<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
---------------------------------------
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 (I.R.S. Employer
incorporation or organization) Identification No.)
9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
- ---------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
781-647-2300
- ---------------------------------------------------------------------
(Registrant's telephone number, including area code)
- ---------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
The number of shares of Common Stock outstanding of Eastern Enterprises as of
April 22, 1998 was 20,423,164.
<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) 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $342,919 $376,920
Operating costs and expenses:
Operating costs 235,645 272,559
Selling, general and administrative expenses 29,624 29,081
Depreciation and amortization 23,241 22,303
-------- --------
288,510 323,943
-------- --------
Operating earnings 54,409 52,977
Other income (expense):
Interest income 2,617 2,105
Interest expense (8,532) (8,790)
Equity in loss of AllEnergy - (1,277)
Other, net 1,290 (27)
-------- --------
Earnings before income taxes 49,784 44,988
Provision for income taxes 18,861 16,765
-------- --------
Earnings before extraordinary item 30,923 28,223
Extraordinary provision for early extinguishment
of debt, net of tax (1,465) -
-------- --------
Net earnings $ 29,458 $ 28,223
======== ========
Basic earnings per share before extraordinary
item $ 1.51 $ 1.39
Extraordinary provision for early extinguishment
of debt, net of tax (.07) -
======== ========
Basic earnings per share $ 1.44 $ 1.39
======== ========
Diluted earnings per share before extraordinary
item $ 1.50 $ 1.38
Extraordinary provision for early extinguishment
of debt, net of tax (.07) -
-------- --------
Diluted earnings per share $ 1.43 $ 1.38
======== ========
Dividends per share $ .41 $ .40
======== ========
</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) 1998 1997 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash and short-term investments $ 122,791 $ 175,274 $ 174,492
Receivables, less reserves 153,169 108,575 149,846
Inventories 36,005 56,644 37,452
Deferred gas costs 32,062 66,595 26,791
Other current assets 4,287 5,145 5,242
---------- ---------- ----------
Total current assets 348,314 412,233 393,823
Property and equipment, at cost 1,541,168 1,516,186 1,456,749
Less--accumulated depreciation 683,468 662,628 629,376
---------- ---------- ----------
Net property and equipment 857,700 853,558 827,373
Other assets:
Deferred post-retirement health care
costs 82,587 83,926 87,404
Investments 15,879 15,072 30,413
Deferred charges and other costs,
less amortization 69,354 69,568 53,992
---------- ---------- ----------
Total other assets 167,820 168,566 171,809
---------- ---------- ----------
Total assets $1,373,834 $1,434,357 $1,393,005
========== ========== ==========
</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) 1998 1997 1997
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Current debt $ 20,651 $ 44,051 $ 43,679
Accounts payable 68,573 67,740 51,308
Accrued expenses 57,799 37,143 52,075
Other current liabilities 66,717 65,762 66,021
----------- ----------- -----------
Total current liabilities 213,740 214,696 213,083
Gas inventory financing 31,610 55,502 34,636
Long-term debt 292,787 342,142 346,081
Reserves and other liabilities:
Deferred income taxes 97,594 98,863 93,473
Post-retirement health care 94,708 95,120 96,606
Coal miners retiree health care 55,632 57,000 59,938
Preferred stock of subsidiary 29,335 29,326 29,301
Other reserves 88,399 92,647 70,383
----------- ----------- -----------
Total reserves and other
liabilities 365,668 372,956 349,701
Commitments and Contingencies
Shareholders' equity:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares - 20,442,907 at
March 31, 1998, December 31, 1997
and March 31, 1997 20,443 20,443 20,443
Capital in excess of par value 32,342 32,663 33,654
Retained earnings 416,761 395,662 396,601
Accumulated other comprehensive
earnings 1,197 1,873 1,472
Treasury stock at cost - 20,783
shares at March 31, 1998; 54,928
shares at December 31, 1997 and
103,074 shares at March 31, 1997 (714) (1,580) (2,666)
---------- ---------- ----------
Total shareholders' equity 470,029 449,061 449,504
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,373,834 $1,434,357 $1,393,005
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Form 10-Q
Page 5.
Eastern Enterprises and Subsidiaries
- ------------------------------------
<TABLE>
Consolidated Statement of Cash Flows
- ------------------------------------
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 29,458 $ 28,223
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 23,241 22,303
Income taxes and tax credits 10,915 16,837
Net loss on early extinguishment of debt 1,465 -
Net gain on sale of assets (1,135) -
Other changes in assets and liabilities:
Receivables (44,594) (52,991)
Inventories 20,639 23,819
Deferred gas costs 34,533 48,546
Accounts payable 833 (22,806)
Other 10,366 7,860
-------- --------
Net cash provided by operating activities 85,721 71,791
Cash flows from investing activities:
Capital expenditures (27,056) (12,038)
Proceeds on sale of assets 5,654 -
Investments (5,273) (7,110)
Other (790) (65)
-------- --------
Net cash used by investing activities (27,465) (19,213)
Cash flows from financing activities:
Dividends paid (8,359) (8,122)
Changes in notes payable (23,500) (17,400)
Repayment of long-term debt (51,509) (1,423)
Changes in gas inventory financing (23,892) (20,958)
Other 1,573 1,091
-------- --------
Net cash used by financing activities (105,687) (46,812)
Net increase (decrease) in cash and
cash equivalents (47,431) 5,766
Cash and cash equivalents at beginning of year 170,222 159,804
-------- --------
Cash and cash equivalents at end of period 122,791 165,570
Short-term investments - 8,922
-------- --------
Cash and short-term investments $122,791 $174,492
======== ========
</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, 1998
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 1997 Annual
Report filed on Form 10-K with the Securities and Exchange Commission.
Earnings per share
Basic earnings per share is based on the weighted average number of shares
outstanding. Diluted earnings per share gives effect to the exercise of stock
options using the treasury stock method, as reflected below:
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average shares 20,414 20,328
Dilutive effect of options 171 90
------ ------
Adjusted weighted average shares 20,585 20,418
====== ======
</TABLE>
2. Change in Accounting Principles
Effective January 1, 1998, Eastern adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." This statement requires
presentation of the components of comprehensive earnings, including the changes
in equity from non-owner sources such as unrealized gains on securities and
minimum pension liability adjustments. Eastern's total comprehensive earnings
were as follows:
<PAGE>
Form 10-Q
Page 7.
<TABLE>
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net earnings $29,458 $28,223
Unrealized gains on securities:
Unrealized holding gains arising
during period 478 257
Less: reclassification adjustment
for gains included in net earnings (1,154) -
------- -------
(676) 257
------- -------
Comprehensive earnings $28,782 $28,480
======= =======
</TABLE>
3. Debt
In March 1998, Midland utilized currently available cash to call $50 million of
9.9% First Preferred Ship Mortgage Bonds, due 2008. In extinguishing this debt,
Midland recognized an extraordinary charge of $2,254,000 pretax, $1,465,000 net,
or $.07 per share.
Midland has entered into a treasury rate lock in order to hedge the interest
rate on long-term debt anticipated to be issued in late 1998. The treasury rate
lock is for $20 million at a 10-year treasury rate of 5.617%. Upon issuance of
the debt, any gain or loss realized on the treasury rate lock will be amortized
to interest expense over the term of the related debt.
4. Inventories
<TABLE>
The components of inventories were as follows:
<CAPTION>
March 31, Dec. 31, March 31,
(In thousands) 1998 1997 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Supplemental gas supplies $24,174 $44,590 $25,017
Other materials, supplies and marine
fuels 11,831 12,054 12,435
------- ------- -------
$36,005 $56,644 $37,452
======= ======= =======
</TABLE>
5. Supplemental cash flow information
<TABLE>
The following are supplemental disclosures of cash flow information:
<CAPTION>
Three months ended March 31,
(In thousands) 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash paid during the period for:
Interest, net of amounts capitalized $ 3,839 $ 1,631
Income taxes $ 8,168 $ 160
</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) 1998 1997 Change
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $280,261 $312,538 (10)%
Midland 62,658 64,382 (3)%
-------- --------
Total $342,919 $376,920 (9)%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Earnings: Three months ended March 31,
(In thousands) 1998 1997 Change
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Boston Gas $51,623 $48,791 6%
Midland 6,088 5,428 12%
ServicEdge (2,137) - nm
Headquarters (1,165) (1,242) 6%
------- -------
Total $54,409 $52,977 3%
======= =======
</TABLE>
Boston Gas
The decrease in Boston Gas revenues was primarily attributable to the pass
through of lower gas costs ($25 million) and the migration of customers from
firm sales to transportation-only services ($12 million), factors that have no
impact on Boston Gas' operating earnings. The Company earns all of its margins
on the local distribution of gas and none on the sale of the commodity itself.
The revenue decrease also reflects 4% warmer weather ($10 million), partially
offset by higher non-firm sales and growth in throughput. Weather for the first
quarter of 1998 was 11% warmer than normal.
Operating earnings for 1998 increased by $2.8 million, reflecting lower
operating costs ($4 million), higher average rates and the impact of throughput
growth, partially offset by the margin impact of warmer weather ($3 million) and
the absence of a pension settlement gain reflected in 1997 ($2 million). The
decrease in operating costs reflects weather-related reductions and cost control
measures.
Midland Enterprises
Weak export grain and coal markets continued to place downward pressure on spot
and contract renewal rates, contributing to a 3% decline in first quarter
revenues. Offsetting this market weakness, lower fuel prices and improved river
conditions contributed to a 12% increase in operating earnings.
Thirty-year record flood levels in March of 1997 severely impacted operations on
the Ohio River and its tributaries and significantly increased operating costs.
1998 operating conditions in these areas have been more normal, although El
Nino-related weather patterns caused delays and flooding in Midland's
southeastern and Gulf operations, impacting operating efficiencies and costs,
while also reducing winter heating related coal demand throughout the Midwest.
<PAGE>
Form 10-Q
Page 9.
First quarter tonnage increased 9% over 1997, while related ton miles declined
5%, reflecting increased utility demand from existing customers as well as new
multi-year industrial coal contracts. Coal ton miles were unchanged from 1997,
reflecting shorter average trip lengths and weaker demand for export coal.
Non-coal tonnage and ton miles declined 6% and 9%, respectively, as compared
with 1997, primarily reflecting weak export grain demand and reduced towing for
other carriers.
Other
ServicEdge's operating loss of $2.1 million for the first quarter of 1998
reflects general and administrative expenses in preparation for serving
customers beginning in April 1998.
In 1997, other income includes a loss of $1.3 million, representing Eastern's
share of AllEnergy's operating losses. Eastern sold its investment in AllEnergy
in December 1997.
In 1998, other, net includes realized gains on investments of $1.1 million.
In March 1998, Eastern recognized an extraordinary loss of $2.3 million pretax,
$1.5 million net, or $.07 per share on the early extinguishment of $50 million
of Midland debt, as discussed in Note 2 of Notes to Financial Statements.
In March 1998, the U.S. Supreme Court heard oral arguments in Eastern's
challenge to the constitutionality of the Coal Industry Retiree Health Benefit
Act of 1992 as applied to Eastern. The Supreme Court's ruling is expected by
June 30, 1998.
FORWARD-LOOKING INFORMATION
This report and other company statements and statements issued or made from time
to time contain certain "forward-looking statements" concerning projected future
financial performance, expected plans or future operations. Eastern cautions
that actual results and developments may differ materially from such projections
or expectations.
Investors should be aware of important factors that could cause actual results
to differ materially from the forward-looking projections or expectations. These
factors include, but are not limited to: the effect of strategic initiatives on
earnings and cash flow, temperatures above or below normal in Boston Gas'
service area, changes in market conditions for barge transportation, adverse
weather and operating conditions on the inland waterways, uncertainties
regarding the start-up of ServicEdge, including expense levels and customer
acceptance, changes in economic conditions, including interest rates and the
value of the dollar versus other currencies, regulatory and court decisions and
developments with respect to Eastern's previously-disclosed environmental and
Coal Act liabilities. Most of these factors are difficult to predict accurately
and are generally beyond Eastern's control.
<PAGE>
Form 10-Q
Page 10.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that projected cash flows from operations, in combination
with currently available resources and the borrowing discussed below, are more
than sufficient to meet Eastern's 1998 capital expenditure and working capital
requirements, potential funding of its Coal Act and environmental liabilities,
normal debt repayments and anticipated dividend payments to shareholders.
Consolidated capital expenditures are budgeted at approximately $110
million, with about 55% at Boston Gas and the balance at Midland.
As discussed in Note 2, in March 1998, Midland utilized currently available cash
to call $50 million of 9.9% First Preferred Ship Mortgage Bonds, due 2008.
Midland currently expects to borrow up to $75 million later in 1998 to refinance
the called debt and to fund capital expenditures for barges during 1998 and
1999. Midland has entered into a treasury rate lock in order to hedge the
interest rate for $20 million of this debt, as discussed in Note 2.
<PAGE>
Form 10-Q
Page 11.
PART II. OTHER INFORMATION
Item 2. Changes in Securities
Eastern issued an aggregate of 7,864 shares of its common stock on January 28,
1998 to executives of Eastern and its subsidiaries, other than its Chairman and
Chief Executive Officer and President and Chief Operating Officer, pursuant to
Eastern's Executive Incentive Compensation Plan ("Incentive Plan"). Eastern
issued 2,025 shares of its common stock on February 25, 1998 to its Chairman and
Chief Executive Officer and President and Chief Operating Officer pursuant to
its Incentive Plan. The issuances of such shares were exempt from registration
under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of the registrant was held on April 22, 1998,
at which the shareholders voted to elect the following Trustees for terms of
office expiring at the 2001 Annual Meeting of Shareholders:
James R. Barker, with 17,875,645 shares voting for and 88,123 shares
withholding authority;
Samuel Frankenheim, with 17,871,689 shares voting for and
88,123 shares withholding authority;
J. Atwood Ives, with 17,876,577 shares voting for and
88,123 shares withholding authority;
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
10.5.2 Eastern's amended and restated Deferred
Compensation Plan for Trustees, dated
April 22, 1998.
10.9.3 Amendment to Trust Agreement between
Eastern and Key Trust Company of
Ohio, N.A., as successor trustee,
dated February 25, 1998.
10.15.1 Letter agreements dated February 25, 1998 with
each of J. A. Ives and R. R. Clayton terminating
letter agreements dated April 28, 1994 regarding
SERP benefits.
10.21.1 Amendment to Eastern's 1996
Non-Employee Trustees' Stock Option
Plan, effective April 22, 1998.
27.1 Financial Data Schedule.
(b) Report on Form 8-K
There were no reports on Form 8-K filed in the first quarter
of 1998.
<PAGE>
Form 10-Q
Page 12.
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 /s/ WALTER J. FLAHERTY
------------------------
Walter J. Flaherty
Senior Vice President
Chief Financial Officer
Date: April 23, 1998 By /S/ JAMES J. HARPER
---------------------------
James J. Harper
Vice President and Controller
(Chief Accounting Officer)
<PAGE>
EXHIBIT INDEX
10.5.2 Eastern's amended and restated Deferred
Compensation Plan for Trustees, dated
April 22, 1998.
10.9.3 Amendment to Trust Agreement between
Eastern and Key Trust Company of
Ohio, N.A., as successor trustee,
dated February 25, 1998.
10.15.1 Letter agreements dated February 25, 1998 with
each of J. A. Ives and R. R. Clayton terminating
letter agreements dated April 28, 1994 regarding
SERP benefits.
10.21.1 Amendment to Eastern's 1996
Non-Employee Trustees' Stock Option
Plan, effective April 22, 1998.
27.1 Financial Data Schedule.
<PAGE>
Exhibit 10.5.2
--------------
EASTERN ENTERPRISES
Deferred Compensation Plan for Trustees
(amended and restated as of April 22, 1998)
1. Purpose
The purpose of this plan (the "Plan") is to assist members of the Board
of Trustees (the "Board") of Eastern Enterprises ("Eastern") who are not and
have never been employees of Eastern or its subsidiaries in making more
satisfactory provision for their income following their retirement from the
Board. To accomplish this purpose, the Plan provides for (a) the elective
deferral of certain fees until the participating member retires from the Board
and for the crediting of such deferrals, at the election of the member as
hereinafter provided, in Share Units, and (b) the crediting of additional Share
Units to accounts maintained hereunder for eligible members of the Board.
2. Administration
The Plan will be administered by the Treasurer of Eastern (the
"Treasurer").
3. Deferral of Retainers and of Fees for Attendance at Meetings
Each member of the Board who is not and has never been an employee of
Eastern or its subsidiaries (an "Eligible Trustee") 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, including those to which he or she is entitled as
a member of any Committee of the Board 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 Eligible Trustee 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 9 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. below, any Eligible Trustee 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
that is filed with the Treasurer prior to the beginning of the
calendar year in which the amounts would be paid if no such
election were made.
<PAGE>
b. In the case of the first calendar year in which an Eligible
Trustee becomes a member of the Board or becomes entitled to
retainers and meeting fees, the election must be made within
thirty (30) days following the date on which the Eligible
Trustee becomes a member of the Board or becomes so entitled.
Such election will apply to all such amounts which would be
paid in cash during such year (and following such election) if
no such election had been made.
5. Cash Accounts; Share Unit Accounts
The Treasurer shall maintain for each Eligible Trustee two Accounts: a
Share Unit Account representing that portion, if any, of the amounts credited to
the Eligible Trustee hereunder that are denominated in Share Units, and a Cash
Account for all remaining amounts, if any, credited hereunder to the Eligible
Trustee. A "Share Unit" for purposes of the plan is a book-keeping unit
representing one share of the common stock, $1.00 par value, of Eastern ("Common
Stock").
6. Crediting of Elective Deferrals
a. Each Eligible Trustee who for any calendar year elects a
deferral under
paragraph 4 shall, on the form referred to therein, make an
irrevocable election to credit each such deferred payment to
his or her Cash Account or Share Unit Account or to both on
the basis of a percentage allocation specified in such
election. Amounts shall be credited to the Eligible Trustee's
Accounts as of the date they would have been paid absent the
deferral (the "crediting date").
b. If an Eligible Trustee has a balance in his or her Cash
Account, then an
additional amount in the nature of interest 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, equal to the prime rate, plus one percent, of
interest charged by BankBoston, N.A. as of the first day of
such year or upon a rate based on such other indices as the
Treasurer 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.
c. If an Eligible Trustee elects to have all or a portion of any
deferral under paragraph 4 credited to his or her Share Unit
Account, the number of whole and fractional Share Units
credited with respect to such deferral or portion thereof
shall be the quotient obtained by dividing the amount of such
deferral or portion thereof by the Fair Market Value of a
share of Common Stock on the crediting date with respect to
such deferral or portion thereof.
<PAGE>
d. Commencing six months and one day following the date on which an
Eligible Trustee ceases to be a member of the Board, such
former Eligible Trustee, to the extent of the remaining
balance (if any) in his or her Account, may elect in writing
to make annual transfers from the Cash Account to the 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 a transfer from a Cash Account to a Share Unit
Account, the Cash Account shall be reduced by the amount of
the transfer and the Share Unit Account shall be credited with
additional whole or fractional Share Units equal to the
quotient obtained by dividing the amount of the transfer by
the Fair Market Value of a share of Common Stock on the date
of transfer. In the event of a transfer from a Share Unit
Account to a Cash Account, the Share Unit Account shall be
reduced by the number of Share Units transferred and the Cash
Account shall be credited with an amount equal to the product
of the number of Share Units transferred multiplied by the
Fair Market Value of a share of Common Stock on the date of
transfer.
7. Additional Annual Share Unit Credits. As of the date this amended and
restated Plan is approved by the Board and thereafter as of the first
day of each calendar quarter beginning with July 1, 1998 and ending
with January 1, 2002 (each, a "paragraph 7 crediting date"), each
individual who is an Eligible Trustee on such paragraph 7 crediting
date shall have credited to his or her Share Unit Account 150 Share
Units. The credit described in the preceding sentence shall be
appropriately adjusted in the event of an occurrence described in
paragraph 8.c. below. In the case of an individual who first becomes an
Eligible Trustee after the date this amended and restated Plan is
approved by the Board and before April 1, 2002, the first paragraph 7
crediting date for such individual shall be the date he or she first
becomes an Eligible Trustee and the credit made to such Eligible
Trustee's Share Unit Account as of such date shall be 150 Share Units
(adjusted as appropriate to reflect any occurrence described in
paragraph 8.c. below).
8. Certain General Provisions Applicable To Share Unit Accounts.
a. 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 date
(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.
<PAGE>
b. 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 whole and fractional Share Units equal to the
quotient obtained 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.
c. The number of Share Units in each Share Unit Account shall be
appropriately adjusted by the Treasurer 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.
9. Payment of Amounts Deferred
a. Amounts in an Eligible Trustee's Cash Account and/or Share
Unit Account will be paid in cash only, in either of the
following ways as elected by the Eligible Trustee:
(i) in a lump sum on the first business day in January of
the year following the year in which the Eligible
Trustee ceases to be a member of the Board; or
(ii) in a number of consecutive annual installments (the
number of such installments, not to exceed ten, to
be elected by the Eligible Trustee) beginning in the
calendar year following the calendar year in which
the Eligible Trustee ceases to be a member of the
Board, the installment in each year to be paid on
the first business day of January in such year and
each installment to equal to the quotient obtained
by dividing (x) the total amount remaining 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 Eligible Trustee that remain unpaid
(including the installment to be paid on such date).
An Eligible Trustee shall elect the form of payment at the
time of his or her first deferral election under paragraph 4;
provided, that if an individual who is an Eligible Trustee on
the date this amended and restated Plan is approved by the
Board has not previously elected any deferral under paragraph
4, he or she shall make the election described in this
paragraph within thirty (30) days from and after the date of
such approval; and further provided, that in the case of an
<PAGE>
individual who first becomes an Eligible Trustee after the
date this amended and restated Plan is approved by the Board
and before April 1, 2002, such election shall be made within
thirty (30) days of becoming an Eligible Trustee. Any election
under this paragraph 9.a that is not made in connection with
an Eligible Trustee's first deferral election under paragraph
4 shall be made in writing on a form acceptable to the
Treasurer and filed with the Treasurer within the time limits
described in the preceding sentence. In the absence of an
effective election under this paragraph 9.a., an Eligible
Trustee shall be deemed to have elected the lump sum payment
described at (i) above. Except as provided in paragraph 9.b
below, once filed with the Treasurer, an Eligible Trustee's
election under this paragraph 9.a. as to the method by which
amounts credited to his or her Accounts will be paid to him or
her will be irrevocable.
b. If an Eligible Trustee or former Eligible Trustee, or any
beneficiary of an Eligible Trustee after the Eligible
Trustee's death, incurs a severe financial hardship, the
Treasurer, in his or her sole discretion, may accelerate
payment from the Eligible Trustee's Cash Account, if any, to
the extent reasonably necessary to alleviate the severe
financial hardship. No revision shall be made with respect
to the schedule for payments from the Eligible Trustee's or
former Eligible Trustee'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. If payment of any portion of an
Eligible Trustee's Cash Account is accelerated pursuant to
this paragraph 9.b., the remainder of such Account shall be
paid in accordance with the Eligible Trustee's election or
deemed election under paragraph 9.a.
c. If at the time of death of an Eligible Trustee or former
Eligible Trustee there is any balance remaining in his or her
Cash Account and/or Share Unit Account, Eastern will pay such
balance in cash to the beneficiary or beneficiaries
designated by the Eligible Trustee on a form satisfactory to
the Treasurer. At the Eligible Trustee's election, such
payment will be made either in a lump sum on the first
business day of January of the year following the year of the
Eligible Trustee's death or in a number of consecutive annual
installments (as elected by the Eligible Trustee but not to
exceed 10) beginning in the calendar year following the year
of the Eligible Trustee'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 9.a.(ii) above. The Eligible Trustee
may at any time change his or her designation of a
beneficiary or beneficiaries and the schedule for payments
to such
<PAGE>
beneficiary or beneficiaries with respect to amounts in his
or her Cash Account by filing an additional form with the
Treasurer. The Eligible Trustee 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 Eligible
Trustee'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 (or, if later, the election
date specified in paragraph 9 above), and shall be
irrevocable
thereafter until six months and one day following the date on
which such Eligible Trustee ceases to be a member of the
Board, after which time such former Eligible Trustee may at
any time change the schedule for payments to such beneficiary
or beneficiaries with respect to amounts, if any, remaining
in his or her Share Unit Account.
d. On the date of any payment from a Share Unit Account pursuant
to paragraph 9.a., 9.b. or 9.c. above, 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. Eligible Trustees, former Eligible
Trustees 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 9.a., 9.b. or 9.c. is to be made from both an
Eligible Trustee's or former Eligible Trustee'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, as determined by the Treasurer.
10. 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.
11. Rights of Eligible Trustees and Other Persons
Any rights accruing to any Eligible Trustee 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 Eligible Trustee or
person and will not be subject to be taken by creditors of such Eligible Trustee
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.
Notwithstanding the foregoing, Eastern in its sole discretion may
establish a so-called "rabbi" trust or similar trust, whether or not conforming
to Rev. Proc. 92-64, or may avail itself of any such trust which it has
previously established, to provide for the payment of benefits hereunder,
subject to such terms as the Board may determine (a "trust"). In the event
Eastern establishes a trust in respect of the Plan or causes a pre-existing
<PAGE>
trust to cover 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 trust cash
sufficient to cause the trust to be "fully funded" as of the date of the
deposit. For purposes of this subparagraph, any such 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 (1) the aggregate of the balances,
determined as of such date, of all Cash Accounts and Share Unit Accounts
hereunder, plus (2) the aggregate of the account balances, determined as of such
date, under all other individual-account type plans and arrangements provided
for through the trust, plus (3) the aggregate of the benefits then in pay status
or otherwise payable under all other plans and arrangements provided for through
the trust, as determined in accordance with the rules set forth in such plans
and arrangements (or, with respect to any such plan or arrangement where no such
rules are set forth, the aggregate of the present value of all accrued benefits
under such plan or arrangement, determined by applying the interest and
mortality assumptions used in determining lump sum present values under the
qualified defined benefit pension plan maintained by Eastern, or if no such
qualified plan is then maintained by Eastern, by applying the assumptions used
prior to the Change of Control in determining Eastern's pension expense under
FAS 87 or any successor pronouncement with respect to such plan or arrangement).
For purposes of this subparagraph, a Change of Control will be deemed to have
occurred if (i) after January 1, 1988 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 or
of the board of trustees or directors of any successor to Eastern by merger,
consolidation or sale of assets.
12. Modification and Termination of the Plan
The Plan may be amended or terminated by the Board at any time, in
whole or in part, such amendment or termination to become effective on the date
specified by the Board.
13. Miscellaneous
The Plan was originally effective as of April 1, 1980 and was amended
and restated to incorporate certain additional Share Unit provisions (see
paragraph 7 above and passim) effective as of April 22, 1998. Certain provisions
applicable to individuals who participated in the Plan prior to April 22, 1998
are set forth in the Plan as in effect prior to this April 22, 1998 amendment
and restatement.
- -----------------------------------------------------
As amended and restated by the Board of Trustees April 22, 1998
<PAGE>
Exhibit 10.9.3
--------------
EASTERN ENTERPRISES
Amendment of Trust Agreement
Instrument of amendment dated February 25, 1998 by and between Eastern
Enterprises ("Eastern") and Key Trust Company of Ohio, N.A. (the "Trustee"):
WHEREAS Eastern and the Trustee are parties to a trust agreement
originally dated January 29, 1987 and subsequently amended, including to
substitute the current Trustee as trustee of the trust established under such
agreement (as heretofore amended, the "Trust Agreement"); and
WHEREAS Eastern wishes to amend the Trust Agreement to provide for the
payment of benefits under a recently established Supplemental Retirement Plan
for Certain Officers; and
WHEREAS Eastern has reserved the right to make such amendment under
Section 10(a) of the Trust Agreement;
NOW, THEREFORE, in consideration of these premises, the Trust Agreement
is hereby amended as follows, effective as of the date set forth above:
1. The first "WHEREAS" clause is amended by deleting the words "and the
1994 Deferred Compensation Plan" and replacing them with the words "the 1994
Deferred Compensation Plan, and the Supplemental Retirement Plan for Certain
Officers".
2. Section 1(b) is amended by deleting the words "or the 1994 Deferred
Compensation Plan" and replacing them with the words "the 1994 Deferred
Compensation Plan, the Supplemental Retirement Plan for Certain Officers".
3. Section 1(e) is amended by deleting the words "and the 1994 Deferred
Compensation Plan)" and replacing them with the words "the 1994 Deferred
Compensation Plan, and the Supplemental Retirement Plan for Certain Officers)".
4. Section 2 (a) is amended by adding the words "or in the
Supplemental Retirement Plan for Certain Officers" immediately after the word
"SERP" and
<PAGE>
Page 2
immediately before the portion of such subsection that begins: "; and further
provided, that no such modification . . . ".
IN WITNESS WHEREOF, Eastern Enterprises and the Trustee have caused
this instrument of amendment to be executed by their duly authorized officers as
of the date set forth above.
EASTERN ENTERPRISES
By: /s/ EASTERN ENTERPRISES
------------------------
KEY TRUST COMPANY OF OHIO, N.A.
By: /S/KEY TRUST COMPANY OF OHIO, N.A.
--------------------------------------
<PAGE>
Exhibit 10.15.1
---------------
February 25, 1998
J. Atwood Ives
17 West Cedar Street
Boston, MA 02108
Re: Eastern Enterprises Supplemental Executive Retirement Plan
Dear Woody:
By letter agreement dated April 28, 1994, you and Eastern Enterprises agreed
that certain amendments being made at that time to the Eastern Enterprises
Supplemental Executive Retirement Plan (the "SERP") would not apply with respect
to benefits that may become payable to you or your spouse under such Plan.
Pursuant to authorization of Eastern's Board of Trustees on February 25, 1998,
that letter agreement may now be rescinded so that the limitations contained
therein shall no longer apply with respect to benefits payable to you or your
spouse under the SERP. Accordingly, by this letter, you and Eastern Enterprises
hereby agree to rescind the letter agreement dated April 28, 1994, as stated
above.
Please indicate your agreement by signing in the space provided below and
returning one copy of this letter agreement to the undersigned.
Sincerely,
/S/ WALTER J. FLAHERTY
Walter J. Flaherty
AGREED:
/S/J.ATWOOD IVES
- -------------------
J. Atwood Ives
<PAGE>
February 25, 1998
Richard R. Clayton
P.O. Box 2364
1 Quail Run
Acton, MA 01720-6364
Re: Eastern Enterprises Supplemental Executive Retirement Plan
Dear Dick:
By letter agreement dated April 28, 1994, you and Eastern Enterprises agreed
that certain amendments being made at that time to the Eastern Enterprises
Supplemental Executive Retirement Plan (the "SERP") would not apply with respect
to benefits that may become payable to you or your spouse under such Plan.
Pursuant to authorization of Eastern's Board of Trustees on February 25, 1998,
that letter agreement may now be rescinded so that the limitations contained
therein shall no longer apply with respect to benefits payable to you or your
spouse under the SERP. Accordingly, by this letter, you and Eastern Enterprises
hereby agree to rescind the letter agreement dated April 28, 1994, as stated
above.
Please indicate your agreement by signing in the space provided below and
returning one copy of this letter agreement to the undersigned.
Sincerely,
/s/ WALTER J. FLAHERTY
Walter J. Flaherty
AGREED:
/S/ RICHARD R. CLAYTON
- ----------------------
Richard R. Clayton
<PAGE>
Exhibit 10.21.1
---------------
EASTERN ENTERPRISES
1996 Non-Employee Trustees' Stock Option Plan
Amendment
Pursuant to Section 9(d) of the Eastern Enterprises 1996 Non-Employee Trustees'
Stock Option Plan (the "Plan"), the Plan is hereby amended, as follows:
1. The Section referred to in the second sentence of Section 2
of the Plan is changed
from "Section 10(d)" to "Section 9(d)".
2. The number of shares of Stock referred to in the first
sentence of Section 6(a) of
the Plan is increased from 1,100 to 1,500.
3. The number of shares of Stock referred to in the second
sentence of Section 6(a)
of the Plan is increased from 550 to 750.
4. All other provisions of the Plan shall remain unchanged.
5. This Amendment is effective as of April 22, 1998.
- ----------------------
As Approved by the Board of Trustees on April 22, 1998
<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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 122,791
<SECURITIES> 0
<RECEIVABLES> 170,882
<ALLOWANCES> 17,713
<INVENTORY> 36,005
<CURRENT-ASSETS> 384,314
<PP&E> 1,541,168
<DEPRECIATION> 683,468
<TOTAL-ASSETS> 1,373,834
<CURRENT-LIABILITIES> 213,740
<BONDS> 292,787
<COMMON> 20,443
29,335
0
<OTHER-SE> 449,586
<TOTAL-LIABILITY-AND-EQUITY> 1,373,834
<SALES> 280,261
<TOTAL-REVENUES> 342,919
<CGS> 206,072
<TOTAL-COSTS> 258,575
<OTHER-EXPENSES> 19,315
<LOSS-PROVISION> 6,713
<INTEREST-EXPENSE> 8,532
<INCOME-PRETAX> 49,784
<INCOME-TAX> 18,861
<INCOME-CONTINUING> 30,923
<DISCONTINUED> 0
<EXTRAORDINARY> (1,465)
<CHANGES> 0
<NET-INCOME> 29,458
<EPS-PRIMARY> 1.44<F1>
<EPS-DILUTED> 1.43<F2>
<FN>
<F1> EPS - Primary is EPS Basic per SFAS 128
<F2> EPS - Fully Diluted is EPS - Diluted per SFAS 128
</FN>
</TABLE>
