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, 1997
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: (978) 322-3000
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, 1997 was 8,653,666.
COLONIAL GAS COMPANY
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income -
Three Months Ended September 30, 1997 and 1996
Nine Months Ended September 30, 1997 and 1996
Twelve Months Ended September 30, 1997 and 1996
Consolidated Condensed Balance Sheets -
September 30, 1997, December 31, 1996 and
September 30, 1996
Consolidated Condensed Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996
Twelve Months Ended September 30, 1997 and 1996
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,
1997 1996
(In Thousands Except
Per Share Amounts)
Operating Revenues $15,190 $15,245
Cost of gas sold 8,587 8,474
Operating Margin 6,603 6,771
Operating Expenses:
Operations 7,345 7,156
Maintenance 1,078 968
Depreciation and Amortization 2,976 2,765
Taxes, other than income 1,253 1,237
Total Operating Expenses 12,652 12,126
Income Taxes (3,029) (2,789)
Utility Operating Loss (3,020) (2,566)
Other Operating Income:
Truck transportation revenues 2,470 2,902
Truck transportation expenses,
including income
taxes and interest 2,018 2,050
Truck transportation net income 452 852
Other, net of income taxes 4 76
Total Other Operating Income 456 928
Non-Operating Income, Net 91 219
Loss Before Interest and Debt Expense (2,473) (1,419)
Interest and Debt Expense 2,093 2,161
Net Loss $(4,566) $(3,580)
Average Common Shares Outstanding 8,620 8,448
Loss per Average Common Share (0.53) $(0.42)
Dividends Paid per Common Share $ .335 $ .325
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended
September 30,
1997 1996
(In Thousands Except
Per Share Amounts)
Operating Revenues $125,726 $117,060
Cost of gas sold 68,621 60,368
Operating Margin 57,105 56,692
Operating Expenses:
Operations 22,464 23,563
Maintenance 3,338 3,234
Depreciation and Amortization 8,921 8,424
Taxes, other than income 4,029 4,077
Total Operating Expenses 38,752 39,298
Income Taxes 4,973 4,435
Utility Operating Income 13,380 12,959
Other Operating Income:
Truck transportation revenues 4,260 9,148
Truck transportation expenses,
including income
taxes and interest 3,949 7,006
Truck transportation net income 311 2,142
Other, net of income taxes 172 175
Total Other Operating Income 483 2,317
Non-Operating Income, Net 294 570
Income Before Interest and Debt Expense 14,157 15,846
Interest and Debt Expense 5,931 6,402
Net Income $8,226 $ 9,444
Average Common Shares Outstanding 8,576 8,413
Income per Average Common Share $ .96 $ 1.12
Dividends Paid per Common Share $1.005 $ 0.970
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Twelve Months Ended
September 30,
1997 1996
(In Thousands Except
Per Share Amounts)
Operating Revenues $179,595 $173,685
Cost of gas sold 95,440 88,045
Operating Margin 84,155 85,640
Operating Expenses:
Operations 30,284 31,901
Maintenance 4,581 4,403
Depreciation and Amortization 11,725 11,025
Taxes, other than income 5,324 5,303
Total Operating Expenses 51,914 52,632
Income Taxes 9,626 9,767
Utility Operating Income 22,615 23,241
Other Operating Income:
Truck transportation revenues 6,143 11,197
Truck transportation expenses,
including income
taxes and interest 5,947 8,918
Truck transportation net income 196 2,279
Other, net of income taxes 206 181
Total Other Operating Income 402 2,460
Non-Operating Income, Net 481 1,021
Income Before Interest and Debt Expense 23,498 26,722
Interest and Debt Expense 8,237 8,749
Net Income $15,261 $17,973
Average Common Shares Outstanding 8,554 8,395
Income per Average Common Share $ 1.78 $ 2.14
Dividends Paid per Common Share $ 1.33 $ 1.29
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31, September 30,
1997 1996 1996
(Unaudited) (Unaudited)
(In Thousands)
Utility Property:
At original cost $356,141 $333,319 $327,102
Accumulated depreciation (91,233) (82,336) (81,273)
Net utility property 264,908 250,983 245,829
Non-Utility Property - Net 6,701 5,925 6,001
Net property 271,609 256,908 251,830
Capital Leases - Net 2,392 1,811 1,795
Current Assets:
Cash and cash equivalents 1,563 3,541 9,061
Accounts receivable - net 4,599 15,004 4,827
Accrued utility revenues 723 6,333 701
Unbilled gas costs 13,694 19,238 13,201
Fuel and other inventories 14,495 14,849 14,492
Prepayments and other current
assets 9,487 8,593 10,323
Total current assets 44,561 67,558 52,605
Deferred Charges and Other
Assets:
Unrecovered deferred
income taxes 9,192 9,774 9,980
Unrecovered environmental
expenses - incurred 3,641 4,011 3,779
Unrecovered environmental
expenses - accrued 656 1,183 1,793
Unrecovered transition
costs - accrued 4,500 4,500 3,600
Other 19,871 18,667 16,625
Total deferred charges
and other assets 37,860 38,135 35,777
Total Assets $356,422 $364,412 $342,007
(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,
1997 1996 1996
(Unaudited) (Unaudited)
(In Thousands)
Capitalization:
Common equity:
Common Stock - par value $3.33 per share
Authorized - 15,000 shares
Issued and outstanding -
8,647, 8,518 and
8,472 shares $28,794 $27,863 $28,212
Premium on common stock 56,517 51,447 53,363
Retained earnings 31,011 25,760 27,043
Total Common equity 116,322 105,070 108,618
Long-term debt 100,144 75,418 85,305
Total capitalization 216,466 180,488 193,923
Capital Lease Obligations 1,471 1,359 967
Current Liabilities:
Current maturities of
long-term debt 10,161 6,141 5,149
Current capital lease
obligations 921 894 828
Notes payable 34,600 61,835 52,000
Gas inventory purchase
obligations 9,934 12,340 10,899
Accounts payable 9,390 12,150 8,605
Other 11,767 8,306 9,713
Total current
liabilities 76,773 101,666 87,194
Deferred Credits and Reserves:
Deferred income taxes-funded 39,126 32,299 34,771
Deferred income taxes-
unfunded 9,192 10,562 9,980
Accrued environmental expenses 656 2,300 1,793
Accrued transition costs 4,500 3,600 3,600
Other 8,238 10,147 9,779
Total deferred credits
and reserves 61,712 58,908 59,923
Total Capitalization and
Liabilities $ 356,422 $ 342,421 $ 342,007
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
1997 1996
(In Thousands)
Cash Flows From Operating Activities:
Net income $ 8,226 $ 9,444
Adjustments to reconcile net
income to net cash 14,158 18,198
Changes in current assets and
liabilities 16,283 6,118
Net cash provided by operating
activities 38,667 33,760
Cash Flows From Investing Activities:
Capital expenditures (24,226) (20,187)
Change in deferred accounts (1,460) (3,499)
Net cash used in investing
activities (25,686) (23,686)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (8,535) (8,160)
Issuance of Common Stock 2,724 2,265
Issuance of long-term debt 15,000 20,000
Retirement of long-term debt (5,113) (11,105)
Debt issue cost (130) (278)
Change in notes payable (15,800) (9,835)
Change in gas inventory purchase
obligations (3,105) (1,441)
Net cash used in financing
activities (14,959) (8,554)
Net (decrease) increase in cash and
cash equivalents (1,978) 1,520
Cash and cash equivalents at
beginning of period 3,541 7,541
Cash and cash equivalents at end of
period $ 1,563 $ 9,061
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for:
Interest - net of amount
capitalized $ 7,480 $ 6,989
Income and franchise taxes $ 6,109 $ 6,780
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended
September 30,
1997 1996
(In Thousands)
Cash Flows From Operating Activities:
Net income $ 15,261 $17,973
Adjustments to reconcile net
income to net cash 19,090 21,492
Changes in current assets and
liabilities 1,262 (4,798)
Net cash provided by operating
activities 35,613 34,667
Cash Flows From Investing Activities:
Capital expenditures (32,281) (27,850)
Change in deferred accounts (4,550) (5,611)
Net cash used in investing
activities (36,831) (33,461)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (11,293) (10,829)
Issuance of Common Stock 3,735 2,923
Issuance of long-term debt 25,000 40,000
Retirement of long-term debt (5,149) (27,502)
Debt issue costs (208) (3,217)
Change in notes payable (17,400) 200
Change in gas inventory purchase
obligations (965) (968)
Net cash (used in) provided by
financing activities (6,280) 607
Net (decrease) increase in cash
and cash equivalents (7,498) 1,813
Cash and cash equivalents at
beginning of period 9,061 7,248
Cash and cash equivalents at end of
period $ 1,563 $ 9,061
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - net of amount
capitalized $ 9,640 $ 10,489
Income and franchise taxes $ 7,817 $ 6,827
(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, 1997 and 1996 and results of
operations for the three, nine and twelve month periods
ended September 30, 1997 and 1996 and cash flows for the
nine and twelve month periods ended September 30, 1997
and 1996.
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, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full
year.
3. During the nine months ended September 30, 1997, the
Company issued 129,000 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 $428,000
and Premium on Common Stock increased $2,296,000.
4. Contingencies
Reference is made to Note I/Contingencies of the Notes to
Consolidated Financial Statements contained within the
Company's 1996 Annual Report to Stockholders.
5. Reclassifications are made periodically to previously
issued financial statements to conform to the current
year presentation.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Three Months Ended September 30, 1997 and 1996
The Company's net loss for the three months ended
September 30, 1997 was $4,566,000, or $.53 per share, which
is 28% or $986,000 more than the $3,580,000 loss, or $.42
per share, reported for the same period last year. This was
primarily caused by two factors. First, utility operating
loss increased $454,000 or 18%, due to a $168,000 decrease
in operating margin and a $299,000 increase in operations
and maintenance expense. Second, net income for Transgas
Inc., Colonial's energy trucking subsidiary, decreased
$400,000 or 47% as a result of warmer weather in the winter
of 1996-97. 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 residential customers are heating accounts.
Nine Months Ended September 30, 1997 and 1996
Net income for the nine months ended September 30, 1997
was $8,226,000 or $0.96 per share, compared to $9,444,000 or
$1.12 per share for the comparable 1996 period.
The Company's operating margin increased 0.7% or $413,000
during the period due to a 5.7% increase in total gas sold
despite weather which was 3.9% warmer than the comparable
period in the prior year and 1.1% warmer than normal. The
Company customer base grew by 4.0% during the nine months
ended September 30, 1997.
Operations and maintenance expenses decreased $995,000 or
3.7% due primarily to decreased insurance expenses and bad
debt expenses, and the expiration of the amortization of
previously deferred rate case expenses. Depreciation and
amortization expense was up $497,000 due to an increase in
utility property.
Income taxes increased $538,000 or 12% due to a higher
level of utility income subject to tax.
Other operating income fell $1,834,000, or 79%, due
primarily to the financial results for Transgas compared to
the 1996 period. A 52% decrease in Transgas' LNG hauls over
the first nine months led to a $4,888,000 decrease in
revenue and resulted in a $1,831,000 decrease in truck
transportation net income. The decreased LNG hauls were
primarily due to the warmer than normal weather during the
winter months.
Twelve Months Ended September 30, 1997 and 1996
Net income for the twelve month period ended September
30, 1997 fell to $15,261,000, or $1.78 per share, down 15%
from $17,973,000 or $2.14 per share over the twelve month
period ended September 30, 1996.
The Company's operating margin decreased 1.7% or
$1,485,000 during the current twelve month period due to a
1.5% decrease in firm gas sales and firm transportation
resulting from weather that was 4.6% warmer than the
comparable prior year period.
Total operating expenses decreased by $718,000.
Operations and maintenance expenses decreased $1,439,000, or
4.0%, principally due to decreases in insurance expenses and
bad debt expenses, as well as the expiration of the
amortization of previously deferred rate case expense.
Depreciation and amortization increased $700,000, or 6.3%
due to an increase in utility property.
Income taxes decreased $141,000 or 1.4% due to a lower
level of utility income subject to tax.
Other operating income fell $2,058,000 primarily due to a
$2,083,000 decrease in net income for Transgas. The warmer
winter of 1996-1997 negatively affected Transgas'
performance as compared to the twelve-month period ended
September 30, 1996.
Interest and debt expense decreased $512,000 or 5.9% due
to decreased interest expense on long term debt and
increased regulatory interest income as a result of
increased unbilled gas costs.
Liquidity and Capital Resources
On September 12, 1997, the Company entered into a new
$75 million credit facility to replace a similar facility
which had expired. The new credit facility has a
3 year term but the maturity of each individual borrowing
made under the facility must be less than one year.
Like the facility it replaced, the new credit
facility is designed to allow the Company to meet its
short term working capital needs and provides the Company
with the option to borrow under any one of several
alternative rates. Up to $30 million of the credit facility
can be used to finance the Company's fuel inventory purchases.
PART II - OTHER INFORMATION
Item 5. Other Information
Effective September 18, 1997, the Company's Common Stock began
trading on the New York Stock Exchange under the symbol "CLG".
Previously, the Company's Common Stock was traded on the NASDAQ
National Market System.
Item 6. Exhibits and Reports on Form 8-K
a. List of Exhibits
The following Exhibits will be filed in an amendment
to this Form 10-Q:
Exhibit
4e Revolving Credit Agreement for Colonial Gas Company,
dated as of September 12, 1997, with Fleet National
Bank as Agent for designated Banks
4f Revolving Credit Agreement for Massachusetts Fuel
Inventory Trust, dated as of September 12, 1997,
with Fleet National Bank as Agent for designated
Banks
4h Security Agreement and Assignment of Contracts
dated as of September 12, 1997, made by Massachusetts
Fuel Inventory Trust in favor of Fleet National
Bank as Agent for designated Banks
b. Reports on Form 8-K
None
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 12, 1997 s/F.L. Putnam III
F.L. Putnam III
President and Chief Executive Officer
Date: November 12, 1997 s/Nickolas Stavropoulos
Nickolas Stavropoulos
Executive Vice President - Finance ,
Marketing and Chief Financial Officer
[END OF FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 1997]
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