-----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, TnjbK7x2V+G1Cpi+Rx9SXFiF1sgY0MJ+DR7af7gcy9Y8Roo+mytTi4+eGUW9th16 AmQ4BLjqpE2kWSIufoYZPg== 0000311259-97-000006.txt : 19970728 0000311259-97-000006.hdr.sgml : 19970728 ACCESSION NUMBER: 0000311259-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970725 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: 97645468 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 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 1-2297 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 July 24, 1997 was 20,355,655. 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 - ------------------------------------
Three months ended Six months ended June 30, June 30, (In thousands, except per share amounts) 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------------- Revenues $207,856 $213,520 $584,776 $632,740 Operating costs and expenses: Operating costs 146,796 150,994 419,355 456,760 Selling, general & adminis- trative expenses 26,497 25,480 55,578 56,100 Depreciation & amortization 15,934 14,458 38,237 38,111 -------- -------- ------- -------- 189,227 190,932 513,170 550,971 -------- -------- ------- -------- Operating earnings 18,629 22,588 71,606 81,769 Other income (expense): Interest income 2,228 2,624 4,333 4,857 Interest expense (8,535) (8,361) (17,325) (17,503) Equity in loss of AllEnergy (1,821) (1,018) (3,098) (1,018) Other, net 85 45 58 277 -------- -------- -------- ------- Earnings before income taxes 10,586 15,878 55,574 68,382 Provision for income taxes 1,548 5,954 18,313 25,576 -------- -------- -------- -------- Net earnings $ 9,038 $ 9,924 $ 37,261 $ 42,806 ======== ======== ======== ======== Earnings per share $ .44 $ .49 $ 1.82 $ 2.10 ======== ======== ======== ======== Dividends per share $ .40 $ .37 $ .80 $ .74 ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 3. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - --------------------------
June 30, Dec. 31, June 30, (In thousands) 1997 1996 1996 - ---------------------------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and short-term investments $ 170,087 $ 159,804 $ 191,136 Receivables, less allowances 95,392 96,854 100,818 Inventories 43,064 61,271 42,288 Deferred gas costs 17,048 75,337 5,449 Other current assets 6,607 6,396 9,355 ---------- ---------- --------- Total current assets 332,198 399,662 349,046 Property and equipment, at cost 1,466,529 1,450,741 1,396,662 Less--Accumulated depreciation 640,816 612,573 597,224 ---------- ---------- --------- Net property and equipment 825,713 838,168 799,438 Other assets: Deferred post-retirement health care costs 86,245 88,563 91,148 Investment in AllEnergy 4,434 2,032 88 Investments 21,608 31,346 23,444 Deferred charges and other costs, less amortization 47,205 61,844 50,358 ---------- --------- ---------- Total other assets 159,492 183,785 165,038 ---------- ---------- ---------- Total assets $1,317,403 $1,421,615 $1,313,522 ========== ========== ==========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 4. Eastern Enterprises and Subsidiaries - ------------------------------------ Consolidated Balance Sheet - --------------------------
June 30, Dec. 31, June 30, (In thousands) 1997 1996 1996 - ------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current debt $ 4,583 $ 61,557 $ 5,358 Accounts payable 43,943 74,114 60,860 Accrued expenses 35,420 25,999 31,012 Other current liabilities 59,830 72,722 68,924 ---------- ---------- ---------- Total current liabilities 143,776 234,392 166,154 Gas inventory financing 29,990 55,594 23,754 Long-term debt 345,084 347,313 351,356 Reserves and other liabilities: Deferred income taxes 94,184 93,198 86,564 Post-retirement health care 96,155 96,980 97,759 Coal miners retiree health care 58,949 61,008 63,035 Preferred stock of subsidiary 29,309 29,292 29,275 Other reserves 69,458 75,848 69,001 ---------- ---------- ---------- Total reserves and other liabilities 348,055 356,326 345,634 Shareholders' equity: Common stock, $1.00 par value Authorized shares -- 50,000,000 Issued shares -- 20,442,907 at June 30, 1997; 20,441,907 at December 31, 1996 and 20,428,707 at June 30, 1996 20,443 20,442 20,429 Capital in excess of par value 32,716 33,389 32,923 Retained earnings 399,617 377,714 377,071 Treasury stock at cost - 88,252 shares at June 30, 1997; 138,110 shares at December 31, 1996 and 147,601 shares at June 30, 1996 (2,278) (3,555) (3,799) ---------- ---------- ---------- Total shareholders' equity 450,498 427,990 426,624 ---------- ---------- ---------- Total liabilities and shareholders' equity $1,317,403 $1,421,615 $1,313,522 ========== ========== ==========
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 - ------------------------------------
Six months ended June 30, (In thousands) 1997 1996 - ------------------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net earnings $ 37,261 $ 42,806 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 38,237 38,111 Income taxes and tax credits 9,771 3,579 Equity in loss of AllEnergy 3,098 1,018 Other changes in assets and liabilities: Receivables 1,462 3,916 Inventories 18,207 5,595 Deferred gas costs 58,289 66,490 Accounts payable (30,172) (4,100) Other (3,702) (10,420) --------- --------- Net cash provided by operating activities 132,451 146,995 Cash flows from investing activities: Capital expenditures (25,915) (45,360) Investment in AllEnergy (5,500) (1,106) Investments (1,900) (11,822) Proceeds on sale of investments - 1,795 Other (727) (640) --------- --------- Net cash (used) by investing activities (34,042) (57,133) Cash flows from financing activities: Dividends paid (16,257) (14,958) Changes in notes payable (56,600) (52,000) Repayment of long-term debt (2,332) (5,445) Changes in gas inventory financing (25,604) (21,846) Other 491 2,456 --------- --------- Net cash used by financing activities (100,302) (91,793) Net increase (decrease) in cash and cash equivalents (1,893) (1,931) Cash and cash equivalents at beginning of year 159,804 185,137 --------- --------- Cash and cash equivalents at end of period 157,911 183,206 Short-term investments 12,176 7,930 --------- --------- Cash and short-term investments $ 170,087 $ 191,136 ========= =========
The accompanying notes are an integral part of these financial statements. Form 10-Q Page 6. EASTERN ENTERPRISES AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS June 30, 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 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. 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 and common equivalent shares outstanding. Quarter and year-to-date shares are 20,499,000 and 20,483,000 respectively, in 1997 and 20,428,000 and 20,414,000, respectively, 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 and six months ended June 30, would result in basic earnings per share of $.44 and $1.83 in 1997 and $.49 and $2.12 in 1996, 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:
June 30, Dec. 31, June 30, (In thousands) 1997 1996 1996 - ----------------------------------------------------------------------------------------------------------- Supplemental gas supplies $ 30,669 $ 49,287 $ 29,704 Other materials, supplies and marine fuels 12,395 11,984 12,584 -------- -------- -------- $ 43,064 $ 61,271 $ 42,288 ======== ======== ========
3. Supplemental cash flow information The following are supplemental disclosures of cash flow information:
Six months ended June 30, (In thousands) 1997 1996 - ----------------------------------------------------------------------------------------------------------------- Cash paid during the year for: Interest, net of amounts capitalized $16,762 $16,391 Income taxes $ 8,981 $23,393
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 June 30, (In thousands) 1997 1996 Change - -------------------------------------------------------------------------------------------------------- Boston Gas $139,743 $136,520 2% Midland 68,113 77,000 (12)% -------- -------- Total $207,856 $213,520 (3)% ======== ========
Six months ended June 30, 1997 1996 Change - -------------------------------------------------------------------------------------------------------- Boston Gas $452,281 $479,861 (6)% Midland 132,495 152,879 (13)% -------- -------- Total $584,776 $632,740 (8)% ======== ========
Boston Gas Unseasonably cold weather, higher gas costs and sales to new customers, partially offset by lower non-firm sales, contributed to the increase in revenues for the second quarter of 1997. Warmer weather and lower average customer usage for the first six months of 1997 decreased revenues by about $34 million. Sales to new customers were partially offsetting. Year-to-date weather was near normal for 1997, and 3% warmer than 1996, as cold temperatures in the second quarter of 1997 offset 8% warmer than normal weather in the first quarter. Midland Enterprises Weak demand for transportation services contributed to revenue decreases of 12% and 13% for the second quarter and first half of 1997, respectively. Industry demand for transportation services remained soft, continuing the weakness experienced in the second half of 1996. As a result of the market issues discussed above, ton miles decreased 11% for the quarter and 12% year-to-date. Coal tonnage decreased 20% and 22% for the quarter and the first half of 1997, respectively, due entirely to shortfalls in utility and industrial accounts. Form 10-Q Page 9. Operating Earnings:
Three months ended June 30, (In thousands) 1997 1996 Change - --------------------------------------------------------------------------------------------------------- Boston Gas $11,368 $ 7,840 45% Midland 9,103 15,612 (42)% Headquarters (1,842) (864) nm ------- ------- Total $18,629 $22,588 (18)% ======= =======
Six months ended June 30, 1997 1996 Change - -------------------------------------------------------------------------------------------------------- Boston Gas $60,159 $54,605 10% Midland 14,531 29,623 (51)% Headquarters (3,084) (2,459) (25)% ------- ------- Total $71,606 $81,769 (12)% ======= =======
Boston Gas Second quarter operating earnings increased $3.5 million from 1996, primarily reflecting higher rates, colder weather and load growth. Operating earnings for the first six months of 1997 increased $5.6 million from 1996. The increase reflected lower operating expenses related to the warmer weather, a change in the inter-period allocation of depreciation and property taxes, as discussed below, and a $2.0 million gain on the settlement of pension obligations, partially offset by the margin impact of decreased revenues. 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 year-to-date expenses by $2.9 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 Operating earnings for the second quarter and year-to-date decreased by $6.5 million and $15.1 million, respectively, from the record levels of 1996. These decreases reflected weaker market conditions, as described above, lower grain rates, and poor operating conditions. Periodic high water conditions on the Mississippi River early in the second quarter, coupled with record Ohio River flooding late in the first quarter, combined to raise operating costs and lower productivity during the first half of 1997. Other: In 1997, other income (expense) for the second quarter and year-to-date includes losses of $1.8 million and $3.1 million, respectively, representing Eastern's 50% share of AllEnergy's operating results. In 1996, other income (expense) includes a loss for AllEnergy of $1.0 million for both the second quarter and year-to-date. Form 10-Q Page 10. A prior year adjustment reduced the 1997 annualized income tax provision rate to 33%, which resulted in an effective tax rate of 15% for the second quarter. In April 1997, the Federal Court of Appeals for the First Circuit affirmed the decision of the Federal District Court for Massachusetts decision upholding the constitutionality of the Coal Industry Retiree Health Benefit Act of 1992 as applied to Eastern. Eastern has filed an appeal of this decision to the U.S. Supreme Court and continues its efforts to legislatively and administratively reduce its liability under the Coal Act. On May 16, 1997 Boston Gas received a positive decision from the Massachusetts Department of Public Utilities ("Department") concerning its request for reconsideration, clarification and recalculation of the Department's November 1996 rate order. The Department granted Boston Gas an additional $1.9 million rate increase (a $6.3 million increase was granted in the November 1996 Order) and reduced the productivity factor portion of the Performance-Based Rate ("PBR") formula established in its November 1996 Order by 50 basis points, from 2.00% to 1.50%. Compared to the Department's original decision, these changes add approximately $3.5 million to revenue next year, increasing to about $8.0 million by 2002, the last year of the plan. On June 5, 1997, Boston Gas filed a notice of appeal of the Department's orders to the Massachusetts Supreme Judicial Court. Boston Gas expects the appeal to take approximately one year, and any relief granted by the court to be prospective. 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 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 and court decisions, 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 flow 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. Form 10-Q Page 11. Consolidated capital expenditures are budgeted at $78 million, about 70% of which are for Boston Gas and the balance for Midland. 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 second quarter of 1997. 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 July 25, 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 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 170,087 0 113,811 18,419 43,064 332,198 1,466,529 640,816 1,317,403 143,776 345,084 20,443 29,309 0 430,055 1,317,403 452,281 584,776 346,333 457,160 45,059 9,658 17,325 55,574 18,313 37,261 0 0 0 37,261 1.82 1.82
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