-----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, KJCUGi89lxEeTKCTcFFbmw1hBwz3Tpv4ouXgRy300y+GS9rckoh73rIVCPwKitEC oP1jyqM/Ht+103ua1UGIPg== 0000311259-97-000004.txt : 19970429 0000311259-97-000004.hdr.sgml : 19970429 ACCESSION NUMBER: 0000311259-97-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970428 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: 97588312 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 March 31, 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 1-2297 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 April 25, 1997 was 20,339,833. 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 Earnings - ----------------------------------
Three months ended March 31, (In thousands, except per share amounts) 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Revenues $376,920 $419,220 Operating costs and expenses: Operating costs 272,559 305,766 Selling, general and administrative expenses 29,081 30,620 Depreciation and amortization 22,303 23,653 -------- -------- 323,943 360,039 -------- -------- Operating earnings 52,977 59,181 Other income (expense): Interest income 2,105 2,233 Interest expense (8,790) (9,142) Equity in loss of AllEnergy (1,277) - Other, net (27) 232 -------- -------- Earnings before income taxes 44,988 52,504 Provision for income taxes 16,765 19,622 -------- -------- Net earnings $ 28,223 $ 32,882 ======== ======== Earnings per share $ 1.38 $ 1.61 ======== ======== Dividends per share $ .40 $ .37 ======== ========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 3. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - --------------------------
March 31, Dec. 31, March 31, (In thousands) 1997 1996 1996 - ------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and short-term investments $ 174,492 $ 159,804 $ 201,696 Receivables, less reserves 149,846 96,854 171,925 Inventories 37,452 61,271 23,773 Deferred gas costs 26,791 75,337 - Other current assets 5,242 6,396 6,379 ---------- ---------- ---------- Total current assets 393,823 399,662 403,773 Property and equipment, at cost 1,456,749 1,450,741 1,372,050 Less--accumulated depreciation 629,376 612,573 584,550 ---------- ---------- ---------- Net property and equipment 827,373 838,168 787,500 Other assets: Deferred post-retirement health care costs 87,404 88,563 91,224 Investment in AllEnergy 4,255 2,032 - Other investments 26,158 31,346 13,729 Deferred charges and other costs, less amortization 53,992 61,844 50,335 ---------- ---------- ---------- Total other assets 171,809 183,785 155,288 ---------- ---------- ---------- Total assets $1,393,005 $1,421,615 $1,346,561 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 4. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - --------------------------
March 31, Dec. 31, March 31, (In thousands) 1997 1996 1996 - --------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current debt $ 43,679 $ 61,557 $ 16,553 Accounts payable 51,308 74,114 54,837 Accrued expenses 52,075 25,999 59,254 Other current liabilities 66,021 72,722 73,688 ---------- --------- --------- Total current liabilities 213,083 234,392 204,332 Gas inventory financing 34,636 55,594 19,187 Long-term debt 346,081 347,313 355,512 Reserves and other liabilities: Deferred income taxes 93,473 93,198 84,480 Post-retirement health care 96,606 96,980 98,079 Coal miners retiree health care 59,938 61,008 64,020 Preferred stock of subsidiary 29,301 29,292 29,267 Other reserves 70,383 75,848 69,139 ---------- --------- --------- Total reserves and other liabilities 349,701 356,326 344,985 Shareholders' equity: Common stock, $1.00 par value Authorized shares -- 50,000,000 Issued shares - 20,442,907 at March 31, 1997; 20,441,907 at December 31, 1996 and 20,405,167 at March 31, 1996 20,443 20,442 20,405 Capital in excess of par value 33,654 33,389 32,198 Retained earnings 398,073 377,714 374,037 Treasury stock at cost - 103,074 shares at March 31, 1997; 138,110 shares at December 31, 1996 and 159,088 shares at March 31, 1996 (2,666) (3,555) (4,095) ---------- ---------- ---------- Total shareholders' equity 449,504 427,990 422,545 Total liabilities and shareholders' equity $1,393,005 $1,421,615 $1,346,561 ========== ========== ==========
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 - ------------------------------------
Three months ended March 31, (In thousands) 1997 1996 - ------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net earnings $ 28,223 $ 32,882 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 22,303 23,653 Income taxes and tax credits 16,837 17,376 Equity in loss of AllEnergy 1,277 - Other changes in assets and liabilities: Receivables (52,991) (67,189) Inventories 23,819 24,109 Deferred gas costs 48,546 74,599 Accounts payable (22,806) (10,123) Other 6,558 7,341 -------- -------- Net cash provided by operating activities 71,766 102,648 Cash flows from investing activities: Capital expenditures (12,038) (19,242) Investment in AllEnergy (3,500) - Investments (3,585) 6,074 Proceeds on sale of investments - 1,795 Other (65) 420 -------- -------- Net cash used by investing activities (19,188) (10,953) Cash flows from financing activities: Dividends paid (8,122) (7,470) Changes in notes payable (17,400) (40,700) Repayment of long-term debt (1,423) (1,479) Changes in gas inventory financing (20,958) (26,413) Other 1,091 926 -------- -------- Net cash used by financing activities (46,812) (75,136) Net increase in cash and cash equivalents 5,766 16,559 Cash and cash equivalents at beginning of year 159,804 185,137 -------- -------- Cash and cash equivalents at end of period 165,570 201,696 Short-term investments 8,922 - -------- -------- Cash and short-term investments $174,492 $201,696 ======== ========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 6. EASTERN ENTERPRISES AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS March 31, 1997 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 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. Such financial information is subject to year-end adjustments and annual audit by independent public accountants. 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 1996 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 shares outstanding and common equivalent shares (20,467,000 shares in 1997 and 20,399,000 shares in 1996). In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," effective for periods ending after December 15, 1997. Restating Eastern's reported earnings per share for the three months ended March 31, 1997 and 1996 would result in basic earnings per share of $1.39 and $1.63, respectively. The SFAS No. 128 calculation of diluted earnings per share is equivalent to the fully diluted earnings per share calculation, which is not materially different from the primary and basic earnings per share calculations. Form 10-Q Page 7. 2. Inventories The components of inventories were as follows:
March 31, Dec. 31, March 31, (In thousands) 1997 1996 1996 - ------------------------------------------------------------------------------------------------------------------ Supplemental gas supplies $25,017 $49,287 $10,437 Other materials, supplies and marine fuels 12,435 11,984 13,336 ------- ------- ------- $37,452 $61,271 $23,773 ======= ======= =======
3. Supplemental cash flow information The following are supplemental disclosures of cash flow information:
Three months ended March 31, (In thousands) 1997 1996 - ----------------------------------------------------------------------------------------------------------------- Cash paid during the year for: Interest, net of amounts capitalized $ 1,631 $ 1,478 Income taxes $ 160 $ 2,462
Form 10-Q Page 8. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS
Revenues: Three months ended March 31, (In thousands) 1997 1996 Change - ------------------------------------------------------------------------------------------------------ Boston Gas $312,538 $343,341 (9)% Midland 64,382 75,879 (15)% -------- -------- Total $376,920 $419,220 (10)% ======== ========
Operating Earnings: Three months ended March 31, (In thousands) 1997 1996 Change - ------------------------------------------------------------------------------------------------------ Boston Gas $48,791 $46,765 4% Midland 5,428 14,011 (61)% Headquarters (1,242) (1,595) 22% ------- ------- Total $52,977 $59,181 (10)% ======= =======
Boston Gas Weather in the Boston Gas service territory was 8% warmer than normal in the first quarter of 1997, and 9% warmer than 1996. The impact of warmer weather decreased revenues by $36 million, partially offset by $11 million in sales to new customers. The corresponding decrease in gross margin during the first quarter was offset by lower operating expenses related to the warmer weather, a change in the inter-period allocation of depreciation and property taxes and a $2.0 million gain on the settlement of pension obligations. To better match expenses against gross margin, on January 1, 1997 Boston Gas changed the inter-period allocation of depreciation and property taxes to be based on firm throughput volumes, as opposed to firm sales volumes, reflecting the increasing importance of unbundled transportation service. This change reduced 1997 first quarter expenses by $3.6 million, as compared to 1996. These expenses will be increased by a like amount over the remainder of 1997, predominantly in the third quarter. Midland Enterprises Extremely poor operating conditions, the expiration of coal transportation contracts and weaker demand for transportation services decreased revenues and operating earnings by $11.5 million and $8.6 million, respectively, in the first quarter of 1997, as compared to the record levels of 1996. In contrast to moderate flooding in 1996, the Ohio River, a key operating area, sustained thirty-year record flood levels in March of 1997. Segments of the river were closed at various times, which significantly affected production and operating costs. Similar conditions affected the Mississippi River and its other tributaries. Continued flooding on the Mississippi River is expected in the Form 10-Q Page 9. second quarter. In addition, operating costs were impacted by fuel prices which averaged 19% higher than in 1996. Industry demand for transportation services remained soft, continuing the weakness experienced in the second half of 1996. Additionally, Midland did not renew several multi-year utility coal contracts in 1996. Available replacement tonnage was not fully offsetting, both in terms of volume and pricing. As a result of the operating and market issues discussed above, tonnage and ton miles declined 18.1% and 13.8%, respectively, from 1996 levels. Total coal tonnage declined 23.2%, with multi-year contract coal tonnage down 29.0%. Non-coal tonnage and ton miles declined 8.6% and 7.1%, respectively, as compared with 1996, primarily reflecting decreases in coke, ores and towing for others. Other In 1997, other income (expense) includes a loss of $1.3 million, representing Eastern's 50% share of AllEnergy's operating results. In April, 1997, the First Circuit Court of Appeals affirmed the District Court's decision upholding the constitutionality of the Coal Industry Retiree Health Benefit Act of 1992 as it applies to Eastern. Eastern is considering filing an appeal of this decision to the Supreme Court. 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, 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 Company's service area, changes in market conditions for barge transportation, adverse operating conditions on the inland waterways, uncertainties regarding the start-up of AllEnergy, including expense levels and customer acceptance, changes in interest rates, regulatory decisions, including without limitation, decisions on Boston Gas' request for reconsideration of the Massachusetts Department of Public Utilities rate restructuring order, and developments with respect to Eastern's previously-disclosed environmental and Coal Act liabilities. All of these factors are difficult to predict and are generally beyond the control of the Company. LIQUIDITY AND CAPITAL RESOURCES Management believes that projected cash flows from operations, in combination with currently available resources, is more than sufficient to meet Eastern's 1997 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 are budgeted at $83 million, about 62% of which are for Boston Gas and the balance for Midland. Form 10-Q Page 10. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Shareholders of the registrant was held on April 24, 1997, at which the shareholders voted to elect the following Trustees for terms of office expiring at the 2000 Annual Meeting of Shareholders: Richard R. Clayton, with 17,459,890 shares voting for and 105,550 shares withholding authority; Leonard R. Jaskol, with 17,461,441 shares voting for and 105,550 shares withholding authority; David B. Stone, with 17,457,222 shares voting for and 105,550 shares withholding authority; Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits None. (b) Report on Form 8-K There were no reports on Form 8-K filed in the first quarter of 1997. Form 10-Q Page 11. 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. 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 WALTER J. FLAHERTY ------------------------- Walter J. Flaherty Senior Vice President and Chief Financial Officer By JAMES J. HARPER ------------------------ James J. Harper Vice President and Controller (Chief Accounting Officer) April 28, 1997. 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 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 174,492 0 167,921 18,075 37,452 393,823 1,456,749 629,376 1,393,005 213,083 346,081 20,443 29,301 0 429,061 1,393,005 312,538 376,920 239,099 294,646 21,761 6,735 8,790 44,988 16,765 28,223 0 0 0 28,223 1.38 1.38
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