<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-2297
EASTERN ENTERPRISES
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1270730
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
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(Address of principal executive offices)
(Zip Code)
617-647-2300
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(Registrant's telephone number, including area code)
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of Common Stock outstanding of Eastern Enterprises as of
April 21, 1995 was 20,136,903.
<PAGE>
Form 10-Q
Page 2.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
EASTERN ENTERPRISES AND SUBSIDIARIES ("Eastern")
<TABLE>
Consolidated Statement of Earnings
- ----------------------------------
<CAPTION>
Three months ended March 31,
(In thousands, except per share amounts) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $366,968 $372,468
Operating costs and expenses:
Operating costs 257,686 267,960
Selling, general and administrative expenses 29,169 27,787
Depreciation and amortization 21,251 19,595
-------- --------
308,106 315,342
-------- --------
Operating earnings 58,862 57,126
Other income (expense):
Interest income 660 345
Interest expense (10,004) (9,412)
Other, net 95 (227)
-------- --------
Earnings from continuing operations
before income taxes 49,613 47,832
Provision for income taxes 18,974 18,970
-------- --------
Earnings from continuing operations 30,639 28,862
Loss from discontinued operations,
net of tax - (174)
-------- --------
Net earnings $ 30,639 $ 28,688
======== ========
Earnings per share from continuing operations $ 1.51 $ 1.38
Discontinued operations - (.01)
-------- --------
Net earnings per share $ 1.51 $ 1.37
======== ========
Dividends per share $ .35 $ .35
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Form 10-Q
Page 3.
Eastern Enterprises and Subsidiaries
- ------------------------------------
<TABLE>
Consolidated Balance Sheet
- --------------------------
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 64,895 $ 60,854 $ 58,026
Receivables, less reserves 151,565 97,093 188,451
Inventories 39,484 60,207 42,307
Deferred gas costs 17,272 66,865 24,421
WaterPro net assets held for sale 51,462 51,462 46,457
Other current assets 6,034 6,841 5,247
---------- ---------- ----------
Total current assets 330,712 343,322 364,909
Investments:
U.S. Filter 47,137 44,847 44,193
Other investments 13,559 5,531 6,041
---------- ---------- ----------
Total investments 60,696 50,378 50,234
Property and equipment, at cost 1,304,184 1,293,733 1,272,095
Less--accumulated depreciation 538,016 518,110 502,595
---------- ---------- ----------
Net property and equipment 766,168 775,623 769,500
Other assets:
Deferred post-retirement health care
costs 96,605 97,589 100,461
Deferred charges and other costs,
less amortization 45,498 72,407 65,172
---------- ---------- ----------
Total other assets 142,103 169,996 165,633
---------- ---------- ----------
Total assets $1,299,679 $1,339,319 $1,350,276
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Form 10-Q
Page 4.
Eastern Enterprises and Subsidiaries
- ------------------------------------
<TABLE>
Consolidated Balance Sheet
- --------------------------
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current debt $ 14,355 $ 67,774 $ 68,645
Accounts payable 47,158 49,981 55,715
Accrued expenses 48,908 22,908 39,558
Other current liabilities 67,268 71,774 66,946
---------- ---------- ----------
Total current liabilities 177,689 212,437 230,864
Gas inventory financing 33,583 53,578 32,079
Long-term debt 363,891 365,488 362,846
Reserves and other liabilities:
Deferred income taxes 92,503 91,534 91,546
Post-retirement health care 102,220 102,382 104,139
Coal miners retiree health care 57,265 58,155 61,941
Preferred stock of subsidiary 29,237 29,229 29,205
Other reserves 50,394 52,382 51,392
---------- ---------- ----------
Total reserves and other
liabilities 331,619 333,682 338,223
Shareholders' equity:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares -- 20,652,725 at
March 31, 1995; 20,651,925 at
December 31, 1994 and 21,651,925
at March 31, 1994 20,653 20,652 21,652
Capital in excess of par value 37,928 37,712 62,006
Retained earnings 347,745 321,880 320,644
Treasury stock at cost - 521,822
shares at March 31, 1995; 241,395
shares at December 31, 1994 and
684,399 shares at March 31, 1994 (13,429) (6,110) (18,038)
---------- ---------- ----------
Total shareholders' equity 392,897 374,134 386,264
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,299,679 $1,339,319 $1,350,276
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Form 10-Q
Page 5.
Eastern Enterprises and Subsidiaries
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<TABLE>
Consolidated Statement of Cash Flows
- ------------------------------------
<CAPTION>
Three months ended March 31,
(In thousands) 1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 30,639 $ 28,688
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Discontinued operations non-cash charges
and working capital changes - 174
Depreciation and amortization 21,251 19,595
Income taxes and tax credits 15,187 14,390
Other changes in assets and liabilities:
Receivables (54,472) (72,268)
Inventories 20,723 28,829
Deferred gas costs 49,593 41,381
Accounts payable (2,823) (7,948)
Other 25,026 3,197
-------- --------
Net cash provided by operating activities 105,124 56,038
Cash flows from investing activities:
Capital expenditures (11,956) (6,994)
Short-term investments (38) 12,974
Other 174 (47)
-------- --------
Net cash provided (used) by investing activities (11,820) 5,933
Cash flows from financing activities:
Dividends paid (7,154) (7,856)
Changes in notes payable (53,530) (45,800)
Proceeds from issuance of long-term debt - 36,000
Repayment of long-term debt (901) (1,435)
Changes in gas inventory financing (19,995) (27,218)
Repurchase of stock (8,301) -
Other 543 1,037
-------- --------
Net cash used by financing activities (89,338) (45,272)
Net increase in cash and cash equivalents 3,966 16,699
Cash and cash equivalents at beginning of year 51,674 23,737
-------- --------
Cash and cash equivalents at end of period 55,640 40,436
Short-term investments 9,255 17,590
-------- --------
Cash and short-term investments $ 64,895 $ 58,026
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Form 10-Q
Page 6.
EASTERN ENTERPRISES AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
1. Accounting policies
It is Eastern's opinion that the financial information contained in this report
reflects all adjustments necessary to present a fair statement of results for
the period reported. All of these adjustments are of a normal recurring nature.
Results for the period are not necessarily indicative of results to be expected
for the year, due to the seasonal nature of Eastern's operations. Except for the
accounting for the investment in U.S. Filter, as described below, all accounting
policies have been applied in a manner consistent with prior periods. Such
financial information is subject to year-end adjustments and annual audit by
independent public accountants.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this Form 10-Q. Therefore these interim
financial statements should be read in conjunction with Eastern's 1994 Annual
Report filed on Form 10-K with the Securities and Exchange Commission.
Investment in U.S. Filter
Eastern holds 3,041,092 shares, which as of March 31, 1995 represented 18%
of the voting stock of U.S. Filter. Since Eastern's acquisition of U.S. Filter
stock in December 1993, the latter has made several acquisitions which have
reduced Eastern's ownership percentage. Additionally, on April 26, 1995 U.S.
Filter issued 6,000,000 common shares pursuant to a registration statement filed
with the Securities and Exchange Commission during the first quarter. This
issuance reduces Eastern's voting interest to approximately 13%. Accordingly,
beginning in the first quarter of 1995, Eastern is accounting for its investment
in U.S. Filter under the cost method. Eastern previously accounted for this
investment under the equity method. Eastern has classified the U.S. Filter
investment as a security available for sale. The net unrealized gain of
$2,300,000 computed in marking this security to market is not reflected on
Eastern's Statement of Earnings but is reflected as a component of shareholders'
equity.
Earnings per share
Per share amounts are based on the weighted average number of common shares
outstanding and common equivalent shares (20,301,000 shares in 1995 and
20,982,000 shares in 1994).
<PAGE>
Form 10-Q
Page 7.
2. Inventories
<TABLE>
The components of inventories were as follows:
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1995 1994 1994
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental gas supplies $26,824 $46,844 $24,421
Other materials, supplies and marine
fuels 12,660 13,363 17,886
------- ------- -------
$39,484 $60,207 $42,307
======= ======= =======
</TABLE>
3. Supplemental cash flow information
<TABLE>
The following are supplemental disclosures of cash flow information:
<CAPTION>
Three months ended March 31,
(In thousands) 1995 1994
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid during the year for:
Interest, net of amounts capitalized $ 1,697 $ 2,251
Income taxes $ 4,087 $ 4,743
</TABLE>
<PAGE>
Form 10-Q
Page 8.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
<TABLE>
RESULTS OF OPERATIONS
<CAPTION>
Revenues: Three months ended March 31,
(In thousands) 1995 1994 Change
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $294,241 $314,302 (6)%
Midland 72,727 58,166 25%
-------- --------
Total $366,968 $372,468 (1)%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Earnings: Three months ended March 31,
(In thousands) 1995 1994 Change
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $44,558 $53,122 (16)%
Midland 15,300 5,025 204%
Headquarters (996) (1,021) 2%
------- -------
Total $58,862 $57,126 3%
======= =======
</TABLE>
Boston Gas
Weather in the Boston Gas service territory was 4% warmer than normal
during the first quarter of 1995, compared to 14% colder than normal in 1994.
This warmer weather and other demand-related factors decreased revenues by $50
million. The corresponding reduction in gross margin, partially offset by lower
operating expenses related to the warmer weather, decreased operating earnings
by about $10 million. Sales to new firm customers and the recognition of lost
margins associated with conservation programs offset increased charges for bad
debts, depreciation and property taxes.
Midland Enterprises
Record ton miles, up 22% from the first quarter of 1994, and significantly
higher rates, particularly for grain and most non-coal commodities, contributed
to Midland's 25% increase in revenues. Coal tonnage and ton miles increased 16%
and 20%, respectively, over 1994, primarily reflecting increased demand by
electric utilities under long-term contracts. During the first quarter of 1994,
contract utility coal tonnage for one of Midland's largest customers was reduced
by a contractual dispute (favorably resolved later in the year) and another had
an unscheduled plant shutdown.
In addition to the increased volumes and rates, the record operating earnings
for the quarter reflected efficiencies from traffic pattern improvements and
unseasonably good operating conditions, as well as continued benefits from cost
reduction programs. During the first quarter of 1994, Midland incurred higher
operating costs from inefficiencies due to flooding and severe winter icing
conditions.
<PAGE>
Form 10-Q
Page 9.
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
1995 capital expenditure and working capital requirement, normal debt repayments
and anticipated dividend payments to shareholders.
On April 10, 1995 Eastern completed the previously announced sale of its
wholly-owned subsidiary, WaterPro Supplies Corporation, for $52.1 million in
cash.
Consolidated capital expenditures are budgeted at approximately $83 million,
two-thirds of which are for Boston Gas and the balance for Midland.
<PAGE>
Form 10-Q
Page 10.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the registrant was held on
April 27, 1995, at which the shareholders voted to elect the
following Trustees for terms of office expiring at the 1998 Annual
Meeting of Shareholders:
Samuel Frankenheim, with 17,199,161 shares voting for
and 72,158 shares withholding authority;
Dean W. Freed, with 17,192,480 shares voting for
and 72,158 shares withholding authority;
J. Atwood Ives, with 17,174,174 shares voting for
and 72,158 shares withholding authority; and
The shareholders also voted at such meeting to approve the Eastern
Enterprises 1995 Stock Option Plan, with 14,780,447 shares voting for
such approval, 2,297,182 shares voting against and 183,134 shares
abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
None.
(b) Report on Form 8-K
There were no reports on Form 8-K filed in the first
quarter of 1995.
<PAGE>
Form 10-Q
Page 11.
SIGNATURES
It is Eastern's opinion that the financial information contained in
this report reflects all adjustments necessary to present a fair statement of
results for the period reported. All of these adjustments are of a normal
recurring nature. Results for the period are not necessarily indicative of
results to be expected for the year, due to the seasonal nature of Eastern's
operations. All accounting policies have been applied in a manner consistent
with prior periods. Such financial information is subject to year-end
adjustments and annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of 1934,
Eastern has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASTERN ENTERPRISES
By JAMES J. HARPER
-----------------------------
James J. Harper
Vice President and Controller
(Chief Accounting Officer)
April 28, 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of earnings and the consolidated balance sheets and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 55,640
<SECURITIES> 9,255
<RECEIVABLES> 169,203
<ALLOWANCES> 17,638
<INVENTORY> 39,484
<CURRENT-ASSETS> 330,712
<PP&E> 1,304,184
<DEPRECIATION> 538,016
<TOTAL-ASSETS> 1,299,679
<CURRENT-LIABILITIES> 177,689
<BONDS> 363,891
<COMMON> 20,653
29,237
0
<OTHER-SE> 372,244
<TOTAL-LIABILITY-AND-EQUITY> 1,299,679
<SALES> 294,241
<TOTAL-REVENUES> 366,968
<CGS> 224,695
<TOTAL-COSTS> 278,849
<OTHER-EXPENSES> 21,388
<LOSS-PROVISION> 7,114
<INTEREST-EXPENSE> 10,004
<INCOME-PRETAX> 49,613
<INCOME-TAX> 18,974
<INCOME-CONTINUING> 30,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,639
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.51
</TABLE>
