-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PICnv0Gbz/FZcQoLbmQLhB9Tu0uEuilzW52qLPB3CYx4i/eGsOJHRmf4JZigtTyN ll/QskY2tZnvMtFHiwrsGQ== 0000071304-95-000015.txt : 19950516 0000071304-95-000015.hdr.sgml : 19950516 ACCESSION NUMBER: 0000071304-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMONWEALTH GAS CO CENTRAL INDEX KEY: 0000022620 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 041989250 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 002-01647 FILM NUMBER: 95538792 BUSINESS ADDRESS: STREET 1: ONE MAIN ST CITY: CAMBRIDGE STATE: MA ZIP: 02142 BUSINESS PHONE: 6172254000 MAIL ADDRESS: STREET 1: P O BOX 9150 CITY: CAMBRIDGE STATE: MA ZIP: 02142-9150 FORMER COMPANY: FORMER CONFORMED NAME: WORCESTER GAS LIGHT CO DATE OF NAME CHANGE: 19720126 10-Q 1 COMMONWEALTH GAS COMPANY FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 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, 1995 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 2-1647 COMMONWEALTH GAS COMPANY (Exact name of registrant as specified in its charter) Massachusetts 04-1989250 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Main Street, Cambridge, Massachusetts 02142-9150 (Address of principal executive offices) (Zip Code) (617) 225-4000 (Registrant's telephone number, including area code) (Former name, address and 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 [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class of Common Stock May 1, 1995 Common Stock, $25 par value 2,857,000 shares The Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this Form with the reduced disclosure format. PART I - FINANCIAL INFORMATION Item 1. Financial Statements COMMONWEALTH GAS COMPANY CONDENSED BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994 ASSETS (Unaudited) March 31, December 31, 1995 1994 (Dollars in Thousands) PROPERTY, PLANT AND EQUIPMENT, at original cost $336 151 $339 476 Less - Accumulated depreciation 89 531 85 162 246 620 254 314 Add - Construction work in progress 940 719 247 560 255 033 CURRENT ASSETS Cash 2 349 4 862 Advances to affiliates 12 165 - Accounts receivable 55 599 33 352 Unbilled revenues 14 212 20 892 Inventories, at average cost 13 244 25 754 Prepaid taxes - Property 885 2 861 Income - 619 Other 1 043 1 076 99 497 89 416 DEFERRED CHARGES Order 636 transition costs 18 447 19 201 Other 17 169 17 155 35 616 36 356 $382 673 $380 805 See accompanying notes. COMMONWEALTH GAS COMPANY CONDENSED BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994 CAPITALIZATION AND LIABILITIES (Unaudited) March 31, December 31, 1995 1994 (Dollars in Thousands) CAPITALIZATION Common Equity - Common stock, $25 par value - Authorized and outstanding - 2,857,000 shares, wholly-owned by Commonwealth Energy System (Parent) $ 71 425 $ 71 425 Amounts paid in excess of par value 27 739 27 739 Retained earnings 14 185 6 837 113 349 106 001 Long-term debt, less current sinking fund requirements 91 750 91 750 205 099 197 751 CURRENT LIABILITIES Interim Financing - Notes payable to banks - 24 950 Advances from affiliates - 11 220 - 36 170 Other Current Liabilities - Current sinking fund requirements 3 650 3 650 Accounts payable - Affiliated companies 1 556 2 669 Other 33 996 33 214 Refundable gas costs 51 279 27 832 Accrued taxes - Income 4 233 - Local property and other 2 776 3 317 Other 7 722 6 928 105 212 77 610 105 212 113 780 DEFERRED CREDITS Accumulated deferred income taxes 34 146 32 699 Unamortized investment tax credits and other 30 292 28 764 Order 636 transition costs 7 924 7 811 72 362 69 274 $382 673 $380 805 See accompanying notes. COMMONWEALTH GAS COMPANY CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Unaudited) 1995 1994 (Dollars in Thousands) GAS OPERATING REVENUES $107 932 $135 558 OPERATING EXPENSES Cost of gas sold 53 498 73 824 Other operation and maintenance 23 565 23 539 Depreciation 4 399 4 081 Taxes - Income 7 803 11 197 Local property 2 453 2 110 Payroll and other 951 960 92 669 115 711 OPERATING INCOME 15 263 19 847 OTHER INCOME 53 156 INCOME BEFORE INTEREST CHARGES 15 316 20 003 INTEREST CHARGES Long-term debt 2 054 2 129 Other interest charges 927 435 Allowance for borrowed funds used during construction (13) (6) 2 968 2 558 NET INCOME 12 348 17 445 RETAINED EARNINGS - Beginning of period 6 837 7 840 Dividends on common stock (5 000) (6 000) RETAINED EARNINGS - End of period $ 14 185 $ 19 285 See accompanying notes. COMMONWEALTH GAS COMPANY CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 (Unaudited) 1995 1994 (Dollars in Thousands) OPERATING ACTIVITIES Net income $ 12 348 $ 17 445 Effects of noncash items - Depreciation and amortization 8 116 5 696 Deferred income taxes and investment tax credits, net 1 218 100 Change in working capital, exclusive of cash, advances to affiliates, and interim financing 27 173 19 318 All other operating items 4 323 (1 002) Net cash provided by operating activities 53 178 41 557 INVESTING ACTIVITIES Additions to property, plant and equipment (exclusive of AFUDC) (2 343) (4 069) Allowance for borrowed funds used during construction (13) (6) Advances to affiliates (12 165) - Net cash used for investing activities (14 521) (4 075) FINANCING ACTIVITIES Payment of dividends (5 000) (6 000) Payment of short-term borrowings (24 950) (33 250) Advances from affiliates (11 220) 2 775 Net cash used for financing activities (41 170) (36 475) Net increase (decrease) in cash (2 513) 1 007 Cash at beginning of period 4 862 1 297 Cash at end of period $ 2 349 $ 2 304 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest, net of amounts capitalized $ 2 047 $ 1 810 Income taxes $ 1 604 $ 1 333 See accompanying notes. COMMONWEALTH GAS COMPANY NOTES TO CONDENSED FINANCIAL STATEMENTS (1) Accounting Policies Commonwealth Gas Company (the Company) is a wholly-owned subsidiary of Commonwealth Energy System. The parent company is referred to in this report as the "System" and together with its subsidiaries is collectively referred to as "the system." The Company's significant accounting policies are described in Note 1 of Notes to Financial Statements included in its 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period and makes allocations of certain expenses to interim periods based upon estimates of revenue from firm sales for the year. The Company has established various regulatory assets in cases where the Massachusetts Department of Public Utilities (DPU) and/or the Federal Energy Regulatory Commission have permitted or are expected to permit recovery of specific costs over time. Similarly, the regulatory liabilities established by the Company are required to be refunded to customers over time. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" (SFAS 121). SFAS 121 imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. Based on the current regulatory framework, the Company accounts for the economic effects of regulation in accordance with the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation" and does not expect that SFAS 121, which the Company expects to adopt on January 1, 1996, will have a material impact on its financial position or results of operations. However, this conclusion may change in the future as competitive factors influence wholesale and retail pricing in this industry. The principal regulatory assets included in deferred charges at March 31, 1995 and December 31, 1994 were as follows: March 31, Dec. 31, 1995 1994 (Dollars in Thousands) FERC Order 636 transition costs $18 447 $19 201 Postretirement benefit costs including pensions 6 054 5 367 Environmental costs 2 499 2 346 Total regulatory assets $27 000 $26 914 The principal regulatory liabilities, reflected in deferred credits- other and relating to income taxes, were $9.8 million and $9.9 million at March 31, 1995 and December 31, 1994, respectively. Generally, expenses which relate to more than one interim period are allocated to other periods to more appropriately match revenues and COMMONWEALTH GAS COMPANY expenses. Principal items of expense which are allocated other than on the basis of passage of time are depreciation and property taxes. These expenses are recorded for interim reporting purposes based upon projected gas revenue. Income tax expense is recorded using the statutory rates in effect applied to book income subject to tax recorded in the interim period. The unaudited financial statements for the periods ended March 31, 1995 and 1994 reflect, in the opinion of the Company, all adjustments (consisting of only normal recurring accruals) necessary to summarize fairly the results for such periods. In addition, certain prior period amounts are reclassified from time to time to conform with the presenta- tion used in the current period's financial statements. The results for interim periods are not necessarily indicative of results for the entire year because of variations in gas consumption due to the heating season and also because of the Company's seasonal rate structure. (2) Commitments (a) Construction Program The Company is engaged in a continuous construction program presently estimated at $106.4 million for the five-year period 1995 through 1999. Of that amount, $21.2 million is estimated for 1995. As of March 31, 1995, the Company's actual construction expenditures amounted to approximately $2.4 million, including an allowance for funds used during construction. The Company expects to finance these expenditures on an interim basis with internally-generated funds and short-term borrowings which are ultimately expected to be repaid with the proceeds from the issuance of long-term debt and/or equity securities. The program is subject to periodic review and revision because of factors such as changes in business conditions, rates of growth, effects of inflation, equipment delivery schedules, licensing delays, availabili- ty and cost of capital and environmental regulations. (b) FERC Order No. 636 As a result of implementing FERC Order 636 (Order 636), each interstate pipeline company is allowed to collect certain transition costs from its customers that resulted from the pipelines' need to buy out gas supply contracts entered into prior to the issuance of Order 636. The Company has been billed a total of approximately $22.4 million from Tennessee Gas Pipeline Company, Algonquin Gas Transmission Company and Texas Eastern Transmission Company through March 31, 1995. In May 1995, the DPU allowed the Company to accelerate recovery of the transition costs that were incurred to date. These costs had been deferred and accumulated as a regulatory asset and were being recovered through the cost of gas adjustment (CGA) over a four-year period that began in November 1993. The costs are now being recovered through the CGA over a one-year period that began May 1, 1995. The accelerated COMMONWEALTH GAS COMPANY recovery period was permitted by the DPU due to the minimal impact on customers' bills. Any further transition costs will be recovered by the Company through the CGA as incurred. At March 31, 1995, a regulatory asset totaling $18.4 million was reflected in deferred charges. In addition, a related liability of $7.9 million was reflected in deferred credits. COMMONWEALTH GAS COMPANY Item 2. Management's Discussion and Analysis of Results of Operations The following is a discussion of certain significant factors which have affected operating revenues, expenses and net income during the periods included in the accompanying condensed statements of income. This discussion should be read in conjunction with the Notes to Condensed Financial Statements appearing elsewhere in this report. A summary of the period to period changes in the principal items included in the condensed statements of income for the three months ended March 31, 1995 and 1994 is shown below: Three Months Ended March 31, 1995 and 1994 Increase (Decrease) (Dollars in Thousands) Gas Operating Revenues $(27 626) (20.4)% Operating Expenses - Cost of gas sold (20 326) (27.5) Other operation and maintenance 26 0.1 Depreciation 318 7.8 Taxes - Federal and state income (3 394) (30.3) Local property and other 334 10.9 (23 042) (19.9) Operating Income (4 584) (23.1) Other Income (103) (66.0) Income Before Interest Charges (4 687) (23.4) Interest Charges 410 16.0 Net Income $ (5 097) (29.2) Firm Unit Sales BBTU (3 020) (15.8) The following is a summary of unit sales for the periods indicated: Unit Sales - In Billions of British Thermal Units (BBTU) Three Months Ended Off- Quasi- Total Firm Interruptible System Firm March 31, 1995 18 027 16 111 153 1 413 350 March 31, 1994 19 178 19 131 47 - - COMMONWEALTH GAS COMPANY Operating Revenues and Unit Sales For the first three months of 1995, operating revenues decreased $27.6 million or 20.4% due primarily to a decrease in the cost of gas sold of $20.3 million and lower firm unit sales of 15.8% offset, in part, by higher interruptible and other sales and a higher level of conservation and load management (C&LM) costs of $562,000. Firm unit sales decreased 15.8% as all customer segments showed declines due to the extremely mild weather conditions experienced during the first quarter compared to a colder than normal period last year. Although interruptible sales increased during the first quarter of 1994, these sales had no effect on net income since the margin from these sales are flowed back to firm customers through the CGA. Off-system and quasi-firm sales continued to contribute to the Company's total sales but had no impact on net income. The margin from these sales was shared with one-half used to reduce the cost of gas to firm customers and the other deferred pending DPU approval of the Company's margin-sharing proposal that is expected to be filed later this year. Operating Expenses For the first quarter of 1995, other operation and maintenance expenses increased by just $26,000 or less than 1% due to higher insurance and benefit costs ($663,000), higher C&LM costs ($562,000) and costs associated with the Company's Automated Meter Reading System ($301,000). These increases were almost entirely offset by continued cost-containment efforts, a lower provision for bad debts ($465,000) reflecting lower billed sales, a decline in amortization related to environmental costs ($314,000) and reduced labor costs ($112,000) reflecting a decline in the number of employees through attrition. Depreciation and Taxes Depreciation increased by 7.8% due to higher levels of depreciable plant- in-service. The change in federal and state income taxes was attributable to the lower level of pretax income. The increase in local property taxes was due to higher tax rates and assessments in the Company's service territory. Other Income and Interest Charges Other income decreased by $103,000 during the first three months of 1994 due primarily to the absence of interest related to a Massachusetts sales tax abatement received in the first quarter of last year and lower sales of design heating systems. Total interest charges increased $410,000 or 16% mainly due to higher interest expense on deferred gas costs offset, in part, by lower interest costs due to lower levels of short-term bank borrowings. COMMONWEALTH GAS COMPANY Environmental Matters The Company is participating in the assessment of a number of former manufactured gas plant (MGP) sites and alleged MGP waste disposal locations to determine if and to what extent such sites have been contaminated and whether the Company may be responsible for remedial actions. The Company is also involved in certain other known or potentially contaminated sites where the associated costs may not be recoverable in rates. There were no significant new developments that occurred during the first quarter of 1995. For further information on these matters, refer to the Company's 1994 Annual Report on Form 10-K. COMMONWEALTH GAS COMPANY PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is not a party to any pending material legal proceeding. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 - Financial Data Schedule Filed herewith as Exhibit 1 is the Financial Data Schedule for the three months ended March 31, 1995. (b) Reports on Form 8-K No reports on Form 8-K were filed for the three months ended March 31, 1995. COMMONWEALTH GAS COMPANY 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. COMMONWEALTH GAS COMPANY (Registrant) Principal Financial Officer: JAMES D. RAPPOLI James D. Rappoli, Financial Vice President and Treasurer Principal Accounting Officer: JOHN A. WHALEN John A. Whalen, Comptroller Date: May 15, 1995 EX-27 2 FINANCIAL DATA SCHEDULE - MARCH 31, 1995
UT This schedule contains summary financial information extracted from the balance sheet, statement of income, statement of retained earnings and statement of cash flows contained in Form 10-Q of Commonwealth Gas Company for the three months ended March 31, 1995 and is qualified in its entirety by reference to such financial statements. 0000022620 COMMONWEALTH GAS COMPANY 1,000 DEC-31-1995 MAR-31-1995 3-MOS PER-BOOK 247,560 0 99,497 35,616 0 382,673 71,425 27,739 14,185 113,349 0 0 91,750 0 0 0 3,650 0 0 0 173,924 382,673 107,932 7,803 84,866 92,669 15,263 53 15,316 2,968 12,348 0 12,348 5,000 2,054 53,178 0 0
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