<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, 1996
---------------------------
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
-------------------------------- ------------------------
(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 29, 1996 was 20,255,619.
<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) 1996 1995
--------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Revenues $419,220 $366,968
Operating costs and expenses:
Operating costs 305,766 257,686
Selling, general and administrative expenses 30,620 29,169
Depreciation and amortization 23,653 21,251
-------- --------
360,039 308,106
-------- --------
Operating earnings 59,181 58,862
Other income (expense):
Interest income 2,233 660
Interest expense (9,142) (10,004)
Other, net 232 95
-------- --------
Earnings before income taxes 52,504 49,613
Provision for income taxes 19,622 18,974
-------- --------
Net earnings $ 32,882 $ 30,639
======== ========
Earnings per share $ 1.61 $ 1.51
======== ========
Dividends per share $ .37 $ .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) 1996 1995 1995
- ------------------------------------------------------------ ------------------ ----------------- ------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 201,696 $ 191,211 $ 63,651
Receivables, less reserves 171,925 104,735 151,565
Inventories 23,773 47,883 39,484
Deferred gas costs - 71,940 17,272
WaterPro net assets held for sale - - 51,462
Investment in U.S. Filter - - 47,137
Other current assets 6,379 9,117 7,278
---------- ---------- ----------
Total current assets 403,773 424,886 377,849
Property and equipment, at cost 1,372,050 1,356,097 1,304,184
Less--accumulated depreciation 584,550 563,337 538,016
---------- ---------- ----------
Net property and equipment 787,500 792,760 766,168
Other assets:
Deferred post-retirement health care
costs 91,224 93,830 96,605
Investments 13,729 13,821 13,559
Deferred charges and other costs,
less amortization 50,335 52,045 45,498
---------- ---------- ----------
Total other assets 155,288 159,696 155,662
---------- ---------- ----------
Total assets $1,346,561 $1,377,342 $1,299,679
========== ========== ==========
</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) 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current debt $ 16,553 $ 57,193 $ 14,355
Accounts payable 54,837 64,960 47,158
Accrued expenses 59,254 26,795 48,908
Other current liabilities 73,688 75,913 67,268
---------- ---------- ----------
Total current liabilities 204,332 224,861 177,689
Gas inventory financing 19,187 45,600 33,583
Long-term debt 355,512 357,675 363,891
Reserves and other liabilities:
Deferred income taxes 84,480 89,102 92,503
Post-retirement health care 98,079 98,717 102,220
Coal miners retiree health care 64,020 65,025 57,265
Preferred stock of subsidiary 29,267 29,262 29,237
Other reserves 69,139 71,336 50,394
---------- ---------- ----------
Total reserves and other
liabilities 344,985 353,442 331,619
Shareholders' equity:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares -- 20,405,167 at
March 31, 1996; 20,385,587 at
December 31, 1995 and 20,652,725
at March 31, 1995 20,405 20,386 20,653
Capital in excess of par value 32,198 31,488 37,928
Retained earnings 374,037 348,821 347,745
Treasury stock at cost - 159,088
shares at March 31, 1996; 191,547
shares at December 31, 1995 and
521,822 shares at March 31, 1995 (4,095) (4,931) (13,429)
---------- ---------- ----------
Total shareholders' equity 422,545 395,764 392,897
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,346,561 $1,377,342 $1,299,679
========== ========== ==========
</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) 1996 1995
--------------------------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 32,882 $ 30,639
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 23,653 21,251
Income taxes and tax credits 17,376 15,187
Other changes in assets and liabilities:
Receivables (67,189) (54,472)
Inventories 24,109 20,723
Deferred gas costs 74,599 72,431
Accounts payable (10,123) (2,823)
Other 7,341 2,188
-------- --------
Net cash provided by operating activities 102,648 105,124
Cash flows from investing activities:
Capital expenditures (19,242) (11,956)
Short-term investments 6,074 (38)
Proceeds on sale of investments 1,795 -
Other 420 174
-------- --------
Net cash used by investing activities (10,953) (11,820)
Cash flows from financing activities:
Dividends paid (7,470) (7,154)
Changes in notes payable (40,700) (53,530)
Repayment of long-term debt (1,479) (901)
Changes in gas inventory financing (26,413) (19,995)
Repurchase of stock - (8,301)
Other 926 543
-------- --------
Net cash used by financing activities (75,136) (89,338)
Net increase in cash and cash equivalents 16,559 3,966
Cash and cash equivalents at beginning of year 185,137 51,674
-------- --------
Cash and cash equivalents at end of period 201,696 55,640
Short-term investments - 8,011
-------- --------
Cash and short-term investments $201,696 $ 63,651
======== ========
</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, 1996
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. 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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 1995 Annual
Report filed on Form 10-K with the Securities and Exchange Commission.
Earnings per share
Per share amounts are based on the weighted average number of common shares
outstanding and common equivalent shares (20,399,000 shares in 1996 and
20,301,000 shares in 1995).
<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) 1996 1995 1995
----------------------------------------------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Supplemental gas supplies $10,437 $35,136 $26,824
Other materials, supplies and marine
fuels 13,336 12,747 12,660
------- ------- -------
$23,773 $47,883 $39,484
======= ======= =======
</TABLE>
3. Supplemental cash flow information
<TABLE>
The following are supplemental disclosures of cash flow information:
<CAPTION>
Three months ended March 31,
(In thousands) 1996 1995
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid during the year for:
Interest, net of amounts capitalized $ 1,478 $ 1,652
Income taxes $ 2,462 $ 4,087
</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) 1996 1995 Change
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $343,341 $294,241 17%
Midland 75,879 72,727 4%
-------- --------
Total $419,220 $366,968 14%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Earnings: Three months ended March 31,
(In thousands) 1996 1995 Change
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $46,765 $44,558 5%
Midland 14,011 15,300 (8)%
Headquarters (1,595) (996) (60)%
------- -------
Total $59,181 $58,862 1%
======= =======
</TABLE>
Boston Gas
Weather in the Boston Gas service territory was 3% colder than normal during the
first quarter of 1996, compared to 4% warmer than normal in 1995. This colder
weather was the primary factor increasing revenues by $49 million. Higher gas
costs, increased non-firm sales and sales to new firm customers also
contributed.
The corresponding increase in gross margin, partially offset by higher charges
for depreciation and retiree benefits, lower capitalized expenses, increased
operating expenses related to the colder weather and higher property taxes,
increased operating earnings by $2 million. Benefits from Boston Gas' ongoing
reengineering program more than offset wage increases.
Midland Enterprises
Higher transportation rates, particularly for non-coal commodities,
increased 1996 revenues by 4% to $76 million, a first quarter record for
Midland.
Severe weather conditions early in 1996, as compared with unseasonably good
conditions for the same period in 1995, resulted in a 2% decline in total ton
miles. Ton miles and tonnage were down 6% and 8%, respectively, for non-coal
commodities, particularly grain and other dry cargo. Coal ton miles increased 5%
reflecting longer trip lengths, while coal tonnage declined 5%. In addition to
the reduced volume, the poor operating conditions increased insurance and
maintenance costs. As a result, operating earnings declined $1.3 million or 8%.
Headquarters
Expenses related to the development of AllEnergy Marketing Company, a new
unregulated retail energy marketing business, increased Headquarters' operating
loss in the first quarter of 1996 to $1.6 million.
<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
1996 capital expenditure and working capital requirements, potential funding of
its Coal Act and environmental liabilities, normal debt repayments and
anticipated divided payments to shareholders.
Consolidated capital expenditures are budgeted at approximately $110 million,
about 55% of which are for Boston Gas and the balance primarily 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
25, 1996, at which the shareholders voted to elect the following
Trustees for terms of office expiring at the 1999 Annual Meeting of
Shareholders:
Thomas W. Jones, with 16,938,326 shares voting for
and 80,208 shares withholding authority;
Rina K. Spence, with 16,938,338 shares voting for
and 80,208 shares withholding authority;
The shareholders also voted at such meeting to approve the Eastern
Enterprises 1996 Non-Employee Trustees' Stock Option Plan, with
15,498,466 shares voting for such approval, 1,249,416 shares voting
against, 273,141 shares abstaining and 1 share not voting.
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 1996.
<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 29, 1996.
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 201,697
<SECURITIES> 0
<RECEIVABLES> 191,326
<ALLOWANCES> 19,401
<INVENTORY> 23,773
<CURRENT-ASSETS> 403,773
<PP&E> 1,372,050
<DEPRECIATION> 584,550
<TOTAL-ASSETS> 1,346,561
<CURRENT-LIABILITIES> 204,332
<BONDS> 355,512
<COMMON> 20,405
29,267
0
<OTHER-SE> 402,140
<TOTAL-LIABILITY-AND-EQUITY> 1,346,561
<SALES> 343,341
<TOTAL-REVENUES> 419,220
<CGS> 271,198
<TOTAL-COSTS> 329,331
<OTHER-EXPENSES> 21,417
<LOSS-PROVISION> 6,826
<INTEREST-EXPENSE> 9,142
<INCOME-PRETAX> 52,504
<INCOME-TAX> 19,622
<INCOME-CONTINUING> 32,882
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,882
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
