-----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, MWXMJ7ykChMQelXQAINFh5++9/lDfSAKvg5KDL83X2BIMzfcSn7yepaJdhxj83P2 uCzg0R8JyHNUBhCs+n4UjA== 0000311259-96-000011.txt : 19961028 0000311259-96-000011.hdr.sgml : 19961028 ACCESSION NUMBER: 0000311259-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961025 SROS: BSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EASTERN ENTERPRISES CENTRAL INDEX KEY: 0000311259 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 041270730 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02297 FILM NUMBER: 96647699 BUSINESS ADDRESS: STREET 1: 9 RIVERSIDE RD CITY: WESTON STATE: MA ZIP: 02193 BUSINESS PHONE: 6176472300 FORMER COMPANY: FORMER CONFORMED NAME: EASTERN GAS & FUEL ASSOCIATES DATE OF NAME CHANGE: 19890511 10-Q 1 EASTERN ENTERPRISES FORM 10-Q Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 --------------------------------------- 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 1-2297 EASTERN ENTERPRISES ----------------------------------------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-1270730 ----------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193 ----------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 617-647-2300 ----------------------------------------------------------------- (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 ---- ---- The number of shares of Common Stock outstanding of Eastern Enterprises as of October 25, 1996 was 20,304,041. Form 10-Q Page 2. PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Company or group of companies for which report is filed: EASTERN ENTERPRISES AND SUBSIDIARIES ("Eastern") Consolidated Statement of Operations - ------------------------------------ (In thousands, except per share amounts)
Three months ended Nine months ended September 30, September 30, 1996 1995 1996 1995 - ---------------------------------------------------------------------------------------------------------------------- Revenues $133,950 $133,444 $766,690 $699,288 Operating costs and expenses: Operating costs 96,345 96,336 553,105 494,164 Selling, general & adminis- trative expenses 22,102 23,306 78,202 77,784 Depreciation & amortization 10,577 10,587 48,688 46,120 -------- ------- ------- ------- 129,024 130,229 679,995 618,068 -------- ------- ------- ------- Operating earnings 4,926 3,215 86,695 81,220 Other income (expense): Interest income 2,413 1,489 7,270 3,558 Interest expense (8,325) (9,168) (25,828) (28,422) Other, net 1,524 312 783 447 -------- ------- ------- ------- Earnings (loss) before income taxes 538 (4,152) 68,920 56,803 Provision (credit) for income taxes (161) (1,593) 25,415 21,648 -------- ------- ------- ------- Net earnings (loss) $ 699 $ (2,559) $ 43,505 $ 35,155 ======== ======== ======== ======== Earnings (loss) per share $ .03 $ (.13) $ 2.13 $ 1.73 ======== ======== ======== ======== Dividends per share $ .37 $ .35 $ 1.11 $ 1.05 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 3. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - -------------------------- (In thousands)
Sept. 30, Dec. 31, Sept. 30, 1996 1995 1995 - ---------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and short-term investments $ 171,035 $ 191,211 $ 115,183 Receivables, less allowances 55,888 104,735 57,858 Inventories 61,427 47,883 57,489 Deferred gas costs 44,773 71,940 64,632 Investment in U.S. Filter - - 72,986 Other current assets 12,679 9,117 9,077 ---------- ---------- ---------- Total current assets 345,802 424,886 377,225 Property and equipment, at cost 1,423,020 1,356,097 1,328,477 Less--Accumulated depreciation 603,043 563,337 551,961 ---------- ---------- ---------- Net property and equipment 819,977 792,760 776,516 Other assets: Deferred post-retirement health care costs 89,808 93,830 94,340 Investments 29,871 13,821 14,540 Deferred charges and other costs, less amortization 53,358 52,045 46,226 ---------- ---------- ---------- Total other assets 173,037 159,696 155,106 ---------- ---------- ---------- Total assets $1,338,816 $1,377,342 $1,308,847 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 4. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - -------------------------- (In thousands)
Sept. 30, Dec. 31, Sept. 30, 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current debt $ 18,604 $ 57,193 $ 9,193 Accounts payable 52,241 64,960 42,156 Accrued expenses 31,153 26,795 31,339 Other current liabilities 67,142 75,913 75,040 ---------- ---------- ---------- Total current liabilities 169,140 224,861 157,728 Gas inventory financing 49,159 45,600 43,982 Long-term debt 350,118 357,675 358,874 Reserves and other liabilities: Deferred income taxes 90,752 89,102 93,829 Post-retirement health care 97,401 98,717 101,482 Coal miners retiree health care 62,169 65,025 55,453 Preferred stock of subsidiary 29,284 29,262 29,254 Other reserves 71,489 71,336 56,789 ---------- ---------- ---------- Total reserves and other liabilities 351,095 353,442 336,807 Shareholders' equity: Common stock, $1.00 par value Authorized shares -- 50,000,000 Issued shares - 20,441,907 at September 30, 1996; 20,385,587 at December 31, 1995 and 20,674,865 at September 30, 1995 20,442 20,386 20,675 Capital in excess of par value 33,043 31,488 38,591 Retained earnings 369,368 348,821 365,080 Treasury stock at cost - 137,866 shares at September 30, 1996; 191,547 shares at December 31, 1995 and 500,749 shares at September 30, 1995 (3,549) (4,931) (12,890) ---------- ---------- ---------- Total shareholders' equity 419,304 395,764 411,456 ---------- ---------- ---------- Total liabilities and shareholders' equity $1,338,816 $1,377,342 $1,308,847 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 5. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Statement of Cash Flows - ------------------------------------ (In thousands)
Nine months ended September 30, 1996 1995 - --------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings $ 43,505 $ 35,155 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 48,688 46,120 Income taxes and tax credits (1,087) 1,256 Other changes in assets and liabilities: Receivables 48,846 43,035 Inventories (13,545) 2,718 Deferred gas costs 27,167 25,071 Accounts payable (12,719) (7,817) Other (7,925) 6,923 --------- --------- Net cash provided by operating activities 132,930 152,461 Cash flows from investing activities: Capital expenditures (76,492) (48,155) Investments (21,146) 965 Proceeds on sale of WaterPro - 52,864 Proceeds on sale of investments 3,090 - Other (1,695) (673) --------- -------- Net cash provided (used) by investing activities (96,243) 5,001 Cash flows from financing activities: Dividends paid (22,462) (21,309) Changes in notes payable (38,300) (58,430) Repayment of long-term debt (6,445) (5,503) Changes in gas inventory financing 3,559 (9,596) Purchase of treasury shares - (8,357) Other 2,805 2,233 --------- --------- Net cash used by financing activities (60,843) (100,962) Net increase (decrease) in cash and cash equivalents (24,156) 56,500 Cash and cash equivalents at beginning of year 185,137 51,674 --------- --------- Cash and cash equivalents at end of period 160,981 108,174 Short-term investments 10,054 7,009 --------- --------- Cash and short-term investments $ 171,035 $ 115,183 ========= =========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 6. EASTERN ENTERPRISES AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS September 30, 1996 1. Accounting policies It is Eastern's opinion that the financial information contained in this report reflects all adjustments necessary to present a fair statement of results for the periods reported. All of these adjustments are of a normal recurring nature. Results for the periods are not necessarily indicative of results to be expected for the year, due to the seasonal nature of Eastern's operations. Such financial information is subject to year-end adjustments and annual audit by independent public accountants. All accounting policies have been applied in a manner consistent with prior periods. However, due to the immateriality of AllEnergy Marketing Company, Inc. ("AllEnergy Inc."), its results have been restated on the equity method to provide comparability with Eastern's continuing involvement in the marketing of retail energy services through a joint venture, AllEnergy Marketing Company, L.L.C. ("AllEnergy LLC"). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this Form 10-Q. Therefore these interim financial statements should be read in conjunction with Eastern's 1995 Annual Report filed on Form 10-K with the Securities and Exchange Commission. Earnings per share Per share amounts are based on the weighted average number of common and common equivalent shares outstanding. Quarter and year-to-date shares are 20,457,000 and 20,428,000, respectively, in 1996 and 20,277,000 and 20,270,000 respectively, in 1995. Form 10-Q Page 7. 2. Inventories The components of inventories were as follows: (In thousands)
Sept. 30, Dec. 31, Sept. 30, 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------ Supplemental gas supplies $ 48,728 $ 35,136 $ 44,443 Other materials, supplies and marine fuels 12,699 12,747 13,046 -------- -------- -------- $ 61,427 $ 47,883 $ 57,489 ======== ======== ========
3. Supplemental cash flow information The following are supplemental disclosures of cash flow information: (In thousands)
Nine months ended September 30, 1996 1995 - ----------------------------------------------------------------------------------------------------------------- Cash paid during the year for: Interest, net of amounts capitalized $17,645 $19,190 Income taxes $28,023 $20,842
4. Contingencies In September 1996 Eastern received notices from the Social Security Administration ("SSA") claiming that Eastern is responsible for health benefit premiums for an additional group of retired coal miners and their beneficiaries under the federal Coal Industry Retiree Health Benefit Act of 1992 ("Coal Act"). In 1993 and 1995 Eastern recorded reserves aggregating $80,000,000 to provide for its estimated undiscounted obligations under the Coal Act with respect to the miners and beneficiaries assigned to Eastern. These amounts were reflected as extraordinary items totaling $52,000,000, net of tax. As more fully discussed in Note 12 of Notes to Financial Statements in Eastern's 1995 Annual Report, its obligation could range from zero to more than $115 million. Due to a lack of information about the recent assignment of the additional group of retired miners and their beneficiaries and other issues, it is not known what the ultimate cost of such assignment, if any, will be to Eastern, and no additional provision has been made at this time. Form 10-Q Page 8. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS
Revenues: (In thousands) Three months ended September 30, 1996 1995 Change - -------------------------------------------------------------------------------------------------------- Boston Gas $ 59,453 $ 56,958 4 % Midland 74,497 76,486 (3)% -------- -------- Total $133,950 $133,444 - ======== ========
Nine months ended September 30, 1996 1995 Change - -------------------------------------------------------------------------------------------------------- Boston Gas $539,314 $480,814 12 % Midland 227,376 218,474 4 % -------- -------- Total $766,690 $699,288 10 % ======== ========
Boston Gas Third quarter revenues increased by $2.5 million, primarily reflecting higher sales to non-firm customers. For the first nine months of 1996, higher customer usage, due principally to colder billing temperatures, and increased sales to non-firm and new firm customers contributed to the $58.5 million increase in revenues. Weather for the first nine months of 1996 was 3% colder than normal, in contrast to slightly warmer than normal weather for the first nine months of 1995. Midland Enterprises Revenues for the third quarter of 1996 were 3% below 1995, reflecting an 8% decline in ton miles. Weak foreign demand for coal and the lack of stored grain combined with a late harvest lowered demand for the transportation of export coal and grain during the quarter. Year-to-date revenues increased 4% over last year on 1% fewer ton miles, as improved market rates, particularly for non-coal commodities, more than offset the impact of lower volume. Lower export coal shipments resulted in a 2% decline in third quarter coal ton miles. Coal tonnage increased 7%, as long haul export movements were replaced by shorter haul spot shipments. Year-to-date coal ton miles and tonnage increased 4% and 2%, respectively, reflecting slightly longer average hauls and a new Midland record for tons of coal transported. Third quarter and year-to-date non-coal tonnage declined 9% and 5%, respectively, mainly due to reduced export activity coupled with reduced towing services for others. Reductions in grain and aggregate tonnage were largely offset by increased shipments of coke, scrap and steel products. Form 10-Q Page 9.
Operating Earnings: (In thousands) Three months ended September 30, 1996 1995 Change - --------------------------------------------------------------------------------------------------------- Boston Gas $(8,749) $(10,800) 19 % Midland 14,663 15,726 (7)% Headquarters (988) (1,711) 42 % ------- -------- Total $ 4,926 $ 3,215 53 % ======= ========
Nine months ended September 30, 1996 1995 Change - --------------------------------------------------------------------------------------------------------- Boston Gas $45,856 $42,005 9 % Midland 44,286 43,569 2 % Headquarters (3,447) (4,354) 21 % ------- ------- Total $86,695 $81,220 7 % ======= =======
Boston Gas The $2 million increase in operating earnings for the third quarter reflects the lack of severance costs incurred in 1995 and the margin impact of increased demand and load growth, partially offset by higher operating expenses. Operating earnings for the first nine months of 1996 increased by about $4 million, as compared to 1995, primarily reflecting the margin impact of colder weather, increased demand and sales to new customers. The absence of severance costs and lower consulting expenses also contributed to the increase in operating earnings. Higher charges for depreciation, lower capitalized expenses and higher property taxes were partially offsetting. Midland Enterprises Although Midland's third quarter operating earnings declined 7% from the record third quarter in 1995, they are the second highest third quarter earnings on record. The decrease reflected lower ton miles, higher operating costs due to traffic pattern inefficiencies resulting from the reduction in export tonnage and higher fuel prices. Year-to-date operating earnings increased 2% over 1995, setting a new earnings record. Increased volume and rates for iron, scrap and steel and strong second quarter export coal demand contributed to the improved year-to-date results. The 16% increase in diesel prices was partially offset by fuel adjustment clauses in Midland's long-term contracts. Form 10-Q Page 10. Interest Income and Expense and Other, Net: Interest income increased $0.9 million for the third quarter and $3.7 million for the first nine months of 1996, reflecting higher cash and investment balances resulting from the sale of WaterPro Supplies in April 1995 and the sale of Eastern's investment in U. S. Filter Corp in November 1995. Interest expense decreased 9% for both the third quarter and the first nine months of 1996, reflecting lower average rates principally due to the refinancing of $60 million of Boston Gas debentures in December 1995 and lower balances of short term obligations. For the third quarter of 1996, Other, net includes gains of $1.1 million on the disposition of Eastern's equity interest in the Maritimes and Northeast Pipeline and $0.9 million on the sale of U.S. Filter stock, partially offset by $0.8 million equity in the losses of AllEnergy Inc. Year-to-date results included $1.8 million equity in the loss of AllEnergy Inc., partially offset by gains on the sale of U.S. Filter stock and other securities. Forward Looking Information: This report and other company reports and statements issued or made from time to time contain certain "forward looking statements" concerning projected future financial performance or concerning expected plans or future operations. Eastern cautions that actual results and developments may differ materially from such projections or expectations. Investors should be aware of important factors that could cause actual results to differ materially from the forward-looking projections or expectations. These factors include, but are not limited to: temperatures above or below normal in Boston Gas' service territory, adverse operating conditions on the inland waterways, uncertainties regarding the start-up of AllEnergy LLC, including expense levels and customer acceptance, changes in interest rates, regulatory decisions, and developments with respect to Eastern's previously-disclosed environmental and Coal Act liabilities, all of which are difficult to predict and are generally beyond Eastern's control. LIQUIDITY AND CAPITAL RESOURCES Management believes that projected cash flow from operations, in combination with currently available capital resources, is more than sufficient to meet Eastern's 1996 capital expenditure and working capital requirements, potential funding of its Coal Act and environmental liabilities, normal debt repayments and anticipated dividend payments to shareholders. Consolidated capital expenditures for 1996 are estimated to total approximately $108 million, of which $76 million have already been expended. About 55% of the projected total are for Boston Gas and the balance primarily for Midland. On May 17, 1996, Boston Gas filed a restructuring and performance-based regulation ("PBR") proposal with the Massachusetts Department of Public Utilities. As part of this proposal, Boston Gas has requested a $30 million rate increase to become effective December 1, 1996. Form 10-Q Page 11. In the restructuring proposal, Boston Gas has proposed to unbundle its services through the opening of its distribution system to competition. Under the plan, all customers, on a phased basis, would be allowed a choice among alternate gas suppliers. Boston Gas has proposed to cease the purchasing and reselling of gas (commonly referred to as the "merchant function") by the year 2000 and thus to become a "distribution-only" company. In general, PBR would set future rates according to a pre-determined formula. Any savings or productivity gains achieved by Boston Gas in excess of target levels would increase operating earnings, while any shortfalls would result in lower earnings. Boston Gas has proposed that the PBR plan last for five years. On September 18, 1996, Eastern and New England Electric System ("NEES") formed AllEnergy LLC, an unregulated retail energy marketing company that is intended to provide a comprehensive array of energy commodities and related products and services to customers in the Northeast. AllEnergy LLC combines Eastern's and NEES' existing unregulated retail energy marketing subsidiaries, AllEnergy Inc. and NEES Energy, Inc., respectively, and is owned equally by both companies. The participation of NEES and NEES Energy, Inc. in the joint venture is subject to approval by the Securities and Exchange Commission. In September 1996 Eastern received notices from the Social Security Administration claiming that Eastern is responsible for health benefit premiums for an additional group of retired coal miners and their beneficiaries under the federal Coal Industry Retiree Health Benefit Act of 1992. As described in Note 4 of Notes to Financial Statements, the liability for these additional premiums could result in an addition to Eastern's reserve for such Coal Act liability and would be recorded as an extraordinary item. No provision has been made at this time because the amount of the additional reserve, if any, cannot be reasonably estimated. On October 24, 1996, Eastern's Board of Trustees voted to increase the quarterly cash dividend from $.37 per share to $.40 per share, payable on January 3, 1997 to shareholders of record as of December 2, 1996. Form 10-Q Page 12. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits None. (b) Reports on Form 8-K There were no reports on Form 8-K filed in the third quarter of 1996. Form 10-Q Page 13. SIGNATURES It is Eastern's opinion that the financial information contained in this report reflects all adjustments necessary to present a fair statement of results for the period reported. All of these adjustments are of a normal recurring nature. Results for the period are not necessarily indicative of results to be expected for the year, due to the seasonal nature of Eastern's operations. All accounting policies have been applied in a manner consistent with prior periods other than changes disclosed in Notes to Financial Statements. Such financial information is subject to year-end adjustments and annual audit by independent public accountants. Pursuant to the requirements of the Securities Exchange Act of 1934, Eastern has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EASTERN ENTERPRISES By JAMES J. HARPER ----------------------------- James J. Harper Vice President and Controller (Chief Accounting Officer) By WALTER J. FLAHERTY ----------------------------- Walter J. Flaherty Senior Vice President and Chief Financial Officer October 25, 1996 EX-27 2 ARTICLE 5
5 This schedule contains summary financial information extracted from the consolidated statement of earnings and the consolidated balance sheets and is qualified in its entirety by reference to such financial statements. 1,000 U.S. DOLLARS 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1 171,035 0 73,981 18,093 61,427 345,802 1,423,020 603,043 1,338,816 169,140 350,118 20,442 29,284 0 398,862 1,338,816 539,314 766,690 430,157 601,520 59,786 10,636 25,828 68,920 25,415 43,505 0 0 0 43,505 2.13 2.13
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