<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _____________
Commission File Number 18154
ESSEX GAS COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1427020
- ------------------------------ --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
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(Address of principal executive offices)
(Zip Code)
617-742-8400
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(Registrant's telephone number, including area code)
NONE
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Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Common stock of Registrant at the date of this report was 100 shares, all held
by Eastern Enterprises.
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FORM 10-Q
Page 2
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
Company or group of companies for which report is filed:
ESSEX GAS COMPANY ("Company")
Consolidated Statements of Earnings
- -----------------------------------
(In Thousands)
Three Months Ended
------------------
March 31, March 31,
2000 1999
------- -------
OPERATING REVENUES
Cost of gas sold $20,882 $22,049
Operating Margin 8,992 10,001
------- -------
11,890 12,048
------- -------
OPERATING EXPENSES:
Operations 1,827 1,977
Maintenance 351 310
Depreciation and amortization 1,742 1,967
Income taxes 2,627 2,501
Taxes, other than income 646 640
------- -------
Total Operating Expenses 7,193 7,395
------- -------
OPERATING EARNINGS 4,697 4,653
OTHER EARNINGS, NET 24 49
------- -------
EARNINGS BEFORE INTEREST EXPENSE 4,721 4,702
------- -------
INTEREST EXPENSE:
Long-term debt 616 616
Other, including amortization
of debt expense 59 118
Less-Interest used during
Construction (24) (1)
------- -------
Total Interest Expense 651 733
------- -------
NET EARNINGS $ 4,070 $ 3,969
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 3
Essex Gas Company
- -----------------
Consolidated Balance Sheets
- ---------------------------
(In Thousands)
March 31, March 31, December 31,
2000 1999 1999
-------- -------- --------
ASSETS
GAS PLANT, AT COST $116,283 $112,423 $116,284
Construction work-in-progress 2,062 500 1,192
Less-Accumulated depreciation (35,775) (31,886) (33,846)
-------- -------- --------
Net Plant 82,570 81,037 83,630
-------- -------- --------
CURRENT ASSETS:
Cash 174 245 122
Accounts receivable less reserves
of $896 and $845 at March 31, 2000
and 1999, respectively, and
$748 at December 31, 1999 7,987 8,049 3,660
Accounts receivable - affiliates 1,007 2,840 -
Accrued utility margin 1,514 2,653 2,414
Deferred gas costs 1,493 - 2,828
Natural gas and other inventories 917 999 1,155
Materials and supplies 471 577 484
Current income taxes - - 913
Prepaid expenses 22 83 25
-------- -------- --------
Total Current Assets 13,585 15,446 11,601
-------- -------- --------
OTHER ASSETS:
Unamortized debt expense 667 701 676
Other 1,238 1,400 1,289
-------- -------- --------
Total Other Assets 1,905 2,101 1,965
-------- -------- --------
TOTAL ASSETS $ 98,060 $ 98,584 $ 97,196
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 4
Essex Gas Company
- -----------------
Consolidated Balance Sheets
- ---------------------------
<TABLE>
<CAPTION>
(In Thousands)
March 31, March 31, December 31,
2000 1999 1999
--------- --------- ------------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stockholder's investment-
Common stock, no par value, 200,000
authorized shares; issued and
outstanding 100 shares $27,805 $27,805 $27,805
Unrealized gain on investments
available for sale, net 22 10 22
Retained earnings 11,799 11,324 7,729
------- ------- -------
Total common stockholder's
Investment 39,626 39,139 35,556
------- ------- -------
Long-term obligations less current portion 27,348 28,055 27,365
------- ------- -------
Total Capitalization 66,974 67,194 62,921
------- ------- -------
CURRENT LIABILITIES:
Current portion of long-term obligations 667 661 665
Gas inventory financing 729 1,021 1,234
Notes payable - 1,850 -
Notes payable to parent company 4,000 4,000 4,000
Accounts payable 4,205 2,372 5,042
Accounts payable - affiliate - 30 4,687
Accrued interest 899 1,007 290
Accrued taxes 219 360 54
Accrued income taxes 2,322 578 -
Refundable gas costs due customers - 3,014 -
Refunds due customers 41 9 55
Other 134 471 148
------- ------- -------
Total Current Liabilities 13,216 15,373 16,175
------- ------- -------
RESERVES AND DEFERRED CREDITS:
Deferred income taxes 8,677 7,183 8,967
Unamortized investment tax credits 959 1,030 977
Retirement benefit liabilities 7,361 5,609 7,238
Other reserves 873 2,195 918
------- ------- -------
Total Reserves and Deferred Credits 17,870 16,017 18,100
------- ------- -------
TOTAL CAPITALIZATION AND LIABILITIES $98,060 $98,584 $97,196
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 5
Essex Gas Company
- -----------------
Consolidated Statements of Cash Flows
- -------------------------------------
(In Thousands)
Three Months Ended
----------------------
March 31, March 31,
2000 1999
---- ----
Cash flows from operating activities:
Net Earnings $ 4,070 $ 3,969
Adjustments to reconcile net earnings to cash
Provided by operating activities:
Depreciation and amortization 1,942 2,049
Deferred income taxes (290) (176)
Other changes in assets and liabilities:
Accounts receivable (4,327) (6,615)
Accounts receivable/payable-affiliates (5,693) -
Accrued utility margin 900 (368)
Inventory 251 2,711
Accounts payable (837) (204)
Refunds due customers (14) (25)
Federal and state income taxes 3,235 3,082
Deferred gas costs 1,335 2,815
Other, net 900 (288)
------- -------
Cash provided by operating activities 1,472 6,950
------- -------
Cash flows from investing activities:
Capital expenditures (870) (382)
Net cost of removal (30) (10)
------- -------
Cash used for investing activities (900) (392)
------- -------
Cash flows from financing activities:
Change in long-term debt (15) -
Change in inventory financing (505) (3,324)
Change in notes payable - (3,055)
------- -------
Cash Used for Financing Activities (520) (6,379)
------- -------
Increase in cash and cash equivalents 52 179
Cash and cash equivalents at beginning
of period 122 66
------- -------
Cash and cash equivalents at end of period $ 174 $ 245
======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during the period for:
Interest net of amounts capitalized $ 82 $ 172
Income taxes $ (318) $ (698)
The accompanying notes are an integral part of these consolidated financial
statements.
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FORM 10-Q
Page 6
ESSEX GAS COMPANY
-----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 2000
--------------
1. ACCOUNTING POLICIES AND OTHER INFORMATION
-----------------------------------------
General
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It is the Company's opinion that the financial information contained in
this report reflects all adjustments necessary to present a fair statement
of results for the periods reported. All of these adjustments are of a
normal recurring nature. Results for the periods are not necessarily
indicative of results to be expected for the year, due to the seasonal
nature of the Company's operations. All accounting policies have been
applied in a manner consistent with prior periods. Such financial
information is subject to year-end adjustments and annual audit by
independent public accountants.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q. Therefore
these interim financial statements should be read in conjunction with the
Company's 1999 Annual Report filed on Form 10-K with the Securities and
Exchange Commission.
Merger
------
On November 4, 1999, Eastern Enterprises ("Eastern"), the parent company of
Essex Gas, signed a definitive agreement to be acquired by KeySpan
Corporation. Subject to receipt of satisfactory regulatory approvals, the
transaction is hoped to close in the early fall of 2000. The merger was
approved by Eastern's shareholders on April 26, 2000.
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FORM 10-Q
Page 7
Seasonal Aspect
---------------
The amount of the Company's natural gas firm throughput for purposes of
space heating is directly related to temperature conditions. Consequently,
there is less gas throughput during the summer months than during the
winter months. In addition, under its seasonal rate structure, the rates
charged customers during November through April are higher than those
charged during May through October. In order to more properly match
depreciation and property tax expense with margin each month, the Company
charges to depreciation and property tax expense an amount equal to the
percentage of the annual volume of firm gas throughput forecasted for the
month, applied to the estimated annual depreciation and property tax
expense.
Reclassifications
-----------------
Certain prior quarter financial statement amounts have been reclassified
for consistent presentation with the current year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS:
----------------------
RESULTS OF OPERATIONS
Net earnings for the first quarter of 2000 were $4.1 million, up $.1
million from net earnings of $4.0 million in the first quarter of 1999.
Weather was 5% colder than 1999, but 3.5% warmer than normal.
Both operating margin and total operating expenses for the first quarter of
2000 were comparable to 1999.
YEAR 2000 ISSUES
The Company continued to monitor its systems through the end of the first
quarter of 2000, including the quarter closing activity. No significant
year 2000 errors or discrepancies were detected and no costs were incurred.
The Company will no longer report on Year 2000 issues.
FORWARD-LOOKING INFORMATION
This report and other Company reports and statements issued or made from
time to time contain certain "forward-looking statements" concerning
projected future financial performance, expected plans or future
operations. The Company cautions that actual results and developments may
differ materially from such projections or expectations.
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FORM 10-Q
Page 8
Investors should be aware of important factors that could cause actual
results to differ materially from the forward-looking projections or
expectations. These factors include, but are not limited to: the impact of
any merger-related activities, the ability to successfully integrate
natural gas distribution operations, temperatures above or below normal,
changes in economic conditions, including interest rates, and regulatory
and court decisions and developments with respect to previously disclosed
environmental liabilities. Most of these factors are difficult to predict
accurately and are generally beyond the control of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that projected cash flow from operations, in
combination with currently available resources, is more than sufficient to
meet 2000 capital expenditures and working capital requirements, dividend
payments and normal debt repayments.
The Company expects capital expenditures for 2000 to be approximately $7.5
million.
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FORM 10-Q
Page 9
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
There are no material pending legal proceedings involving the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) List of Exhibits
None.
(b) No reports on Form 8-K have been filed during the quarter for which
this report is filed.
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FORM 10-Q
Page 10
SIGNATURES
- ----------
It is the Company's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to present
a fair statement of results for the period reported, but such results are
not necessarily indicative of results to be expected for the year due to
the seasonal nature of the business of the Company. Except as otherwise
herein indicated, all accounting policies have been applied in a manner
consistent with prior periods. Such financial information is subject to
year-end adjustments and an annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Essex Gas Company
-------------------------------------------
(Registrant)
/s/ Joseph F. Bodanza
--------------------------------------------
J.F. Bodanza, Sr. Vice President and Treasurer
(Principal Financial and Accounting Officer)
Dated: April 28, 2000
---------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 82,570
<OTHER-PROPERTY-AND-INVEST> 841
<TOTAL-CURRENT-ASSETS> 13,585
<TOTAL-DEFERRED-CHARGES> 1,064
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 98,060
<COMMON> 27,805
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 11,821
<TOTAL-COMMON-STOCKHOLDERS-EQ> 39,626
0
0
<LONG-TERM-DEBT-NET> 26,959
<SHORT-TERM-NOTES> 4,729
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<CAPITAL-LEASE-OBLIGATIONS> 389
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<TOTAL-OPERATING-EXPENSES> 16,185
<OPERATING-INCOME-LOSS> 4,697
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<TOTAL-INTEREST-EXPENSE> 651
<NET-INCOME> 4,070
0
<EARNINGS-AVAILABLE-FOR-COMM> 4,070
<COMMON-STOCK-DIVIDENDS> 0
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</TABLE>
