted from a modification to the gas cost recovery mechanism
at Boston Gas that increased operating earnings by $11.6 million. In
addition, record flooding in the Midwest and strikes by the United Mine
Workers ("UMW") and Boston Gas union employees decreased revenues and
increased operating expenses.
Earnings before income taxes decreased from $63.0 million in 1992 to a
loss of $16.6 million in 1993, primarily reflecting the decrease in
operating earnings described above, the $13.0 million loss on the sale of
Ionpure, lower interest income and higher interest expense. Interest
income decreased due to lower investment balances and rates. The increase
in interest expense primarily reflected additional dividends paid on
subsidiary preferred stock. The high income tax rate in 1993 resulted from
the absence of any tax benefit recognized on the writedown of WaterPro
goodwill and, to a much lesser extent, the 1% increase in the federal
statutory rate and unbenefited capital losses on the sale of Ionpure, as
described in Note 9.
Net earnings of $46.1 million in 1992 decreased to a loss of $77.7
million in 1993, reflecting the above-described 1993 extraordinary charge
for the reserve for coal miners retiree health care and the absence of the
$8.2 million benefit recorded in 1992 on the adoption of SFAS 109, as
described in Note 9.
BOSTON GAS
Increased sales to Boston Gas firm customers, primarily to an electric
utility on a seasonal-firm basis, increased revenue by $21.8 million and
operating earnings by $4.9 million. Relatively low residual oil prices
throughout 1993 limited sales to non-firm customers and reduced
comparative revenues by nearly $15.0 million. However, a $37.7 million
rate increase which took effect November 1, 1993 and the pass through of
higher gas costs were somewhat offsetting. The weather in 1993, which was
4.5% warmer than 1992, was 1.3% warmer than normal, decreasing revenues by
$9.8 million and operating earnings by $1.7 million.
Excluding the $11.6 million benefit in 1992 of the modification to the
gas cost recovery mechanism, operating earnings decreased by $2.4 million
as the partial impact of the rate increase in combination with the benefit
of ongoing load growth offset much of the increased expenses attributable
primarily to the work stoppage.
<PAGE>
(Page 28)
MIDLAND
Midland's transportation revenues decreased in 1993 primarily as a result
of: reduced coal and grain shipments caused by the severe flooding on the
Mississippi and Illinois Rivers and reduced exports of both commodities;
the curtailment of coal shipments under a major long-term contract; and
lower deliveries to electric utilities caused by the UMW strike.
Midland's tonnage and ton miles were unchanged from 1992 despite several
significant events that negatively affected the barge industry in general
and Midland specifically. A decline in coal tonnage from 1992 primarily
reflected reduced shipments to electric utilities due to the UMW strike
(resolved in December), disruption in river traffic caused by flooding,
and the cessation of coal shipments under a long-term contract. An
increase in non-coal tonnage, despite a significant reduction in grain
tonnage, served to replace the lower coal volume, although at lower
margins. Benefits of cost savings programs helped to offset much
of the lost margins. Higher coal terminal throughput was offset by lower
phosphate terminalling.
In addition to restricting tonnage and altering traffic patterns,
flooding increased operating costs and shifted business to less profitable
markets.
In December 1993 Midland sold its liquid barge business at a pretax gain
of $8.0 million. In addition, Midland closed its barge construction
facility in Port Allen, Louisiana and set up a $3.5 million reserve to
reflect shutdown costs and carrying charges until final disposition of the
facility is determined. These transactions were included in "Other
income."
WATER PRODUCTS GROUP
Water Products Group's revenue declined slightly as
increases at WaterPro offset most of the Ionpure
reduction resulting from its sale as of October 1, 1993.
Operating profits declined due to intense competition and slow moving
inventory charges at WaterPro. WaterPro's 1993 operating
profits also included charges related to upgrading
its information system, a training and logistics
initiative and higher corporate overhead. These
charges offset the absence of the $1.0 million
restructuring charge recorded in 1992.
<TABLE>
1992 COMPARED TO 1991
REVENUES:
<CAPTION>
(In millions)
--------------------------------------------------------
1992 1991 Change
<S> <C> <C> <C>
Boston Gas $ 594.3 $527.9 13 %
Midland 263.6 267.1 (1)%
Water Products Group 233.5 198.1 18 %
--------------------
Total $1,091.4 $993.1 10 %
--------------------------------
--------------------------------
</TABLE>
The increase in consolidated revenues from 1991 to 1992 primarily
reflected colder weather and continued growth in the Boston Gas firm
customer base. Higher revenues for WaterPro and Ionpure also contributed
to the increase.
<TABLE>
OPERATING EARNINGS:
<CAPTION>
(In millions)
---------------------------------------------------------
1992 1991 Change
<S> <C> <C> <C>
Boston Gas $63.1 $39.3 61 %
Midland 38.3 40.5 (5)%
Water Products Group (0.3) (1.3) nm
Headquarters (5.1) (5.7) nm
-----------------
Total $96.0 $72.8 32 %
---------------------------
---------------------------
</TABLE>
Results for all segments of Eastern's operations for 1992 and 1991 were
depressed by the recession, as reflected by weak demand experienced by
Midland and high bad debt expense for Boston Gas. For both WaterPro and
Ionpure, competitive pressures decreased margins which offset the benefit
of higher revenues.
<PAGE>
(Page 29)
Net earnings before accounting changes increased 29% from 1991, as the
growth in operating earnings was partially offset by increased interest
expense, lower interest income and an increase in the reported tax rate
due to the 1992 adoption of SFAS 109, as described in Note 9 of Notes.
Net earnings for 1992 also increased from the $8.2 million benefit
recorded on the adoption of SFAS 109 and the absence of the $8.7 million
charge, net of tax, recorded in 1991 on the adoption of SFAS 106, as
described in Notes 9 and 15 of Notes. The SFAS charge in 1991 was
partially offset by a one-time gain related to a 1987 pension termination.
BOSTON GAS
The weather in 1992 was 19.3% colder than 1991 and 3.6% colder than
normal, increasing revenues by $47.0 million and operating earnings by
$14.7 million. The 1992 modification to the gas cost recovery mechanism
resulted in a one-time benefit to operating earnings of $11.6 million.
Growth in the firm customer base, which was evenly divided between
traditional residential markets and the commercial/industrial market,
increased operating earnings in 1992 by $7.1 million. These gains were
partially offset by higher operating expenses in 1992 related primarily to
increased system maintenance costs and depreciation.
MIDLAND
Midland's ton miles during 1992 increased 1% from 1991, reflecting
increased volume from grain and other commodities, mostly offset by
reduced demand for coal transportation due to moderate temperatures
and a weak economy. Industry overcapacity reduced rates
and margins. Revenues and earnings from support operations were
generally lower than 1991.
Lower fuel costs and improved operating conditions, partially offset
by increased administrative costs and depreciation expense related to fleet
renewal, resulted in lower operating costs as compared to 1991.
WATER PRODUCTS GROUP
In 1992 the Water Products Group incurred an operating loss of $0.3
million, compared to a loss in 1991 of $1.3 million. WaterPro's
results reflected increased sales, partially offset by decreased margins.
Ionpure benefited from increased sales of capital goods, especially in
Europe. The 1992 operating loss reflects a number of unusual charges,
including nearly $1.0 million in restructuring charges at WaterPro.
LIQUIDITY AND CAPITAL
RESOURCES
Management believes that projected cash flow from operations, in
combination with currently available resources, is more than sufficient
to meet Eastern's 1994 capital expenditure and working capital
requirements, normal debt repayments and anticipated dividends to
shareholders.
In addition to cash and short-term investments in excess of $50
million, Eastern maintains a $60 million credit agreement plus
other lines, all of which are available for general corporate purposes.
At December 31, 1993 there were no borrowings outstanding under any of
these facilities.
Through a combination of increased equity and newly issued debt,
Eastern expects to continue its policy of capitalizing Boston Gas and
Midland with approximately equal amounts of equity and long-term debt.
Both subsidiaries maintain "A" ratings with the major rating agencies.
<PAGE>
(Page 30)
In May 1993 Eastern contributed $20.0 million to Boston Gas which was
used to redeem $20.0 million of 9% debentures due 2001.
During the last quarter of 1993, Eastern repurchased 1,739,900 shares
of its common stock for $46.0 million.
To meet working capital requirements which reflect the seasonal nature
of the gas distribution business, Boston Gas had $106.3 million of notes
outstanding at December 31, 1993. In January 1994 Boston Gas issued
$36.0 million of Medium-Term Notes, the proceeds of which were used
to reduce short-term indebtedness. An additional $14.0 million is
available for issuance under a shelf registration through December 31,
1994 for the funding of capital expenditures and other corporate purposes.
Boston Gas also maintains a credit agreement which backs the issuance
of up to $90 million of commercial paper to fund its inventory of gas
supplies. At December 31, 1993, Boston Gas had outstanding $59.3 million
of commercial paper for this purpose. Anticipated increases in deferred
gas costs and pipeline transition costs resulting from the restructuring
of the natural gas industry are expected to be funded through additional
short term borrowings.
Consolidated capital expenditures, principally at Boston Gas, are
budgeted at approximately $60 million for 1994.
OTHER MATTERS
Boston Gas may have or share responsibility for environmental
remediation of certain former manufactured gas plant sites, as described
in Note 13 of Notes. A 1990 regulatory settlement agreement provides for
recovery by Boston Gas of environmental costs associated with such sites
over separate, seven-year amortization periods without a return on the
unamortized balance. Although Eastern does not possess at this time
sufficient information to reasonably determine the ultimate cost to
Boston Gas of such remediation, it believes that it is not probable that
such costs will materially affect Eastern's financial condition or
results of operations.
Eastern may share responsibility for environmental remediation in the
vicinity of a former coal tar processing facility in Everett,
Massachusetts, as described in Note 13. Eastern does not possess at
this time sufficient information to reasonably determine or estimate
the ultimate cost to it of such remediation.
<PAGE>
(Page 31)
Consolidated Statements of Operations
<TABLE>
(In thousands, except per share amounts)
- ---------------------------------------------------------------------------
<CAPTION>
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
REVENUES $1,099,847 $1,091,434 $993,070
OPERATING COSTS AND EXPENSES:
Operating costs 830,692 805,154 742,535
Selling, general and administrative
expenses 132,907 136,545 130,937
Depreciation and amortization 59,261 53,728 46,793
----------------------------------
OPERATING EARNINGS BEFORE WRITEDOWN 76,987 96,007 72,805
Writedown of WaterPro goodwill 45,000 -- --
----------------------------------
OPERATING EARNINGS AFTER WRITEDOWN 31,987 96,007 72,805
OTHER INCOME (EXPENSE):
Interest income 2,875 4,217 6,628
Interest expense (35,305) (33,924) (29,720)
Loss on sale of Ionpure (13,000) -- --
Other, net (3,179) (3,269) (2,620)
----------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES (16,622) 63,031 47,093
PROVISION FOR INCOME TAXES 15,538 25,125 17,726
----------------------------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (32,160) 37,906 29,367
EXTRAORDINARY ITEM: Reserve for coal
miners retiree health care, net of
tax benefit of $24,500 (45,500) -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
FOR:
Income taxes -- 8,209 --
Post-retirement health care costs, net
of tax benefit of $4,463 -- -- (8,662)
----------------------------------
NET EARNINGS (LOSS) $ (77,660) $ 46,115 $ 20,705
----------------------------------
----------------------------------
EARNINGS (LOSS) PER SHARE BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $(1.43) $1.67 $1.30
EXTRAORDINARY ITEM: Reserve for coal
miners retiree health care, net of tax (2.02) -- --
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
FOR:
Income taxes -- .37 --
Post-retirement health care costs, net
of tax -- -- (.38)
----------------------------------
EARNINGS (LOSS) PER SHARE $(3.45) $2.04 $ .92
----------------------------------
----------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
(Page 32)
<TABLE>
Consolidated Balance Sheets
<CAPTION>
(In thousands)
- ---------------------------------------------------------------------------
December 31, 1993 1992
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 52,240 $ 105,440
Receivables, less reserves of $14,466 in 1993 and
$12,630 in 1992 145,523 137,958
Inventories 87,568 93,078
Deferred gas costs 65,802 40,868
Other current assets 11,995 9,378
-----------------------
TOTAL CURRENT ASSETS 363,128 386,722
INVESTMENTS:
Equity in U.S. Filter 44,292 --
Other investments 8,279 7,443
-----------------------
TOTAL INVESTMENTS 52,571 7,443
PROPERTY AND EQUIPMENT, AT COST 1,275,161 1,275,573
Less -- accumulated depreciation 489,196 475,794
-----------------------
NET PROPERTY AND EQUIPMENT 785,965 799,779
OTHER ASSETS:
Deferred post-retirement health care costs 101,182 99,126
Deferred charges and other costs, less
amortization 63,600 41,097
Goodwill, less amortization 13,231 90,899
-----------------------
-----------------------
TOTAL ASSETS $1,379,677 $1,425,066
-----------------------
-----------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
(Page 33)
<TABLE>
<CAPTION>
(In thousands)
- ---------------------------------------------------------------------------
December 31, 1993 1992
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current debt $ 114,335 $ 62,247
Accounts payable 76,161 78,889
Accrued expenses 31,280 22,188
Other current liabilities 63,703 42,802
-----------------------
TOTAL CURRENT LIABILITIES 285,479 206,126
GAS INVENTORY FINANCING 59,297 48,631
LONG-TERM DEBT 328,939 357,109
RESERVES AND OTHER LIABILITIES:
Deferred income taxes 90,793 105,544
Post-retirement health care 104,730 103,760
Coal miners retiree health care 63,060 --
Preferred stock of subsidiary 29,197 29,436
Other reserves 54,444 56,554
-----------------------
TOTAL RESERVES AND OTHER LIABILITIES 342,224 295,294
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock $1.00 par value --
Authorized shares -- 50,000,000
Issued shares -- 21,644,378 in 1993 and
23,634,543 in 1992 21,644 23,635
Capital in excess of par value 61,778 112,050
Retained earnings 299,131 408,739
Treasury stock at cost -- 714,786 shares in 1993
and 1,013,320 shares in 1992 (18,815) (26,518)
-----------------------
TOTAL SHAREHOLDERS' EQUITY 363,738 517,906
-----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,379,677 $1,425,066
-----------------------
-----------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
(Page 34)
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(In thousands)
- ---------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS (LOSS) $(77,660) $ 46,115 $ 20,705
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 59,261 53,728 46,793
Income taxes and tax credits (16,061) 1,355 4,487
Coal miners retiree health care 70,000 -- --
Writedown of WaterPro goodwill 45,000 -- --
Loss on sale of Ionpure 13,000 -- --
Other changes in assets and liabilities:
Receivables (17,003) (14,138) 2,049
Inventories (3,813) (17,355) 6,363
Deferred gas costs (24,934) (26,994) 2,793
Accounts payable 717 3,331 3,915
Other (9,970) 532 5,720
------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 38,537 46,574 92,825
------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (64,391) (82,891) (112,085)
Acquisitions, net of cash acquired -- -- (37,117)
Short-term investments (14,411) 20,769 (34,696)
Proceeds on sale of liquid barge business 14,950 -- --
Other (3,096) (6,816) (1,201)
------------------------------
NET CASH USED BY INVESTING ACTIVITIES (66,948) (68,938) (185,099)
------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (31,697) (31,634) (31,560)
Issuance of preferred stock by subsidiary -- 29,436 --
Changes in notes payable 53,286 (1,474) 14,553
Proceeds from issuance of long-term debt -- 53,000 42,000
Repayment of long-term debt (26,273) (26,324) (9,519)
Changes in gas inventory financing 10,666 17,461 (4,021)
Purchase of treasury shares (46,039) -- (692)
Other 857 756 (4,095)
------------------------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (39,200) 41,221 6,666
------------------------------
Net increase (decrease) in cash and cash
equivalents (67,611) 18,857 (85,608)
Cash and cash equivalents at beginning of
year 91,377 72,520 158,128
------------------------------
Cash and cash equivalents at end of year 23,766 91,377 72,520
Short-term investments 28,474 14,063 34,696
------------------------------
CASH AND SHORT-TERM INVESTMENTS $ 52,240 $105,440 $107,216
------------------------------
------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
(Page 35)
<TABLE>
Consolidated Statements of Shareholders' Equity
<CAPTION>
(In thousands)
- ------------------------------------------------------------------------------------------------------------
Common Capital in
Stock Excess of Retained Treasury
$1 Par Value Par Value Earnings Stock Total
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1990 $23,598 $112,279 $405,898 $(28,615) $513,160
ADD (DEDUCT):
Net earnings -- -- 20,705 -- 20,705
Dividends declared -- $1.40 per
share -- -- (31,560) -- (31,560)
Purchase of stock -- -- -- (692) (692)
Foreign currency translation
adjustment -- -- (392) -- (392)
Issuance of stock 15 343 -- 1,307 1,665
-------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 23,613 112,622 394,651 (28,000) 502,886
ADD (DEDUCT):
Net earnings -- -- 46,115 -- 46,115
Dividends declared -- $1.40 per
share -- -- (31,660) -- (31,660)
Foreign currency translation
adjustment -- -- (367) -- (367)
Unearned compensation related to
the issuance of restricted stock, net -- (1,079) -- 1,371 292
Issuance of stock 22 507 -- 111 640
-------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 23,635 112,050 408,739 (26,518) 517,906
ADD (DEDUCT):
Net loss -- -- (77,660) -- (77,660)
Dividends declared -- $1.40 per
share -- -- (31,711) -- (31,711)
Purchase of stock -- -- -- (46,039) (46,039)
Retirement of stock (2,000) (50,732) -- 52,732 --
Foreign currency translation
adjustment -- -- (237) -- (237)
Unearned compensation related to
the issuance of restricted stock, net -- 262 -- 105 367
Issuance of stock 9 198 -- 905 1,112
-------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 $21,644 $ 61,778 $299,131 $(18,815) $363,738
-------------------------------------------------------------------
-------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
(Page 36)
Notes to Financial Statements
1. ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Eastern
Enterprises ("Eastern"), Boston Gas Company ("Boston Gas"),
Midland Enterprises Inc. ("Midland") and Water Products Group,
consisting of WaterPro Supplies Corporation ("WaterPro") and
Ionpure Technologies Corporation ("Ionpure"). See Note 10 concerning the
exchange in 1993 of Ionpure for an equity interest in United States Filter
Corporation ("U.S. Filter") in a non-cash transaction.
Certain prior year financial statement information has been
reclassified to be consistent with the current presentation. All material
intercompany balances and transactions have been eliminated in
consolidation. Certain accounting policies followed by Eastern and its
subsidiaries are described below:
Cash: Highly liquid instruments with original maturities of three months
or less are considered cash equivalents.
Inventories: Inventories are valued at the lower of cost or market using
the first-in, first-out (FIFO) or average cost method. The components of
inventories were as follows:
<TABLE>
<CAPTION>
(In thousands)
----------------------------------------------------------------------
<S> <C> <C>
December 31, 1993 1992
Supplemental gas supplies $53,152 $42,140
Other materials, supplies and marine fuel 17,984 23,886
Finished products 16,432 27,052
--------------------
$87,568 $93,078
--------------------
--------------------
</TABLE>
Goodwill: Goodwill is amortized on a straight-line basis over a period of
40 years. Accumulated amortization as of December 31, 1992 amounted to
$7,016,000.
During 1993, management determined that WaterPro's goodwill was impaired
and it was written down to its realizable value as described in Note 12.
Accumulated amortization was eliminated to reflect the new cost basis
which will be amortized over its remaining life of 35 years.
<TABLE>
Other current liabilities: Included in other current liabilities were:
<CAPTION>
(In thousands)
----------------------------------------------------------------------
December 31, 1993 1992
<S> <C> <C>
Pipeline transition costs
regulatory liability $24,174 $ --
Pipeline refunds due utility
customers 8,029 13,061
Reserves for insurance claims 8,285 8,480
Dividends payable 7,930 7,916
--------------------
</TABLE>
Revenue recognition: Boston Gas' revenues are recorded when billed. Boston
Gas defers the cost of any firm gas that has been distributed, but is
unbilled at the end of a period, to the period in which the gas is billed
to customers. Midland recognizes revenue on tows in progress on the
percentage of completion method based on miles traveled. WaterPro
recognizes revenues on shipment.
Depreciation and amortization: Depreciation and amortization are provided
using the straight-line method at rates designed to allocate the cost of
property and equipment over their estimated useful lives. Because the
rates of depreciation on commercial equipment vary with each property
unit, it is impractical to state each rate individually. Excluding the
amortization of goodwill, depreciation and amortization as a percentage of
average depreciable assets was as follows:
<TABLE>
--------------------------------------------------------------------
<CAPTION>
Years ended December 31, 1993 1992
<S> <C> <C>
Boston Gas 4.0% 3.8%
Midland 4.2% 4.1%
Water Products Group 13.7% 15.5%
Headquarters 11.2% 14.7%
----------------
</TABLE>
Earnings per share: Earnings per share are based on the weighted average
number of common and common equivalent shares outstanding. Such shares
amounted to 22,530,000 in 1993, 22,654,000 in 1992 and 22,580,000 in 1991.
Fully diluted earnings per share were not materially different from
primary earnings per share.
2. BUSINESS SEGMENT INFORMATION
Operating results and other financial data are presented for Eastern's
three business segments: Boston Gas, a local gas distribution company
serving eastern and central Massachusetts; Midland, a barge transportation
<PAGE>
(Page 37)
company operating on the inland waterways;
and Water Products Group, consisting of WaterPro, a distributor of
components for municipal water and wastewater systems and Ionpure, a
provider of water purification systems sold effective October 1, 1993.
<TABLE>
<CAPTION>
(In thousands)
----------------------------------------------------------------------
1993 1992 1991
<S> <C> <C> <C>
REVENUES:
Boston Gas $ 614,294 $ 594,330 $527,928
Midland 254,921 263,617 267,044
Water Products Group 230,632 233,487 198,098
-----------------------------------
$1,099,847 $1,091,434 $993,070
-----------------------------------
-----------------------------------
OPERATING EARNINGS:
Boston Gas $49,063 $63,120 $39,291
Midland 33,001 38,277 40,471
Water Products Group\1/<F1> (402) (249) (1,237)
Headquarters (4,675) (5,141) (5,720)
-----------------------------------
$76,987 $96,007 $72,805
-----------------------------------
-----------------------------------
IDENTIFIABLE ASSETS, NET OF DEPRECIATION AND RESERVES:
Boston Gas $ 834,440 $ 738,604 $ 644,273
Midland 373,144 395,097 391,714
Water Products Group 64,230 179,751 178,813
Headquarters 107,863 111,614 118,651
-----------------------------------
$1,379,677 $1,425,066 $1,333,451
-----------------------------------
-----------------------------------
CAPITAL EXPENDITURES:
Boston Gas $47,057 $51,136 $ 57,400
Midland 14,191 29,327 48,531
Water Products Group\2/<F2> 2,941 2,353 5,951
Headquarters 202 75 203
-----------------------------------
$64,391 $82,891 $112,085
-----------------------------------
-----------------------------------
DEPRECIATION AND AMORTIZATION:
Boston Gas $27,566 $22,493 $18,685
Midland 25,288 24,607 22,240
Water Products Group 6,062 6,183 5,447
Headquarters 345 445 421
------------------------------------
$59,261 $53,728 $46,793
------------------------------------
------------------------------------
<FN>
- -----------
<F1> \1/Excludes $45,000 charge to write down WaterPro goodwill in 1993.
<F2> \2/Excludes $37,117 for acquisitions in 1991.
Operating loss under "Headquarters" reflects unallocated corporate
general and administrative expenses. Identifiable assets under
"Headquarters" include cash and short-term investments and in
1993 Eastern's investment in U.S. Filter.
</TABLE>
3. LONG-TERM OBLIGATIONS AND CURRENT DEBT
Credit agreement and lines of credit:
Eastern maintains a credit agreement with a group of banks which provides
for the borrowing by Eastern and certain subsidiaries of up to $60,000,000
at any time through December 31, 1994. In addition Eastern and certain
subsidiaries maintain lines of credit totaling $50,000,000. At December
31, 1993 and 1992 no borrowings were outstanding under these agreements.
The interest rate for borrowings is the agent bank's prime rate or, at
Eastern's option, various alternatives. The agreement and lines require
facility or commitment fees, which average 3/16 of 1% of the unused
portion. Boston Gas utilizes the credit agreement and the lines of credit
to back commercial paper borrowings. Included in current debt were
$106,300,000 and $54,944,000 of commercial paper and notes payable at
December 31, 1993 and 1992, respectively.
Gas inventory financing: Boston Gas funds its inventory of gas supplies
through external sources. All costs related to this funding are
recoverable from customers. Boston Gas maintains a credit agreement with a
group of banks which provides for the borrowing of up to $90,000,000 for
the exclusive purpose of funding its inventory of gas supplies or for
backing commercial paper issued for the same purpose. Boston Gas had
$59,297,000 and $48,631,000 of commercial paper outstanding to fund its
inventory of gas supplies at December 31, 1993 and 1992, respectively.
Since the commercial paper is supported by the credit agreement, these
borrowings have been classified as non-current in the accompanying
consolidated balance sheets. The credit agreement includes a one-year
revolving credit which may be converted to a two-year term loan at the
option of Boston Gas if the one-year revolving credit is not renewed
<PAGE>
(Page 38)
by the banks. Boston Gas may select interest rate alternatives based on
prime or Eurodollar rates and requires a commitment fee of 1/8 of 1% on the
unused portion. No borrowings were outstanding under this agreement during
1993 and 1992.
<TABLE>
LONG-TERM DEBT:
<CAPTION>
(In thousands)
-----------------------------------------------------------------------------
December 31, 1993 1992
<S> <C> <C>
BOSTON GAS:
7.95%-9% Sinking Fund Debentures, due 1997-2001 $ 63,142 $ 83,142
8.33%-9.75% Medium-Term Notes, Series A,
due 2005-2022 100,000 100,000
First Mortgage Bonds --
8.375% Series, due 1996 3,360 3,840
Capital leases 7,008 8,240
Less -- current portion (2,165) (1,712)
--------------------
171,345 193,510
--------------------
MIDLAND:
First Preferred Ship Mortgage Bonds -- 9.9% Series,
due 2008 48,692 48,827
8.1%-9.85% Medium-Term Notes, Series A,
due 2002-2012 75,000 75,000
Promissory Note, due 1995 3,031 5,456
8.8% Ship Financing Bond,
due 1996 938 1,314
Capital leases 35,804 38,593
Less -- current portion (5,871) (5,591)
--------------------
157,594 163,599
--------------------
$328,939 $357,109
--------------------
--------------------
</TABLE>
Description of debt: In 1992 Boston Gas filed a shelf registration
covering the issuance of up to $50,000,000 of Medium-Term Notes through
December 31, 1994. In January 1994 Boston Gas issued $36,000,000 of
Medium-Term Notes, Series B, with a weighted average maturity of 24 years
and coupon of 6.94%. Proceeds from the issuance reduced current debt.
Boston Gas' First Mortgage Bonds are secured by a first mortgage lien on
a portion of Boston Gas' utility properties and franchises.
Midland's First Preferred Ship Mortgage Bonds are secured by certain
transportation equipment. The Ship Financing Bond was assumed pursuant to
an acquisition of certain marine companies. This obligation is guaranteed
by the U.S. Government and is secured by certain transportation equipment.
Midland's promissory note bears interest at variable rates based upon
the prime rate or, at its option, Eurodollar or certificate of deposit
quotes.
Capital leases consist of property and equipment lease obligations with
an average interest rate of 9.6%. Minimum lease payments under these
agreements are due in installments through 2003.
Five-year sinking funds and operating lease commitments: In addition to
the property and equipment financed under capital leases, Eastern and its
subsidiaries lease certain facilities, vessels and equipment under long-
term operating leases which expire on various dates through the year 2006.
Total rentals charged to expense were $13,169,000 in 1993, $12,563,000 in
1992 and $10,923,000 in 1991.
Sinking fund requirements and maturities, net of amounts acquired in
advance are $8,036,000, $6,675,000, $8,239,000, $15,049,000 and
$13,016,000 for 1994 through 1998, respectively.
Future minimum lease commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Operating lease
(In thousands) commitments
----------------------------------------------------------------------------
<S> <C>
1994 $10,374
1995 9,327
1996 7,661
1997 4,501
1998 1,613
Thereafter 4,979
-------
$38,455
-------
-------
</TABLE>
<PAGE>
(Page 39)
4. PREFERRED STOCK OF SUBSIDIARY
On July 23, 1992 Boston Gas sold 1,200,000 shares of variable-term
cumulative preferred stock, which is non-voting and has a
liquidation value of $25 per share. On July 13, 1993, Boston Gas
selected a Final Term of September 1, 2018 and fixed the dividend
rate at 6.421%. Dividends are paid quarterly, commencing
September 1, 1993. The Final Term requires 5% annual
sinking fund payments beginning on September 1,
1999 and is non-callable for 10 years.
5. STOCK PLANS
Eastern has a stock option plan which provides for the
issuance of non-qualified stock options, incentive
stock options and stock appreciation rights ("SARs")
to its officers and key employees. Options and SARs
may be granted at prices not less than fair market value
on the date of grant for periods not extending beyond
ten years from the date of grant. Exercise of an
option requires surrender of the related
SAR, if any. Exercise of an SAR requires surrender of
the related option.
Shares available for future grants under the
stock option plans were 199,334 at December 31,
1993, 188,806 at December 31, 1992, and 162,939 at
December 31, 1991. Stock options exercisable at
December 31, 1993 and 1992 were 389,188 and 330,325,
respectively. SARs exercisable at December 31,
1993 and 1992 were 121,100 and 116,228, respectively.
Option activity during the past three years was as follows:
<TABLE>
<CAPTION>
Average Stock
option price options SARs
---------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December
31, 1990 $24.14 375,811 166,406
Granted 27.34 313,500 31,750
Exercised 24.29 (16,357) (26,711)
Surrendered 23.54 (26,711) (50)
Canceled 25.45 (14,962) (1,800)
--------------------------------
Outstanding at
December
31, 1991 $25.72 631,281 169,595
Granted 27.06 2,000 --
Exercised 21.79 (20,569) (22,647)
Surrendered 21.49 (22,647) (1,850)
Canceled 28.47 (5,220) (2,410)
---------------------------------
Outstanding at
December
31, 1992 $26.00 584,845 142,688
Exercised 21.93 (10,109) (8,588)
Surrendered 21.97 (8,588) (120)
Canceled 29.16 (1,940) (970)
---------------------------------
Outstanding at
December
31, 1993 $26.12 564,208 133,010
---------------------------------
---------------------------------
</TABLE>
Under Restricted Stock Plans for key employees and non-employee
trustees, Eastern awarded 4,000 and 52,500 shares in 1993 and 1992.
Eastern recognized compensation expense of $367,000 in 1993 and $292,000
in 1992 in accordance with the vesting terms of these awards. Shares
available for future awards under these plans were 48,500 shares at
December 31, 1993 and 22,500 at December 31, 1992.
6. COMMON STOCK PURCHASE RIGHTS
On February 22, 1990, Eastern declared a distribution to shareholders of
record on March 5, 1990, pursuant to the terms of a Common Stock Rights
Agreement between Eastern and The Bank of New York, of one common stock
purchase right for each outstanding share of common stock. Each right
would initially entitle the holder to purchase one share of common stock
at an exercise price of $100.00, subject to adjustment to prevent
dilution. The rights become exercisable on the 10th business day
after a person
<PAGE>
(Page 40)
acquires 20% or more of Eastern's stock or commences a tender offer for
20% or more of Eastern's stock, or on the 10th business day after
Eastern's Board of Trustees determines that a shareholder owning at least
10% of Eastern's stock is an "adverse person," based on criteria specified
in the rights agreement. The rights may be redeemed by Eastern at a price
of $.01 at any time prior to the 10th day after a 20% position has been
acquired. The rights will expire March 5, 2000.
If Eastern is acquired in a merger or other business combination, each
right will entitle its holder to purchase common shares of the acquiring
company having a market value of twice the exercise price of each right
(i.e., at a 50% discount). If an acquiror purchases 20% of Eastern's
common stock or has been determined to be an "adverse person," each right
will entitle its holder to purchase a number of Eastern's common shares
having a market value of twice the right's exercise price.
<TABLE>
7. INTEREST EXPENSE
<CAPTION>
(In thousands)
----------------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Interest on long-term debt $31,326 $31,781 $29,427
Other, including amortization of debt expense 3,754 3,375 3,838
Less -- capitalized interest (1,164) (1,637) (3,545)
Subsidiary preferred stock dividends 1,389 405 --
-------------------------------
Interest expense $35,305 $33,924 $29,720
-------------------------------
-------------------------------
Interest payments $34,307 $33,390 $28,554
-------------------------------
-------------------------------
</TABLE>
<TABLE>
8. OTHER INCOME (EXPENSE)
<CAPTION>
(In thousands)
----------------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Provision for environmental expenses $ (5,715) $ (2,500) $ (5,400)
Gain on termination of pension plan in 1987 -- -- 3,500
Gain on sale of liquid barge business 7,988 -- --
Closing of barge construction facility (3,500) -- --
Other (1,952) (769) (720)
------------------------------------
$ (3,179) $ (3,269) $ (2,620)
------------------------------------
------------------------------------
</TABLE>
<TABLE>
9. INCOME TAXES
The table below reconciles the statutory U.S. Federal income tax provision
<CAPTION>
(In thousands)
--------------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Statutory rate 35% 34% 34%
Computed provision for income taxes at statutory Federal rate $(5,818) $21,431 $16,012
Increase (decrease) from statutory rate resulting principally from:
Writedown of goodwill 15,750 -- --
State taxes, net of Federal benefit 1,833 2,468 1,649
Effect of change in Federal income tax rate 1,414 -- (1,500)
Unbenefited capital losses 1,068 84 --
Amortization of goodwill 839 907 863
Unbenefited foreign losses 373 470 1,181
Other, net 79 (235) (479)
--------------------------------
Provision for
income taxes $15,538 $25,125 $17,726
--------------------------------
--------------------------------
</TABLE>
<TABLE>
Following is a summary of the provision for income taxes:
<CAPTION>
(In thousands)
---------------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Current:
Federal $ 6,083 $14,662 $10,783
State 1,500 3,139 1,852
Foreign -- (25) 219
-------------------------------
Total current
provision 7,583 17,776 12,854
Deferred:
Federal 6,635 6,749 4,226
State 1,320 600 646
-------------------------------
Total deferred
provision 7,955 7,349 4,872
-------------------------------
Provision for
income taxes $15,538 $25,125 $17,726
-------------------------------
-------------------------------
Tax payments $10,809 $ 6,656 $ 8,817
-------------------------------
</TABLE>
<PAGE>
(Page 41)
Effective January 1, 1992, Eastern adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes."
Eastern recorded a credit to income of approximately $8,209,000 or $.37
per share, which represents the net decrease to the deferred tax
liabilities as of that date. This amount has been reflected in the
consolidated statement of earnings as the cumulative effect of the
accounting change for non-utility operations. The cumulative effect for
Boston Gas and the impact of the 1993 tax increase have been recorded as a
regulatory asset and are being recovered in accordance with Boston Gas'
1993 rate order.
The 1991 tax provision was reduced by $1,755,000 of credits no longer
applicable under SFAS 109.
The Revenue Reconciliation Act of 1993 increased the statutory Federal
income tax rate from 34% to 35%, effective January 1, 1993. The provision
for income tax in 1993 includes approximately $468,000 for the impact of
the rate change on the current earnings, and approximately $1,414,000 to
reflect the additional deferred tax requirements for non-utility
operations as of January 1, 1993, in accordance with SFAS 109.
Significant items making up deferred tax liabilities and deferred tax
assets are as follows:
<TABLE>
<CAPTION>
(In thousands)
------------------------------------------------------------------------------------------
December 31, 1993 1992
<S> <C> <C>
Assets:
Unbilled revenue $ 30,924 $ 21,878
Coal retiree health care 24,500 --
Regulatory liabilities 5,494 6,797
Deferred investment tax credits 5,437 5,567
Bad debt reserve 5,366 4,390
Other 13,038 12,795
------------------------
Total deferred tax assets 84,759 51,427
Liabilities:
Accelerated depreciation (130,379) (118,617)
Deferred gas costs (23,861) (15,526)
Other (18,098) (18,913)
------------------------
Total deferred tax liabilities (172,338) (153,056)
------------------------
Total deferred taxes $ (87,579) $ (101,629)
--------------------------
--------------------------
</TABLE>
During 1991, deferred income taxes were provided for
significant timing differences in the
recognition of revenue and expenses for tax and
financial statement purposes. Principal
components of the 1991 deferred provision were
$2,807,000 for employee benefit reserves and $2,794,000
for accelerated depreciation, partially offset by a credit of $1,021,000
for deferred gas costs.
10. IONPURE DISPOSITION
On December 1, 1993 Eastern exchanged the stock of its
wholly owned subsidiary, Ionpure, for 2,027,395
shares or 22% of the voting stock of U.S. Filter plus
$100,000. In connection with the exchange, in the third
quarter of 1993 Eastern recorded a pre-tax charge of
$13,000,000 ($9,300,000 after-tax or $.41 per share)
to write down Ionpure assets to their estimated
realizable value, net of related transaction
expenses. The tax credit of $3,700,000 reflects the
benefit of ordinary deductions from the
transaction and partial utilization of capital
losses against current capital gains. Since Ionpure
was operated for the account of U.S. Filter after October
1, 1993, its subsequent operating results have been
excluded from Eastern's consolidated results.
Eastern accounts for its investment in U.S. Filter
using the equity method, with a lag of one fiscal
quarter. The difference of approximately $19,700,000
between the carrying value of Eastern's investment and
its share of the underlying net assets of U.S. Filter as
of December 1, 1993 is being amortized over a period of 40 years.
11. ACQUISITIONS
On January 10, 1991 Eastern acquired certain assets and
operations of A & P Water and Sewer Supplies, Inc., a
distributor of components for municipal water systems
in the mid-Atlantic region, for approximately $35,500,000
in cash. Eastern also acquired
<PAGE>
(Page 42)
another operation in 1991 for $1,600,000. These acquisitions have
been accounted for as purchases. Accordingly, the acquired
assets and liabilities were recorded at their estimated
fair values at the date of acquisition.
Results of operations for these acquisitions have been
included in Eastern's consolidated results since
the dates of acquisition. Results of operations from
the beginning of the year to the dates of acquisition
would not have been material to Eastern.
12. WRITEDOWN OF WATERPRO GOODWILL
During the fourth quarter of 1993, Eastern determined
that a significant impairment of the fair value
of WaterPro had occurred due to a permanent erosion in
margins and lack of industry growth. The impairment was
determined by discounting at 10% WaterPro's cash flows,
as projected in management's five year forecast. The
discount rate reflects WaterPro's projected
weighted average cost of capital. Accordingly,
Eastern wrote down the book value of WaterPro by taking
a $45,000,000 charge against the goodwill associated with
the purchase of WaterPro's operations. No tax benefit
has been recognized against this charge.
13. ENVIRONMENTAL MATTERS
There are 37 identified former manufactured gas
plant ("MGP") sites located within Boston Gas' service
territory. Massachusetts Electric Company, a wholly-
owned subsidiary of New England Electric System
("NEES"), has assumed responsibility for
remediating one such MGP site in Lynn, Massachusetts,
pursuant to the decision of the First Circuit Court of
Appeals in John S. Boyd, Inc. et al. v. Boston Gas
---------------------------------------
Company, et al., which affirmed that NEES and its
----------------
subsidiaries are responsible for remediating the site as
prior owners and operators, and that Boston Gas did not
assume any liability for such remediation when it
acquired the property from NEES in 1973.
Thirteen other former MGP sites within Boston Gas'
service territory are currently owned by Boston
Gas, and 10 of such 13 sites were also acquired from NEES
and its subsidiaries. Boston Gas is currently working
with the Massachusetts Department of Environmental
Protection (the "DEP") to determine the extent of
remediation which may be required at such 13 sites. A
1990 settlement agreement with the Massachusetts
Department of Public Utilities provides for
recovery by Boston Gas through the cost of gas
adjustment clause of any environmental response costs
associated with MGP sites over separate, seven-year
amortization periods without a return on the unamortized
balance. Due to uncertainties as to the
extent and sources of releases of compounds, the
nature and extent of any required remediation and the
extent of contribution or assumption of responsibility
by NEES for the sites acquired from it, Eastern
does not possess at this time sufficient information
to reasonably determine the ultimate cost to Boston Gas
of remediation at such sites, but believes that it
is not probable that such costs will materially affect
Eastern's financial condition or results of operations.
Eastern is aware of certain non-utility sites,
associated with operations in which it is no longer
involved, for which it may have or share environmental
remediation responsibility. While Eastern has provided
reserves that cover some anticipated costs of
remediation of the site of a former coal tar processing
facility in Everett, Massachusetts (the
"Facility"), and believes that it has provided
reserves that are adequate to cover the estimated costs
of remediation of the other such sites, the extent of
Eastern's potential liability at such sites is
not yet determinable.
The Facility, which was located on a 10-acre parcel of land
formerly owned by Eastern, was operated by predecessors of
Allied-Signal, Inc. from the early 1900s until 1937 and by
Koppers Company, predecessor of Beazer East, Inc. (and
Eastern's controlling stockholder until 1951) from 1937
until 1960 when the Facility was shut down. The Facility
processed coal tar purchased from Eastern's adjacent
by-product coke plant, also shut down in
<PAGE>
(Page 43)
1960. Eastern, Beazer and Allied-Signal entered into
an Administrative Consent Order with the DEP in 1989
which requires that they jointly investigate and
develop a remedial response plan for the Facility site,
including any area where a release from that site may
have come to be located. The companies have entered into
a cost-sharing agreement under which each company has
agreed to bear one-third of the costs of compliance with
the Consent Order, while preserving any claims it may
have against the other companies. In 1993 the
companies completed preliminary remedial
measures, including abatement of seepage of
materials into the adjacent Island End River,
a 29-acre tidal river which is part of Boston harbor.
Studies have identified compounds that may be
associated with coal tar and/or oil in soil and
ground water at the site and adjacent areas and in the
Island End River sediments. The National Oceanic and
Atmospheric Administration and the Coast Guard have
recently begun working with the DEP in connection with
further investigation and possible remediation of
river sediment conditions. In addition, the U.S.
Environmental Protection Agency is currently
evaluating the Facility site and the Island End River for
possible designation as a federal priority Superfund
site. In light of uncertainties as to the
extent and sources of releases of compounds, the
nature of any required remediation, the area and
volume of soil, ground water and/or sediments that may be
included, the possibility of participation by additional
potentially responsible parties and the
apportionment of liability, Eastern does not possess at
this time sufficient information to reasonably
determine or estimate the ultimate cost to it of such
remedial measures. Eastern may be entitled to recovery
against certain insurers with respect to this matter.
14. COAL MINERS RETIREE HEALTH CARE
In September 1993 Eastern received notice from the
Social Security Administration claiming that
Eastern is responsible for health care and death
benefit premiums for certain retired coal miners and
their beneficiaries under the newly-effective federal
Coal Industry Retiree Health Benefit Act of 1992 (the
"Coal Act"). The amount of premiums requested
aggregates in excess of $5,000,000 to cover an
initial 20-month period ending September 30, 1994,
and relates to retired miners who are said to have
worked for Eastern's Coal Division prior to the
transfer of those operations to a subsidiary in 1965.
Eastern has filed a lawsuit in the Federal District
Court for Massachusetts challenging the
constitutionality of the new statute, as applied to it,
and asserting a claim against Peabody Holding
Company, Inc. ("Peabody"), to which Eastern sold its
coal subsidiaries in 1987, that any liabilities under
the Coal Act should be borne by Peabody and such
subsidiaries. Eastern has posted security to delay
payment of premiums pending the outcome of its
constitutional challenge. Eastern is aware of several
other lawsuits challenging the constitutionality of the
Coal Act.
Eastern has recorded a reserve of $70,000,000 to
provide for its undiscounted obligations under the Coal
Act. This amount has been reflected as an
extraordinary item of $45,500,000 net of tax or
$2.02 per share, in accordance with the
conclusions of the Financial Accounting Standard Board's
Emerging Issues Task Force, which has determined that an
entity such as Eastern which no longer has operations in
the coal industry should account for its entire
obligation under the Coal Act as an extraordinary
item. If Eastern prevails in its constitutional challenge
or its claim against Peabody, its obligation
under the Coal Act would be eliminated. Eastern's
obligation could be more than $100 million depending
on other factors including administrative review of
assigned individuals, medical inflation rates,
Medicare reimbursements and other changes in government
health care programs.
<PAGE>
(Page 44)
15. RETIREE BENEFITS
Eastern and its subsidiaries, through
various company-administered plans and other union
retirement and welfare plans under collective bargaining
agreements, provide retirement benefits for the
majority of their employees, including pensions and
certain health care and life insurance benefits. Normal
retirement age is 65 but provision is made for
earlier retirement. Pension benefits for salaried plans
are based on salary and years of service, while
union retirement and welfare plans are based on
negotiated benefits and years of service. Employees
who are participants in the pension plans become
eligible for health care benefits if they reach
retirement age while working for Eastern.
The funding of retirement and employee benefit plans
is in accordance with the requirements of the plans
and collective bargaining agreements and, where
applicable, in sufficient amounts to satisfy the
"Minimum Funding Standards" of the Employee Retirement
Income Security Act ("ERISA").
Effective January 1, 1991, Eastern adopted Statement of
Financial Accounting Standards No. 106 ("SFAS
106"), "Employers" Accounting for Post-
retirement Benefits Other Than Pensions,'' by
immediately recognizing the cumulative effect of the
accounting change. SFAS 106 requires that the expected
cost of post-retirement benefits other than pensions
be charged to expense during the period that the employee
renders service. At the date of adoption, the cumulative
effect of the accounting change ("transition
obligation") was $102,245,000, of which
$89,120,000 was attributable to Boston Gas. With
regulatory approval, Boston Gas has deferred the cost of
the transition obligation and the amount by
which expense under SFAS 106 exceeds expense under the
current benefit payments. The impact of immediate
recognition of the balance of the transition obligation
was $13,125,000 pre-tax or $8,662,000 net of tax, equal
to $.38 per share. Boston Gas' 1993 rate order
provides a four year transition to full recovery
of tax deductible amounts, which approximate SFAS 106
expense including amortization of the
transition charges. The net cost for these plans
and agreements charged to expense was as follows:
<TABLE>
PENSIONS
<CAPTION>
(In thousands)
-------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Service cost $ 4,556 $ 4,176 $ 3,894
Interest cost on projected benefit obligation 9,869 9,033 8,353
Actual return on plan assets (21,763) (12,961) (25,796)
Net amortization and deferral 10,729 2,590 17,378
-----------------------------------
Total net pension cost of company-administered plans 3,391 2,838 3,829
Multi-employer union retirement and welfare plans 377 321 298
-----------------------------------
Total net pension cost $ 3,768 $ 3,159 $ 4,127
-----------------------------------
-----------------------------------
</TABLE>
<TABLE>
HEALTH CARE
<CAPTION>
(In thousands)
-------------------------------------------------------------------------------------------------
Years ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Service cost $ 1,590 $ 1,569 $ 1,511
Interest cost on accumulated benefit obligation 8,065 8,955 8,644
Actual return on plan assets (282) (173) --
Net amortization and deferral (1,241) (247) --
Boston Gas deferral (2,368) (4,447) (5,130)
---------------------------------------
Total retiree health care cost $ 5,764 $ 5,657 $ 5,025
---------------------------------------
---------------------------------------
</TABLE>
<PAGE>
(Page 45)
The following table sets forth the funded status of company-administered
plans and amounts recorded in Eastern's consolidated balance sheet as of
December 31, 1993 and 1992 using actuarial measurement dates as of October
1, 1993 and 1992:
<TABLE>
<CAPTION>
(In thousands) Pensions Health Care
-----------------------------------------------------------------------------------------------------
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested benefits $104,355 $101,276 $ 67,492 $ 84,696
Non-vested benefits 13,275 11,773 15,741 29,441
-------------------------------------------------------
117,630 113,049 83,233 114,137
Effect of future salary increases 18,820 18,477 -- --
-------------------------------------------------------
Projected benefit obligation ("PBO") $136,450 $131,526 $ 83,233 $ 114,137
-------------------------------------------------------
-------------------------------------------------------
Plan assets at fair value $152,925 $147,175 $ 10,856 $ 5,573
Less PBO 136,450 131,526 83,233 114,137
-------------------------------------------------------
Plan assets in excess of (less than)
PBO 16,475 15,649 (72,377) (108,564)
Unrecognized net obligation at December
31, 1985 being amortized over 15 years 2,951 3,324 -- --
Unrecognized net (gain) loss (19,638) (12,370) (15,171) 8,145
Unrecognized prior service cost
(benefit) 15,837 8,315 (17,182) (8,341)
Amounts contributed to plans during
fourth quarter 476 375 -- 5,000
Unfunded accumulated benefits (1,291) (918) -- --
-------------------------------------------------------
Net asset (reserve) at December 31 $ 14,810 $ 14,375 $(104,730) $(103,760)
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
The above vested health care benefits include $58,380,000
and $70,128,000 for retirees in 1993 and 1992,
respectively. To fund health care benefits under its
collective bargaining agreements, in 1991 Boston
Gas established a Voluntary Employee Beneficiary
Association ("VEBA"), to which it makes contributions
from time to time. Plan assets are invested in
equity securities, fixed income investments and money
market instruments.
Following are the assumptions used in the
actuarial measurements:
<TABLE>
<CAPTION>
-----------------------------------------------
1993 1992
<S> <C> <C>
Discount rate 7.5% 7.5%
Return on plan assets 8.5% 8.5%
Increase in future
compensation 5.0% 5.0%
Health care inflation
trend 12.0% 14.0%
-----------------
</TABLE>
The health care inflation trend is assumed to drop gradually to 5% after 7
years. A one-percentage-point increase in the assumed health care cost
trend would have increased the net periodic post-retirement benefit cost
charged to expense and the accumulated benefit obligation by $62,000 and
$6,440,000, and, $89,000 and $9,993,000, respectively, in 1993 and 1992.
<PAGE>
(Page 46)
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments:
Cash, short-term investments and debt: The carrying amounts approximate
fair value because of the short maturity of those instruments. Short-term
debt includes notes payable, gas inventory financing, and other
miscellaneous short-term liabilities.
Long-term debt and preferred stock of subsidiary: The fair values are
based on currently quoted market prices.
The carrying amounts and estimated fair values of Eastern's financial
instruments are as follows:
<TABLE>
<CAPTION>
(In thousands)
---------------------------------------------------------------------------------------------------
December 31, 1993 1992
----------------------- ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and short-term investments $ 52,240 $ 52,240 $105,440 $105,440
Short-term debt 165,596 165,596 103,575 103,575
Long-term debt 336,975 390,336 364,412 394,290
Preferred stock of subsidiary 29,197 30,600 29,436 29,436
-----------------------------------------------------
</TABLE>
<TABLE>
17. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<CAPTION>
(In thousands, except per share amounts)
---------------------------------------------------------------------------------------------------
For the three months ended 1993: Mar. 31, June 30, Sept. 30, Dec. 31,
<S> <C> <C> <C> <C>
Revenues $368,368 $259,745 $195,917 $275,817
Operating earnings (loss) 46,617 13,760 (5,273) (23,117)
Pretax earnings (loss) 38,190 5,567 (26,431) (33,948)
Earnings (loss) before extraordinary item 23,025 3,264 (20,998) (37,451)
Net earnings (loss) 23,025 3,264 (20,998) (82,951)
Earnings (loss) per share before
extraordinary item $1.02 $.14 $ (.93) $ (1.66)
Earnings (loss) per share 1.02 .14 (.93) (3.68)
-----------------------------------------------------
1992:
Revenues $356,589 $250,251 $203,264 $281,330
Operating earnings 55,442 19,535 2,033 18,997
Pretax earnings (loss) 48,003 12,290 (5,206) 7,944
Earnings (loss) before accounting change 29,825 7,384 (3,559) 4,256
Net earnings (loss) 38,034 7,384 (3,559) 4,256
Earnings (loss) per share before
accounting change $1.32 $.32 $ (.15) $.18
Earnings (loss) per share 1.69 .32 (.15) .18
-----------------------------------------------------
</TABLE>
<PAGE>
(Page 47)
Independent Auditor's Report
To the Trustees and Shareholders of Eastern Enterprises:
We have audited the accompanying consolidated
balance sheets of Eastern Enterprises (a Massachusetts
voluntary association) and subsidiaries as of December
31, 1993 and 1992, and the related consolidated
statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended
December 31, 1993. These financial statements are the
responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the
financial position of Eastern Enterprises and subsidiaries
as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three
years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
As explained in Notes 15 and 9 to the consolidated
financial statements, effective January 1, 1991 and
January 1, 1992, respectively, the company changed its method
of accounting for post-retirement benefits other than
pensions and income taxes.
Arthur Andersen & Co.
Boston, Massachusetts,
February 4, 1994.
Management's Report on Responsibility
The management of Eastern Enterprises is responsible for
the preparation, integrity and fair presentation of the
company's financial statements. These statements
have been prepared in accordance with generally
accepted accounting principles and, as such, include amounts
based on management's informed judgments and estimates. The
financial statements have been audited by the independent
accounting firm of Arthur Andersen & Co., which was
given unrestricted access to all financial records and
related data.
Eastern maintains a system of internal control over
financial reporting which is designed to provide reasonable
assurance to the company's management and Board of
Trustees regarding the preparation of reliable
financial statements and the safeguarding of assets. The
system includes a documented organizational structure and
division of responsibility, an internal audit staff, the
careful selection and development of personnel and
established policies and procedures, including policies
to foster a strong ethical climate and control
environment, which are communicated throughout Eastern.
The Audit Committee of the Board of Trustees, consisting
solely of outside trustees, meets periodically with
management, internal auditors and the independent auditors
to review internal accounting controls, financial results
and accounting principles and practices. The Audit Committee
also annually recommends to the Board of Trustees the
selection of independent auditors.
J. Atwood Ives
Chairman and Chief Executive Officer
Walter J. Flaherty
Senior Vice President and Chief Financial Officer
James J. Harper
Vice President and Controller
<PAGE>
(Page 48)
<TABLE>
Summary of Operations
<CAPTION>
(In thousands,
except per share
amounts)
- ---------------------------------------------------------------------------------------------------------------------
Years ended
December 31, 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Boston Gas $ 614,294 $ 594,330 $ 527,928 $ 554,509 $ 559,692 $ 449,437
Midland 254,921 263,617 267,044 269,061 233,958 222,492
Water Products
Group 230,632 233,487 198,098 126,452 46,436 --
------------------------------------------------------------------------------------------------
TOTAL REVENUES 1,099,847 1,091,434 993,070 950,022 840,086 671,929
Operating costs
and expenses 1,022,860 995,427 920,265 863,696 764,070 606,251
OPERATING EARNINGS:
Boston Gas 49,063 63,120 39,291 40,179 45,900 43,092
Midland 33,001 38,277 40,471 43,950 34,535 27,381
Water Products
Group (402) (249) (1,237) 5,680 2,851 --
Headquarters (4,675) (5,141) (5,720) (3,483) (7,270) (4,795)
------------------------------------------------------------------------------------------------
OPERATING
EARNINGS BEFORE
WRITEDOWN: 76,987 96,007 72,805 86,326 76,016 65,678
Writedown of
WaterPro
goodwill (45,000) -- -- -- -- --
-----------------------------------------------------------------------------------------------
OPERATING
EARNINGS AFTER
WRITEDOWN: 31,987 96,007 72,805 86,326 76,016 65,678
OTHER INCOME (EXPENSE):
Interest income 2,875 4,217 6,628 11,108 9,612 8,875
Interest expense (35,305) (33,924) (29,720) (27,344) (24,945) (24,241)
Loss on sale of
Ionpure (13,000) -- -- -- -- --
Peabody-
related\1/<F1> -- -- -- 13,887 13,621 14,003
Other, net (3,179) (3,269) (2,620) 4,590 3,335 1,897
-----------------------------------------------------------------------------------------------
PRE-TAX EARNINGS
(LOSS) (16,622) 63,031 47,093 88,567 77,639 66,212
Provision for
income taxes 15,538 25,125 17,726 24,613 21,086 15,539
-----------------------------------------------------------------------------------------------
EARNINGS (LOSS)
BEFORE
EXTRAORDINARY
ITEM AND
ACCOUNTING
CHANGES (32,160) 37,906 29,367 63,954 56,553 50,673
Extraordinary
item net of
tax\2/<F2> (45,500) -- -- -- -- --
Cumulative
effect of
accounting
change for:
SFAS No. 109 -- 8,209 -- -- -- --
SFAS No. 106 -- -- (8,662) -- -- --
------------------------------------------------------------------------------------------------
NET EARNINGS
(LOSS) $ (77,660) $ 46,115 $ 20,705 $ 63,954 $ 56,553 $ 50,673
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
FINANCIAL
STATISTICS AND
RATIOS:
Total assets $1,379,677 $1,425,066 $1,333,451 $1,199,214 $1,148,727 $1,087,224
Cash from
operating
activities 38,537 46,574 92,825 88,042 81,278 68,840
Capital
expenditures\3/<F3> 64,391 82,891 112,085 96,779 89,587 63,101
Long-term debt 328,939 357,109 327,361 296,578 260,367 263,587
Shareholders'
equity 363,738 517,906 502,886 513,160 498,017 472,750
Debt/equity
ratio 47/53 41/59 39/61 37/63 34/66 36/64
Return on total
capital 5.0%\4/<F4> 7.7% 4.8% 10.2% 9.5% 9.2%
Return on equity 4.5%\4/<F4> 9.0% 4.1% 12.6% 11.7% 11.0%
SHARES
OUTSTANDING AT
DECEMBER 31 20,930 22,621 22,543 22,504 23,213 23,166
PER SHARE DATA:
Earnings (loss)
before
extraordinary
item and
accounting
change $ (1.43) $ 1.67 $ 1.30 $ 2.77 $ 2.43 $ 2.18
Net earnings
(loss) (3.45) 2.04 .92 2.77 2.43 2.18
Dividends
declared 1.40 1.40 1.40 1.40 1.40 1.30
Shareholders'
equity 17.38 22.89 22.31 22.80 21.45 20.41
--------------------------------------------------------------------------------------------
<FN>
<F1> \1/Eastern's 15.01% investment in Peabody Holding Company, Inc. (Peabody), sold in 1990.
<F2> \2/Charge of $70,000 pretax or $2.02 per share to reserve for coal miners retiree health care.
<F3> \3/Excludes $37,117 in 1991, $10,931 in 1990 and $93,689 in 1989 for acquisitions by Water Products Group.
<F4> \4/Excludes non-recurring net charges of $98,800 for the writedown of WaterPro goodwill, loss on sale of Ionpure and
a reserve for coal miners retiree health care.
</TABLE>
<PAGE>
(Page 50)
<TABLE>
CASH DIVIDENDS PER SHARE
- -----------------------------------
<CAPTION>
<S> <C> <C>
Quarter 1993 1992
First $ .35 $ .35
Second .35 .35
Third .35 .35
Fourth .35 .35
------------------
Total $1.40 $1.40
------------------
------------------
</TABLE>
<TABLE>
STOCK PRICE RANGE
- ---------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C>
Quarter High Low High Low
First $29 3/8 $26 3/8 $28 1/2 $23 1/2
Second 30 26 3/8 27 3/4 25 1/4
Third 29 1/4 26 7/8 28 5/8 24 3/4
Fourth 29 25 1/2 28 1/2 24 1/8
----------------------------------------
APPENDIX TO EXHIBIT 13.1
NARRATIVE DESCRIPTION OF GRAPHIC AND IMAGE MATERIAL APPEARING IN PAPER FORMAT
VERSION OF FORM 10-K
Pages 26 through 29 contain bar graphs of revenues, operating earnings,
capital structure and capital expenditures for 1989 through 1993. The data
points comprising these graphs appear in the table on page 48 under the
heading, "Summary of Operations."
Capital expenditures by business segment for 1991 through 1993 are shown
in Note 2 of Notes to Financial Statements. Capital expenditures, in millions
of dollars, for 1989 and 1990 were as follows:
</TABLE>
<TABLE>
<CAPTION>
1989 1990
---- ----
<S> <C> <C>
Boston Gas ................................. 40.7 42.3
Water Products Group and Other ............. .8 3.6
Midland .................................... 48.1 50.9
--- ---
Total .................................. 89.6 96.8
--- ---
--- ---
</TABLE>
The figures exclude acquisitions in the Water Products group.
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following table shows all direct and indirect subsidiaries of the
registrant except (1) subsidiaries which, considered in the aggregate as a
single subsidiary, do not constitute a significant subsidiary, and (2) certain
consolidated wholly-owned multiple subsidiaries carrying on the same line of
business as to which certain summary information appears below.
JURISDICTION OF INCORPORATION
-----------------------------
Boston Gas Company Massachusetts
Midland Enterprises Inc. Delaware
13 subsidiaries engaged in water transportation
and related activities
Water Products Group Incorporated Massachusetts
WaterPro Supplies Corporation Massachusetts
