<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
______________
FORM 10-Q
__________
(MARK ONE)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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 0-17605
YANKEE ENERGY SYSTEM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CONNECTICUT 06-1236430
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
599 RESEARCH PARKWAY
MERIDEN, CONNECTICUT 06450-1030
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER (203) 639-4000
NOT APPLICABLE
(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 ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
NUMBER OF SHARES OF COMMON STOCK ($5.00 PAR VALUE)
OUTSTANDING AT APRIL 30, 1994 10,287,683
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
<CAPTION>
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets - March
31, 1994 and September 30, 1993 2-3
Consolidated Statements of Income -
Three and Six Months Ended
March 31, 1994 and 1993 4
Consolidated Statements of Cash Flows -
Six Months Ended March 31, 1994 and 1993 5
Notes to Consolidated Financial
Statements 6-7
Report on Review by Independent
Public Accountants 8
<CAPTION>
<S> <C>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-12
PART 11. OTHER INFORMATION
<CAPTION>
<S> <C>
Item 4. Submission of Matters to a
Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, SEPTEMBER 30,
1994 1993
____ ____
(UNAUDITED)
(Thousands of Dollars)
<S> <C> <C>
ASSETS
Utility Plant, at original cost $ 453,296 $ 445,912
Less: Accumulated provision for
depreciation 157,316 149,300
_________ _________
295,980 296,612
Construction work in progress 12,242 11,772
_________ _________
Total Net Utility Plant 308,222 308,384
_________ _________
Other Property and Investments 25,110 23,543
_________ _________
Current Assets:
Cash and temporary cash investments 23,133 6,509
Accounts receivable, net 63,490 20,214
Fuel supplies 4,971 15,702
Other materials and supplies 2,070 2,393
Accrued utility revenues 15,012 5,016
Prepaid taxes -- 3,894
Other 3,026 4,618
_________ _________
Total Current Assets 111,702 58,346
_________ _________
Deferred Gas Costs and Other 4,833 7,385
Recoverable Pipeline
Transition Costs 9,493 7,531
Recoverable Environmental
Cleanup Costs 36,110 36,104
Receivable from Customers for
Unrecovered Income Taxes (Note 3) 28,416 ---
Receivable from Customers for
Unrecovered Postretirement Benefits 709 ---
(Note 3) ________ _______
Total Assets $ 524,595 $ 441,293
________ _________
________ _________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31, SEPTEMBER 30,
1994 1993
____ ____
(UNAUDITED)
(Thousands of Dollars)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shares - $5.00 par value.
Authorized 20,000,000 shares; 10,287,683
shares outstanding at March 31, 1994
and September 30, 1993 $ 51,438 $ 51,438
Capital surplus, paid in 84,974 84,930
Retained earnings 26,108 8,796
Employee stock ownership
plan guarantee (2,200) (2,600)
_________ _______
Total Common Shareholders' Equity 160,320 142,564
Preferred stock subject to
mandatory redemption 15,000 15,000
Long-term debt, net of
current portion 148,333 153,633
________ _______
Total Capitalization 323,653 311,197
________ _______
Current Liabilities:
Notes payable to banks 6,000 ---
Long-term debt, current portion 8,667 8,667
Accounts payable 20,626 16,739
Accrued interest 4,107 4,081
Accrued taxes 25,678 ---
Refundable energy costs 1,583 3,703
Pipeline transition costs payable 1,542 2,691
Other 3,811 4,026
________ ________
Total Current Liabilities 72,014 39,907
________ ________
Accumulated Deferred Income Taxes 33,813 38,441
Unfunded Deferred Income Taxes (Note 3) 28,402 ---
Accumulated Deferred Investment
Tax Credits 10,023 10,212
Reserve for Environmental Cleanup Costs 35,000 35,000
Unfunded Postretirement Benefits (Note 3) 709 ---
Deferred Gas Cost 14,882 ---
Other Deferred Credits 6,099 6,536
________ _______
Commitments and Contingencies (Note 2)
Total Capitalization and
Liabilities $ 524,595 $ 441,293
________ ________
________ ________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
__________________
1994 1993
____ ____
(Thousands of Dollars, Except
Share Information)
<S> <C> <C>
Operating Revenues $ 134,369 $ 123,624
Less: Cost of Gas 74,004 66,613
_______ _______
Revenues, net of cost of gas 60,365 57,011
________ _______
Other Operating Expenses:
Operations 14,223 13,418
Maintenance 2,075 1,808
Depreciation 4,323 4,421
Federal and state income taxes 13,194 12,743
Taxes other than income taxes 8,574 8,000
_______ _______
Total Other Operating Expenses 42,389 40,390
_______ _______
Operating Income 17,976 16,621
Other Income, net 645 1,062
________ _______
Income Before Interest Charges 18,621 17,683
Interest Charges, net 3,425 3,570
________ _______
Income Before Preferred Dividends 15,196 14,113
Preferred Dividends 274 274
________ ______
Net Income $ 14,922 $ 13,839
_______ ______
_______ ______
Total Earnings per Common Share $ 1.45 $ 1.35
_______ ______
_______ ______
Average Common Shares Outstanding 10,287,683 10,287,683
___________ __________
___________ __________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
__________________
1994 1993
____ ____
(Thousands of Dollars, Except
Share Information)
<S> <C> <C>
Operating Revenues $ 226,155 $ 214,608
Less: Cost of Gas 122,305 115,202
_______ _______
Revenues, net of cost of gas 103,850 99,406
_______ _______
Other Operating Expenses:
Operations 26,739 25,700
Maintenance 3,642 3,126
Depreciation 8,696 8,481
Federal and state income taxes 21,175 19,486
Taxes other than income taxes 14,178 14,302
_______ _______
Total Other Operating Expenses 74,430 71,095
_______ _______
Operating Income 29,420 28,311
Other Income, net 1,193 1,543
_______ _______
Income Before Interest Charges 30,613 29,854
Interest Charges, net 6,783 7,656
_______ _______
Income Before Preferred Dividends 23,830 22,198
Preferred Dividends 548 548
_______ ______
Net Income $ 23,282 $ 21,650
_______ ______
_______ ______
Total Earnings per Common Share $ 2.26 $ 2.10
_______ ______
_______ ______
Average Common Shares Outstanding 10,287,683 10,287,683
___________ __________
___________ __________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1994 1993
____ ____
(Thousands of Dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before preferred dividends $ 23,830 $ 22,198
Adjusted for the following:
Depreciation 8,696 8,481
Iroquois and other equity earnings (1,666) (1,994)
Deferred income taxes net (4,800) 751
Deferred gas cost activity and other
non-cash items 13,653 16,107
Changes in working capital:
Accounts receivable and accrued
utility revenues (53,272) (49,736)
Accounts payable 3,887 6,617
Accrued taxes 29,572 20,667
Other working capital
(excludes cash) 10,618 8,041
________ _______
Net cash provided by
operating activities 30,518 31,132
_________ _______
CASH FLOWS FROM FINANCING ACTIVITES:
Net proceeds from common stock issuance --- 21,449
Long-term debt issuance --- 20,000
Retirement of long-term debt (5,300) (5,750)
Increase(decrease)in short-term debt 6,000 (15,300)
Financing expenses 12 ---
Cash dividends-preferred stock (548) (548)
Cash dividends-common stock (5,966) (5,692)
_________ ________
Net cash provided by (used for)
financing activities (5,802) 14,159
________ ________
INVESTMENT IN PLANT AND OTHER:
Utility Plant, net of allowance for other
funds used during construction (8,193) (7,310)
Other property and investments --- (217)
Investment in nonutility plant (1,000) ---
Iroquois distribution 1,101 ---
_______ _______
Net cash used for plant and other
investments (8,092) (7,527)
________ _______
NET INCREASE IN CASH
FOR THE PERIOD 16,624 37,764
Cash, beginning of period 6,509 462
________ _______
Cash, end of period $ 23,133 $ 38,226
________ _______
________ _______
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, net of amounts capitalized $ 7,230 $ 6,992
Income taxes $ 1,609 $ 2,872
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1) GENERAL
The accompanying unaudited consolidated financial statements
should be read in conjunction with the Annual Report of
Yankee Energy System, Inc. (Yankee Energy or the Company) on
Form 10-K for the fiscal year ended September 30, 1993 (1993
Form 10- K), including the audited financial statements (and
notes thereto) incorporated by reference therein, and the
Company's quarterly report on Form 10-Q for the quarter
ended December 31, 1993 (First Quarter Form 10-Q). In the
opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to
present fairly the financial position of the Company as of
March 31, 1994, and its results of operations for the three
and six months ended March 31, 1994 and 1993 and cash flows
for the six months ended March 31, 1994 and 1993. The
results of operations for the three and six months ended
March 31, 1994 and 1993 are not necessarily indicative of
the results expected for a full year, due mainly to the
highly seasonal nature of the gas business.
2) COMMITMENTS AND CONTINGENCIES
TRANSITION COSTS - ORDER NO. 636: The three major pipeline
systems serving Yankee Gas, Iroquois Gas Transmission
System,Tennessee Gas Pipeline Company, and Algonquin Gas
Transmission Company and its affiliate, Texas Eastern
Transmission Company, have all restructured their services
pursuant to Federal Energy Regulatory Commission (FERC)
Order 636. Through March 31, 1994, Yankee Gas has paid
approximately $8.0 million of transition costs. These
payments, as well as an additional $1.5 million representing
an additional transition cost liability likely to be
incurred by Yankee Gas, have been deferred for future
recovery. This estimate of $9.5 million may be subject to
revision following future FERC orders. Yankee Gas'
management anticipates full recovery of transition
costs consistent with past Connecticut Department of Public
Utility Control (DPUC) practices concerning gas costs. The
DPUC has established a docket concerning generic issues
related to Order 636 including cost recovery.
There have been no other material developments in this area.
For a detailed description of the items that comprise
commitments and contingencies of the Company, see the 1993
Form 10-K.
3) ADOPTION OF NEW ACCOUNTING STANDARDS
INCOME TAXES: Effective October 1, 1993, Yankee Energy
adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109).
FAS 109 supersedes previously issued income tax accounting
standards. Yankee Energy recorded, as of October 1, 1993,
an additional deferred tax liability and a regulatory asset,
representing the probable future rate recovery from
customers when such deferred tax liability becomes payable.
The deferred tax liability primarily represents certain
temporary differences between the book and tax basis of
utility plant for which deferred taxes had not previously
been recorded in accordance with the regulatory rate
practices of the DPUC. The adoption of FAS 109 did not have
a material effect on the Company's results of operations or
financial position.
POSTRETIREMENT BENEFITS: Effective October 1, 1993, Yankee
Energy adopted the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (FAS 106). The
provisions of FAS 106 require that Yankee Energy record the
cost of postretirement benefits over the employees' active
service periods rather than on an as-paid basis as was
Yankee Energy's prior practice. Yankee Energy's
unrecognized transitional benefit obligation liability was
approximately $20 million as of October 1, 1993. Yankee
Energy's annual costs for postretirement benefit obligations
other than pension, including amortization of the transition
obligation over a twenty-year period, will be approximately
$3.1 million in fiscal 1994, based on the provisions of FAS
106. A one percentage point increase in the inflation rate
from the assumed rate would increase the unrecognized
transitional benefit obligation liability by approximately
$3.3 million as of October 1, 1993, and would increase the
service cost and interest cost components of postretirement
benefit cost by approximately $0.5 million annually. The
DPUC is allowing $1.728 million of associated expenses to be
recovered in rates and has indicated its objective to grant
full rate recovery within a reasonable time frame of all FAS
106 related expenses. On this basis, the Company is
deferring for future recovery the difference between the
annual estimated expense and the portion currently being
collected in rates. The adoption of FAS 106 increased
assets and liabilities but did not have a negative impact on
the Company's results of operations or financial position.
4) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform
with current year classifications.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Yankee Energy System, Inc.:
We have reviewed the accompanying consolidated balance sheet of
Yankee Energy System, Inc. (a Connecticut corporation) and
subsidiaries (the Company) as of March 31, 1994, and the related
consolidated statements of income for the three-month and
six-month period then ended and cash flows for the six-month
period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
As discussed in Note 3, effective October 1, 1993, the Company
changed their method of accounting for postretirement benefits
other than pensions and income taxes.
Arthur Andersen & Co.
Hartford, Connecticut
April 28, 1994
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
This section contains management's assessment of the financial
condition of Yankee Energy System, Inc. (the Company or Yankee
Energy) and the principal factors which had an impact on the
results of operations in the periods presented. This discussion
should be read in conjunction with the Company's Annual Report on
Form 10-K for the year ended September 30, 1993, including the
audited consolidated financial statements (and notes thereto)
incorporated by reference therein, and the Company's quarterly
report on Form 10-Q for the quarter ended December 31, 1993.
FINANCIAL CONDITION
Overview
Consolidated earnings per share for the three months ended March
31, 1994 were $1.45 compared to $1.35 for the three months ended
March 31, 1993, a seven percent increase. For the six months
ended March 31, 1994, consolidated earnings were $2.26 per share
compared to the $2.10 for the six months ended March 31, 1993, an
eight percent increase.
Earnings for common shares increased for both periods in fiscal
1994 compared to last year due primarily to higher revenues from
the Company's utility subsidiary, Yankee Gas Services Company
(Yankee Gas), as a result of higher firm sales resulting
primarily from colder weather in fiscal 1994. These increases
were partially offset by normal increases in operating and tax
expense.
RESULTS OF OPERATIONS
COMPARISON OF THE SECOND QUARTER OF FISCAL 1994 WITH THE SECOND
QUARTER OF FISCAL 1993
REVENUES AND SALES
Operating revenues increased $10.7 million in the second quarter
of fiscal 1994 compared with the same period in the prior fiscal
year.
The components of the change in operating revenues are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Changes in
Operating Revenues
Increase/(Decrease)
(Millions of Dollars)
<S> <C>
Firm and other (excluding gas cost recoveries):
Sales, transportation and other $3.9
____
Subtotal - firm and other 3.9
____
Interruptible sales and transportation
(excluding gas cost recoveries): (0.6)
____
Total: Excluding gas cost recoveries 3.3
Plus: Gas cost recoveries 7.4
____
Total change in operating revenues $10.7
____
____
</TABLE>
The corresponding changes in the Company's throughput were as
follows:
<TABLE>
<CAPTION>
Quarter Ended March 31,
(Mcf - thousands)
1994 1993 Increase/
____ ____ (Decrease)
________
<S> <C> <C> <C>
Firm sales and transportation 14,726 13,643 1,083
Interruptible sales and
transportation 1,510 2,269 (759)
Total 16,236 15,912 324
______ ______ ____
______ ______ ____
</TABLE>
Firm and other revenues (excluding gas cost recoveries) increased
for the second quarter of fiscal 1994 compared to the same period
in fiscal 1993 due to a 7.6 percent increase in firm sales
primarily due to colder weather.
Higher gas costs in the three moths ended March 31, 1994 making
gas less economical for customers able to use alternative fuels,
resulted in a decrease in interruptible margins this quarter.
Gas cost recoveries increased due to higher sendout in the second
quarter of fiscal 1994 compared to the same period in fiscal 1993
and higher per-unit gas costs.
EXPENSES
Cost of gas increased $7.4 million for the three months ended
March 31, 1994 compared to the three months ended March 31, 1993
due to higher sendout and higher per-unit costs.
The components of cost of gas were as follows:
<PAGE>
<TABLE>
<CAPTION>
Quarter Ended March 31,
1994 1993
____ ____
(Millions of Dollars)
<S> <C> <C>
Actual gas Purchases $60.2 $57.7
Effect of purchased gas adjustment
(PGA) clause 13.8 8.9
_____ _____
Total expense $74.0 $66.6
_____ _____
_____ _____
</TABLE>
Operations and maintenance expenses increased $1.1 million in the
second quarter of fiscal 1994 compared to the second quarter of
fiscal 1993, due to higher levels of payroll and benefits
expenses.
Federal and State income taxes, including the portion contained
in Other Income, increased $0.4 million due to higher pre-tax
operating income in fiscal 1994 compared to the same period in
fiscal 1993.
Taxes other than income taxes increased $0.6 million for the
three months ended March 31, 1994 compared to the three months
ended March 31, 1993 primarily due to higher Connecticut Gross
Earnings taxes resulting from higher revenues in fiscal 1994.
Other income, net (excluding Federal and State income taxes)
decreased $0.5 million for the three months ended March 31, 1994
due to lower equity earnings associated with Housatonic's
investment in Iroquois.
COMPARISON OF THE FIRST SIX MONTHS OF FISCAL 1994 WITH THE FIRST
SIX MONTHS OF FISCAL 1993
Operating revenues increased $11.5 million in the first six
months of fiscal 1994 compared with the same period in the prior
year.
<PAGE>
The components of the change in operating revenues are as
follows:
<TABLE>
<CAPTION>
Change in
Operating Revenues
Increase/(Decrease)
(Millions of Dollars)
<S> <C>
Firm and other revenues
(excluding gas cost recoveries):
Regulatory decision $ 0.2
Sales, transportation and other 4.4
____
Subtotal - Firm and other 4.6
Interruptible (excluding gas cost
recoveries):
Margin sharing - 1993 (0.1)
_____
Subtotal - Interruptible (0.1)
Total - Excluding gas cost
recoveries 4.5
Plus: Gas cost recoveries 7.0
___
Total change in operating revenues $11.5
____
____
</TABLE>
Firm and other revenues (excluding gas cost recoveries) increased
in fiscal 1994 primarily due to a 4.6 percent firm sales increase
in the first six months of fiscal 1994 compared with the same
period in the prior year reflecting colder weather than the prior
period.
Gas cost recoveries increased in fiscal 1994 due to higher firm
sales and the refund of prior overcollections of gas costs from
firm customers in fiscal 1993.
<PAGE>
The components of the Company's throughput are as follows:
<TABLE>
<CAPTION>
Six Months Ended March 31,
(mcf - thousands)
<S> <C> <C> <C>
Increase/
1994 1993 (Decrease)
____ ____ __________
Firm sales and
transportation 24,548 23,424 1,124
Interruptible sales
and transportation 4,092 4,294 (202)
_____ _____ _____
Total 28,640 27,718 922
______ ______ ___
______ ______ ___
</TABLE>
Firm sales increased primarily due to the colder weather
experienced in fiscal 1994 compared to the same period in 1993.
Interruptible and other decreased as a result of higher gas
costs.
Cost of gas increased $7.1 million in fiscal 1994 due primarily
to higher firm sales and the fiscal 1993 refund of prior year
overcollections of gas costs.
Operations and maintenance expenses increased $1.6 million in the
fiscal 1994 period due to higher levels of payroll and benefits
expenses.
Depreciation expense increased $0.2 million in the fiscal 1994
compared to fiscal 1993 primarily due to increased plant balances
in fiscal 1994.
Federal and state income taxes, including the portion contained
in Other Income, increased $1.8 million due primarily to a higher
income from operations in fiscal 1994.
Other income (excluding Federal and State income taxes) decreased
$0.3 million, in the fiscal 1994 period due primarily to lower
earnings associated with Housatonic's investment in Iroquois.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for utility plant and other investments totaled $8.1
million for the first six months of fiscal 1994, reflecting a
$0.6 million increase from the same period in fiscal 1993. This
increase was due primarily to the deferral of construction
activities in the first quarter of fiscal 1993 resulting from a
ten-week work stoppage during that period. During the first six
months of fiscal 1994, construction additions were supported by
cash from operations. Internally generated cash flows during
fiscal 1994 approximated the cash flows generated during the same
period in fiscal 1993.
The seasonal nature of gas revenues, inventory purchases and
construction expenditures create a need for short-term borrowing
to supplement internally generated funds. Yankee Gas has
arranged a $40 million revolving line of credit with a group of
five banks whereby funds may be borrowed on a short-term
revolving basis using either fixed or variable rate loans.
Yankee Gas also has another $22 million of credit lines available
on an uncommitted basis. At March 31, 1994, Yankee Gas had no
borrowings outstanding on its agreements. In addition, Yankee
Energy has $6.0 million outstanding at March 31, 1994 on a $7.0
million committed line of credit.
The long-term credit needs of Yankee Gas are being met by a first
mortgage bond indenture which provides for the issuance of bonds
from time to time, subject to certain issuance tests.
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Yankee Energy Shareholders on
February 25, 1994, the following directors were elected
to three-year terms expiring at the 1997 Annual
Meeting: Frederick M. Lowther, Leonard A. O'Connor and
Emery G. Olcott. Directors continuing in office are
John K. Armstrong, Philip T. Ashton, Eileen S. Kraus,
Thomas H. O'Brien and Nicholas L. Trivisonno. William
O. Bailey retired as Chairman of the Board of the
Company effective at the conclusion of the Annual
Meeting. Philip T. Ashton was elected Chairman of the
Board at the Board of Directors meeting following the
Annual Meeting. Shareholders also ratified the
appointment of Arthur Andersen & Co. as the Company's
independent auditors.
Item 5. OTHER INFORMATION
Iroquois has been informed by the U. S. Attorney's
Offices for the Northern, Southern and Eastern
Districts of New York that a civil investigation is
underway to determine whether Iroquois committed civil
environmental violations during construction of the
pipeline. In February, 1992, 26 alleged violations
were identified to Iroquois in writing. In response,
Iroquois denied that such violations occurred.
Iroquois subsequently was informed that alleged
violations included certain field reports prepared by a
Federal/State Inter-Agency Task Force which surveyed
the right-of-way in connection with the right-of-way
restoration program. Iroquois responded to the
appropriate U. S. Attorneys' Offices that none of
the matters referenced in field reports issued to date
represent violations of any law or governmental
authorization. No proceedings in connection with this
civil investigation have been commenced by the federal
government against Iroquois.
On December 3, 1993, Iroquois received notification
from the Enforcement Staff of the Federal Energy
Regulatory Commission's Office of the General Counsel
("Enforcement") that Enforcement has commenced a
preliminary, non-public investigation concerning
Iroquois' construction of certain of its pipeline
facilities. That office has requested certain
information regarding such construction. In addition,
on December 27, 1993, Iroquois received a similar
request for information from the Army Corps of Engineers
requesting certain information regarding permit
compliance in connection with certain aspects of the
pipeline's construction. Iroquois is evaluating and
responding to these requests for information and
intends to work with these agencies to allay their
concerns. No proceedings have been commenced against
Iroquois in connection with these agency inquiries.
A criminal investigation has been initiated against
Iroquois and its environmental consultant by the U. S.
Attorneys' Office for the Northern District of New York
in conjunction with the U. S. Environmental Protection
Agency ("EPA") and the Federal Bureau of Investigation
("FBI"). According to a press release issued by the
FBI in June, 1992, areas under investigation include
possible environmental violations, wire fraud, mail
fraud, and providing false information of concealment
of information from federal agencies in conjunction
with the construction of the base pipeline. To date no
criminal charges have been filed, and the Assistant
U. S. Attorney in charge of the investigation has
stated that he is not yet ready to meet with Iroquois'
attorneys to discuss the specifics of the matter.
Based upon information currently available to the
Company, the Company believes that the ultimate
resolution of these matters will not have a material
adverse effect on the financial conditions or results
of operations of the Company and its subsidiaries.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits - None.
b. Reports on Form 8-K - None.
<PAGE>
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.
YANKEE ENERGY SYSTEM, INC.
__________________________
(Registrant)
Date: May 12, 1994 /s/ Michael E. Bielonko
___________________________
Michael E. Bielonko
Vice President, Treasurer and
Chief Financial Officer
Date: May 12, 1994 /s/ Nicholas A. Rinaldi
___________________________
Nicholas A. Rinaldi
Controller
