SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995 Commission File No. 0-1857-3
THE BERKSHIRE GAS COMPANY
Massachusetts 04-1731220
115 Cheshire Road, Pittsfield, Massachusetts 01201-1388
Registrant's telephone number, including Area Code 413:442-1511
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 of 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 ] N [ ]
At March 31, 1995, the Registrant had issued and outstanding 2,091,304 shares
of Common Stock, par value $2.50.
THE BERKSHIRE GAS COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS-Unaudited
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
Three Months Three Months
Ended 3/31/95 Ended 3/31/94
<S> <C> <C>
Operating Revenues $21,615 $25,948
Cost of Gas Sold 11,218 13,823
Operating Margin 10,397 12,125
Other Operating Expenses 3,396 3,972
Depreciation Expense 1,680 1,546
Total 5,076 5,518
Utility Operating Income 5,321 6,607
Other Income - Net 548 683
Operating and Other Income 5,869 7,290
Interest Expense 946 959
Other Taxes 743 679
Pre-Tax Income 4,180 5,652
Income Taxes 1,624 2,145
NET INCOME 2,556 3,507
Retained Earnings at Beginning of Period 5,580 4,606
Total 8,136 8,113
Dividends Declared:
Preferred Stock 174 176
Common Stock 575 474
Total Dividends 749 650
Retained Earnings at End of Period $7,387 $7,463
Income Available for Common Stock $2,382 $3,331
Average Shares of Common Stock Outstanding 2,091,304 1,758,186
Income Per Share of Common Stock $1.14 $1.89
</TABLE>
See Independent Auditors' Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS - Unaudited
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended 3/31/95 Ended 3/31/94
<S> <C> <C>
Operating Revenues $38,533 $43,441
Cost of Gas Sold 19,975 22,959
Operating Margin 18,558 20,482
Other Operating Expenses 8,932 9,453
Depreciation Expense 2,902 2,721
Total 11,834 12,174
Utility Operating Income 6,724 8,308
Other Income - Net 1,399 1,626
Operating and Other Income 8,123 9,934
Interest Expense 2,806 2,667
Other Taxes 1,359 1,252
Pre-Tax Income 3,958 6,015
Income Taxes 1,512 2,246
NET INCOME 2,446 3,769
Retained Earnings at Beginning of Period 7,098 5,658
Total 9,544 9,427
Dividends Declared:
Preferred Stock 521 546
Common Stock 1,636 1,418
Total Dividends 2,157 1,964
Retained Earnings at End of Period $7,387 $7,463
Income Available for Common Stock $1,925 $3,223
Average Shares of Common Stock Outstanding 1,978,316 1,749,093
Income Per Share of Common Stock $0.97 $1.84
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS - Unaudited
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
Twelve Months Twelve Months
Ended 3/31/95 Ended 3/31/94
<S> <C> <C>
Operating Revenues $48,122 $52,250
Cost of Gas Sold 24,901 27,471
Operating Margin 23,221 24,779
Other Operating Expenses 12,388 12,089
Depreciation Expense 3,603 3,428
Total 15,991 15,517
Utility Operating Income 7,230 9,262
Other Income - Net 2,160 1,876
Operating and Other Income 9,390 11,138
Interest Expense 3,628 3,519
Other Taxes 1,734 1,627
Pre-Tax Income 4,028 5,992
Income Taxes 1,678 2,208
NET INCOME 2,350 3,784
Retained Earnings at Beginning of Period 7,463 6,296
Adjustment to Retained Earnings 390 0
Total 10,203 10,080
Dividends Declared:
Preferred Stock 694 731
Common Stock 2,122 1,886
Total Dividends 2,816 2,617
Retained Earnings at End of Period $7,387 $7,463
Income Available for Common Stock $1,656 $3,053
Average Shares of Common Stock Outstanding 1,912,455 1,743,378
Income Per Share of Common Stock $0.87 $1.75
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1994
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Utility Plant:
Utility Plant - at original cost $90,485 $86,098
Less: Accumulated Depreciation 21,994 19,907
Utility Plant - Net 68,491 66,191
Other Property:
Other Property - at original cost 10,664 9,957
Less: Accumulated Depreciation 4,675 4,242
Other Property - Net 5,989 5,715
Current Assets:
Cash 75 65
Accounts Receivable:
Utility Service 10,338 8,133
(less allowance for doubtful accounts:
Mar. 1995-$778; June 1994-$727)
Merchandise & Liquefied Petroleum 818 554
(less allowance for doubtful accounts:
Mar 1995-$107; June 1994-$89)
Other Receivables 74 133
Inventories (at the lower of average
cost or market):
Natural Gas 1,013 2,088
Liquefied Petroleum 247 184
Materials and Supplies 1,222 1,357
Prepayments 31 146
Total Current Assets 13,818 12,660
Deferred Debits:
Unamortized Debt Expense 589 624
Capital Stock Expense 679 340
Environmental Cleanup Costs 1,210 1,030
Other 703 1,537
Total Deferred Debits 3,181 3,531
Recoverable Environmental Cleanup Costs 2,894 2,894
TOTAL ASSETS $94,373 $90,991
LIABILITIES AND OTHER CREDITS
Common Shareholders' Equity:
Common Stock $ 5,228 $ 4,417
Premium on Common Stock 15,565 11,431
Retained Earnings 7,387 7,098
Total Common Shareholders' Equity 28,180 22,946
Redeemable Cumulative Preferred Stock 8,448 8,491
Long-Term Debt (less current maturities) 30,983 31,083
Current Liabilities:
Notes Payable to Banks 0 6,580
Current Maturities of Long-Term Debt 900 900
Accounts Payable 2,679 2,776
Taxes Accrued 3,076 (155)
Other Current Liabilities 5,309 5,261
Recoverable Gas Costs 3,571 502
Total Current Liabilities 15,535 15,864
Unamortized Investment Tax Credit 1,374 1,430
Deferred Income Taxes 6,959 8,283
Reserve for Recoverable Environmental
Cleanup Costs 2,894 2,894
TOTAL LIABILITIES AND OTHER CREDITS $94,373 $90,991
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
STATEMENT OF CASH FLOWS - Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended 3/31/95 Ended 3/31/94
<S> <C> <C>
Cash flows from Operating Activities:
Net Income $2,446 $3,769
Adjustments to Reconcile Net Income/(Loss) to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 3,536 3,235
Provision for Losses on Accounts Receivable 602 1,027
Deferred Gas Costs 3,069 1,553
Deferred Income Taxes (1,324) (1,514)
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable (3,071) (8,351)
Other Receivables 59 (318)
Inventories 1,147 1,549
Accrued Consumer Rebate 1,838 0
Capital Stock Expense (440) 0
Accounts Payable (97) 706
Taxes Accrued 3,231 1,722
Other Assets and Current Liabilities (1,020) 373
Total Adjustments 7,530 (18)
Net Cash Provided by Operating Activities 9,976 3,751
Cash Flows from Investing Activities:
Construction Expenditures (6,031) (3,899)
Net Cash Used in Investing Activities (6,031) (3,899)
Cash Flows from Financing Activities:
Dividends Paid (2,157) (1,964)
Current Maturities of Long-Term Debt 0 (250)
Proceeds on Long-term Debt (100) 5,670
Repayment of Note Payable Borrowings-Net (6,580) (2,671)
Proceeds from Sale of Common Stock 4,449 0
Proceeds from Other Stock Transactions - Net 453 (104)
Net Cash (Used in) Provided by Financing Activities (3,935) 681
Net Increase in Cash 10 533
Cash at Beginning of Period 65 59
Cash at End of Period $ 75 $ 592
</TABLE>
See Independent Accountants' Report and Notes to Financial Statements.
The balance sheet as of March 31,1995, the related statements of income and
retained earnings for the three, nine and twelve month periods ended March
31, 1995 and 1994, and the statements of cash flows for the nine month period
ended March 31, 1995 and 1994 have been reviewed, prior to filing, by the
Registrants independent public accountants, Deloitte & Touche LLP, whose
report covering their review of the financial statements is presented below.
Deloitte &
Touche LLP
City Place Telephone: (203) 280-3000
185 Asylum Street Facsimile: (203) 280-3051
Hartford, Connecticut 06103-3402
INDEPENDENT ACCOUNTANTS' REPORT
The Berkshire Gas Company:
We have reviewed the accompanying balance sheet of The Berkshire Gas Company
as of March 31, 1995, the related statements of income and retained earnings
for the three month, nine month and twelve month periods ended March 31, 1995
and 1994, and the statements of cash flows for the nine month periods ended
March 31, 1995 and 1994. These financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such financial statements for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of The Berkshire Gas Company as of June 30, 1994,
and the related statements of income and retained earnings and of cash flows
for the year then ended (not presented herein); and in our report dated August
16, 1994, we expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the accompanying balance sheet as
of June 30, 1994 is fairly stated, in all material respects, in relation to
the balance sheet from which it has been derived.
Deloitte & Touche LLP
May 9, 1995
The Berkshire Gas Company
Notes to Financial Statements
March 31, 1995
(Dollars in Thousands Except Share Amounts)
NOTES:
OTHER FINANCIAL INFORMATION:
The accompanying unaudited financial statements have been prepared with
the instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All adjustments, which in the opinion of management are
necessary to a fair presentation of the operations for the interim periods
presented, have been made. These adjustments are of a normal recurring
nature. The results of operations for such interim periods are not necessary
indicative of results of operations for a full year. These financial
statements should be read in conjunction with the summary of accounting
policies and notes to financial statements included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1994.
CONTINGENCIES:
ENVIRONMENTAL:
Federal, state and local laws and regulations establishing standards and
requirements for protection of the environment have increased in number and
scope in recent years. The Berkshire Gas Company (the "Company") cannot
predict the future impact of such standards and requirements, which are
subject to change and can have retroactive effects.
During fiscal 1990, the Massachusetts Department of Public Utilities
(MDPU) issued a generic ruling on cost recovery for environmental cleanup with
respect to former gas manufacturing sites. Under the ruling, the Company may
recover annual cleanup costs, excluding carrying costs, over a seven year
period through the Cost of Gas Adjustment Clause (CGAC). This ruling also
provides for the sharing of any proceeds received from insurance carriers
equally between the Company and its ratepayers, and establishes maximum
amounts that can be recovered from customers in any one year.
During the period ended March 31, 1995, the Company continued the
analysis and field review of two parcels of real estate formerly used for gas
manufacturing operations, which had been found to contain coal tar deposits
and other substances associated with by-products of the gas manufacturing
process. The review and assessment process began in 1985 with respect to the
first site which is owned by the Company, and in 1989 with respect to the
second site, which was formerly owned by the Company. With the review and
approval of the Massachusetts Department of Environmental Protection ("MDEP"),
at the first site, the investigative work is near completion and remedial
alternatives are being examined. At the second site, investigative activities
are commencing. It is difficult to predict the potential financial impact of
the sites until first, the nature and risk is fully characterized and second,
the remedial strategies and related technologies are determined. The general
philosophy of the Company is one of source removal and/or reduction coupled
with risk minimization. Assuming successful implementation, it is anticipated
that through 2009 the level of expenditures for the site will range from
$2,894 to $8,777. The Company has recorded the lesser amount of the range
in accordance with the requirements of SFAS No. 5. Ultimate expenditures
cannot be determined until a remedial action plan can be developed and
approved by the MDEP.
The Company's unamortized costs at March 31, 1995 were $1,210 and should
be recovered using the formula discussed above.
TRANSPORTATION PIPELINE:
Claims against the Company have been asserted by a general contractor
and certain subcontractors involved in the construction of a transportation
pipeline for which the Company served as developer, and are in the early
stages of proceedings. Although the Company cannot predict the ultimate
outcome of the claims, which the Company believes are without merit, it
intends to contest the claims vigorously and believes that the outcome will
not have a material adverse impact on the overall financial condition or
results of operations of the Company.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations - Third Quarter Ended March 31, 1995 versus Third
Quarter Ended March 31, 1994
Berkshire Gas Company considers Operating Margin (Operating Margin or
Gross Profit = Operating Revenues Net of Cost of Gas Sold) to be a more
pertinent measure of operating results than operating revenues because income
is not significantly affected by changes in revenue due to similar
fluctuations in gas costs. The Company is regulated to recover from or return
to the customers, any changes in the cost of natural gas.
Operating Margin decreased $1,728,000 or 14.3% as compared with the
quarter ended March 31, 1994. Operating Margin is primarily affected by the
change in the level of firm gas sold and transported. Interruptible gas sold
and transported has no affect on Operating Margin since those margins are
flowed back to the firm customer. The Company's sales are affected by weather
as the majority of its firm customers use natural gas for heating. The
decrease from 1994 is primarily due to lower volumes of firm gas sold due to
18% warmer weather than 1994, partially offset by higher volumes of gas sold
and transported at slightly lower margins from increased firm transportation
volumes to industrial customers.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Firm MCF Sold & Transported 2,470,615 2,833,995
Operating Margin $10,397,000 $12,125,000
Average Operating Margin Per Firm MCF $4.21 $4.28
</TABLE>
Other Operating Expenses decreased $576,000 or 14.5% as compared to the
quarter ended March 31, 1994 due to a lower provision for bad debts, decreased
gas production due to less demand for gas, maintenance costs due to the warmer
weather, and lower employee welfare expense due to fewer medical claims.
Depreciation Expense increased $134,000 or 8.7% due to an increase in
the level of depreciable assets.
Other Income decreased $135,000 or 19.8% primarily due to lower income
from propane operations. Propane is sold primarily as a heating fuel and
volumes were lower due to significantly warmer weather, partially offset by a
6% increase in the number of customers.
Other Taxes increased $64,000 or 9.4% due to higher personal property
valuations and rates.
The decrease in Income Taxes of $521,000 resulted from lower net income.
Dividends Declared on Common Stock increased $101,000 due to additional
shares outstanding. The Company sold 295,000 shares of Common Stock during
the second quarter of fiscal 1995.
Results of Operations - Nine Months Ended March 31, 1995 versus Nine Months
Ended March 31, 1994
Operating Margin decreased $1,924,000 or 9.4% as compared with the nine
months ended March 31, 1994. The decrease from 1994 resulted from 15% warmer
weather causing lower volumes of firm gas sold, partially offset by increased
volumes and margins on transportation revenues to industrial customers.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Firm MCF Sold & Transported 4,659,255 5,021,802
Operating Margin $18,558,000 $20,482,000
Average Operating Margin Per Firm MCF $3.98 $4.08
</TABLE>
Other Operating Expenses decreased $521,000 or 5.5% as compared to the
nine months ended March 31, 1994. Reasons for this decrease are the same as
those discussed for the quarter ended March 31, 1995.
Depreciation Expense increased $181,000 or 6.7% due to an increase in
the level of depreciable assets.
Other Income decreased $227,000 or 14%; Other Taxes increased $107,000
or 8.5%; Dividends Declared on Common Stock increased $218,000; and Income
Taxes decreased $734,000 all for the same reasons as noted in the three month
explanation above.
Interest Expense increased $139,000 or 5.2% due primarily to gas
supplier refunds being returned to the ratepayers through the CGAC, and to a
lesser extent, increased borrowing rate.
Results of Operations - Twelve Months Ended March 31, 1995 versus Twelve
Months Ended March 31, 1994
Operating Margin decreased $1,558,000 or 6.3% over the twelve months
ended March 31, 1995. The decrease from 1994 is primarily due to lower
volumes of firm gas sold due to 13.5% warmer weather than 1994, partially
offset by increased volumes and margins on transportation revenues to
industrial customers.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Firm MCF Sold & Transported 5,975,641 6,203,653
Operating Margin $23,221,000 $24,779,000
Average Operating Margin Per Firm MCF $3.89 $3.99
</TABLE>
Other Operating Expenses increased $299,000 or 2.5% over the twelve
months ended March 31,1994. The increase is primarily due to higher legal
expenses of $197,000, increase costs associated with maintaining customer
records and collections of $151,000, higher expenses for maintenance of mains
and services of $145,000 and higher regulatory costs of $59,000 partially
offset by lower provision for bad debts of $201,000 and lower production costs
of $199,000 due to less costs associated with restructuring supply contracts
brought about by the Federal Energy Regulatory Commission ("FERC") Order 636.
Depreciation Expense increased $175,000 due to an increase in the level
of depreciable assets.
Other Income increased $284,000 or 15.1% over the twelve months ended
March 31, 1994. The increase resulted primarily from the settlement of an
insurance claim relating to a line of business that was discontinued in the
1970's in the amount of $403,000 (net of taxes and amounts previously
recorded); this was partially offset by lower Propane revenue of $315,000
caused by significantly warmer weather.
Interest Expense increased $109,000; Other Taxes increased $107,000;
Dividends Declared on Common Stock increased $236,000, and Income Taxes
decreased $530,000 all for the same reasons as noted in the three month
explanation.
Liquidity and Capital Resources - March 31, 1995
The Company added approximately $6,031,000 to Plant assets during the
nine months ended March 31, 1995. These construction expenditures primarily
represent investments in new and replacement mains and services.
The Company initially finances construction expenditures and other
funding needs primarily with short-term bank borrowings, and to a lesser
extent with the reinvestment of dividends. The Company continually evaluates
its short-term borrowing position and based on prevailing interest rates,
market conditions, etc., makes determinations regarding conversion of short-
term borrowings to long-term debt or equity. As part of this strategy, the
Company sold 295,000 shares of Common Stock during the second quarter of
fiscal 1995, netting proceeds of $4,212,600 to repay short-term obligations.
Funds for environmental clean-up costs are initially financed through
short-term borrowings and all such costs will be recovered over a seven year
period under a ruling issued by the MDPU.
The capital structure of the Company at March 31, 1995 was 41.7% Common
Equity, 12.5% Preferred Stock and 45.8% Long-Term Debt.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8 - K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE BERKSHIRE GAS COMPANY
Registrant
/s/ CHERYL M. CLARK
Cheryl M. Clark
Corporate Clerk
/s/ MICHAEL J. MARRONE
Michael J. Marrone
Vice President, Treasurer & Chief
Financial Officer
Dated: May 12, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
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<PERIOD-END> MAR-31-1995
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<TOTAL-NET-UTILITY-PLANT> 68,491
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