<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-449
FALL RIVER GAS COMPANY
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Massachusetts 04-1298780
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
155 North Main Street, Fall River, Massachusetts 02720
------------------------------------------------ ------------
(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 675-7811
----------------
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
NONE NONE
------------------- ------------------------
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock par value $.83 1/3 per share
-----------------------------------------
(Title of Class)
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 .
--- ---
Indicate by check mark if disclosures of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by references in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant (1,498,367) shares was $23,973,872 as of December 15, 1996 of
$16.00.
Indicate the number of shares outstanding of each of the Registrant's
classes of the latest practicable date.
Class Outstanding at December 15, 1996
----- --------------------------------
Common Stock, $.83 1/3 par value 1,781,299
Documents incorporated by reference:
Definitive Proxy Statement dated December 23, 1996 (Part III)
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FALL RIVER GAS COMPANY
----------------------
1996 FORM 10-K ANNUAL REPORT
----------------------------
Table of Contents
PART I
------
Page
Item 1. Business 3
General 3
Competition 3
Rates and Regulation 8
Seasonal Nature of Business 11
Environmental Matters 12
Gas Supply 12
Item 2. Properties 14
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security Holders 15
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder 18
Matters
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and Analysis of Financial Condition and 20
Results of Operations
Item 8. Financial Statements and Supplementary Data 24-32
Item 9. Disagreements on Accounting and Financial Disclosure 33
PART III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Management Remuneration and Transactions 33
Item 12. Security Ownership of Certain Beneficial Owners and Management 33
Item 13. Certain Relationships and Related Transactions 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports of Form 8-K 35
2
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PART I
------
ITEM 1. Business
- ----------------
General
-------
Fall River Gas Company ("Registrant"), organized as a Massachusetts
corporation on September 25, 1880, is an investor-owned public utility company
that sells, distributes and transports natural gas (mixed with propane and
liquefied natural gas during winter months) at retail through a pipeline
distribution system in the city of Fall River and the towns of Somerset, Swansea
and Westport, all located within the Commonwealth of Massachusetts. The
principal markets served by the Registrant are (1) residential customers using
gas for heating, cooking and or water heating, (2) industrial customers using
gas for processing items such as textile and metal goods, (3) commercial
customers using gas for cooking and heating, and (4) federal and state housing
projects using gas for heating, cooking and water heating. There have been no
significant changes in services rendered, markets served or methods of
distribution since the beginning of fiscal 1996.
The Registrant is engaged in only one line of business, as aforesaid, and
in activities incidental thereto. The Registrant has one wholly-owned
subsidiary, Fall River Gas Appliance Company, Inc., a Massachusetts corporation,
which rents water heaters and conversion burners (primarily for residential use)
in the city and towns in the Registrant's gas service area.
No material expenditures were made during the fiscal year by the Registrant
or its wholly-owned subsidiary for research or development of new products or
services or for the improvement of existing products or services.
3
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Competition
-----------
Historically, the Registrant was not subject to competition from any other
gas public utility or gas marketers, but rather only from electricity, oil,
coal, steam and other fuels for heating, water heating, cooking, air
conditioning and other purposes, including propane used by some residential,
commercial and industrial customers. As described below, however, "gas on gas"
competition does now exist. The principal considerations in the competition
between the Registrant and other suppliers of fuel or energy include price,
equipment operational efficiencies and ease of delivery. In addition, the type
of equipment already installed in the businesses and residences significantly
affects the customer's choice of fuel or energy source.
The price of natural gas currently compares favorably to electricity but is
generally higher than fuel oil. Natural gas is slightly higher priced than oil
for certain commercial and industrial customers. As price is generally
considered the most significant factor affecting competition among the various
energy sources, there is always uncertainty in the continuing competition among
such energy sources, due to variations in price. Equipment operational
efficiencies and ease of delivery gives natural gas advantages over oil and also
makes natural gas comparable to electricity in these respects. Because of
natural gas' environmental advantages, efficiency and security of supply, the
demand for natural gas is expected to continue to increase and, thus, natural
gas will improve its competitive position relative to other fuels. Also,
manufacturing, processing and other equipment requirements are such that the use
of gas rather than another fuel, is virtually a necessity for certain large
consumers. Heating, water heating and other domestic or commercial equipment is
generally designed for a particular energy
4
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source, and especially with respect to heating equipment, the cost of conversion
is a disincentive for individuals and businesses to change their energy source.
Currently, the Registrant estimates that its gas heating saturation in areas in
which it has been in active service is somewhat above 88%.
Over the past several years, some very significant developments have
occurred in the regulation of the natural gas industry, starting in October,
1985 when the Federal Regulatory Commission ("FERC") issued its Order 436 which
allowed for greater competition. These developments culminated in FERC's
issuance of its Order 636 in April, 1992, commonly known as "Order 636", which
(as amended) substantially revised the regulation of interstate pipelines. FERC
stated that such action was necessary because of the significant changes in the
gas industry brought about by the institution of open-access transportation in
1985 (Order No. 436) and the passage by Congress of the Wellhead Decontrol Act
of 1989 which eliminated price controls on wellhead sales. Order 636 was
intended to maximize consumer benefits of decontrol and competition at the
wellhead and establish a nationwide competitive gas market.
Order 636 mandated the unbundling of interstate pipeline sales and
transportation services and required pipelines to provide open-access
transportation on a basis equal in quality for all gas supplies whether
purchased from the pipeline or another seller. Order 636 also required access to
the pipelines' system storage, a capacity release program, changes in pipelines'
rate design, conditions for pregranted abandonment of services, and the recovery
of transition costs incurred by the pipelines. Moreover, Order 636 provided
mechanisms permitting the interstate pipelines' customers, such as the
Registrant, to reduce the level of the firm services that they obtained from
such pipelines, as
5
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well as to "release" any excess capacity on a temporary or permanent basis.
The pipelines serving the Registrant, the affiliated Algonquin Gas
Transmission Company ("Algonquin") and Texas Eastern Transmission Company
("Texas Eastern"), have made the required compliance filings of tariff sheets
and have fully implemented the provisions of Order 636 as required by Order 636.
The primary related issue of the billing by Algonquin and Texas Eastern of
transition costs has been resolved, as discussed in greater detail below. The
Registrant has made appropriate arrangements for supplies to replace the sales
service formerly provided by Algonquin (such replacement supplies are
hereinafter referred to as "Conversion Supplies").
The Registrant is required to obtain the approval of the Massachusetts
Department of Public Utilities ("MDPU") for gas supplies that are to be
purchased over a period in excess of one year, including any Conversion
Supplies. See "Gas Supply" below. Through its arrangements for the Conversion
Supplies, the Registrant has contracted for a "city gate management service",
which includes the provision of transportation, sales and storage services by a
third party. The Registrant expects to maintain reliability and flexibility of
service through this arrangement at a cost very competitive with any other
combination of unbundled services, but with much less administrative risk and
costs than would pertain to alternatives. The bulk of Registrant's Conversion
Supplies are on a multi-year basis from CNG Gas Services, Corp. in quantities
described below. In June 1995, the MDPU approved the Registrant's contract for
such Conversion Supplies. The Registrant also has short-term arrangements in
place for supplemental supplies for the 1996-1997 season. The Registrant is
currently analyzing the proper amount of such supply
6
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for future years. (See also Rates and Regulation below).
Overall, the Registrant's customers should benefit over the long-term from
the industry restructuring. However, during the near term, the Registrant has
been subject to the pass-through of additional costs from Algonquin and Texas
Eastern associated with required rate design revisions and transition costs
incurred in fully implementing Order No. 636. As a direct result of the
implementation of Order 636, the Registrant, like most other local distribution
companies, has incurred transition costs, including the former pipeline company
suppliers' costs of restructuring gas supply contracts, costs of facilities that
were supporting the gas sales function and that are no longer used and useful
for transportation-only services, certain unrecovered gas costs and various
miscellaneous other costs related to restructuring. The Registrant has recovered
such costs on an "as incurred" basis through its rates, as permitted by the
MDPU. See "Rates and Regulation" below. All Algonquin transition costs have been
billed to the Registrant and collected from end-users. In addition, Texas
Eastern transition costs will be incurred on a volumetric basis over the next
seven years. Further, the Registrant will be required to incur additional
regulatory and legal expenses related to the negotiation and filing for approval
of new gas supply contracts from time to time. Additional staffing and
expenditures may be necessary to upgrade the Registrant's gas dispatch center's
computer equipment and software. The Registrant will continue to seek secure
long-term supplies for its customers while taking advantage of a competitive
wellhead gas market whose supply can eventually be moved through a national gas
pipeline system.
At the same time, however, the Registrant notes that the implementation of
Order 636 has increased the potential for competition
7
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in gas procurement, supply and sales. FERC's actions have sought to encourage
competition and natural gas market efficiency through deregulation and
"unbundling" of services at the interstate pipeline level. This unbundling has
changed the historical relationships of the natural gas industry, whereby
producers sold to pipelines, pipelines sold to local distribution companies
("LDCs"), such as the Registrant, and LDCs to end-users. Now LDCs or end-users
may utilize pipeline services for purchases, or simply for the transportation of
gas purchased from third parties.
Consequently, while the Registrant has been subject to competition from
electricity, oil, propane, coal and other fuels, the regulatory changes brought
about by Order 636 have created the potential for competition among existing and
new suppliers or brokers of natural gas ("marketers"). Also, regulatory changes
at the state level, as further described below, in Rates and Regulation, have
led to increased competition in retail sales of natural gas. As a result,
marketers are currently selling natural gas to several large volume end-users to
whom the Registrant historically made sales. Marketers can be expected to seek
to provide an increasing volume of sales services to end-users located within
the Registrant's service territory. As a result, if the Registrant does not
increase its sales to other end-users, then the Registrant would have a smaller
sales base across which it can allocate fixed costs. That in turn could
necessitate further requests for rate relief, thereby affecting the Company's
competitive position. At the current time, however, for all third-party sales
that are occurring in the Registrant's service territory, the Registrant
transports those gas supplies within the Company's service territory and
delivers the supplies to the customers. The level of margins for such
transportation services, is the
8
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same to the Registrant as if it sold the gas supplies to the same end-users.
Similar opportunities may exist for the Registrant to broker gas to new or
existing customers, whether or not located within the Registrant's service
territory.
For all of these reasons, the Registrant believes that competition from
other fuel sources, as well as from natural gas brokers, marketers and other
LDCs, will intensify in the future.
Rates and Regulation
--------------------
The Registrant is subject to the regulatory authority of the MDPU with
respect to various matters, including rates, financings, certain gas supply
contracts and planning and safety matters.
The Registrant's principal sales rate classifications are residential,
commercial and industrial. It also provides transportation service and, from
time to time subject to specific MDPU approval, may provide service under
special contracts. The Registrant's rate structure is based on the cost of
providing service to each class. By order dated October 16, 1996, the MDPU
authorized the Registrant to increase its rates for sales of gas effective
December 1, 1996. The amount of this increase on an annualized basis was
$3,200,000.
On May 17, 1996 the Registrant filed a request with the MDPU to increase
its rates by approximately $5,000,000. That filing also made various changes to
its Commercial and Industrial rates to facilitate the ability of customers on
such rates to choose between purchasing their gas supplies from the Company in a
"bundled" basis or purchasing from third parties and having the Registrant
transport and deliver such supplies. Such unbundling was also designed to make
the Registrant economically indifferent to customers' choice of bundled sales
service and Registrant transport of third-party gas supplies. After hearings the
Registrant
9
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negotiated a settlement (the "Settlement") with all parties to the proceedings,
pursuant to which the Registrant's rates would collect an additional $3,200,000
annually, various changes would be made to terms under which the Registrant
transports customer-owned gas and, that no performace base rate would now be
implemented. Also, the parties agreed that the Registrant would have a study
performed to determine the most cost-effective use of the interstate pipeline
capacity held by the Registrant that had formerly been used for sales to
customers that had migrated from bundled sales service to transportation of gas
supplied by marketers rather than by the Company (the "Capacity Release Study").
On October 16, 1996 the MDPU approved Settlement in its entirety. As a result,
the Registrant will implement the changed rates effective December 1, 1996.
The Registrant's firm rate structure is based on generally seasonal rates,
whereby base rates are higher in the winter (November through April) and lower
in the summer (May through October). In addition to its base rates, the
Registrant has a seasonal cost of gas adjustment rate schedule (the "CGA"),
which provides for the recovery, from firm customers, of all purchased gas
costs. Through the CGA, the Registrant imposes charges, subject to MDPU
approval, that are estimated semi-annually and include credits for gas pipeline
refunds and profit margins applicable to interruptible sales. Actual gas costs
are reconciled annually and any differences is included as an adjustment in the
calculation of the decimals for the two subsequent six-month periods.
Charges under the CGA rate schedule are added to the base rates, and are
designed generally to recover higher costs in the winter and refund lower gas
costs in the summer. See "Seasonal Nature of Business" below.
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The Registrant is collecting FERC Order 636 transition costs from its
customers through the CGA as permitted by the MDPU.
Consistent with state policy, the Registrant has developed proposals for
demand-side management ("DSM"), (e.g., conservation). These proposals have been
approved by the MDPU, including a mechanism for recovery of lost margins
associated with DSM-included reductions in sales and an incentive tied to
documentable energy savings from DSM efforts. After issuing a request for
proposals and obtaining several credible bids, the Registrant entered a
contract, under which a third party is providing the bulk of the services
necessary for the implementation of the Registrant's DSM program. Subject to the
MDPU's review for reasonableness, costs of these programs are also recoverable
through the CGA.
The MDPU and the Massachusetts Energy Facilities Siting Council (now known
as the Massachusetts Energy Facilities Board, or "EFSB") were merged in 1992.
The EFSB is now a division of the MDPU. Periodically, the Registrant is required
to file a long-term forecast of expected demand for its gas service. The
Registrant filed a long-range forecast with the EFSB on June 19, 1992.
Currently, the forecast filing is pending before the MDPU. In connection with
its efforts to arrange for a smaller portion of its long-term gas supply in
addition to the supply from CNG Gas Services Corp. that is described above and
to determine the optimal disposition of interstate pipeline capacity rights
formerly used to serve customers that now buy their supplies from marketers, the
Registrant is currently in the process of updating the long-range forecast filed
with the EFSB in 1992. It plans to file such forecast update upon its
completion.
The regulation of prices, terms and conditions of interstate
11
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pipeline transportation and sales of natural gas is subject to the jurisdiction
of FERC. Although the Registrant is not under the direct jurisdiction of FERC,
the Registrant monitors, and periodically participates in, proceedings before
FERC that affect the Registrant's pipeline gas suppliers or transporters, the
Registrant's operations and other matters pertinent to the Registrant's
business.
The Registrant is also subject to standards prescribed by the Secretary of
Transportation under the Natural Gas Pipeline Safety Act of 1968 with respect to
the design, installation, testing, construction and maintenance of pipeline
facilities. The enforcement of these standards has been delegated to the MDPU,
which has taken an active role in such enforcement, including the application of
civil penalties and the requirement of remedial programs.
Seasonal Nature of Business
---------------------------
The Registrant's business has a distinct seasonal quality to it, resulting
from such a large percentage of its sendout going to serve residential and
commercial heating loads. Operating revenues from the sale of natural gas
reflect the seasonal nature of the business to the extent that such revenues are
affected by temperature variations between the heating and non-heating seasons.
See "Rates and Regulation" above.
Environmental Matters
---------------------
In January 1990 the Registrant notification from the Massachusetts
Department of Environmental Protection ("DEP") that it is one of numerous
"potentially responsible parties" under Massachusetts laws in connection with
two sites in Massachusetts which were the subject of alleged releases of
hazardous materials, including lead, by a company which had purchased scrap
meters from various utilities including the Registrant. The Registrant has
entered into an agreement with a group of
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other potentially responsible parties ("Group") to respond jointly and to share
costs associated with the DEP's investigation. The Group has negotiated an
agreement in principal with the DEP to conduct limited response actions at one
of the sites without admission of liability at an estimated cost of under
$100,000, pursuant to which the Registrant and other Group companies would be
released from any further liability at the site. Remedial actions were commenced
September 5, 1995 and are substantially complete, subject to final DEP approval
of the action taken. The investigation of the second site is in the early stages
and the cost to clean up at the second site and the Registrant's degree of
responsibility has not been determined. The Registrant does not expect its
allocated share of response actions at the first site or of any response actions
which it may take or which may be required at the second site to be significant.
Gas Supply
----------
With the advent of FERC Order 636, which was implemented on June 1, 1993,
the Registrant assumed the full responsibility for aggregating, gathering and
arranging for the transmission of all required long line gas supplies to its
city gate.
Order 636 called for the unbundling of commodity components from the
transportation or capacity components of gas service. Order 636 further called
for the unbundling of storage capacity and pipeline transportation capacity
related to such storage to yield totally separate services.
The Registrant has contracted with CNG Gas Services Corporation ("CNG")-for
required services as follows:
A. Purchase of all long line commodity supplies for city gate delivery.
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B. Purchase of commodity for injection into storage for future city gate
delivery.
C. Gathering and balancing of supply and deliveries in the producing or
production areas.
D. Management of capacity owned by Registrant on Texas Eastern and
Algonquin Gas Transmission systems to facilitate efficient and cost
effective delivery of purchased commodity.
E. Management of Registrant controlled storage field capacity and
transportation per Registrant's directives.
F. Provision for Appalachian back-up commodity deliveries for up to 70%
of long line contractual obligation in the event of curtailment in the
producing area or on Texas Eastern's System.
<TABLE>
G. Contract deliveries provide for the following:
<CAPTION>
Annual
Contract
Contract MDQ Quantity Availability
- -------- --- -------- ------------
<S> <C> <C> <C> <C>
Firm Contract
(F-1, F-4, CD-1) 17,641 5,219,255 365 days
Storage Supplement
to F-1 (Firm)
SS-1 9,114 641,735 365 days (1)
FSS-1 327 19,620 365 days
STB 2,000 180,000 365 days
<FN>
(1) 7,124 of total MDQ available to city gate from 11/16 thru 4/15 as
winter service supplies delivered via Algonquin.
</TABLE>
The remainder of the MDQ is available at the city gate each day of the
year.
All commodity deliveries made under the above contract types are priced at
100% of market index. This type of pricing mechanism assures that the supplies
delivered will be as competitive as is possible
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in today's volatile market.
The Registrant has negotiated into the CNG supply contract a mechanism
whereby alternative market indices may be used in conjunction with the futures
market to fix the price of all or part of the portfolio if the market is such
that additional price security is deemed prudent.
The term of the CNG contract commenced on June 1, 1993 and continues for
six (6) years. The MDPU has approved the CNG contract.
In addition to the supplemental gas supplies described below, the
Registrant has need for a supply of approximately 1,328,000 mmbtu during the
1996-1997 heating season (November through March). To fulfill this portion of
its supply portfolio, the Registrant has obtained bids from several potential
suppliers and has entered a supply contract with a term encompassing that period
with Distrigas of Massachusetts Corporation.
The Registrant has a renewable one-year Firm Liquid Contract with Distrigas
of Massachusetts Corporation for 225,000 MMBTU of liquefied natural gas ("LNG"),
to be delivered by truck to the Registrant's storage tank for use in "peak
shaving" operations which supplement pipeline volummes in peak requirement
situations.
In addition to the LNG peak shaving facilities, the Registrant also
maintains storage and sendout facilities for liquefied propane gas ("LPG") that
provide an additional 88,000 MMBTU of sendout capacity when needed.
ITEM 2. Properties
- ------------------
The Registrant has approximately 635 miles of distribution mains, the major
portion of which are constructed of coated steel, plastic or cast iron. The
Registrant owns and operates vaporizing equipment with an approximate daily
capacity of 14,000 MCF and six LNG
15
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storage tanks with a total capacity of approximately 320,000 gallons. The
Registrant also owns and operates an LNG storage tank with a capacity of 45,000
barrels equivalent to approximately 157,000 MCF of vaporized gas, as well as and
LNG vaporization equipment with a daily vaporization rate of approximately
21,000 MCF. The Registrant has three gate stations receiving gas from the
Algonquin pipeline.
All of the principal properties of the Registrant are owned in fee, subject
to the lien of the mortgage securing the Registrant's First Mortgage Bonds, and
further subject to covenants, restrictions, easements, leases, right-of-way and
other similar minor encumbrances common to properties of comparable size and
character, and none of which, in the opinion of the Registrant's management,
materially interferes with the Registrant's use of its properties for the
conduct of its business. The Registrant's gas mains are primarily located under
public highways and streets. Where they are under private property, the
Registrant has obtained easements or rights-of-way from the record holders of
title. These easements and rights are deemed by the Registrant to be adequate
for the purpose for which they are being used.
ITEM 3. Legal Proceedings
- -------------------------
See Item 1. See Business-Environmental Matters above for a discussion of
potentially material legal proceedings.
ITEM 4. Submission of Matters To A Vote Of Security Holders
- -----------------------------------------------------------
Not applicable.
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Additional Item - Executive Officers of the Registrant
- ------------------------------------------------------
Executive Officers:
Raymond H. Faxon*
-----------------
Age 89, currently Vice Chairman of the Board of Directors and assistant
Treasurer of the Registrant. His current business function is Vice Chairman of
the Board of Directors and Assistant Treasurer. He is the father of Bradford J.
Faxon. Positions held for the past five years are as follows:
1/1/88 - 12/31/93 - Chairman of the Board of Directors and Assistant Treasurer
1/1/94 - to Present - Vice Chairman of the Board of Directors and Assistant
Treasurer
His principal occupation for the past five years has been employment with
the Registrant.
Bradford J. Faxon*
------------------
Age 58, currently chairman of the Board of Directors, President and a
Director of the Registrant. His current business function is Chief Executive
Officer. Positions held with the Registrant for the past five years are as
follows:
12/1/78 to Present - Director
8/1/96 to Present - President
1/1/94 to Present - Chairman of the Board of Directors
He is the son of Raymond H. Faxon. His principal occupation for the past
five years has been employment with the Registrant.
Peter H. Thanas
---------------
Age 52, currently Senior Vice President and Treasurer of the Registrant.
His current business function is Chief Financial and Accounting Officer of the
Registrant. Positions held for the past five
17
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years are as follows:
8/ 1/86 to 9/19/94 - Financial Vice President and Treasurer
9/20/94 to Present - Senior Vice President and Treasurer
His principal occupation for the past five years has been employment with
the Registrant.
John F. Fanning
---------------
Age 50, currently Vice President of Production and Gas Supply. His
current business function is Vice President of Production and Gas Supply of the
Registrant. Positions held with the Registrant for the past five years are as
follows:
7/ 1/87 - 12/31/89 - Manager of Gas Supply
1/ 1/90 - 9/20/93 - Superintendent of Production and Gas Supply
9/21/93 to Present - Vice President of Production and Gas Supply
His principal occupation for the past five years has been employment with
the Registrant.
Wallace E. Fletcher
-------------------
Age 63, currently Comptroller and Assistant Treasurer. His current
business function is Comptroller and Assistant Treasurer of the Registrant.
Positions held with the Registrant for the past five years are as follows:
5/27/92 to Present - Comptroller and Assistant Treasurer
His principal occupation for the past five years has been four years with
the Registrant and one year as a self employed consultant.
All officers are either elected or appointed at the Directors' Meeting
following the annual Stockholders' meeting. Their terms of office are to be for
one year or until their successors have been duly elected or appointed.
*Members of the Executive Committee.
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PART II
-------
<TABLE>
ITEM 5. Market For The Registrant's Common Stock And Related Stock-
<CAPTION>
Holders Matters
--------------------------------------------------------
(a) Common Stock Quotations
(OTC market)
3 Months
Ended 9/30/96 6/30/96 3/31/96 12/31/95 9/30/95 6/30/95 3/31/95 12/31/94
(See Note)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High 18-1/4 21 21-3/4 24 25 25 25-1/2 25-3/4
Low 18 18 20-3/4 21-1/4 24 25 25 25-1/4
</TABLE>
National Quotation Bureau
Because of the infrequency of trading of the Registrant's Common Stock, such
quotations may reflect inter-dealer prices, not actual transaction.
(b) Number of Stockholders at September 30, 1996 is 832.
(c) Dividends:
1996 1995
---- ----
November 15, 1995 - $.24 November 15, 1994 - $.24
February 15, 1996 - .24 February 15, 1995 - .24
May 15, 1996 - .24 May 15, 1995 - .24
August 15, 1996 - .24 August 15, 1995 - .24
Note: Dividends prior to 12/31/93 adjusted to reflect 2 for 1 stock split.
As of September 30, 1996 the Registrant had retained earnings totalling
$10,865,648 of which $7,149,260 was restricted against payment of cash dividends
under the terms of the Registrant's Indenture of Trust.
ITEM 6. Selected Financial Data
- -------------------------------
The following table summarizes certain consolidated financial data and is
qualified in its entirety by the more detailed Consolidated Financial Statements
included herein.
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Selected Financial Data
Fall River Gas Company and Subsidiary
<TABLE>
The following table summarized certain consolidated financial data and is
qualified in its entirety by the more detailed Consolidated Financial Statements
included herein.
<CAPTION>
Twelve Months Nine Months
------------- -----------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Operating Revenues .... $48,965,547 $44,418,114 $48,330,933 $44,818,763 $36,047,493
Operating Expenses
Other than
Income Taxes ............. 46,281,412 41,641,929 44,564,940 40,932,252 33,082,762
Interest Expense .......... 1,707,792 1,460,927 1,101,280 1,242,756 948,168
Net Income ................ 1,425,708 1,616,206 2,491,100 2,352,360 1,819,882
Earnings per
Common Share (Note 2) ... $0.80 $0.91 $1.40 $1.32 $1.02
Cash Dividend per
Common Share (Note 2) ... $0.96 $0.96 $0.98 $0.97 $0.92
Total Assets .............. $53,191,153 $50,956,507 $49,625,842 $46,501,414 $38,263,167
Long-Term Debt
(excluding current
maturities) ............ $13,500,000 $ 6,500,000 $ 7,380,000 $ 7,560,000 $ 7,680,000
Common Stock Quotations (National Quotation Bureau)
(OTC Market)
<CAPTION>
3 Months
Ended
09/30/96 06/30/96 03/31/96 12/31/95 09/30/95 06/30/95 03/31/95 12/31/94
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High ............ 18-1/4 21 21-3/4 24 25 25 25-1/2 25-3/4
Low ............. 18 18 20-3/4 21-1/4 24 25 25 25-1/4
<FN>
NOTE: The Company changes its year end from December 31, to September 30, 1992. The amounts shown in
1992 are as of September 30, 1992 and the none months ended September 30, 1992.
</TABLE>
20
<PAGE> 21
ITEM 7. Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
-------------------------------------------------------------------
This Annual Report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially from those contemplated by such statements. Such statements
reflect management's current views, are based on many assumptions and are
subject to risks and uncertainties.
Certain important factors could cause such results to differ include
government regulation, the highly competitive nature of the markets in which the
Registrant is engaged, and dependence on key personnel and variations in weather
and energy prices. These factors are not intended to represent a complete list
of the general or specific risks that may affect the Registrant.
OVERVIEW
Results of operation are derived from two major classifications, utility
and non-utility. Earnings of the utility are the result of the sale of natural
gas to firm and seasonal customers, as well as the transportation and delivery
of a third party gas to customers on our distribution system. Non-utility
earnings are primarily the result of the rental of water heaters and conversion
burners.
Earnings per share for fiscal 1996 were $0.80 compared with $0.91 per
common share in fiscal 1995 and $1.40 in fiscal 1994. Net income in fiscal 1996
was $1,426,000 compared to $1,616,000 in fiscal 1995 and $2,491,000 in fiscal
1994.
RESULTS OF OPERATION
Fiscal 1996 versus Fiscal 1995
Operating revenues in fiscal 1996 totalled $48,966,000, an increase of 10.2
percent over fiscal 1995. Revenues from sales to firm customers increased 12.8
percent over the prior period as a result of higher gas sales due in large part
to colder weather. Included in the increased revenues was an increase of
$3,675,000 in gas costs recovered by the Company's Cost of Gas Adjustment Clause
(CGAC). All changes in the price of fuel to serve our firm customer requirements
are recovered through the CGAC.
Gas sales to firm customers increased 11.8 percent over fiscal 1995, and
totalled 6,222,000 Mcf. This was primarily the result of colder weather which
was 9.8 percent colder than the prior year.
Cost of gas sold includes costs for gas operation including supplemental
fuels, such as propane, liquefied natural gas (LNG), and storage, which are used
to augment the Company's primary supply of natural gas during periods of peak
usage. The average cost of gas in fiscal 1996 and fiscal 1995 was $4.10 and
$3.88, respectively. The
21
<PAGE> 22
increase in gas costs is primarily due to colder temperatures. Higher priced
supplemental sources were required to serve our customers' needs.
Other operations expenses increased 14.1 percent over fiscal 1995. Wage
increases, escalating health care costs, and inflation were the primary factors
causing this increase.
Taxes, other than Federal income, increased to $807,000 in fiscal 1996, an
increase of 31.3 percent over fiscal 1995. Increased construction over the years
has generated increased property taxes.
Other income totalled $791,000 in fiscal 1996 and $773,000 in fiscal 1995.
Earnings of Fall River Gas Appliance Company, Inc., the Company's wholly-owned
subsidiary, were $779,000 in fiscal 1996 and $753,000 in fiscal 1995, a result
of increased rental revenue.
Interest expense in fiscal 1996 was $1,708,000, an increase of 16.9 percent
over the prior fiscal year. Increased short term borrowing for additions to
property, plant and equipment was primarily responsible for this increase.
Fiscal 1995 versus Fiscal 1994
Fiscal 1995 operating revenues totalled $44,418,000, an 8.1 percent
decrease from fiscal 1994. Revenues from the sales to firm customers decreased
12.1 percent from prior fiscal year as a result of a $4,286,000 reduction in gas
costs recovered and decreased gas sales due to warmer weather. Special contract
sales totalled $1,853,000 in fiscal 1995 and $248,000 in fiscal 1994, offsetting
a portion of the firm gas sales decrease.
The average cost of gas during fiscal 1995 was $4.17 per Mcf compared to
$4.86 the prior fiscal year. The decrease in gas costs was primarily due to
warmer weather.
Operation expenses decreased by 1.9 percent during fiscal 1995. Normal wage
increases and inflation in other areas were offset by decreases in the Company's
uncollectible expenses and the cost of health insurance.
Maintenance expense in fiscal 1995 was $1,994,000, an increase of 11.9
percent over the prior fiscal year. Expenses related to the Company's
distribution system are responsible for this increase.
Other income in fiscal 1995 was $772,000 a decrease of $42,000 from fiscal
1994, a decrease of 5.5 percent.
Interest expense in fiscal 1995 totalled $1,460,000, an increase of 32.7
percent over fiscal 1994. During the year the Company's average daily balance of
short-term borrowing increased from $13,052,000 to $14,586,000, while weighted
average interest rose from 4.3 percent to 6.4 percent.
LIQUIDITY AND CAPITAL RESOURCES
Sales of natural gas are seasonal, generating approximately seventy
22
<PAGE> 23
percent of its annual revenues between November 1 and March 31. Daily cash
requirements are met through internal generation and short-term borrowing under
the Company's line of credit. Long-term financing and equity issues are used to
refinance short-term debt deemed appropriate by management.
During fiscal 1996 the Company received permission from the MDPU to issue
long-term debt securities and on September 20, 1996 the Company issued a thirty
year $7,000,000 First Mortgage Bonds with a 7.99 percent coupon rate. The
proceeds from the issue were used to reduce the Company's short-term debt.
On May 17, 1996 the Company filed with the MDPU a request to increase its
firm rates. After responding to interrogatories and presenting witnesses in
support of the Company's filing, the Company was able to reach a settlement
agreement with all parties. Contained in this settlement was an increase in
revenues of $3,200,000 along with the "unbundling" of its commercial and
industrial tariffs. With unbundled rates our customers can now choose to buy gas
from the Company or purchase its own gas supply from a third party and have it
transported up to and into the Company's distribution system. These new rates
are effective for gas sold on or after December 1, 1996.
Also in fiscal 1996 the Company received approval from the MDPU to
institute a dividend reinvestment plan. Stockholders can now opt to receive
additional shares of the Company's common stock at a 3 percent discount in lieu
of a cash dividend. The cash generated from this plan will be used to reduce the
Company's short-term debt.
During fiscal 1996 gas cost billings were higher than the Company's cost of
gas, thereby having a positive cash flow of approximately $2,600,000. This has
also reduced our deferred gas balance from $2,800,000 in fiscal 1995 to $200,000
in fiscal 1996.
The Company's net cash generated from operating activities in fiscal 1996
was $1,215,000 compared to $5,507,000 and $6,784,000 in fiscal years 1995 and
1994, respectively, Cash from investing activities in the amounts of $4,247,000,
$4,883,000, and $4,303,000 in fiscal years 1996, 1995, and 1994, respectively
were used for capital expenditures.
Capital expenditures are primarily for the expansion and improvements in
the Company's distribution system. As is customary in the utility industry, cash
for construction requirements in excess of internally generated funds are
initially provided through short-term borrowing that is eventually funded with
permanent capital. At September 30, 1996 the Company has $13,200,000 of
available borrowings under its lines of credit.
Information on the sources and uses of cash for the past three fiscal years
is included in the Consolidated Statements of Cash Flow in this report.
23
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Fall River Gas Company:
We have audited the accompanying consolidated balance sheets of FALL RIVER
GAS COMPANY (a Massachusetts corporation) and subsidiary as of September 30,
1996 and 1995 and the related consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
September 30, 1996. These financial statements and the schedule referred to
below are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fall River Gas Company and
subsidiary as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1996, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The financial statement
schedule under part IV, Item 14, presented for purposes of additional analysis
and is not a required part of the basic consolidated financial statements. This
information has been subject to the auditing procedures applied in our audit of
the basic consolidated financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic consolidated
financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 19, 1996
24
<PAGE> 25
CONSOLIDATED STATEMENTS OF INCOME
Fall River Gas Company and Subsidiary
<TABLE>
For the Years Ended September 30, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
GAS OPERATING REVENUES (Note 1) ..................... $48,965,547 $44,418,114 $48,330,933
OPERATING EXPENSES:
Operations -
Cost of gas sold (Note 1) ....................... 31,132,828 28,097,557 31,161,990
Other ........................................... 10,268,772 8,998,223 9,170,829
Maintenance ...................................... 1,987,782 1,994,445 1,781,601
Depreciation (Note 1) ............................ 1,608,641 1,498,948 1,391,981
Taxes -
Local property and other ...................... 1,283,389 1,052,756 1,058,539
Federal and state income (Note 4) ............. 341,432 471,421 988,466
----------- ----------- -----------
46,622,844 42,113,350 45,553,406
----------- ----------- -----------
OPERATING INCOME .................................... 2,342,703 2,304,764 2,777,527
OTHER INCOME (EXPENSE):
Earnings of Fall River Gas Appliance Company Inc.
(Note 3) ...................................... 778,813 752,913 799,326
Interest income .................................. 14,489 15,059 15,944
Other ............................................ (2,505) 4,397 (417)
----------- ----------- -----------
INCOME BEFORE INTEREST EXPENSE ...................... 3,133,500 3,077,133 3,592,380
----------- ----------- -----------
INTEREST EXPENSE:
Long-term debt ................................ 683,387 697,600 711,163
Other ......................................... 1,024,405 763,327 390,117
----------- ----------- -----------
1,707,792 1,460,927 1,101,280
----------- ----------- -----------
NET INCOME .......................................... $ 1,425,708 $ 1,616,206 $ 2,491,100
=========== =========== ===========
NUMBER OF COMMON SHARES OUTSTANDING
(Note 2) ........................................... 1,780,542 1,780,542 1,780,542
=========== =========== ===========
EARNINGS PER SHARE (Note 2) ......................... $0.80 $0.91 $1.40
===== ===== =====
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended September 30, 1996,1995, and 1994
1996 1995 1994
BALANCE AT BEGINNING OF YEAR ........................ $11,149,260 $11,242,375 $10,496,206
Net Income .......................................... 1,425,708 1,616,206 2,491,100
----------- ----------- -----------
Total ......................................... 12,574,968 12,858,581 12,987,306
Dividends declared .................................. 1,709,320 1,709,321 1,744,931
----------- ----------- -----------
BALANCE AT END OF YEAR .............................. $10,865,648 $11,149,260 $11,242,375
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
Fall River Gas Company and Subsidiary
<TABLE>
September 30, 1996 and 1995
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at original cost:
Gas ......................................................... $56,156,164 $52,770,211
Nonutility, principally rented gas appliances ............. 4,911,102 4,852,644
----------- -----------
61,067,266 57,622,855
Less-Accumulated depreciation (Note 1) .................... 19,651,954 18,801,699
----------- -----------
41,415,312 38,821,156
----------- -----------
CURRENT ASSETS:
Cash ...................................................... 393,935 315,309
Accounts receivable, less allowance for doubtful accounts
of $670,000 in 1996 and $687,000 in 1995 ................. 2,676,322 2,159,170
Inventories, at average cost -
Liquefied natural gas, propane, and natural gas in storage 3,242,688 2,754,655
Materials and supplies ................................... 1,387,077 1,386,242
Deferred gas costs (Note 1) ............................... 201,265 2,808,882
Prepaid and Deferred Taxes ................................ 555,983 0
Prepayments and other ..................................... 630,938 510,001
----------- -----------
9,088,208 9,934,259
----------- -----------
DEFERRED CHARGES:
Regulatory asset (Note 7) ................................. 650,383 527,025
Other ..................................................... 2,037,250 1,674,067
----------- -----------
2,687,633 2,201,092
----------- -----------
$53,191,153 $50,956,507
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statement.
26
<PAGE> 27
<TABLE>
CONSOLIDATED BALANCE SHEETS (Cont.)
Fall River Gas Company and Subsidiary
September 30, 1996 and 1995
<S> <C> <C>
CAPITALIZATION:
Stockholders' investment-
Common stock, par value $.83-1/3 per share, 2,201,334
shares authorized and issued (Note 2) .................... $ 1,834,445 $ 1,834,445
Premium paid-in on common stock ........................... 1,356,043 1,356,043
Retained earnings (Note 5) ................................ 10,865,648 11,149,260
----------- -----------
14,056,136 14,339,748
Less - 420,792 shares in 1996 and 1995 of common stock
held in treasury, at cost (Note 2) ......................... 1,418,743 1,418,743
----------- -----------
12,637,393 12,921,005
Long-term debt, less current sinking fund requirements
(Note 5) ................................................... 13,500,000 6,500,000
----------- -----------
Total capitalization .................................. 26,137,393 19,421,005
----------- -----------
CURRENT LIABILITIES:
Current sinking fund requirements (Note 5) .................. 0 880,000
Notes payable to banks (Note 5) ............................. 14,300,000 15,600,000
Dividends payable ........................................... 427,330 427,330
Accounts payable ............................................ 3,554,624 3,585,300
Gas supplier refunds due customers .......................... 0 1,367,969
Accrued taxes ............................................... 0 838,617
Other ....................................................... 1,732,241 1,993,043
----------- -----------
20,014,195 24,692,259
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
DEFERRED CREDITS:
Accumulated deferred income taxes (Note 4) .................. 4,123,986 3,905,117
Unamortized investment tax credits (Note 4) ................. 567,695 605,653
Other ....................................................... 1,925,224 1,832,385
Regulatory liability (Note 4) ............................... 422,660 500,088
----------- -----------
7,039,565 6,843,243
----------- -----------
$53,191,153 $50,956,507
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Fall River Gas Company and Subsidiary
For the Years Ended September 30, 1996,1995 and 1994
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash Provided by (Used for)
Operating Activities:
Net Income ........................................... $ 1,425,708 $ 1,616,206 $ 2,491,100
Items not requiring (providing) cash:
Depreciation ....................................... 1,807,808 1,695,854 1,587,278
Deferred income taxes .............................. 218,869 274,184 (734,131)
Investment tax credits, net ........................ (37,958) (38,049) (38,445)
Change in working capital .......................... (1,573,387) 2,180,393 2,961,892
Other sources, net ................................. (626,514) (221,380) 515,933
----------- ----------- -----------
Net cash provided by operating activities ......... 1,214,526 5,507,208 6,783,627
----------- ----------- -----------
Investing Activities:
Additions to utility property, plant and equipment ... (3,779,718) (4,294,225) (3,711,116)
Additions to nonutility property ..................... (466,862) (589,172) (591,939)
----------- ----------- -----------
Net cash used for investing activities ............. (4,246,580) (4,883,397) (4,303,055)
----------- ----------- -----------
Financing Activities:
Cash dividends paid on common stock .................. (1,709,320) (1,709,320) (1,736,028)
Retirement of long-term debt through sinking fund .... (880,000) (160,000) (140,000)
Proceeds from 7.99% Debt Issue ....................... 7,000,000 0 0
Increase(decrease) in notes payable to banks, net .... (1,300,000) 1,200,000 (600,000)
----------- ----------- -----------
Net cash provided by (used for) financing activities 3,110,680 (669,320) (2,476,028)
Increase (decrease) in cash ................................ 78,626 (45,509) 4,544
Cash, beginning of year .................................... 315,309 360,818 356,274
----------- ----------- -----------
Cash, end of year .......................................... $ 393,935 $ 315,309 $ 360,818
=========== =========== ===========
Changes in Components of Working Capital (excluding cash):
(Increase) decrease in current assets:
Accounts receivable ................................. $ (517,152) $ 492,836 $ (612,385)
Inventories ......................................... (488,868) (37,438) 800,611
Prepayments and other ............................... (676,920) (72,874) (36,207)
Deferred gas cost ................................... 2,607,617 1,787,937 (5,633)
Increase (decrease) in current liabilities:
Accounts payable .................................... (30,676) 311,467 1,168,353
Gas supplier refunds due customers .................. (1,367,969) 237,366 (390,890)
Accrued taxes ....................................... (838,617) (660,616) 1,499,233
Other ............................................... (260,802) 121,715 538,810
----------- ----------- -----------
Change in Working Capital .......................... $(1,573,387) $ 2,180,393 $ 2,961,892
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest ............................................ $ 1,743,878 $ 1,695,329 $ 1,632,681
Income taxes ........................................ 2,111,259 813,052 1,513,114
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fall River Gas Company and Subsidiary
September 30, 1996
1) ACCOUNTING POLICIES
Principles of Consolidation
The Consolidated financial statements include the accounts of Fall River
Gas Company and subsidiary (the Company), Fall River Gas Appliance Company, Inc.
The Company's principal business is the operation of a regulated gas
distribution company in southeastern Massachusetts, while its wholly-owned
subsidiary rents gas appliances. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Regulation
The Company's rates, operations, accounting and certain other practices are
subject to the regulatory authority of the Massachusetts Department of Public
Utilities (MDPU).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting, principles requires the Company to make estimates and
assumptions that affect the reporting and disclosure of assets and liabilities,
including those that are of a contingent nature, at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Depreciation
Depreciation of property, plant and equipment is provided using the
straight-line method at rates designed to amortize the cost of these assets over
their estimated useful lives. The composite depreciation rate for gas plant is
3%. Rented gas appliances have estimated useful lives of 10 to 20 years.
Gas Operating Revenues and Cost of Gas Sold
Gas operating revenues are recorded based on meter readings made on a cycle
basis throughout the month. Accordingly, in any period, the actual volume of gas
supplied to customers may be more or less than the usage for which the customers
have been billed.
The Company's approved rate tariffs include a cost of gas adjustment (CGAC)
factor allowing dollar-for-dollar recovery of the cost of gas sendout to firm
customers. Actual costs incurred at the end of any period may differ from
amounts recovered through application of the CGAC. Any excess or deficiency in
amounts billed as compared to costs is deferred and either refunded to, or
recovered from, the customers over a subsequent period.
Fair Value of Financial Instruments
Because of the short maturity of certain assets, which include cash and
temporary cash investments and accounts receivable, and certain liabilities,
which include accounts payable and notes payable to banks, these instruments are
stated at amounts which approximate fair value.
The fair market value of the Company's long-term debt is estimated based on
the quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities. Management
believes the carrying value of the debt approximates its fair value at September
30, 1996.
2) STOCK SPLIT
On September 21, 1993 the stockholders of Fall River Gas Company authorized
a two-for-one common stock split. As a result, one additional share of common
stock was issued on January 14, 1994 and for each share of common stock held on
the close of business on December 31, 1993.
29
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
3) FALL RIVER GAS APPLIANCE COMPANY, INC.
<TABLE>
The earnings of the Fall River Gas Appliance Company, Inc. are shown as
Other Income in the accompanying Consolidated Statements of Income. Condensed
operating information of the Appliance Company for the years ended September 30,
1996, 1995, and 1994 is as follows:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenues ................ $2,941,885 $2,680,609 $2,629,591
Costs and expenses ................ 1,629,693 1,412,244 1,285,120
---------- ---------- ----------
Income before income taxes .... 1,312,192 1,268,365 1,344,471
Income tax expense ................ 533,379 515,452 545,145
---------- ---------- ----------
Net income ................... $ 778,813 $ 752,913 $ 799,326
========== ========== ==========
</TABLE>
4) INCOME TAXES
<TABLE>
The Company and its subsidiary file a consolidated Federal income tax
return. Each company provides Federal income taxes on a separate company basis.
The following is a summary of the provision for Federal and State income taxes:
<CAPTION>
1996 1995 1994
-------------------------------------------------------------------------
Federal State Federal State Federal State
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Current ............................... $535,480 $159,195 $583,815 $167,951 $1,024,154 $260,342
Deferred .............................. 181,356 37,513 227,763 46,421 239,018 47,902
Investment tax credits ................ (37,958) -- (38,049) -- (38,445) --
-------- -------- -------- -------- ---------- --------
Total provision .................. $678,878 $196,708 $773,529 $214,372 $1,224,727 $308,244
======== ======== ======== ======== ========== ========
Provision for income taxes included in:
Operating expenses .................. $277,028 $ 64,404 $384,950 $ 86,471 $ 814,223 $174,243
Other income-
Fall River Gas
Appliance Company .............. 401,207 132,172 387,725 127,727 411,035 134,110
Other ............................... 643 132 854 174 (531) (109)
-------- -------- -------- -------- ---------- --------
Total provision ................. $678,878 $196,708 $773,529 $214,372 $1,224,727 $308,244
======== ======== ======== ======== ========== ========
</TABLE>
On October 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 109, "Accounting for Income Taxes". SFAS 109 requires
adjustments of deferred tax assets and liabilities to reflect the future tax
consequences, at currently enacted tax laws and rates, of items already
reflected in the financial statements. The implementation of SFAS 109 resulted
in the recognition of a regulatory liability of approximately $412,000 for the
tax benefit of unamortized investment tax credits, which SFAS 109 requires to be
treated as a temporary difference. This benefit is being passed on to customers
over the lives of the property giving rise to the investment tax credit. Also, a
regulatory liability of approximately $88,000 was established for the excess
reserves for deferred taxes for pre-July 1987 deferred income taxes that were
recorded in excess of the current Federal statutory income tax rate.
The tax effect of the cumulative differences that gave rise to the deferred
tax liabilities and deferred tax assets for the year ended September 30, 1996
and 1995 are detailed on the following page:
30
<PAGE> 31
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts ........... $ 250,917 $ 267,794
Unamortized investment tax credits ...... 221,401 236,205
Contributions in aid of construction .... 188,611 198,765
Unbilled revenue ........................ 443,497 308,759
Deferred pension ........................ 202,786 202,786
Deferred compensation ................... 235,461 235,461
Regulatory liability .................... 195,035 195,035
Other ................................... 399,738 254,267
---------- ----------
Total Deferred Tax Assets ...................... 2,137,446 1,899,072
Deferred Tax Liabilities:
Property related ........................ 4,964,711 5,044,529
Deferred gas costs ...................... 78,493 1,095,464
Other ................................... 442,460 161,693
---------- ----------
Total Deferred Tax Liabilities ................. 5,485,664 6,301,686
---------- ----------
Net Deferred Tax Liability ..................... $3,348,218 $4,402,614
========== ==========
</TABLE>
The combined Federal and State income tax provision set forth above represents
approximately 38% of income taxes in 1996 and 39% in 1995 and 1994. The combined
statutory rate for Federal and State income tax was approximately 39% in 1996,
1995, and 1994. The difference between the effective income tax rate and
statutory rate results primarily from the amortization of investment tax credits
Investment tax credits are amortized over the life of the property giving rise
to the credits.
5) LONG-TERM DEBT AND NOTES PAYABLE TO BANKS
<TABLE>
Long-term debt consists of:
<CAPTION>
Amounts Outstanding
-------------------
Amounts Sept. 30, Sept. 30,
Authorized 1996 1995
---------- ----------- ----------
<S> <C> <C> <C>
FIRST MORTGAGE BONDS:
8.75% Series, due 1996 ............. 3,200,000 0 880,000
9.44% Series, due 2020 ............. 6,500,000 6,500,000 6,500,000
7.99% Series, due 2026 ............. 7,000,000 7,000,000 0
----------- ----------
13,500,000 7,380,000
Less - Current sinking
fund requirements and maturities .. 0 880,000
----------- ----------
$13,500,000 $6,500,000
=========== ==========
</TABLE>
Under the terms of the Indenture of First Mortgage, as amended, aggregate
indebtedness is limited to an amount not to exceed 65% of the Company's total
Capitalization. In addition, subsequent borrowings are subject to interest
coverage restrictions. There are no aggregate maturities and sinking fund
requirements for the next five years applicable to the issues outstanding at
September 30, 1996. The First Mortgage Bonds are secured by a lien on
substantially all of the Company's gas plant. Under the terms of the Most
restrictive supplemental indenture, retained earnings of $7,149,260 were
restricted against payment of dividends at September 30, 1996.
31
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Cont.)
The Company maintains lines of credit with various banks under which it may
borrow up to $27,500,000. These lines are reviewed periodically by the various
banks and may be renewed or cancelled. The Company pays a commitment fee on the
lines of credit totalling $25,000,000 at rates ranging from 5/16 of 1% to 3/8 of
1%. The balance of the lines are uncommitted and carry no fee. At September 30,
1996, there were $14,300,000 borrowings under these lines of credit.
<TABLE>
The following table summarizes certain information related to the Company's
short-term borrowings for the years ended September 30, 1996, and 1995:
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Average daily balance outstanding for the period ..... $17,900,000 $14,586,000
Weighted average interest rate for the period ........ 6.1% 6.4%
Maximum amount outstanding during the
period based on month-end balances .............. $20,400,000 $17,900,000
Weighted average interest rate at end of period ...... 6.6% 7.5%
</TABLE>
6) EMPLOYEES' PENSION PLANS
The Company has defined benefit plans covering substantially all of its
employees. The benefits under these plans are based on years of service and
employees' compensation levels. The Company's policy is to fund pension costs
accrued including amortization of past service costs.
<TABLE>
The following table sets forth the funding status of the pension plan as of
September 30, 1996 and 1995:
Actuarial present value of benefit obligations:
<CAPTION>
1996 1995
---- ----
Union Salaried Union Salaried
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Vested .................................................. $(5,743,317) $(5,236,341) $(5,119,504) $(4,449,398)
Non vested .............................................. (14,534) (27,096) (9,224) (70,461)
----------- ----------- ----------- -----------
Total accumulated benefit obligation .................... $(5,757,851) $(5,263,437) $(5,128,728) $(4,519,859)
=========== =========== =========== ===========
Projected benefit obligation ............................ $(5,613,894) $(6,159,975) $(5,508,398) $(5,822,854)
Plan assets at fair value .................................... 6,400,940 5,205,804 6,037,834 4,293,447
----------- ----------- ----------- -----------
Projected benefit obligation (in excess)
or less than plan assets ................................... 787,046 (954,171) 529,436 (1,529,407)
Unrecognized net gain ........................................ (1,104,683) (1,118,470) (1,046,210) (804,592)
Unrecognized prior service cost
due to plan amendment ...................................... 0 1,299,360 0 1,417,484
Unrecognized net obligation .................................. 449,424 169,321 524,328 197,540
----------- ----------- ----------- -----------
Prepaid pension cost (pension liability)
recognized on the consolidated balance sheet ............... $ 131,787 $ (603,960) $ 7,554 $ (718,975)
=========== =========== =========== ===========
Net Pension cost included the following components: 1996 1995 1994
---- ---- ----
Service cost ............................................ $ 365,511 $ 375,838 $ 408,466
Interest cost ........................................... 906,500 866,021 837,690
Return on assets ........................................ (1,320,522) (1,287,810) (56,166)
Net deferral and amortization ........................... 520,684 757,372 (463,664)
----------- ----------- -----------
Net periodic pension cost ............................... $ 472,173 $ 711,421 $ 726,326
=========== =========== ===========
Assumptions used to determine the projected benefit obligation were: 1996 1995
---- ----
Discount rate ........................................... 8.0% 8.0%
Rate of increase in future compensation levels .......... 3.0% 4.0%
Expected long-term rate of return on assets ............. 9.0% 8.0%
</TABLE>
32
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
7) OTHER POST-EMPLOYMENT BENEFITS
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits to qualified retired employees.
In 1994, the Company adopted Statement of Financial Accounting Standards No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS
106). Prior to 1994, expense was recognized when benefits were paid. In
accordance with SFAS 106, the Company began recording the Cost for this plan on
an accrual basis for 1994. As permitted by SFAS 106, the Company is recording
the transition obligation over a twenty year period.
<TABLE>
The following table sets forth the status of the plans at September 30, 1996 and
1995:
1996 1995
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees .................................. $(1,150,310) $ (871,487)
Fully eligible active plan participants ... (109,934) (110,362)
Other active plan participants ............ (875,107) (949,071)
----------- -----------
(2,135,351) (1,930,920)
Plan assets .................................... 200,786 0
Unrecognized transition obligation ............. 2,403,554 2,544,938
Unrecognized past service costs ................ 123,494 134,600
Unrecognized (Gain) ............................ (1,042,080) (1,275,643)
----------- -----------
Accrued postretirement benefit cost ............ $ (449,597) $ (527,025)
=========== ===========
</TABLE>
<TABLE>
Net periodic postretirement benefit cost for fiscal 1996 and 1995 included the
following components:
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service Costs-benefits attributable to service during the period $ 80,022 $ 66,601 $144,234
Interest cost on accumulated postretirement benefit obligation . 140,210 107,320 219,734
Net amortization and deferral .................................. 141,385 141,385 141,385
Recognized past service ........................................ 11,106 11,106 --
Recognized (gain) .............................................. (59,909) (79,353) --
-------- -------- --------
312,814 247,059 505,353
Regulatory asset ............................................... 123,358 183,735 343,290
-------- -------- --------
Net expense .................................................... $189,456 $ 63,324 $162,063
======== ======== ========
</TABLE>
For measurement purposes, a 7% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1996. The rate was assumed to
decrease gradually to 4% by fiscal 2005, and to remain at that level thereafter.
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
by 1% in each year would increase the accumulated postretirement benefit
obligation as of September 30, 1996 by $604,881 and the aggregate of the service
and the interest cost components of net periodic postretirement benefit cost
(NPPBC) for the year by $89,398. The discount rate was 7% for the development of
the NPPBC and for disclosure.
33
<PAGE> 34
As of September 30, 1996, the Company has a regulatory asset amounting to
$650,383 related to unrecovered SFAS 106 expenses. On October 16, 1996 the MDPU
approved a settlement agreement between the company and intervenors for an
increase in rates effective December 1, 1996. As part of the settlement
agreement, the Company was allowed recovery of annual SFAS 106 expenses, as well
as, amounts recorded as regulatory assets during the three year period ended
September 30, 1996.
8) COMMITMENTS AND CONTINGENCIES In January 1990, the
Company received notification from the Massachusetts Department of
Environmental Protection that it is one of several "potentially responsible
parties" under Massachusetts law in connection with a site operated by a
company which purchased scrap meters from various utilities including the
Company. The investigation is in the discovery stage and the cost to clean
up the site and the Company's degree of responsibility has not yet been
determined. However, management does not expect the costs to be
significant.
9) UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
The following is unaudited quarterly information for the fiscal years ended
September 30, 1996 and 1995. Quarterly variations between periods are
caused primarily by the seasonal nature of the gas distribution business.
<CAPTION>
Quarter Ended Quarter Ended
------------- -------------
Thousands except per share amounts) Dec. 31 Mar. 31 June 30 Sept. 30 Dec. 31 Mar. 31 June 30 Sept. 30
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues................. $11,455 $22,373 $10,313 $4,825 $9,990 $19,483 $9,858 $5,087
Operating Income (Loss)............ 338 1,874 301 (170) 429 1,667 375 (166)
Net Income (Loss).................. 94 1,615 91 (374) 263 1,449 233 (329)
Net Income (Loss) per Share........ 0.05 0.91 0.05 (0.21) 0.15 0.81 0.13 (0.18)
</TABLE>
ITEM 9. Disagreements On Accounting And Financial Disclosures
-------------------------------------------------------------
None. PART III
ITEM 10. Directors and Executive Officers Of Registrant
-------------------------------------------------------
Information required under this item regarding directors and compliance
with Section 16(A) of the Exchange Act is contained in the Registrant's
1996 Proxy Statement, to be filed with the commission pursuant to
Regulation 14A, and is incorporated herein by reference, pursuant to Form
10-K General Instruction G(3). See also Additional Item Executive Officers
of Registrant in above.
ITEM 11. Management Remuneration And Transactions
-------------------------------------------------
Information required under this item is contained in the Registrant's
1996 Proxy Statement, filed with the commission pursuant to Regulation 14A,
and is incorporated herein by reference, pursuant to Form 10-K General
Instruction G(3).
ITEM 12. Security Ownership Of Certain Beneficial Owners And Management
-----------------------------------------------------------------------
Information required under this item is contained in the Registrant's
1996 Proxy Statement, filed with the commission pursuant to Regulation 14A,
and is incorporated herein by reference, pursuant to Form 10K General
Instruction G(3).
ITEM 13. Certain Relationships And Related Transactions
-------------------------------------------------------
Not applicable.
34
<PAGE> 35
PART IV
-------
ITEM 14. Exhibits, Financial Statement Schedules, And Reports On Form 8-K
- -------------------------------------------------------------------------
(a) (1) and (2) The response to this portion if Item 14 is submitted in the
following pages.
(b) The Registrant was not required to file a Form 8-K during fiscal year
1996.
35
<PAGE> 36
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FALL RIVER GAS COMPANY
BY /s/ Peter H. Thanas
----------------------
Senior Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
/s/ Bradford J. Faxon President, Chairman of 12/19/96
- ----------------------------- the Board and Director
(Chief Executive Officer
/s/ Raymond H. Faxon Vice Chairman of the 12/19/96
- ----------------------------- Board and Director
/s/ Peter H. Thanas Senior Vice President 12/19/96
- ----------------------------- and Treasurer
(Chief Financial and
Accounting Officer
/s/ Cindy L.J. Audette Director 12/19/96
- -----------------------------
/s/ Thomas K. Barry Director 12/19/96
- -----------------------------
/s/ Thomas H. Bilodeau Director 12/19/96
- -----------------------------
/s/ Ronald J. Ferris Director 12/19/96
- -----------------------------
/s/ Jack R. McCormick Director 12/19/96
- -----------------------------
/s/ Gilbert C. Oliveira Jr. Director 12/19/96
- -----------------------------
/s/ Donald R. Patnode Director 12/19/96
- -----------------------------
36
<PAGE> 37
Page Number Or
Exhibit Incorporation Or
Numbers Description Reference To
- ------- ----------- -----------------
(3) Articles of Incorporation and Exhibit 3 to Report
By-Laws on Form 10-K for
calender year ended
December 31, 1982
(3a) A copy of an Amendment to the Exhibit 3a to Report
Articles of Incorporation to on Form 10-K for
increase the number of Common calendar year ended
Shares from 366,889 to 1,100,667 December 31, 1987
and to change the Par Value from
$5.00 to $1 2/3
(3b) A copy of an Amendment to the By-Laws Exhibit 3b to Report
on Form 10-K for
calendar year ended
December 31, 1990
(3c) A copy of an Amendment to the By-Laws Exhibit 3c to Report
on Form 10-K for
calendar year ended
December 31, 1991
(3d) A copy of an Amendment to the Articles Attached hereto
of Incorporation, dated December 31, 1993
(4) Instruments defining the rights Exhibit 4 to Report
of security holders, including on Form 10-K for
indentures calendar year ended
December 31, 1982
(4a) Thirteenth Supplemental Indenture Attached hereto
between the Registrant and
State Street Bank and Trust Co.
(10a) Purchase of F-1 from Algonquin Exhibit 10a to Report
Gas Transmission Company on Form 10-K for
calendar year ended
(10b) Purchase of SNG from Algonquin Exhibit 10b to Report
Gas Transmission Company on Form 10-K for
calendar year ended
December 31, 1982
(10c) A copy of the contract between Exhibit 10c to Report
the Registrant and Utility on Form 10-K for
Workers Union of America, AFL CIO calendar year ended
and Local No. 431, dated May 1, 1984 December 31, 1984
(10d) A copy of an Employment and Con- Exhibit 10d to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984, between the calendar year ended
Registrant and Jack R. McCormick December 31, 1984
(10e) A copy of an Employment and con- Exhibit 10e to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984, between the calendar year ended
Registrant and Bradford J. Faxon December 31, 1984
(10f) A copy of an Employment and Con- Exhibit 10f to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984, between calendar year ended
Registrant and Norman J. Meyer December 31, 1984
37
<PAGE> 38
Page Number or
Exhibit Incorporation Or
Numbers Description Reference to
- ------- ----------- ----------------
(10g) A copy of the Restatement of Con- Exhibit 10g to Report
sulting Agreement dated as of on Form 10-K for
December 13, 1983, between the calendar year ended
Registrant and Thomas H. Bilodeau December 31, 1984
(10h) A copy of an Agreement, Combined Sup- Exhibit 10h to Report
plementary Agreement, and Amendment on Form 10-K for
to Agreement for Employment and calendar year ended
Consulting Services between the December 31, 1984
Registrant and Raymond H. Faxon
(10i) A copy of an Amendment to Employment Exhibit 10i to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Bradford J. Faxon December 31, 1986
(10j) A copy of an Amendment to Employment Exhibit 10j to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Norman J. Meyer December 31, 1986
(10k) A copy of an Employment and Consulting Exhibit 10k to Report
Agreement dated as of August 1, 1986 on Form 10-K for
between the Registrant and Peter H. calendar year ended
Thanas December 31, 1986
(10L) A copy of an Amendment to Employment Exhibit 10L to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Peter H. Thanas December 31, 1986
(10m) A copy of the Contract between the Exhibit 10m to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and calendar year ended
Local, 431, dated May 31, 1987 December 31, 1987
(10n) A copy of Precedent Agreement for Exhibit 10n to Report
Firm Sales Service under Rate on Form 10-K for
Schedule F-4 calendar year ended
December 31, 1987
(10o) Settlement Agreement between DOMAC Exhibit 10o to Report
and Registrant to terminate and on Form 10-K for
abandon GS-1 and TS-1 Service calendar year ended
Agreements December 31, 1988
(10p) A copy of Service Agreement for Firm Exhibit 10p to Report
Liquid Service between Distrigas on Form 10-K for
and Registrant calendar year ended
December 31, 1988
(10q) A copy of Service Agreement for Exhibit 10q to Report
Interruptible Vapor Service be- on Form 10-K for
tween Distrigas and Registrant calendar year ended
December 31, 1988
(10r) A copy of Service Agreement for Firm Exhibit 10r to Report
Vapor Service between Distrigas on Form 10-K for
and Registrant calendar year ended
December 31, 1988
(10s) A copy of a Deferred Compensationq Exhibit 10s to Report
Agreement with Bradford J. Faxon on form 10-K for
calendar year ended
December 31, 1989
38
<PAGE> 39
Page Number or
Exhibit Incorporation Or
Numbers Description Reference To
- ------- ----------- ----------------
(10t) A copy of a Deferred Compensation Exhibit 10t to Report
Agreement with Peter H. Thanas on Form 10-K for
calendar year ended
December 31, 1989
(10u) A copy of the Contract between the Exhibit 10u to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and calendar year ended
Local 431, dated May 1, 1990 December 31, 1990
(10v) A copy of an Employment Contract Exhibit 10v to Report
with Bradford J. Faxon on Form 10-K for
calendar year ended
December 31, 1991
(10w) A copy of an Employment Contract Exhibit 10w to Report
with Peter H. Thanas on Form 10-K for
calendar year ended
December 31, 1991
(10x) A copy of the Contract between the Exhibit 10x to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and calendar year ended
Local 431, dated May 1, 1995 September 30, 1995
(10y) A copy of Gas Sales Agreement Exhibit 10y to Report
between CNG Gas Service Corporation on Form 10-K for fiscal
and Fall River Gas Company year ended September 30,
1995
(22) The Registrant has one Subsidiary,
Fall River Gas Appliance Company, Inc.,
that is incorporated in Massachusetts,
and does business under said name
(23) Consent of Independent Public Accountants
Attached To the Stockholders and Board of
Directors of Fall River Gas Company
39
<PAGE> 40
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Fall River Gas Company
As independent public accountants, we hereby consent to the incorporation
by reference in the registration statement on Form S-3, File No. 333-13995 of
our reports dated November 19, 1996, included in Fall River Gas company Form
10-K for the year ended September 30, 1996, and to all references to our firm
included in this registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
December 30, 1996
40
<PAGE> 41
FALL RIVER GAS COMPANY AND SUBSIDIARY
-------------------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
(Submitted in Answer to Item 14 of Form 10-K,
Securities and Exchange Commission)
Reference
---------
Report of independent public accountants Page 24
Fall River Gas Company and Subsidiary Consolidated balance
sheets - As of September 30, 1996 and September 30, 1995 Page 26 & 27
Consolidated statements for the years ended September 30,
1996, 1995, and 1994
Income Page 25
Retained earnings Page 25
Cash flows Page 28
Notes to consolidated financial statements Page 29-34
SCHEDULES
---------
VIII - Valuation and Qualifying Accounts and Reserves for
the years ended September 30, 1996, 1995, and 1994 Attached
Report to independent public accountants on schedules Attached
Schedules, other than the one listed to above, are either not required or not
applicable or the required information is shown in the financial statements or
notes thereto.
41
<PAGE> 42
FALL RIVER GAS COMPANY AND SUBSIDIARY SCHEDULE VIII
--------------------------------------------------
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
--------------------------------------------------
<CAPTION>
FOR YEAR ENDED SEPTEMBER 30, 1996
----------------------------------------
ADDITIONS DEDUCTIONS
------------------------- -----------------------
Balance at Charges to Charges Charges for Balance at
Beginning Costs and to Other Which Reserves End of
Description of Period Expenses Accounts Were Created Other Period
----------- --------- -------- -------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtbul accounts $686,650 $411,500 $456,348 ($28,235) $670,038
-------- -------- -------- -------- -------- --------
<CAPTION>
FOR YEAR ENDED SEPTEMBER 30, 1995
----------------------------------------
ADDITIONS DEDUCTIONS
------------------------- -----------------------
Balance at Charges to Charges Charges for Balance at
Beginning Costs and to Other Which Reserves End of
Description of Period Expenses Accounts Were Created Other Period
----------- --------- -------- -------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtbul accounts $701,734 $311,500 $368,249 ($41,665) $686,650
-------- -------- -------- -------- -------- --------
<CAPTION>
FOR YEAR ENDED SEPTEMBER 30, 1994
----------------------------------------
ADDITIONS DEDUCTIONS
------------------------- -----------------------
Balance at Charges to Charges Charges for Balance at
Beginning Costs and to Other Which Reserves End of
Description of Period Expenses Accounts Were Created Other Period
----------- --------- -------- -------- ------------ ----- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtbul accounts $470,770 $575,500 $379,613 ($35,077) $701,734
-------- -------- -------- -------- -------- --------
</TABLE>
42
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Fall River Gas Company
As independent public accountants, we hereby consent to the incorporation
by reference in the registration statement on Form S-3, File No. 333-13995 of
our reports dated November 19, 1996, included in Fall River Gas company Form
10-K for the year ended September 30, 1996, and to all references to our firm
included in this registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
December 30, 1996
40
<TABLE> <S> <C>
<ARTICLE> UT
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 38,653,367
<OTHER-PROPERTY-AND-INVEST> 3,144,850
<TOTAL-CURRENT-ASSETS> 8,705,303
<TOTAL-DEFERRED-CHARGES> 2,687,633
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 53,191,153
<COMMON> 1,834,445
<CAPITAL-SURPLUS-PAID-IN> 1,356,043
<RETAINED-EARNINGS> 10,865,648
<TOTAL-COMMON-STOCKHOLDERS-EQ> 14,056,136
0
0
<LONG-TERM-DEBT-NET> 13,500,000
<SHORT-TERM-NOTES> 14,300,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 11,335,017
<TOT-CAPITALIZATION-AND-LIAB> 53,191,153
<GROSS-OPERATING-REVENUE> 48,965,547
<INCOME-TAX-EXPENSE> 1,624,821
<OTHER-OPERATING-EXPENSES> 44,998,023
<TOTAL-OPERATING-EXPENSES> 46,622,844
<OPERATING-INCOME-LOSS> 2,342,703
<OTHER-INCOME-NET> 790,797
<INCOME-BEFORE-INTEREST-EXPEN> 3,133,500
<TOTAL-INTEREST-EXPENSE> 1,707,792
<NET-INCOME> 1,425,708
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,716,388
<COMMON-STOCK-DIVIDENDS> 1,709,321
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 1,214,526
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
