[COLONIAL GAS COMPANY FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1994]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
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 0-10007
COLONIAL GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1558100
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
40 Market Street, Lowell, Massachusetts 01852
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(508) 458-3171
Former name, former address and former fiscal year, if
changed since last report: Not applicable
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No
The number of shares of the registrant's common stock,
$3.33 par value, outstanding as of November 1, 1994 was
8,185,625.
COLONIAL GAS COMPANY
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income -
Three Months Ended September 30, 1994 and 1993
Nine Months Ended September 30, 1994 and 1993
Twelve Months Ended September 30, 1994 and 1993
Consolidated Condensed Balance Sheets -
September 30, 1994, December 31, 1993 and
September 30, 1993
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993
Twelve Months Ended September 30, 1994 and 1993
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II - OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
September 30,
1994 1993
(In Thousands Except
Per Share Amounts)
Operating Revenues $13,026 $12,259
Cost of gas sold 6,797 6,704
Operating Margin 6,229 5,555
Operating Expenses:
Operations 7,835 7,146
Maintenance 1,452 1,396
Depreciation and Amortization 2,316 1,652
Taxes, other than income 1,006 908
Total Operating Expenses 12,609 11,102
Income Taxes (3,248) (2,809)
Utility Operating Loss (3,132) (2,738)
Other Operating Income (Loss):
Truck transportation revenues 3,476 3,031
Truck transportation expenses,
including income taxes and interest (3,158) (2,424)
Truck transportation net income 318 607
Other, net of income taxes 8 (31)
Total Other Operating Income 326 576
Non-Operating Income, Net 81 567
Loss Before Interest and Debt Expense (2,725) (1,595)
Interest and Debt Expense 2,109 2,127
Net Loss $ (4,834) $ (3,722)
Average Common Shares Outstanding 8,142 7,954
Loss per Average Common Share $ (0.59) $ (0.47)
Dividends Paid per Common Share $ .315 $ .31
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIAIRIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended
September 30,
1994 1993
(In Thousands Except
Per Share Amounts)
Operating Revenues $118,182 $110,973
Cost of gas sold 63,334 61,405
Operating Margin 54,848 49,568
Operating Expenses:
Operations 25,852 24,364
Maintenance 4,523 4,079
Depreciation and Amortization 6,882 4,956
Taxes, other than income 3,242 2,991
Total Operating Expenses 40,499 36,390
Income Taxes 3,573 3,068
Utility Operating Income 10,776 10,110
Other Operating Income (Loss):
Truck transportation revenues 10,754 5,480
Truck transportation expenses,
including income taxes and interest (9,273) (5,211)
Truck transportation net income 1,481 269
Other, net of income taxes (83) (121)
Total Other Operating Income 1,398 148
Non-Operating Income, Net 258 953
Income Before Interest and Debt Expense 12,432 11,211
Interest and Debt Expense 6,206 6,134
Net Income $ 6,226 $ 5,077
Average Common Shares Outstanding 8,094 7,908
Income per Average Common Share $ 0.77 $ 0.64
Dividends Paid per Common Share $ 0.94 $ 0.925
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIAIRIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Twelve Months Ended
September 30,
1994 1993
(In Thousands Except
Per Share Amounts)
Operating Revenues $173,471 $161,233
Cost of gas sold 92,845 88,357
Operating Margin 80,626 72,876
Operating Expenses:
Operations 34,235 32,723
Maintenance 6,076 5,529
Depreciation and Amortization 8,757 6,448
Taxes, other than income 4,105 3,917
Total Operating Expenses 53,173 48,617
Income Taxes 7,897 6,604
Utility Operating Income 19,556 17,655
Other Operating Income (Loss):
Truck transportation revenues 12,833 7,911
Truck transportation expenses,
including income taxes and interest (11,226) (7,763)
Truck transportation net income 1,607 148
Other, net of income taxes (148) (182)
Total Other Operating Income (Loss) 1,459 (34)
Non-Operating Income, Net 370 1,185
Income Before Interest and Debt Expense 21,385 18,806
Interest and Debt Expense 8,213 8,162
Net Income $13,172 $10,644
Average Common Shares Outstanding 8,069 7,884
Income per Average Common Share $ 1.63 $ 1.35
Dividends Paid per Common Share $ 1.25 $ 1.228
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31, September 30,
1994 1993 1993
(Unaudited) (Unaudited)
(In Thousands)
Utility Property:
At original cost $278,576 $260,570 $253,523
Accumulated depreciation (64,920) (57,857) (57,616)
Net utility property 213,656 202,713 195,907
Non-Utility Property - Net 3,621 3,235 3,234
Net property 217,277 205,948 199,141
Capital Leases - Net 3,113 3,914 3,919
Current Assets:
Cash and cash equivalents 8,032 5,482 4,922
Accounts receivable - net 3,478 14,474 4,272
Accrued utility revenues 701 7,170 516
Unbilled gas costs 9,254 16,759 13,433
Fuel and other inventories 18,196 17,529 19,428
Prepayments and other
current assets 8,789 6,254 9,113
Total current assets 48,450 67,668 51,684
Deferred Charges and Other Assets:
Unrecovered deferred
income taxes 12,107 12,689 12,090
Unrecovered environmental
expenses - incurred 4,453 4,062 3,225
Unrecovered environmental
expenses - accrued 5,300 5,300 13,800
Unrecovered transition
costs - accrued 2,000 2,000 -
Other 13,013 10,537 10,349
Total deferred charges
and other assets 36,873 34,588 39,464
Total Assets $305,713 $312,118 $294,208
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND CAPITALIZATION
September 30, December 31, September 30,
1994 1993 1993
(Unaudited) (Unaudited)
(In Thousands)
Capitalization:
Common equity:
Common Stock - par value $3.33 per share
Authorized - 15,000 shares
Issued and outstanding - 8,177,
8,030 and 7,981 shares $27,229 $26,739 $26,576
Premium on common stock 48,420 45,799 44,883
Retained earnings 20,364 21,745 17,278
Total Common equity 96,013 94,283 88,737
Long-term debt 77,956 87,432 87,432
Total capitalization 173,969 181,715 176,169
Capital Lease Obligations 2,417 3,149 3,224
Current Liabilities:
Current maturities of
long-term debt 8,446 3,318 3,318
Current capital lease
obligations 697 765 695
Notes payable 35,500 32,600 20,200
Gas inventory purchase
obligations 13,647 15,233 14,825
Accounts payable 6,300 12,161 6,119
Accrued pipeline charges - 305 413
Other 9,456 9,031 11,809
Total current liabilities 74,046 73,413 57,379
Deferred Credits and Reserves:
Deferred income taxes-funded 25,565 23,395 21,357
Deferred income taxes-unfunded 12,107 12,689 12,090
Accrued environmental expenses 5,300 5,300 13,800
Accrued transition costs 2,000 2,000 -
Other 10,309 10,457 10,189
Total deferred credits
and reserves 55,281 53,841 57,436
Total Capitalization and
Liabilities $305,713 $312,118 $294,208
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIAIRIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1994 1993
(In Thousands)
Cash Flows From Operating Activities:
Net income $ 6,226 $ 5,077
Adjustments to reconcile net income
to net cash 13,853 23,084
Changes in current assets and liabilities 13,785 667
Net cash provided by operating activities 33,864 28,828
Cash Flows From Investing Activities:
Capital expenditures (19,071) (16,744)
Change in deferred accounts (4,714) (1,768)
Net cash used in investing activities (23,785) (18,512)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (7,607) (7,315)
Issuance of Common Stock 3,111 3,204
Issuance of long-term debt 721 -
Retirement of long-term debt (5,068) (1,500)
Change in notes payable 2,900 (4,300)
Change in gas inventory purchase obligations (1,586) 84
Net cash used in financing activities (7,529) (9,827)
Net increase in cash and cash equivalents 2,550 489
Cash and cash equivalents at beginning of period 5,482 4,433
Cash and cash equivalents at end of period $ 8,032 $ 4,922
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - net of amount capitalized $ 6,383 $ 6,096
Income and franchise taxes $ 5,947 $ 4,153
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIAIRIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended
September 30,
1994 1993
(In Thousands)
Cash Flows From Operating Activities:
Net income $13,172 $10,644
Adjustments to reconcile net income
to net cash 15,987 12,539
Changes in current assets and liabilities 1,199 2,680
Net cash provided by operating activities 30,358 25,863
Cash Flows From Investing Activities:
Capital expenditures (27,836) (26,639)
Change in deferred accounts (3,292) (557)
Net cash used in investing activities (31,128) (27,196)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (10,086) (9,697)
Issuance of Common Stock 4,190 4,369
Issuance of long-term debt 721 -
Retirement of long-term debt (5,068) (4,500)
Change in notes payable 15,300 12,400
Change in gas inventory purchase obligations (1,177) 1,729
Net cash provided by financing activities 3,880 4,301
Net increase in cash and cash equivalents 3,110 2,968
Cash and cash equivalents at beginning of period 4,922 1,954
Cash and cash equivalents at end of period $ 8,032 $ 4,922
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - net of amount capitalized $ 9,269 $ 9,197
Income and franchise taxes $ 6,734 $ 4,160
(See accompanying notes to consolidated condensed financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of the Company, the accompanying
unaudited consolidated condensed financial statements
contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the
financial position as of September 30, 1994 and 1993 and
results of operations for the three, nine and twelve
month periods ended September 30, 1994 and 1993 and cash
flows for the nine and twelve month periods ended
September 30, 1994 and 1993.
2. Due to the significant impact of gas used for space
heating during the heating season (November-April) and
the Company's seasonal rate structure, the results of
operations for the three month and nine month periods
ending September 30, 1994 and 1993 are not necessarily
indicative of the results to be expected for the full
year.
3. During the nine months ended September 30, 1994, the
Company issued 147,000 shares of Common Stock, $3.33 par
value, under a Dividend Reinvestment and Common Stock
Purchase Plan and under Employee Savings Plans. As a
result, Common Stock, $3.33 par value, increased $490,000
and Premium on Common Stock increased $2,621,000.
4. On October 20, 1994, the Massachusetts Department of
Public Utilities (DPU) ruled that Massachusetts gas
utilities may continue to recover from customers through
the cost of gas adjustment clause (CGAC) FERC Order 636 -
related transition costs passed on to them by interstate
gas pipeline companies.
5. Contingencies
Reference is made to Note J/Contingencies of the Notes to
Consolidated Financial Statements contained within the
Company's 1993 Annual Report to Stockholders.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
Three Months Ended September 30, 1994 and 1993
The Company's net loss for the three months ended
September 30, 1994 was $4,834,000, which is 30% or
$1,112,000 more than the $3,722,000 loss reported for the
same period last year. The principal reasons for this change
are described below. The Company typically incurs losses for
the second and third quarters while reporting profits for
the first and fourth quarters. This is due to significantly
higher natural gas sales throughout the colder months to
meet customers' heating needs. Approximately 90% of the
Company's customers are residential accounts.
The Company's operating margin increased 12% or $674,000
during the third quarter due to a rate increase effective
November 1, 1993.
Total operating expenses increased by 14% or $1,507,000
primarily due to a $664,000 increase in depreciation and
amortization expense based on higher depreciation rates
approved with the Company's 1993 rate increase and a
$400,000 increase in bad debt expense.
Income taxes credit increased $439,000 or 16% due to an
increase in operating loss.
Other operating income declined $250,000 due to lower
margins on liquefied natural gas hauling.
Non-operating income (net of income taxes) declined
$486,000 compared to 1993 which included a non-recurring
insurance recovery of $509,000 relating to a discontinued
line of business.
Nine Months Ended September 30, 1994 and 1993
Net income for the nine months ended September 30, 1994
was $6,226,000, compared to $5,077,000 for the comparable
1993 period. This $1,149,000 or 23% increase is due to
factors described below.
The Company's operating margin increased 11% or $5,280,000
during the period due to higher firm gas sales (resulting
from annualized customer growth of 2% and weather which was
2.3% colder than the comparable period in the prior year and
11% colder than normal) and a 4.9% rate increase effective
November 1, 1993.
Total operating expenses increased by 11% or $4,109,000,
of which depreciation and amortization expense increased
$1,926,000 due to higher depreciation rates approved with
the Company's 1993 rate increase. Operations expense
increased by $1,488,000 -- which includes $1,087,000 in
higher payroll costs caused primarily by responding to the
effects of the extremely cold weather during the first
quarter of 1994 and $456,000 in increased bad debt expense.
Income taxes increased $505,000 or 17% due to a higher
level of income subject to tax.
Other operating income increased $1,250,000 due to
improved results for Transgas. This increase reflects
heightened demand for Transgas' liquefied natural gas (LNG)
delivery and vaporization services resulting from the
extremely cold winter of 1993-94.
Twelve Months Ended September 30, 1994 and 1993
Net income for the twelve-month period ending September
30, 1994 was $13,172,000 compared to $10,644,000 for the
same period in 1993. This 24% or $2,528,000 increase is due
to factors described below.
The Company's operating margin increased 11% or $7,750,000
during the period due to higher firm gas sales resulting
from continued customer growth and an increase in rates
effective November 1, 1993. Weather was 1.6% colder than the
comparable prior twelve-month period and 9.1% colder than
normal.
Total operating expenses increased by 9.4% or $4,556,000,
of which depreciation and amortization expense increased
$2,309,000 due to higher depreciation rates approved with
the Company's 1993 rate increase. Operations expense
increased by $1,512,000 -- which includes higher payroll
costs caused primarily by responding to the effects of the
extremely cold weather during the first quarter of 1994 and
increased bad debt expense.
Income taxes increased $1,293,000 or 20% due to a higher
level of income subject to tax.
Other operating income increased $1,493,000 due to the
significant increase in LNG delivery and vaporization
services provided by Transgas resulting from the heightened
demand for LNG as a result of the extremely cold 1993-94
winter.
Non-operating income (net of income taxes) for the 1993
period included non-recurring insurance settlements of
$815,000 related to environmental matters and a discontinued
line of business.
Liquidity and Capital Resources
In July 1994, the Company established a bank line of
credit of $75,000,000 with a consortium of four banks to
replace its expiring $60,000,000 bank line of credit. The
$75,000,000 bank line of credit expires on June 15, 1997.
The bank line of credit allows the Company to borrow from
time to time up to $75,000,000, less whatever amount has
been borrowed through the Company's gas inventory trust
(described below). The line of credit allows the Company the
option to borrow under four alternative rates: prime rate,
certificate of deposit rate, eurodollar rate (LIBOR), and a
competitive bid option.
The Company has an agreement with a single-purpose
Massachusetts trust, the Company's gas inventory trust,
under which the Company sells supplemental gas inventory to
the trust at the Company's cost. The Company's agreement
with the trust requires it to repurchase such inventory at
cost when needed and to reimburse the trust for expenses
incurred to finance the gas inventory. The trust finances
such purchases of inventory by borrowing under a bank line
of credit with a maximum borrowing commitment of $30,000,000
that is complementary to and on similar terms as the
Company's bank line of credit described above.
PART II - OTHER INFORMATION
Item 5. Other Information
The DPU recently opened a generic investigation to study
the appropriateness of implementing incentive regulation for
electric and gas companies. The concept of incentive
regulation was promoted by Colonial in the DPU's recently
completed proceeding on mergers and acquisitions as a
potentially more efficient way to encourage safe, reliable
and least cost utility service. The Company filed initial
comments on November 1, 1994. Upon review of all electric
and gas companies' comments, the DPU will determine if a
public hearing is appropriate. The DPU has stated that it
intends to issue a "policy statement" regarding incentive
regulation in early 1995.
Item 6. Exhibits and Reports on Form 8-K
a. List of Exhibits
None
b. Reports on Form 8-K
There were no reports filed on Form 8-K for the quarter
ended September 30, 1994.
SIGNATURES
Pursuant to the requirements 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.
COLONIAL GAS COMPANY
(Registrant)
Date: November 10, 1994 F.L. Putnam III
President
Date: November 10, 1994 Nickolas Stavropoulos
Vice President - Finance and
Chief Financial Officer
[END OF COLONIAL GAS COMPANY FORM 10-Q FOR THE PERIOD
ENDED SEPTEMBER 30, 1994]
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