-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SZ6puxiMFaKJAKLUSmG/S5HR8qCK5afQ6pNGy2CtwARhal/0ppP8ZP3blXYX0xyu Pcjw44zKwbNcI245RDVe8Q== 0000310103-97-000014.txt : 19970814 0000310103-97-000014.hdr.sgml : 19970814 ACCESSION NUMBER: 0000310103-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658793 BUSINESS ADDRESS: STREET 1: 855 MAIN STREET CITY: BRIDGEPORT STATE: CT ZIP: 06604 BUSINESS PHONE: 8007607776 MAIL ADDRESS: STREET 1: 855 MAIN ST CITY: BRIDGEPORT STATE: CT ZIP: 06604 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 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 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) (800) 760-7776 (Registrant's Telephone Number, Including Area Code) (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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No
PART I. 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 June 30, June 30, ----------------------- ------------------------ 1997 1996 1997 1996 ---- ---- ---- ---- Operating Revenues............................. $ 44,026 $ 43,954 $ 225,765 $ 233,918 Purchased gas.................................. 22,539 22,827 118,584 127,086 --------- --------- --------- --------- Gross margin................................... 21,487 21,127 107,181 106,832 Operating Expenses: Operations................................... 11,482 11,130 38,120 37,723 Maintenance.................................. 853 848 2,781 2,959 Depreciation................................. 3,988 3,639 11,810 11,113 Federal and state income taxes............... (865) (809) 11,330 11,811 Municipal, gross earnings and other taxes.... 3,568 3,582 13,873 14,134 --------- --------- --------- --------- Total operating expenses....................... 19,026 18,390 77,914 77,740 --------- --------- --------- --------- Operating income............................... 2,461 2,737 29,267 29,092 Other deductions (income), net................. 171 191 (420) 443 Interest Expense: Interest on long-term debt and amortization of debt issue costs........... 3,079 2,700 9,242 8,103 Other interest, net.......................... 416 530 1,030 1,566 --------- -------- --------- --------- Total interest expense......................... 3,495 3,230 10,272 9,669 --------- -------- --------- --------- Net (Loss) Income.............................. $ (1,205) $ (684) $ 19,415 $ 18,980 ========= ========= ========= ========= Net (loss) income per share.................... $ (0.13) $ (0.08) $ 2.14 $ 2.13 ========= ========= ========= ========= Dividends paid per share....................... $ 0.33 $ 0.33 $ 0.99 $ 0.98 --------- --------- --------- --------- Weighted average number of common shares outstanding during period............. 9,129,030 8,942,188 9,076,400 8,905,632 --------- --------- --------- --------- See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share) June 30, Sept. 30, 1997 1996 --------- --------- (Unaudited) Assets ------ Utility Plant: Gross utility plant......................................... $390,699 $376,109 Less: accumulated depreciation.............................. 126,617 118,348 -------- -------- Net utility plant........................................... 264,082 257,761 Nonutility property, net...................................... 2,773 2,804 -------- -------- Net utility plant and other property.......................... 266,855 260,565 -------- -------- Current Assets: Cash and cash equivalents................................... 7,073 5,121 -------- -------- Accounts receivable......................................... 43,613 33,615 Less: allowance for doubtful accounts....................... 1,605 2,742 -------- -------- Net accounts receivable................................... 42,008 30,873 -------- -------- Accrued utility revenues, net............................... 2,783 2,608 Inventories................................................. 11,543 15,331 Prepaid expenses............................................ 3,271 1,841 -------- -------- Total current assets.......................................... 66,678 55,774 -------- -------- Deferred Charges and Other Assets: Unamortized debt expenses................................... 6,101 6,238 Unrecovered deferred income taxes........................... 42,371 41,435 Other....................................................... 42,542 35,216 -------- -------- Total deferred charges and other assets....................... 91,014 82,889 -------- -------- Total assets.................................................. $424,547 $399,228 ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share) June 30, Sept. 30, 1997 1996 ---------- --------- (Unaudited) Capitalization and Liabilities ------------------------------ Common Shareholders' Equity: Common Stock: authorized--20,000,000 shares, par value $1 per share, issued and outstanding--9,150,247 shares; 9,012,267 shares......................................... $ 9,150 $ 9,012 Capital in excess of par value............................. 94,048 91,079 Unearned compensation...................................... (1,104) --- Retained earnings.......................................... 48,291 37,870 -------- -------- Total common shareholders' equity............................ 150,385 137,961 -------- -------- Long-term debt............................................... 134,528 138,727 -------- -------- Total capitalization......................................... 284,913 276,688 -------- -------- Current Liabilities: Short-term borrowings...................................... 19,300 19,200 Current maturities of long-term debt....................... 4,654 595 Accounts payable........................................... 11,130 14,250 Refunds due customers...................................... 2,793 202 Federal, state and deferred income taxes................... 8,345 2,424 Property and other accrued taxes........................... 7,158 5,555 Interest payable........................................... 2,799 3,569 Customers' deposits........................................ 1,804 1,826 Refundable purchased gas costs............................. 1,601 520 Other...................................................... 4,439 3,545 -------- -------- Total current liabilities.................................... 64,023 51,686 -------- -------- Deferred Credits: Deferred income taxes and investment tax credits........... 67,437 65,381 Other...................................................... 8,174 5,473 -------- -------- Total deferred credits....................................... 75,611 70,854 -------- -------- Total capitalization and liabilities......................... $424,547 $399,228 ======== ======== See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Nine Months Ended June 30, ----------------- 1997 1996 ---- ---- Net cash provided by operating activities.............................. $26,255 $28,847 ------- ------- Cash Flows from Investing Activities: Capital expenditures................................................. (18,178) (15,931) Contributions in aid of construction................................. 42 45 Payments for retirement of utility plant............................. (240) (26) Energy ventures...................................................... --- (1,966) ------- ------- Net cash used by investing activities.................................. (18,376) (17,878) ------- ------- Cash Flows from Financing Activities: Dividends paid on common stock....................................... (8,994) (8,732) Issuance of common stock............................................. 3,107 2,208 Repayments of long-term debt......................................... (140) (140) Increase (decrease) in short-term borrowings......................... 100 (4,500) ------- ------- Net cash used by financing activities.................................. (5,927) (11,164) ------- ------- Net increase (decrease) in cash and cash equivalents................... 1,952 (195) Cash and cash equivalents at beginning of period....................... 5,121 4,635 ------- ------- Cash and cash equivalents at end of period............................. $ 7,073 $ 4,440 ======= ======= Supplemental Disclosures of Cash Flow Information Cash paid during the period for: Interest............................................................. $11,486 $10,402 Income taxes......................................................... $ 4,291 $ 4,325 See Notes to Consolidated Financial Statements.
CONNECTICUT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands) 1. The unaudited consolidated financial statements presented herein should be read in conjunction with the consolidated financial statements of Connecticut Energy Corporation ("Connecticut Energy" or "Company") for the fiscal year ended September 30, 1996 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. In preparing the financial statements in conformity with generally accepted accounting principles ("GAAP"), the Company uses estimates. Estimates are disclosed when there is a reasonable possibility for change in the near term. For this purpose, near term is defined as a period of time not to exceed one year from the date of the financial statements. The Company's financial statements have been prepared based on management's estimates of the impact of regulatory, legislative and judicial developments on the Company or significant groups of its customers. The recorded amounts of certain accruals, reserves, deferred charges and assets could be materially impacted if circumstances change which affect these estimates. 2. The Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), prepares its financial statements in accordance with the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS 71"), which requires a cost- based, rate-regulated enterprise such as Southern to reflect the impact of regulatory decisions in its financial statements. The Connecticut Department of Public Utility Control's ("DPUC") actions through the ratemaking process can create regulatory assets in which costs are allowed for ratemaking purposes in a period other than the period in which the costs would be charged to expense if the reporting entity were unregulated. In the application of SFAS 71, Southern follows accounting policies that reflect the impact of the rate treatment of certain events or transactions that are permitted to differ from GAAP. The most significant of these policies include the recording of deferred gas costs, deferred conservation costs, deferred hardship heating customer accounts receivable arrearages, deferred environmental evaluation costs and an unfunded deferred income tax liability, with a corresponding unrecovered asset, to account for temporary differences previously flowed through to ratepayers. Southern had net regulatory assets as of June 30, 1997 and September 30, 1996 of $58,243 and $59,281, respectively. These amounts are included in deferred charges and other assets and deferred credits in the consolidated balance sheets and are solely due to the application of the provisions of SFAS 71. During fiscal 1996, the DPUC approved regulations designed to increase competition in the natural gas industry in Connecticut by giving commercial and industrial gas customers the ability to purchase gas from independent brokers and marketers and by allowing local gas distribution companies to charge firm transportation rates for use of their distribution systems. The firm transportation rates are designed to provide Southern with the same margins provided by the bundled services. While the DPUC's actions encourage a competitive environment by deregulating certain activities, the Company believes that it continues to meet the requirements of SFAS 71. 3. Due to the seasonal nature of gas sales for space heating purposes by Southern, the results of operations for the nine months ended June 30, 1997 are not indicative of the results to be expected for the fiscal year ending September 30, 1997. 4. Certain prior year amounts have been reclassified to conform with the current format of financial statement presentation. 5. Deferred charges and other assets include amounts related to the following: June 30, Sept. 30, As of 1997 1996 - ----------------------------------------------------------------------------- Hardship heating customer accounts receivable arrearages $13,400 $11,753 Hardship heating customer assistance grant program 1,494 0 Energy assistance funding shortfall 960 1,502 Prepaid pension and postretirement medical contributions 14,397 11,395 Conservation costs 4,583 3,954 Environmental evaluation costs 768 915 Nonqualified benefit plans 2,323 1,160 Gas holder costs 369 554 Investment in energy ventures 1,941 1,960 Other 2,307 2,023 ------- ------- $42,542 $35,216 ======= ======= Southern has been allowed to recover various deferred charges in rates over periods ranging from three to five years in accordance with the DPUC's Decision in Southern's latest rate case. 6. Deferred credits include amounts related to the following: June 30, Sept. 30, As of 1997 1996 - ----------------------------------------------------------------------------- Interruptible margin sharing $ 429 $ 556 Nonqualified benefit plans 2,871 2,574 Insurance reserve 1,198 722 Hardship heating customer assistance grant program 0 75 Economic development initiatives 727 675 FERC Order No. 636 transition costs 1,820 187 Other 1,129 684 ------ ------ $8,174 $5,473 ====== ====== 7. 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. See section in Management's Discussion and Analysis entitled "Environmental Matters" for further detail. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Connecticut Energy Corporation ("Connecticut Energy" or "Company") and its subsidiaries and their representatives may, from time to time, make written or oral statements, including statements contained in the Company's filings with the Securities and Exchange Commission ("SEC") and in its annual report to shareholders, including its Form 10-K for the fiscal year ended September 30, 1996 and this quarterly report on Form 10-Q, which constitute or contain "forward-looking" information as that term is defined in the Private Securities Litigation Reform Act of 1995. All statements other than the financial statements and other statements of historical facts included in this quarterly report regarding the Company's financial position and strategic initiatives and addressing industry developments are forward-looking statements. Where, in any forward-looking statement, the Company, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Factors which could cause actual results to differ materially from those stated in the forward-looking statements may include, but are not limited to, general and specific economic, financial and business conditions; federal and state regulatory, legislative and judicial developments which affect the Company or significant groups of its customers; the impact of competition on the Company's revenues; fluctuations in weather from normal levels; changes in development and operating costs; the availability and cost of natural gas; the availability and terms of capital; exposure to environmental liabilities; the costs and effects of unanticipated legal proceedings; the successful implementation and achievement of internal performance goals; the impact of unusual items resulting from ongoing evaluations of business strategies and asset valuations and changes in business strategy. RESULTS OF OPERATIONS Net Income - ---------- Connecticut Energy's consolidated net income for the three and nine months ended June 30, 1997 and 1996 is detailed below: Three Months Ended Nine Months Ended June 30, June 30, ------------------ ----------------- (in thousands, except per share) 1997 1996 1997 1996 ---- ---- ---- ---- Net (Loss) Income $(1,205) $ (684) $19,415 $18,980 ======= ====== ======= ======= Net (Loss) Income per Share $ (0.13) $(0.08) $ 2.14 $ 2.13 ======= ====== ======= ======= Weighted Average Shares Outstanding 9,129 8,942 9,076 8,906 ------- ------ ------- ------- Factors which affected the higher net loss for the three months ended June 30, 1997 were lower interruptible margins and increased expenses for operations, depreciation and long-term debt interest. Increased firm margins and lower short-term interest expense compared to the corresponding 1996 period were partially offsetting. Net income for the nine months ended June 30, 1997 increased approximately 2% compared to the nine months ended June 30, 1996. Factors which contributed to increased net income for the 1997 period included higher firm margins, lower maintenance expense, lower provisions for federal and state income taxes, lower gross earnings tax and lower short-term interest expense. Partially offsetting these positive impacts on net income were slightly lower interruptible margins, higher depreciation expense and higher long- term debt interest. Total Sales and Transportation Volumes - -------------------------------------- Total volumes of gas sold and transported by the Company's principal subsidiary, The Southern Connecticut Gas Company ("Southern"), for the three and nine months ended June 30, 1997 were 10,296 and 36,900 MMcf, respectively, representing increases of approximately 42% and 17% compared to the corresponding 1996 periods. These increases were primarily attributable to increases in off-system sales and off-system transportation volumes. Additionally, this category includes volumes associated with service under Southern's firm transportation tariffs, which commenced during the quarter ended June 30, 1996. Firm Sales and Transportation Volumes - ------------------------------------- Firm sales and transportation volumes for the three months ended June 30, 1997 increased approximately 9% compared to the corresponding 1996 period. The increase was primarily due to weather which was approximately 10% colder than the 1996 quarter and growth in Southern's customer base. Firm sales and transportation volumes for the nine months ended June 30, 1997 decreased approximately 5% compared to the corresponding 1996 period. The decrease was primarily due to weather which was approximately 7% warmer than the nine months ended June 30, 1996. Growth in Southern's customer base and the continued conversions of nonheating customers to heating customers partially offset the overall decrease in this category. Interruptible Sales and Transportation Volumes - ---------------------------------------------- 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, on-system margins earned, net of gross earnings tax, from interruptible services in excess of an annual target were being allocated through a margin sharing mechanism between Southern and its firm customers. Beginning June 1, 1996, excess on-system margins earned that would have been returned to Southern's firm customers have been redirected, with Connecticut Department of Public Utility Control ("DPUC") approval, to fund certain economic development and hardship assistance programs. The chart below depicts volumes of gas sold to and transported for on-system interruptible customers, off-system sales volumes and off-system transportation volumes under a special contract with The Connecticut Light and Power Company for its Devon electric generating station as well as gross margins earned and retained due to the margin sharing mechanism on these services for the three and nine months ended June 30, 1997 and 1996, respectively: Three Months Ended Nine Months Ended June 30, June 30, ------------------ ----------------- (dollars in thousands) 1997 1996 1997 1996 ---- ---- ---- ---- Gross Margin Earned $2,690 $3,327 $9,736 $9,223 ====== ====== ====== ====== Gross Margin Retained $2,435 $2,702 $6,385 $6,513 ====== ====== ====== ====== Volumes Sold and Transported (MMcf) 6,581 3,866 16,873 10,351 ------ ------ ------ ------ Gross margin earned by Southern was lower for the three months ended June 30, 1997 compared to the corresponding 1996 period principally due to lower average market prices of alternate fuels. Gross margin retained represents the difference between gross margin earned and margin to be returned through the margin sharing mechanism. Gross margin retained for the three months ended June 30, 1997 compared to the 1996 quarter was lower principally due to lower margin earned. Volumes sold and transported in the 1997 quarter were approximately 70% higher than the 1996 quarter principally due to increases in off-system transportation and sales activity. Gross margin earned for the nine months ended June 30, 1997 was higher than the comparable 1996 period principally due to increased on-system interruptible sales, off-system transportation and off- system sales activity for the period. Lower margin retained for the nine months ended June 30, 1997 was principally due to the change in sharing mechanism for certain off-system services as of April 1, 1996 which increased the allocation of margins to be returned to firm customers from 50% to 85%. Gross Margin - ------------ Gross margin for the three months ended June 30, 1997 was approximately 2% higher than gross margin for the three months ended June 30, 1996. This variance in margins was primarily the result of increased firm margins compared to the 1996 quarter due to customer growth and conversions of nonheating customers to heating customers. Gross margin for the nine months ended June 30, 1997 was slightly higher compared to the corresponding 1996 period. Higher firm margins earned due to growth in Southern's customer base were partially offset by lower interruptible margins retained as well as lower revenues earned on bailment activities. Southern's firm rates include a Weather Normalization Adjustment clause ("WNA") which allows Southern to charge or credit the non-gas portion of its firm rates to reflect deviations from normal weather. Because weather during the three months ended June 30, 1997 was approximately 13% colder than normal, the operation of the WNA returned approximately $803,000 to firm customers. This compares to a return to firm customers during the three months ended June 30, 1996 of approximately $192,000. The operation of the WNA collected approximately $2,369,000 during the nine months ended June 30, 1997 due to weather which was approximately 3% warmer than normal. This compares to a return to firm customers of approximately $2,709,000 during the corresponding 1996 period. Southern's firm rates also include a Purchased Gas Adjustment clause ("PGA") which allows Southern to flow through to its customers, through periodic adjustments to amounts billed, increased or decreased costs incurred for purchased gas compared to base rate levels without affecting gross margin. The operation of Southern's PGA increased revenues and gas costs for the three and nine months ended June 30, 1997 by approximately $482,000 and $5,762,000, respectively. For the three and nine months ended June 30, 1996, PGA adjustments increased revenues and gas costs by approximately $593,000 and $6,628,000, respectively. Operations Expense - ------------------ Operations expense for the three months ended June 30, 1997 increased approximately 3% compared to the corresponding 1996 period primarily due to a higher provision for uncollectibles, which was partially offset by the termination on December 31, 1996 of the amortization of amounts relating to Southern's 3-Way Payment Plan. Depreciation Expense - -------------------- Depreciation expense for the three and nine months ended June 30, 1997 increased approximately 10% and 6%, respectively, compared to the corresponding 1996 periods. The increases were 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 months ended June 30, 1997 decreased approximately 4% compared to the corresponding 1996 period. This decrease was primarily due to a lower effective tax rate related to the flow- through effect of deferred gas costs which decreased taxable income as well as a reduction in the statutory state income tax rate. Municipal, Gross Earnings and Other Taxes - ----------------------------------------- Municipal, gross earnings and other taxes decreased approximately 2% for the nine months ended June 30, 1997 compared to the corresponding 1996 period primarily due to lower gross earnings tax due to lower revenues. Other (Income) Deductions, Net - ------------------------------ Other income for the nine months ended June 30, 1997 was higher compared to the corresponding 1996 period primarily due to the receipt of approximately $974,000 in interest income from one of Southern's interstate pipeline suppliers related to Southern's prepayment of transition costs associated with Federal Energy Regulatory Commission's Order No. 636. Interest Expense - ---------------- Total interest expense increased approximately 8% and 6% for the three and nine months ended June 30, 1997, respectively, compared to the corresponding 1996 periods primarily due to higher long-term debt costs associated with the issuance of $20,000,000 in secured Medium-Term Notes in August 1996. For the quarter ended June 30, 1997 compared to the 1996 quarter, lower short-term interest expense on deferred gas cost balances was partially offset by increased short-term debt costs due to higher average short-term borrowings and a higher average annualized interest rate as well as higher short-term interest expense on pipeline refunds. For the nine months ended June 30, 1997 compared to the corresponding 1996 period, lower short-term interest expense on deferred gas cost and margin sharing balances was partially offset by higher interest expense for pipeline refunds and short-term borrowings. 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 capital expenditure programs and other corporate purposes, Connecticut Energy and Southern have credit lines with a number of banks as detailed below: Shared Connecticut Connecticut Energy/ Energy Southern Southern Total ----------- -------- ------------------- ----- Committed Lines $5,000,000 $32,000,000 $20,000,000 $57,000,000 Uncommitted Lines --- $10,000,000 $ 8,000,000 $18,000,000 At June 30, 1997, the Company had unused lines of credit of $55,700,000. 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, 1997 were lower compared to the corresponding 1996 period principally due to the effect of warmer weather on the operation of the PGA and the timing of reductions in accounts payable balances. Partially offsetting the overall reduction in operating cash flows were a lower comparative increase in accounts receivable balances and a lower comparative reduction in revenue sharing balances. Investing Activities - -------------------- Capital expenditures approximated $18,136,000 and $15,886,000 for the nine months ended June 30, 1997 and 1996, respectively. Capital expenditures for the nine months ended June 30, 1997 were approximately 14% higher than the 1996 period due to the impact of less severe winter weather on construction activity. 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. Regulatory Matters - ------------------ In February 1997, the Company and Southern requested a reopening of a DPUC Decision dated December 13, 1978, Docket No. 77- 08-28, Application of The Southern Connecticut Gas Company for ------------------------------------------------------- Approval of Corporate Reorganization and Merger and Formation of a - ------------------------------------------------------------------ Holding Company, for the purpose of addressing changed conditions in - --------------- the Company's operations since that time, which include the dissolution of certain subsidiaries and deregulation of the natural gas marketplace resulting from recent federal and state regulatory actions. On May 21, 1997, the DPUC issued a Decision in the reopened docket. The Decision modified or eliminated several conditions relating to the Company's nonregulated subsidiaries. The Company believes those subsidiaries will now have more flexibility to compete in the rapidly changing energy market on both a financial and operational basis. 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 latest 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 II- OTHER INFORMATION Items 1, 2, 3, 4 and 5 are inapplicable. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibit 27 - Financial Data Schedule Submitted only in electronic format to the Securities and Exchange Commission. (b) Reports on Form 8-K: Form 8-K, dated April 23, 1997, concerning the Company's Form S-3 registration of 1,750,000 additional shares of common stock was filed with the Commission on July 10, 1997. 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 13, 1997 By:/s/ Vincent L. Ammann, Jr. --------------- ------------------------ Vincent L. Ammann, Jr. Vice President and Chief Accounting Officer EX-27 2
UT 1000 9-MOS SEP-30-1997 JUN-30-1997 PER-BOOK 264,082 2,773 66,678 91,014 0 424,547 9,150 92,944 48,291 150,385 0 0 134,528 19,300 0 0 4,654 0 0 0 115,680 424,547 225,765 11,330 185,168 196,498 29,267 420 29,687 10,272 19,415 0 19,415 8,994 9,242 26,255 2.14 0
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