-----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, Io62smksBYC8mzwHufwkHqxmAGrG29wXy8I7GGzqeC+uuwDYj8yu4/p3/bS7iYIY IXUy+/I3XtUzmSkSG1HP+g== 0000310103-95-000020.txt : 19950814 0000310103-95-000020.hdr.sgml : 19950814 ACCESSION NUMBER: 0000310103-95-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONNECTICUT ENERGY CORP CENTRAL INDEX KEY: 0000310103 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 060869582 STATE OF INCORPORATION: CT FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08369 FILM NUMBER: 95561117 BUSINESS ADDRESS: STREET 1: 855 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 2033828111 MAIL ADDRESS: STREET 1: 855 MAIN ST STREET 2: 855 MAIN ST CITY: BRIDGEPORT STATE: CT ZIP: 06604 10-Q 1 UNITED STATES 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 June 30, 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 No. 1-8369 CONNECTICUT ENERGY CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-0869582 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 855 Main Street Bridgeport, Connecticut 06604 (Address of principal executive offices) (Zip Code) (203) 579-1732 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check 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. Class Outstanding at August 3, 1995 ----- ----------------------------- Common Stock, $1 par value 8,833,305 PART 1. FINANCIAL INFORMATION CONNECTICUT ENERGY CORPORATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share) (Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended June 30, June 30, June 30, ------------------ ----------------- ------------------- 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Operating Revenues..................... $ 39,755 $ 36,835 $ 208,562 $ 215,387 $ 234,048 $ 238,594 Purchased gas.......................... 20,692 16,704 103,967 114,659 116,178 126,056 --------- --------- --------- --------- --------- --------- Gross margin........................... 19,063 20,131 104,595 100,728 117,870 112,538 Operating Expenses: Operations........................... 11,177 11,741 39,091 38,066 51,234 47,617 Maintenance.......................... 872 954 2,868 3,174 3,729 4,005 Depreciation and depletion........... 3,551 3,269 10,500 9,746 13,785 12,766 Federal and state income taxes....... (1,125) (1,147) 10,786 9,041 7,147 6,131 Municipal, gross earnings and other taxes........................ 3,385 3,535 13,087 14,120 15,281 16,693 --------- --------- --------- --------- --------- --------- Total operating expenses............... 17,860 18,352 76,332 74,147 91,176 87,212 --------- --------- --------- --------- --------- --------- Operating income....................... 1,203 1,779 28,263 26,581 26,694 25,326 Other deductions, net.................. 31 125 351 372 565 487 Interest Expense and Preferred Stock Dividends: Interest on long-term debt and amortization of debt issue costs... 2,713 2,727 8,145 8,191 10,874 10,760 Other interest and preferred stock dividends, net..................... 444 265 1,096 605 1,154 894 --------- --------- --------- --------- --------- --------- Total interest expense and preferred stock dividends...................... 3,157 2,992 9,241 8,796 12,028 11,654 --------- --------- --------- --------- --------- --------- Net (Loss) Income...................... $ (1,985) $ (1,338) $ 18,671 $ 17,413 $ 14,101 $ 13,185 ========= ========= ========= ========= ========= ========= Net (loss) income per share............ $ (0.23) $ (0.16) $ 2.13 $ 2.19 $ 1.62 $ 1.68 ========= ========= ========= ========= ========= ========= Dividends paid per share............... $ 0.325 $ 0.325 $ 0.975 $ 0.965 $ 1.30 $ 1.285 --------- --------- --------- --------- --------- --------- Weighted average number of common shares outstanding during period..... 8,796,699 8,589,334 8,753,667 7,955,326 8,731,136 7,829,706 --------- --------- --------- --------- --------- --------- See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, Sept. 30, June 30, 1995 1994 1994 ----------- ----------- ----------- (Unaudited) (Unaudited) Assets - ------ Utility Plant: Gross utility plant............................... $349,444 $331,953 $324,431 Less--accumulated depreciation.................... 104,489 97,458 97,529 -------- -------- -------- Net utility plant............................... 244,955 234,495 226,902 Nonutility property, net.......................... 2,492 2,492 2,586 -------- -------- -------- Net utility plant and other property................ 247,447 236,987 229,488 -------- -------- -------- Current Assets: Cash and cash equivalents......................... 4,005 1,637 5,918 -------- -------- -------- Accounts receivable............................... 37,755 27,445 41,363 Less--allowance for doubtful accounts............. 4,057 3,747 4,645 -------- -------- -------- Net accounts receivable............................. 33,698 23,698 36,718 -------- -------- -------- Accrued utility revenues, net..................... 2,706 2,630 2,494 Unrecovered purchased gas costs................... --- 4,523 --- Inventories....................................... 12,457 14,678 11,777 Prepaid expenses.................................. 2,337 1,847 1,974 -------- -------- -------- Total current assets................................ 55,203 49,013 58,881 -------- -------- -------- Deferred Charges: Unamortized debt expenses......................... 6,144 6,317 6,379 Unrecovered deferred taxes........................ 37,024 35,398 33,313 Other............................................. 26,195 25,205 29,107 -------- -------- -------- Total deferred charges.............................. 69,363 66,920 68,799 -------- -------- -------- Total assets........................................ $372,013 $352,920 $357,168 ======== ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, Sept. 30, June 30, 1995 1994 1994 ----------- ----------- ----------- (Unaudited) (Unaudited) Capitalization and Liabilities - ------------------------------ Common Shareholders' Equity: Common Stock--par value $1 per share: authorized--20,000,000 shares, issued and outstanding--8,828,347 shares; 8,700,266 shares; 8,654,850 shares.............. $ 8,828 $ 8,700 $ 8,655 Capital in excess of par value................................................... 87,622 85,265 84,352 Retained earnings................................................................ 41,884 31,754 39,143 Adjustment for minimum pension liability......................................... --- --- (108) -------- -------- -------- Total common shareholders' equity.................................................. 138,334 125,719 132,042 -------- -------- -------- Preferred Stock: The Southern Connecticut Gas Company Redeemable Preferred Stock: authorized-- 200,000 shares, par value $100 per share 4.75% cumulative series, none issued authorized--600,000 shares, par value $1 per share, none issued................ --- --- --- Preference Stock: The Southern Connecticut Gas Company: authorized--1,000,000 shares, par value $1 per share, none issued Connecticut Energy Corporation: authorized--1,000,000 shares, par value $1 per share, none issued Preferred stock expense............................................................ --- --- --- -------- -------- -------- Total preferred stock.............................................................. --- --- --- -------- -------- -------- Long-term debt..................................................................... 119,776 119,917 120,371 -------- -------- -------- Total capitalization............................................................... 258,110 245,636 252,413 -------- -------- -------- Current Liabilities: Short-term borrowings........................................................... 11,800 18,800 6,700 Current maturities of long-term debt............................................ 594 594 594 Accounts payable................................................................ 10,061 10,886 8,589 Refunds due customers........................................................... 4 --- 3,387 Federal, state and deferred income taxes........................................ 7,008 3,565 10,006 Property and other accrued taxes................................................ 6,865 5,289 7,348 Interest payable................................................................ 2,246 3,315 2,264 Customer deposits............................................................... 1,902 1,901 1,951 Refundable purchased gas costs.................................................. 6,206 --- 1,850 Other accrued liabilities....................................................... 3,112 4,137 2,750 -------- -------- -------- Total current liabilities.......................................................... 49,798 48,487 45,439 -------- -------- -------- Deferred Credits: Deferred income taxes and investment tax credits................................ 58,094 54,974 52,217 Other........................................................................... 6,011 3,823 7,099 -------- -------- -------- Total capitalization and liabilities............................................... $372,013 $352,920 $357,168 ======== ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Nine Months Ended Twelve Months Ended June 30, June 30, ------------------ ------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Net cash provided by operating activities: $37,091 $24,339 $32,561 $21,462 ------- ------- ------- ------- Cash flows from investing activities: Capital expenditures................................ (21,234) (17,334) (30,549) (25,531) Proceeds from sale of subsidiaries.................. --- --- 8 --- Contributions in aid of construction................ 20 42 29 95 Payments for retirement of utility plant............ (262) (541) (500) (697) Other............................................... (50) --- (50) --- ------- ------- ------- ------- Net cash used by investing activities................. (21,526) (17,833) (31,062) (26,133) ------- ------- ------- ------- Cash flows from financing activities: Dividends paid on common stock...................... (8,541) (7,935) (11,360) (10,325) Issuance of common stock............................ 2,485 22,711 3,443 23,708 Issuance of long-term debt.......................... --- --- --- 12,000 Repayments of long-term debt........................ (141) (140) (595) (594) Early redemption of preferred stock................. --- (638) --- (638) (Decrease) increase in short-term borrowings........ (7,000) (16,800) 5,100 (20,300) ------- ------- ------- ------- Net cash (used by) provided by financing activities... (13,197) (2,802) (3,412) 3,851 ------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents.. 2,368 3,704 (1,913) (820) Cash and cash equivalents at beginning of period...... 1,637 2,214 5,918 6,738 ------- ------- ------- ------- Cash and cash equivalents at end of period............ $ 4,005 $ 5,918 $ 4,005 $ 5,918 ======= ======= ======= ======= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest............................................ $ 9,815 $ 9,529 $ 11,618 $11,651 Income taxes........................................ $ 6,635 $ 2,065 $ 8,822 $ 2,065 See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements of Connecticut Energy Corporation ("Company") for the fiscal year ended September 30, 1994 as presented in the Annual Report on Form 10-K . In the opinion of management, the accompanying financial information reflects all adjustments which are necessary to provide a fair presentation of the interim periods shown. All such adjustments are of a normal recurring nature. 2. Due to the seasonal nature of gas sales for space heating purposes by the Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), the results of operations for the nine months ended June 30, 1995 are not indicative of the results to be expected for the fiscal year ended September 30, 1995. 3. Included in other deferred charges are amounts related to the deferral of certain hardship heating customer accounts receivable arrearages totalling $10,431,000, $10,211,000 and $9,949,000 at June 30, 1995, September 30, 1994 and June 30, 1994, respectively; the deferral of certain shortfalls in energy assistance funding related to the 1991/92 and 1992/93 heating seasons amounting to $2,184,000, $2,742,000 and $2,790,000 at June 30, 1995, September 30, 1994 and June 30, 1994, respectively; prepaid pension contributions of $7,599,000, $6,355,000 and $6,355,000 at June 30, 1995, September 30, 1994, and June 30, 1994, respectively; and an intangible pension asset of $101,000, $101,000 and $3,652,000 at June 30, 1995, September 30, 1994 and June 30, 1994, respectively. 4. Included in other deferred credits are amounts related to a minimum pension liability totalling $101,000, $101,000 and $3,816,000 at June 30, 1995, September 30, 1994 and June 30, 1994, respectively. 5. Southern has identified coal tar residue at three sites in Connecticut. This residue results from historic coal gasification operations conducted at those sites by Southern's predecessors from the late 1800s through the first part of this century. Many gas distribution companies throughout the country carried on such gas manufacturing operations during the same period. See section entitled "Environmental Matters" on page 17 for further detail. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net Income - ---------- Connecticut Energy Corporation's ("Company") consolidated net income for the three, nine and twelve months ended June 30, 1995 and 1994 is detailed below:
Three Months Ended Nine Months Ended Twelve Months Ended June 30, June 30, June 30, ------------------ ----------------- ------------------- (in thousands, except 1995 1994 1995 1994 1995 1994 per share) ---- ---- ---- ---- ---- ---- Net (Loss) Income $(1,985) $(1,338) $18,671 $17,413 $14,101 $13,185 ======= ======= ======= ======= ======= ======= Net (Loss) Income Per Share $ (0.23) $ (0.16) $ 2.13 $ 2.19 $ 1.62 $ 1.68 ======= ======= ======= ======= ======= ======= Weighted Average Shares Outstanding 8,797 8,589 8,754 7,955 8,731 7,830 ------- ------- ------- ------- ------- -------
The higher net loss for the three months ended June 30, 1995 is primarily attributable to lower margins on firm sales by the Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), due to slightly lower usage per customer. Partially offsetting this decrease in firm margins were lower operating expenses primarily for labor due to less overtime payments, pensions, group health insurance and other general and administrative expenses. Factors affecting the increase to net income for the nine month period ended June 30, 1995 were additional interruptible margins earned and retained by Southern, because of Southern's ability to serve interruptible customers throughout the winter due to the combination of warmer than normal weather and competitive natural gas prices; a 6.6% rate increase implemented by Southern on December 9, 1993; and the continued conversion of residential non-heating customers to heating customers. Lower operating expenses primarily in the areas of labor due to less overtime payments because of the warmer weather, a lower gross revenue tax due to lower revenues and lower property taxes were offset by higher expenses for uncollectibles, leases, employee benefit costs due to the adoption of Statement of Financial Accounting Standards No. 106 ("SFAS 106"), depreciation, interest and taxes due to higher pre-tax income and a higher effective tax rate. Margins for the twelve months ended June 30, 1995 were positively affected by the rate increase implemented by Southern, retention of increased margins on interruptible services and the conversion of residential non-heating customers to heating customers. Partially offsetting these increases were higher operating expenses associated with uncollectibles, leases, employee benefit costs principally due to the adoption of SFAS 106 and depreciation expense. Total Sales and Transportation Volumes - -------------------------------------- Southern's total volumes of gas sold and transported for the three months ended June 30, 1995 was 10,569 MMcf, which represented an increase of approximately 141% as compared to the corresponding 1994 period. This increase was primarily attributable to sales to interruptible customers and volumes of gas transported in accordance with a special contract entered into in July of 1994 with The Connecticut Light and Power Company ("CL&P") for its Devon generating station ("Devon Station"). For the nine and twelve months ended June 30, 1995, Southern's total volumes of gas sold and transported of approximately 40,382 MMcf and 47,568 MMcf were approximately 55% and 61% higher, respectively, as compared to the corresponding 1994 periods principally due to higher interruptible volumes and higher transportation volumes to CL&P's Devon Station. Sales for the 1995 periods were also positively affected by Southern's ability to sell gas off-system in accordance with the Department of Public Utility Control's ("DPUC") decision regarding the implementation of Federal Energy Regulatory Commission ("FERC") Order No. 636. Firm Sales Volumes - ------------------ Firm sales volumes for the nine and twelve months ended June 30, 1995 decreased 2,564 MMcf and 2,658 MMcf, or approximately 12%, as compared to the corresponding 1994 periods. These decreases were principally due to weather that was approximately 14% and 15% warmer than the corresponding 1994 periods. Interruptible Sales and Transportation Volumes - ---------------------------------------------- The chart below depicts total volumes of gas both sold to and transported for interruptible customers, off-system sales volumes and transportation volumes under the special contract with CL&P as well as gross margins earned and retained due to the margin sharing mechanism on these services:
Three Months Ended Nine Months Ended Twelve Months Ended June 30, June 30, June 30, ------------------ ----------------- ------------------- (in thousands) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Gross margin earned $3,267 $1,437 $10,333 $4,712 $13,042 $6,231 ====== ====== ======= ====== ======= ====== Gross margin retained $1,629 $1,383 $ 6,448 $3,530 $ 8,264 $4,976 ====== ====== ======= ====== ======= ====== Volumes sold and transported (MMcf) 7,502 1,499 22,048 5,151 27,406 6,767 ------ ------ ------- ------ ------- ------
Margins earned on volumes delivered to interruptible customers vary depending upon the relationship of the market price for alternate fuels to the cost of natural gas and related transportation. Additionally, margins earned, net of gross earnings tax, from interruptible service in excess of an annual target are allocated through a margin sharing mechanism between firm customers and Southern. Margins earned and retained by Southern were higher for the three and nine months ended June 30, 1995 as compared to the corresponding 1994 periods principally due to higher levels of interruptible sales and Southern's ability to sell and transport gas off-system pursuant to the DPUC'S decision regarding the implementation of FERC Order No. 636. The increase in margins earned and retained for the twelve months ended June 30, 1995 when compared to the corresponding 1994 period is principally attributable to the increased level of interruptible services experienced during the period, the change in the margin sharing year, an increase in the target margin level from $2,000,000 to $4,000,000 in accordance with the DPUC's decision in Southern's latest rate case and Southern's ability to sell and transport gas on an off-system basis. Gross Margin - ------------ The Company's gross margin decreased by approximately 5% for the three months ended June 30, 1995 as compared to the corresponding 1994 period due to lower firm margins stemming from a slightly lower usage per customer. Partially offsetting this decline were higher margins earned and retained from interruptible services. The Company's gross margin increased by approximately 4% and 5%, respectively, for the nine and twelve months ended June 30, 1995 as compared to the corresponding periods ended June 30, 1994 as a result of higher firm and interruptible margins. Additionally, gross margin for the nine and twelve months ended June 30, 1995 was positively affected by the collection of approximately $6,869,000 and $6,811,000, respectively, from firm customers through the operation of the Weather Normalization Adjustment Clause ("WNA") implemented in December of 1993. The WNA collections helped offset the effects of lower firm sales volumes resulting from weather that was approximately 10% and 11% warmer than normal for the nine and twelve months ended June 30, 1995, respectively. Gross margins for the comparative 1994 periods were negatively impacted by the return to customers of approximately $2,800,000 through the operation of the WNA. Southern's firm rates include a purchased gas adjustment clause ("PGA") which allows Southern to pass through to its customers, through periodic adjustments to amounts billed, increased or decreased costs incurred for purchased gas as compared to base rate levels without affecting gross margin. For the three and nine months ended June 30, 1995, adjustments related to Southern's PGA decreased revenues and gas costs by approximately $973,000 and $3,576,000, respectively, as compared to a PGA adjustment for the nine months ended June 30, 1994 which increased revenues and gas costs by approximately $6,979,000. Operations Expense - ------------------ Operations expense for the three months ended June 30, 1995 decreased approximately 5% as compared to the corresponding 1994 period. This decrease was principally due to lower costs for labor, conservation, pensions, employee health insurance and other general and administrative expenses, but was partially offset by a higher expense for uncollectible accounts. For the nine months ended June 30, 1995, operations expense increased approximately 3% as compared to the corresponding 1994 period. This increase was principally due to higher costs related to uncollectible accounts, leases and the adoption and recovery of postretirement health care expenses, but was partially offset by lower expenses for labor, conservation and employee health insurance. Operations expense for the twelve months ended June 30, 1995 increased approximately 8% as compared to the corresponding 1994 period. More than 85% of the increase was attributable to a higher expense for uncollectible accounts. Other increases were lease payments and postretirement health care costs. Partially offsetting these increases were decreases in costs related to labor, conservation, employee health insurance and other general and administrative expenses. In December 1992, the DPUC allowed Southern to defer certain shortfalls in energy assistance funding from various state and federal agencies related to the 1991/92 and 1992/93 heating seasons. The DPUC's action positively impacted Southern's provision for uncollectible accounts for the fiscal year ended September 30, 1993. Southern has been allowed to recover these costs as well as deferred costs associated with Southern's certified hardship forgiveness program beginning January 1, 1994 in accordance with the DPUC's latest rate decision. Accordingly, included in operations expense for the three, nine and twelve months ended June 30, 1995, were approximately $640,000, $2,687,000 and $2,920,000, respectively, relating to these amortizations as compared to $747,000, $1,494,000 and $1,494,000 for the corresponding 1994 periods. Maintenance Expense - ------------------- Maintenance expense for the three, nine and twelve months ended June 30, 1995 decreased approximately 9%, 10% and 7%, respectively, as compared to the same 1994 periods. These decreases were primarily attributable to lower labor and material costs associated with Southern's mains due to a lower level of maintenance activity resulting from warmer than normal weather experienced in the 1995 periods. Depreciation and Depletion - -------------------------- Depreciation expense for the three, nine and twelve months ended June 30, 1995 increased approximately 9%, 8% and 8%, respectively, as compared to the corresponding 1994 periods primarily due to additions to plant in service by Southern. Federal and State Income Taxes - ------------------------------ The total provision for federal and state income taxes for the nine and twelve months ended June 30, 1995 increased approximately 19% and 17%, respectively, as compared to the corresponding 1994 periods. These increases were primarily due to higher pre-tax income, coupled with a higher effective tax rate for the 1995 periods. Results for the twelve months ended June 30, 1995 were also impacted by the flow-through tax effect of the amortization of previously deferred costs. Partially offsetting these increases in the tax provision for the nine and twelve months ended June 30, 1995 were benefits related to the prepayment of approximately $6,500,000 in transition costs, the current deductibility of conservation expenses and certain postretirement health care and pension costs. Municipal, Gross Earnings and Other Taxes - ----------------------------------------- Municipal, gross earnings and other taxes decreased approximately 4% for the three months ended June 30, 1995 as compared to the corresponding 1994 period. This decrease was primarily due to a lower provision for property taxes and was partially offset by a higher gross revenue tax due to higher revenues for the 1995 period. Municipal, gross earnings and other taxes decreased approximately 7% and 8% for the nine and twelve months ended June 30, 1995, respectively, as compared to the corresponding 1994 periods. These decreases were primarily due to lower gross revenue taxes, lower sales and use taxes and lower provisions for property taxes. Interest Expense and Preferred Stock Dividends - ---------------------------------------------- Total interest expense and preferred stock dividends increased approximately 6% for the three months ended June 30, 1995 as compared to the corresponding 1994 period. This increase was primarily due to higher short-term interest costs due to higher average borrowings during the 1995 period and a higher interest expense related to deferred gas costs and revenue sharing balances. Partially offsetting the increased short-term costs was the absence of any interest costs related to refunds from interstate pipeline suppliers. Total interest expense and preferred stock dividends increased approximately 5% for the nine months ended June 30, 1995 as compared to the corresponding 1994 period. This increase was primarily due to higher short-term interest costs due to higher average interest rates and a higher interest expense related to deferred gas costs and revenue sharing balances. Partially offsetting the increased short-term interest costs for this period was the absence of any interest costs related to refunds from interstate pipeline suppliers. Total interest expense and preferred stock dividends increased approximately 3% for the twelve months ended June 30, 1995 as compared to the corresponding 1994 period primarily due to higher average short-term interest rates, higher interest related to deferred gas costs and higher long-term debt expense related to the issuance of Series Y First Mortgage Bonds in September 1993. This increase was partially offset by lower interest costs related to interstate pipeline refunds. LIQUIDITY AND CAPITAL RESOURCES Operating Activities - -------------------- The seasonal nature of Southern's business creates large short- term cash demands primarily to finance gas purchases, customer accounts receivable and certain tax payments. To provide these funds, as well as funds for its capital expenditure program and other corporate purposes, Southern has committed lines of credit with a number of banks totalling $32,000,000 and uncommitted lines of credit with two of its banks totalling $14,000,000, in addition to a revolving credit line agreement for up to $20,000,000 with one of its banks. This latter agreement has a revolving credit feature through December 21, 1996, followed by a term loan period through December 21, 2000. Effective July 1, 1995, the Company obtained a committed line of credit with one of its banks totalling $5,000,000. Because of the availability of short-term credit and the ability to issue long-term debt and additional equity, management believes it has adequate financial flexibility to meet its anticipated cash needs. Operating cash flows for the nine months ended June 30, 1995 were positively affected by higher net income, the receipt of approximately $8,678,000 in interstate pipeline refunds used to offset previously deferred transition costs and a higher refundable purchased gas cost balance. Operating cash flows for the nine months ended June 30, 1995 as compared to the nine months ended June 30, 1994 were positively affected by lower accounts receivable and higher refundable purchased gas cost balances. Operating cash flows for the twelve months ended June 30, 1995 were positively affected by higher net income and the receipt of approximately $12,726,000 in interstate pipeline refunds used to offset previously deferred transition costs. Operating cash flows for the twelve months ended June 30, 1995 as compared to the twelve months ended June 30, 1994 were positively affected by a higher refundable purchased gas cost balance as well as a lower accounts receivable balance. Investing Activities - -------------------- Capital expenditures approximated $21,214,000 and $17,292,000 for the nine months ended June 30, 1995 and 1994, respectively, and $30,520,000 and $25,436,000 for the twelve months ended June 30, 1995 and 1994, respectively. On an annual basis, Southern relies upon cash flows from operating activities to fund a portion of these expenditures, with the remainder funded by short-term borrowings and, at some later date, long-term debt and capital stock financings. FERC Order No. 636 Transition Costs - ----------------------------------- As a result of FERC Order No. 636, costs are being incurred by Southern's interstate pipeline suppliers to convert existing "bundled" sales services to "unbundled" transportation and storage services. These transition costs include: (1) unrecovered gas costs, (2) gas supply realignment costs, (3) stranded investment costs and (4) new facilities costs. As of June 30, 1995, Southern has paid approximately $16,345,000 in transition costs which represents Southern's total expected obligation for transition costs. Of the amount paid, $4,461,000 represents unrecovered gas costs and $11,884,000 represents gas supply realignment costs and stranded investment costs. On July 8, 1994, the DPUC issued a Decision regarding implementation of FERC Order No. 636 by the Connecticut local gas distribution companies. The DPUC prescribed, among other things, various mechanisms for the recovery of deferred transition costs. As of June 30, 1995, Southern has recovered substantially all of its deferred transition costs through the use of the recovery mechanisms allowed by the DPUC. Environmental Matters - --------------------- Southern has identified coal tar residue at three sites in Connecticut resulting from coal gasification operations conducted at those sites by Southern's predecessors from the late 1800s through the first part of this century. Many gas distribution companies throughout the country carried on such gas manufacturing operations during the same period. The coal tar residue is not designated a hazardous material by any federal or Connecticut agency, but some of its constituents are classified as hazardous. On April 27, 1992, Southern notified the Connecticut Department of Environmental Protection ("DEP") and the United States Environmental Protection Agency of the presence of coal tar residue at the sites. On November 9, 1994, the DEP informed Southern that it had performed a preliminary review of the information provided to it by Southern and had determined that, based on current priorities and limited staff resources, a comprehensive review of site conditions and subsequent participation by the DEP "are not possible at this time". Until the DEP conducts a comprehensive review, no discussions with it addressing the extent, timing and type of remedial action, if any, can occur. Given the DEP's response, management cannot at this time predict the costs of any future site analysis and remediation, if any, nor can it estimate when any such costs, if any, would be incurred. While such future analytical and cleanup costs could possibly be significant, management believes, based upon the provisions of the Partial Settlement in Southern's last rate order, that Southern will be able to recover these costs through its customer rates. Although the method, timing and extent of any recovery remain uncertain, management currently does not expect that the incurrence of such costs will materially adversely impact the Company's financial condition or results of operations. PART 2. OTHER INFORMATION Items 1, 2, 3, 4 and 5 are inapplicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule Submitted only in electronic format to the Securities and Exchange Commission. (b) Reports on Form 8-K: There were no reports filed on Form 8-K during the quarter. 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. CONNECTICUT ENERGY CORPORATION (Registrant) DATE: August 11, 1995 /s/ Vincent L. Ammann, Jr. ------------------------------- by: Vincent L. Ammann, Jr. Vice President and Chief Accounting Officer EX-27 2
UT 1,000 9-MOS SEP-30-1995 JUN-30-1995 PER-BOOK 244,955 2,492 55,203 69,363 0 372,013 8,828 87,622 41,884 138,334 0 0 119,776 6,800 0 5,000 594 0 0 0 101,509 372,013 208,562 10,786 169,513 180,299 28,263 (351) 27,912 9,241 18,671 0 18,671 8,541 8,145 37,091 2.13 0
-----END PRIVACY-ENHANCED MESSAGE-----