-----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, DjAIuewvIAH5PfoH4N9ZmY/frn7J6ii45uP3xfzSFblRGPtRtnMa+HnHbDZP7qqb UQEyRkkyROfcGnpyY7bvOQ== 0000910647-98-000284.txt : 19981116 0000910647-98-000284.hdr.sgml : 19981116 ACCESSION NUMBER: 0000910647-98-000284 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE GAS CO /MA/ CENTRAL INDEX KEY: 0000317406 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 041731220 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01857 FILM NUMBER: 98746031 BUSINESS ADDRESS: STREET 1: 115 CHESHIRE RD CITY: PITTSFIELD STATE: MA ZIP: 01201-1388 BUSINESS PHONE: 4134421511 10-Q 1 BODY OF 10-Q FOR 1ST QUARTER SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 30, 1998 Commission File No. 0-1857-3 THE BERKSHIRE GAS COMPANY Massachusetts 04-1731220 115 Cheshire Road, Pittsfield, Massachusetts 01201-1803 Registrant's telephone number, including Area Code 413:442-1511 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 ----- ----- At September 30, 1998, the Registrant had issued and outstanding 2,352,335 shares of Common Stock, par value $2.50. THE BERKSHIRE GAS COMPANY STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - Unaudited ---------------------------------------------------------- (In Thousands Except Per Share Amounts)
Three Months Ended 09/30/98 09/30/97 -------- -------- Operating Revenues $ 4,247 $ 4,480 Cost of Gas Sold 1,559 1,949 --------------------- Operating Margin 2,688 2,531 --------------------- Other Operating Expenses 2,909 2,659 Depreciation 352 365 --------------------- Total 3,261 3,024 --------------------- Utility Operating Loss (573) (493) Other Income - Net 432 424 --------------------- Operating Loss and Other Income (141) (69) Interest Expense 1,078 1,101 Other Taxes 215 204 --------------------- Pre-Tax Loss (1,434) (1,374) Income Tax Benefit (558) (538) --------------------- NET LOSS (876) (836) Retained Earnings at Beginning of Period 8,911 8,739 --------------------- Total 8,035 7,903 --------------------- Dividends Declared: Preferred Stock 4 4 Common Stock 682 638 --------------------- Total Dividends 686 642 --------------------- Retained Earnings at End of Period $ 7,349 $ 7,261 ===================== Loss Attributable to Common Stock $ (880) $ (840) ===================== Average Shares of Common Stock Outstanding 2,337.9 2,231.6 --------------------- Basic and Diluted Loss Per Share of Common Stock $ (0.38) $ (0.38) =====================
See Independent Accountants' Review Report and Notes to Financial Statements. THE BERKSHIRE GAS COMPANY STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - Unaudited ---------------------------------------------------------- (In Thousands Except Per Share Amounts)
Twelve Months Ended 9/30/98 9/30/97 ------- ------- Operating Revenues $49,626 $48,826 Cost of Gas Sold 24,140 23,526 ------------------- Operating Margin 25,486 25,300 ------------------- Other Operating Expenses 12,616 11,992 Depreciation 4,158 4,049 ------------------- Total 16,774 16,041 ------------------- Utility Operating Income 8,712 9,259 Other Income - Net 1,927 2,364 ------------------- Operating and Other Income 10,639 11,623 Interest Expense 4,369 4,289 Other Taxes 1,881 1,787 ------------------- Pre-Tax Income 4,389 5,547 Income Taxes 1,636 2,119 ------------------- NET INCOME 2,753 3,428 Retained Earnings at Beginning of Period 7,261 6,396 ------------------- Total 10,014 9,824 ------------------- Dividends Declared: Preferred Stock 15 72 Common Stock 2,650 2,491 ------------------- Total Dividends 2,665 2,563 ------------------- Retained Earnings at End of Period $ 7,349 $ 7,261 =================== Earnings Available for Common Stock $ 2,738 $ 3,356 =================== Average Shares of Common Stock Outstanding 2,290.1 2,198.4 ------------------- Basic and Diluted Earnings Per Share of Common Stock $ 1.20 $ 1.53 ===================
See Independent Accountants' Review Report and Notes to Financial Statements. THE BERKSHIRE GAS COMPANY BALANCE SHEETS ------------------------- (In Thousands)
September 30, June 30, 1998 1998 ------------- -------- (Unaudited) (Audited) ASSETS: Utility Plant: Utility Plant - at original cost $108,268 $106,654 Less: Accumulated Depreciation 31,607 31,371 ------------------------ Utility Plant - Net 76,661 75,283 ------------------------ Other Property: Other Property - at original cost 12,862 12,784 Less: Accumulated Depreciation 6,620 6,420 ------------------------ Other Property - Net 6,242 6,364 ------------------------ Current Assets: Cash 116 160 Accounts Receivable Utility Service (less allowance: Sept. 1998-$919;June 1998-$900) 2,788 5,427 Merchandise & Other (less allowance: Sept. 1998-$81; June 1998-$74) 362 669 Other Receivables 562 181 Inventories (at the lower of average cost or market): Natural Gas 3,248 2,313 Liquefied Petroleum 143 134 Materials and Supplies 1,830 1,814 Prepayments and Other 857 979 Prepaid Taxes 1,939 370 Recoverable Gas Costs 1,965 224 ------------------------ Total Current Assets 13,810 12,271 ------------------------ Deferred Debits: Unamortized Debt Expense 2,176 2,200 Capital Stock Expense 264 275 Environmental Cleanup Costs 840 800 Other 1,515 1,414 ------------------------ Total Deferred Debits 4,795 4,689 ------------------------ Recoverable Environmental Cleanup Costs 3,290 3,290 ------------------------ TOTAL ASSETS $104,798 $101,897 ========================
See Independent Accountants' Review Report and Notes to Financial Statements. THE BERKSHIRE GAS COMPANY BALANCE SHEETS ------------------------- (In Thousands)
September 30, June 30, 1998 1998 ------------ -------- (Unaudited) (Audited) CAPITALIZATION AND LIABILITIES Common Shareholders' Equity: Common Stock $ 5,881 $ 5,790 Premium on Common Stock 19,535 18,835 Retained Earnings 7,349 8,911 ------------------------ Total Common Shareholders' Equity 32,765 33,536 ------------------------ Redeemable Cumulative Preferred Stock 312 321 ------------------------ Long-Term Debt 34,000 34,000 ------------------------ Current Liabilities: Notes Payable to Banks 10,835 7,085 Current Maturities of Long-Term Debt 6,000 6,000 Accounts Payable 2,724 3,024 Other Current Liabilities 2,660 3,098 ------------------------ Total Current Liabilities 22,219 19,207 ------------------------ Other Liabilities 1,600 1,676 ------------------------ Unamortized Investment Tax Credit 1,121 1,139 ------------------------ Deferred Income Taxes 9,491 8,728 ------------------------ Reserve for Recoverable Environmental Cleanup Costs 3,290 3,290 ------------------------ TOTAL CAPITALIZATION AND LIABILITIES $104,798 $101,897 ========================
See Independent Accountants' Review Report and Notes to Financial Statements. THE BERKSHIRE GAS COMPANY STATEMENTS OF CASH FLOWS - Unaudited ------------------------------------ (In Thousands)
Three Months Ended 9/30/98 9/30/97 ------- ------- Cash flows from Operating Activities: Net Loss $ (876) $ (836) Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: Depreciation and Amortization 577 606 Provision for Losses on Accounts Receivable 99 102 Recoverable Gas Costs (1,741) (1,542) Deferred Income Taxes 763 626 Changes in Assets and Liabilities Which Provided (Used) Cash: Accounts Receivable 2,848 2,848 Other Receivables (381) 109 Inventories (959) (1,404) Accounts Payable (300) (479) Prepaid Taxes (1,569) (1,426) Other (537) (660) -------------------- Total Adjustments (1,200) (1,220) -------------------- Net Cash Used in Operating Activities (2,076) (2,056) -------------------- Cash Flows Used in Investing Activities: Construction Expenditures (1,814) (2,100) -------------------- Cash Flows Provided by Financing Activities: Dividends Paid (686) (642) Proceeds from Notes Payable 3,750 4,240 Proceeds from Other Stock Transactions 782 362 -------------------- Net Cash Provided by Financing Activities 3,846 3,960 -------------------- Net Decrease in Cash (44) (196) Cash at Beginning of Period 160 356 -------------------- Cash at End of Period $ 116 $ 160 ==================== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Year for: Interest(net of amount capitalized) $ 1,422 $ 1,517 ==================== Income Taxes(net of refund) $ 181 $ 204 ====================
See Independent Accountants' Review Report and Notes to Financial Statements. The Berkshire Gas Company Notes to Financial Statements September 30,1998 - ------------------------------------------------------------------------------- (Dollars in Thousands Except Share Amounts) NOTES: OTHER FINANCIAL INFORMATION: The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. All adjustments, which in the opinion of management are necessary for a fair presentation of the operations for the interim periods presented, have been made. These adjustments are of a normal recurring nature. Due to the significant impact of gas used for space heating during the heating season (November-April) and the Company's seasonal rate structure, the results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the summary of accounting policies and notes to financial statements included in the Company's Annual Report on Form 10-K for the year ended June 30, 1998. CONTINGENCIES: ENVIRONMENTAL: Like other companies in the natural gas industry, the Company is a party to governmental actions associated with former gas manufacturing sites. Management estimates that expenditures to remediate and monitor known environmental sites will range from $3,290 to $12,302. In accordance with SFAS No. 5, the Company has recorded the most likely cost of $3,290. The Company 's unamortized cost at September 30, 1998 was $840 and should be recovered over a seven-year period through the Cost of Gas Adjustment Clause ("CGAC"). Management's Discussion and Analysis of Financial Condition and Results of Operations - ------------------------------------------------------------------------------- Results of Operations - First Quarter Ended September 30, 1998 versus First Quarter Ended September 30, 1997 - ------------------------------------------------------------------------------- Berkshire Gas considers Operating Margin (Operating Margin or Gross Profit = Operating Revenues Net of Cost of Gas Sold) to be a more pertinent measure of operating results than Operating Revenues. This is due primarily to the fact that revenues include changes in the cost of natural gas which must be recovered or returned to customers through the Cost of Gas Adjustment Clause. Consequently, changes in the cost of gas will affect revenue levels, but does not have a corresponding affect on income. Additionally, margins earned on interruptible gas sold and transported are flowed back to the customers and therefore are not included in income. Accordingly, the discussion below pertains to Operating Margin. Operating Margin increased $157,000 or 6.2%, despite warmer weather, from the three months ended September 30, 1997, primarily due to growth in transportation revenues.
1998 1997 ---- ---- 3 Month Firm MCF Sold & Transported 703,000 713,000 3 Month Operating Margin $2,688,000 $2,531,000 3 Month Average Operating Margin Per Firm MCF $3.82 $3.55
Other Operating Expenses increased $250,000 or 9.4% from the three months ended September 30, 1997. The increase is primarily due to employee benefits costs, the development and implementation of new information systems companywide, costs incurred for the restructuring to a holding company and marketing promotions. Depreciation Expense decreased $13,000 due to a program of leasing short-lived assets previously purchased. Other Income increased $8,000 due to additional revenues generated by the Propane operation. Interest Expense decreased $23,000 due to lower levels of borrowings. Dividends on Common Stock increased $44,000 primarily due to an increase in the number of shares reflecting active shareholder participation in the Dividend Reinvestment Program ("DRIP"), and to a lesser extent, a quarterly increase in dividends to $.29 per share from $.285 in 1997. - ------------------------------------------------------------------------------- Results of Operations - Twelve Months Ended September 30, 1998 versus Twelve Months Ended September 30,1997 - ------------------------------------------------------------------------------- Earnings available for Common Stock were $2,738,000 for the twelve months ended September 30, 1998 as compared to $3,356,000 for 1997. The decrease is primarily due to increased operating expenses and lower other income caused by a warmer heating season. Operating Margin increased $186,000 or .7% from the twelve months ended September 30, 1997. The Company increased firm volumes sold during the winter heating season through commercial growth, which more than offset the 11% warmer than normal weather.
1998 1997 ---- ---- 12 Month Firm MCF Sold & Transported 6,105,000 6,448,000 12 Month Operating Margin $25,486,000 $25,300,000 12 Month Average Operating Margin Per Firm MCF $4.17 $3.92
Other Operating Expenses rose $624,000 or 5.2% over the twelve months ended September 30, 1997. The increase is due to costs incurred for the restructuring to a holding company, employee benefit costs, costs reflecting the development and implementation of new information systems companywide and increased marketing and promotion expenses. Other Income decreased $437,000 or 18.5% from 1997 primarily due to lower Propane revenues as a result of substantially warmer weather and lower Interest Income on undercollected gas costs recovered through the CGAC. This was partially offset by increased income from appliance rentals. Other Taxes increased $94,000 or 5.3% due to increases in plant property and municipal tax rates. Dividends declared on Common Stock increased $159,000 due to additional shares outstanding through the Company's DRIP. LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1998 The Company added approximately $1,814,000 to Utility Plant assets and Other Property during the three months ended September 30, 1998. These construction expenditures primarily represent investments in new and replacement mains and services. The capital structure of the Company at September 30, 1998 was 48.8% Common Equity, 0.5% Preferred Stock and 50.7% Long-Term Debt. The Company initially finances construction expenditures and other funding needs primarily with short-term bank borrowings, and to a lesser extent with the reinvestment of dividends and cash investments from the Company's DRIP. The Company continually evaluates its short-term borrowing position and based on prevailing interest rates, market conditions, etc., makes determinations regarding conversion of short-term borrowings to long-term debt or equity. It is management's view that the Company has adequate access to capital markets and will have sufficient capital resources, both internal and external, to meet anticipated capital requirements. Funds for environmental clean-up costs are initially financed through short-term borrowings and all such costs will be recovered over a seven year period under a ruling issued by the Massachusetts Department of Telecommunications and Energy ("DTE"), formerly the Massachusetts Department of Public Utilities ("MDPU"). Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by such statements. Such statements reflect management's current views, are based on many assumptions and are subject to risks and uncertainties. Certain important factors which could cause such results to differ include risks associated with the Company's maintaining contracts with specific customers, government regulation, the increasingly competitive nature of the markets in which the Company is engaged, and dependence on key personnel. These factors are not intended to represent a complete list of the general or specific risks that may affect the Company. Year 2000 Compliance The Company has identified all significant applications that will require modification to ensure Year 2000 Compliance. Internal and external resources are being used to make the required modifications and test Year 2000 Compliance. The Company believes that the most critical risk relates to the replacement and modification of its business application software. During the second quarter of fiscal 1999, the Company has replaced its core business applications which support customer service, billing, collection, jobbing and engineering. This upgraded system is Year 2000 compliant. The Company expects to have completed an upgrade to its finance, accounting, payroll and inventory systems by the end of the second quarter of fiscal 1999. These upgrades were initiated in the normal course of addressing business needs. The Company has also assessed the other areas of its business not related to its core information systems. Presently, the Company believes that these areas which include automated meter reading, dispatch, administrative and distribution, can be modified or upgraded without disruption of service or material cost. Due to the complexity of the Year 2000 problem and the reliance on certain critical vendors and suppliers, there can be no guarantees that the Company will achieve Year 2000 compliance or that critical vendors and suppliers will achieve Year 2000 compliance. At this time, the Company cannot assess the effect on the Company of such non-compliance. The Company expects to include contingency plans as part of its Year 2000 study in an effort to mitigate the risks of any non-compliance by third parties. The total cost to the Company of Year 2000 Compliance activities has not been and is not anticipated to be material to its financial position or results of operations in any given year. These costs and the date on which the Company plans to complete Year 2000 modification and testing processes are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ from those plans. PART II - OTHER INFORMATION Item 1. Legal Proceedings - ------- ----------------- No developments during the quarter. Item 2. Changes in Securities - ------- --------------------- The Company has filed an S-3 effective November 12, 1998 for an increase of 200,000 Common shares available for the Company's DRIP. Item 3. Defaults Upon Senior Securities - ------- ------------------------------- Not Applicable Item 4. Submission of Matters to a Vote of Security Holders - ------- --------------------------------------------------- On November 6, 1998, the Annual Meeting of the shareholders of the Berkshire Gas Company was held at the Crowne Plaza Pittsfield Hotel, Pittsfield, Massachusetts at 10:00 a.m. Proxies for said annual meeting were solicited pursuant to Regulation 14A. There was no solicitation in opposition to Management's nominees, as listed in the Proxy statement, for the election of Directors. All nominees were duly elected. Item 5. Other Information - ------- ----------------- On June 23, 1998, the Company filed a petition with the DTE for approval to form a holding company which will be called Berkshire Energy Resources. Thereafter, on August 14, 1998 Berkshire Gas filed a petition with the DTE for the issuance and sale of not more than 200,000 additional shares of Common Stock, purusant to the DRIP. These petitions were approved on November 5, 1998 by the DTE. Item 6. Exhibits and Reports on Form 8 - K - ------- ---------------------------------- (a) List of Exhibits Exhibit 27 - Financial Data Schedule The balance sheet as of September 30, 1998, the related statements of operations and retained earnings for the three month and twelve month periods ended September 30, 1998 and 1997, and the statements of cash flows for the three month periods ended September 30, 1998 and 1997 have been reviewed, prior to filing, by the Registrant's independent public accountants, Deloitte & Touche LLP, whose report covering their review of the financial statements is presented below. Deloitte & Touche LLP - ------------- ------------------------------------------ City Place Telephone:(860) 280-3000 185 Asylum Street Facsimile:(860) 280-3051 Hartford, Connecticut 06103-3402 INDEPENDENT ACCOUNTANTS' REPORT The Berkshire Gas Company: We have reviewed the accompanying balance sheet of The Berkshire Gas Company as of September 30, 1998, the related statements of operations and retained earnings for the three month and twelve month periods ended September 30, 1998 and 1997, and the statements of cash flows for the three month periods ended September 30, 1998 and 1997. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of The Berkshire Gas Company as of June 30, 1998, and the related statements of income, stockholders' equity, and of cash flows for the year then ended (not presented herein); and in our report dated August 12, 1998, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of June 30, 1998 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Deloitte & Touche LLP November 5, 1998 SIGNATURES ---------- Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE BERKSHIRE GAS COMPANY ------------------------- Registrant /s/ Michael J. Marrone --------------------------- Michael J. Marrone Vice President, Treasurer & Chief Financial Officer Dated: November 12, 1998 EX-27 2 FDS ARTICLE UT FOR QUARTER ENDED 9/30/98
UT 3-MOS JUN-30-1999 SEP-30-1998 PER-BOOK 76,661 6,242 13,810 4,795 3,290 104,798 5,881 19,535 7,349 32,765 0 312 34,000 10,835 0 0 0 0 0 0 26,886 104,798 4,247 (558) 2,909 3,261 (573) 432 (356) 1,078 (876) 4 (880) 682 0 (2,076) (.38) 0
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