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 September 30, 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 for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filling requirements for the past 90 days.
Yes X No
At September 30, 1995, the Registrant had issued and outstanding 2,115,235
shares of Common Stock, par value $2.50.
THE BERKSHIRE GAS COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS - Unaudited
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
Three Months Three Months
Ended 9/30/95 Ended 9/30/94
<S> <C> <C>
Operating Revenues $4,153 $4,832
Cost of Gas Sold 1,719 2,382
------ ------
Operating Margin 2,434 2,450
------ ------
Other Operating Expenses 2,282 2,612
Depreciation 335 310
------ ------
Total 2,617 2,922
------ ------
Utility Operating Loss (183) (472)
Other Income - Net 316 348
------ ------
Operating Loss and Other Income 133 (124)
Interest Expense 867 922
Other Taxes 191 212
------ ------
Pre-Tax Loss (925) (1,258)
Income Tax Benefit (351) (492)
------ ------
NET LOSS (574) (766)
Retained Earnings at Beginning
of Period 6,718 7,098
------ ------
Total 6,144 6,332
------ ------
Dividends Declared:
Preferred Stock 173 174
Common Stock 582 488
------ ------
Total Dividends 755 662
------ ------
Retained Earnings at End
of Period $5,389 $5,670
====== ======
Loss Attributable to Common Stock ($ 747) ($ 940)
====== ======
Average Shares of Common Stock
Outstanding 2,113,714 1,774,944
--------- ---------
Loss Per Share of Common Stock ($0.35) ($0.53)
====== ======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS - Unaudited
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
Twelve Months Twelve Months
Ended 9/30/95 Ended 9/30/94
<S> <C> <C>
Operating Revenues $47,256 $53,320
Cost of Gas Sold 24,158 28,048
------- -------
Operating Margin 23,098 25,272
------- -------
Other Operating Expenses 11,259 13,006
Depreciation 3,649 3,404
------- -------
Total 14,908 16,410
------- -------
Utility Operating Income 8,190 8,862
Other Income - Net 1,484 2,454
------- -------
Operating and Other Income 9,674 11,316
Interest Expense 3,613 3,598
Other Taxes 1,676 1,641
------- -------
Pre-Tax Income 4,385 6,077
Income Taxes 1,665 2,418
------- -------
NET INCOME 2,720 3,659
Retained Earnings at Beginning
of Period 5,670 4,250
Adjustment to Retained Earnings 0 390
------- -------
Total 8,390 8,299
------- -------
Dividends Declared:
Preferred Stock 693 708
Common Stock 2,308 1,921
------- -------
Total Dividends 3,001 2,629
------- -------
Retained Earnings at End
of Period $ 5,389 $ 5,670
======= =======
Earnings Available for Common Stock $ 2,027 $ 2,951
------- -------
Average Shares of Common Stock
Outstanding 2,069,398 1,760,354
--------- ---------
Earnings Per Share of Common Stock $0.98 $1.68
===== =====
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Utility Plant:
Utility Plant - at original cost $92,983 $91,863
Less: Accumulated Depreciation 22,685 22,537
------- -------
Utility Plant - Net 70,298 69,326
------- -------
Other Property:
Other Property - at original cost 10,891 10,766
Less: Accumulated Depreciation 4,938 4,804
------- -------
Other Property - Net 5,953 5,962
------- -------
Current Assets:
Cash and Cash Equivalents 109 492
Accounts Receivable
Utility Service (less allowance: 4,149 6,103
Sept. 1995-$901; June 1995-$832)
Merchandise & Other (less allowance: 421 509
Sept. 1995-$133; June 1995-$119)
Other Receivables 204 234
Inventories (at the lower of average
cost or market):
Natural Gas 2,624 1,702
Liquefied Petroleum 226 250
Materials and Supplies 1,373 1,284
Prepayments 410 178
------- -------
Total Current Assets 9,516 10,752
------- -------
Deferred Debits:
Unamortized Debt Expense 567 578
Capital Stock Expense 600 638
Environmental Cleanup Costs 1,088 1,046
Other 1,006 787
------- -------
Total Deferred Debits 3,261 3,049
------- -------
Recoverable Environmental Cleanup 2,894 2,894
------- -------
Costs
TOTAL ASSETS $91,922 $91,983
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
LIABILITIES AND OTHER CREDITS
Common Shareholders' Equity:
Common Stock $ 5,288 $ 5,259
Premium on Common Stock 15,851 15,711
Retained Earnings 5,389 6,718
------- -------
Total Common Shareholders' Equity 26,528 27,688
------- -------
Redeemable Cumulative Preferred Stock 8,406 8,448
------- -------
Long-Term Debt (less current maturities) 30,983 30,983
------- -------
Current Liabilities:
Notes Payable to Banks 3,920 0
Current Maturities of Long-Term Debt 900 900
Accounts Payable 2,684 3,091
Taxes Accrued (862) 125
Other Current Liabilities 5,317 5,518
Refundable Gas Costs 2,445 4,117
------- -------
Total Current Liabilities 14,404 13,751
------- -------
Unamortized Investment Tax Credit 1,336 1,355
------- -------
Deferred Income Taxes 7,371 6,864
------- -------
Reserve for Recoverable Environmental
Cleanup Costs 2,894 2,894
------- -------
TOTAL LIABILITIES AND OTHER CREDITS $91,922 $91,983
======= =======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
THE BERKSHIRE GAS COMPANY
STATEMENT OF CASH FLOWS - Unaudited
(In Thousands)
<TABLE>
<CAPTION>
Three Months Three Months
Ended 9/30/95 Ended 9/30/94
<S> <C> <C>
Cash flows from Operating Activities:
Net Loss ($ 574) ($ 766)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 568 515
Provision for Losses on Accounts Receivable 80 65
Refundable Gas Costs (1,672) (1,812)
Deferred Income Taxes 507 656
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable 1,962 2,949
Other Receivables 30 96
Inventories (987) (952)
Accounts Payable (407) (425)
Taxes Accrued (987) (1,470)
Other (695) (813)
------ ------
Total Adjustments (1,601) (1,191)
------ ------
Net Cash Used in Operating Activities (2,175) (1,957)
------ ------
Cash Flows from Investing Activities:
Construction Expenditures (1,500) (1,384)
------ ------
Net Cash Used in Investing Activities (1,500) (1,384)
------ ------
Cash Flows from Financing Activities:
Dividends Paid (755) (662)
Proceeds from Note Payable Borrowings 3,920 3,890
Proceeds from Other Stock Transactions - Net 127 106
------ ------
Net Cash Provided by Financing Activities 3,292 3,334
------ ------
Net Decrease in Cash (383) (7)
Cash and Cash Equivalents at Beginning
of Period 492 65
------ ------
Cash and Cash Equivalents at End of Period $ 109 $ 58
====== ======
</TABLE>
See Independent Accountants' Review Report and Notes to Financial Statements.
The Berkshire Gas Company
Notes to Financial Statements
September 30, 1995
(Dollars in Thousands Except Share Amounts)
NOTES:
OTHER FINANCIAL INFORMATION:
The accompanying unaudited financial statements have been
prepared in accordance 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 necessarily 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, 1995.
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 effect.
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 September 30, 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 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 continuing. 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 2010 the level of
expenditures for the site will range from $2,894 to $8,777. The anticipated
level of expenditures has remained the same from prior year estimates
resulting from the Company's analysis and review of the sites and the
commencement of clean-up activities at the first site. The Company has
recorded the most likely cost of $2,894 in accordance with 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
September 30, 1995 were $1,088 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. 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 - First Quarter Ended September 30, 1995 versus First
Quarter Ended September 30, 1994
Since income is not significantly affected by changes in revenue due
to changes in gas costs, the discussion below pertains to Operating
Margin(Operating Margin or Gross Profit = Operating Revenues Net of Cost of
Gas Sold). Berkshire Gas Company considers Operating Margin to be a more
pertinent measure of operating results than Operating Revenues.
Operating Margin decreased $16,000 or .6% from the three months ended
September 30, 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 decrease from 1994 is primarily due to
slightly lower firm transportation volumes sold to industrial customers.
<TABLE>
<CAPTION>
1995 1994
<C> <C> <C>
3 Month Firm MCF Sold & Transported 700,769 751,868
3 Month Operating Margin 2,434,000 2,450,000
3 Month Average Operating Margin
Per Firm MCF $3.47 $3.26
</TABLE>
Other Operating Expenses decreased $330,000 or 12.6% from the three
months ended September 30, 1994. The decrease is due primarily to a
reduction in Administrative and General costs of $79,000 due to cost
containment measures, lower Transmission and Distribution costs of $165,000
or 18.9% due to decreased payroll and increased operating efficiencies, and
lower ECS ("Energy Conservation Service") expenses.
The Income Tax benefit was reduced by $141,000 due to reduction in Net
Loss in 1995.
Dividends Declared on Common Stock increased $94,000 due to additional
shares outstanding from the sale of 295,000 shares during the second quarter
of fiscal 1995, and to a lesser extent, additional shares from the Dividend
Reinvestment Plan ("DRIP").
Results of Operations - Twelve Months Ended September 30, 1995 versus Twelve
Months Ended September 30, 1994
Earnings available for Common Stock were $2,027,000 for the twelve
months ended September 30, 1995 as compared to $2,951,000 for 1994. The
decrease is due primarily to significantly warmer weather during the heating
season, furthermore, 1994 results included proceeds from an insurance
settlement which increased earnings $403,000.
Operating Margin decreased $2,174,000 or 8.6% from the twelve months
ended September 30, 1994. Operating Margin is primarily affected by the
change in the level of firm gas sold and transported.
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 8.4% warmer than
normal temperatures for the winter period, partially offset by higher
volumes of firm transportation to industrial customers.
<TABLE>
<CAPTION>
1995 1994
<C> <C> <C>
12 Month Firm MCF Sold & Transported 5,896,992 6,405,724
12 Month Operating Margin $23,098,000 $25,272,000
12 Month Average Operating Margin
Per Firm MCF $3.92 $3.95
</TABLE>
Other Operating Expenses decreased $1,747,000 or 13.4% from the twelve
months ended September 30, 1994. The decrease reflects lower Customer
Accounts expense of $485,000 due to lower levels of uncollectible accounts;
decreased Administrative and General costs of $756,000 due to lower
insurance, regulatory costs, and employee welfare expense; lower
Transmission and Distribution due to reduced payroll and lower system
maintenance costs; and lower professional fees associated with restructuring
supply contracts brought about by the Federal Energy Regulatory Commission
("FERC") Order 636.
Depreciation expense increased $245,000 due to an increase in the
amount of depreciable assets.
Other Income decreased $970,000 from 1994. The decrease was primarily
due to an insurance settlement that was included in 1994 income in the
amount of $403,000 (net of taxes and amounts previously recorded). Propane
revenue was $113,000 less due to significantly warmer weather during the
heating season. Interest income was $172,000 less resulting from the
overcollection of prior period gas costs through the CGAC.
Income Taxes decreased $753,000 from 1994 due to lower earnings.
Dividends Declared on Common Stock increased $387,000 due to
additional shares outstanding, and to a lesser extent, dividends increased
$.015 per share in 1995. The Company sold 295,000 shares of Common Stock
during the second quarter of fiscal 1995.
Liquidity and Capital Resources - September 30, 1995
The Company added approximately $1,500,000 to Plant assets during the
three months ended September 30, 1995. These construction expenditures
primarily represent investments in new and replacement mains and services.
The capital structure of the Company at September 30,1995 was 40.2%
Common Equity, 12.8% Preferred Stock and 47.0% Long-Term Debt.
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.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No developments during the quarter.
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
Not Applicable
Item 6. Exhibits and Reports on Form 8 - K
(a) List of Exhibits
27 - Financial Data Schedule
The balance sheet as of September 30, 1995, the related statements of
income and retained earnings for the three month periods ended September 30,
1995 and 1994, and the statements of cash flows for the three month period
ended September 30, 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 September 30, 1995, the related statements of income and retained
earnings for the three month periods ended September 30, 1995 and 1994, and
the statements of cash flows for the three month periods ended September 30,
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,
1995, 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 25, 1995, 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, 1995 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Deloitte & Touche LLP
November 8, 1995
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/ Michael J. Marrone
Vice President, Treasurer &
Chief Financial Officer
Dated: November 8, 1995
<TABLE> <S> <C>
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<S> <C>
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