-----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, Byrzh5X9jl0lb+on7Bnq9/miFQJPLzJnE1BN8sCNvShCLpm9nXLnz8WBq3UFyyUr N44la6AvyGHO2fwDaM2w0A== 0000046189-96-000012.txt : 19960606 0000046189-96-000012.hdr.sgml : 19960606 ACCESSION NUMBER: 0000046189-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960411 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESSEX COUNTY GAS COMPANY CENTRAL INDEX KEY: 0000046189 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 041427020 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01166 FILM NUMBER: 96546237 BUSINESS ADDRESS: STREET 1: 7 N HUNT RD CITY: AMESBURY STATE: MA ZIP: 01913 BUSINESS PHONE: 5083884000 MAIL ADDRESS: STREET 1: 7 NORTH HUNT ROAD CITY: AMESBURY STATE: MA ZIP: 01913 FORMER COMPANY: FORMER CONFORMED NAME: HAVERHILL GAS CO DATE OF NAME CHANGE: 19830420 10-Q 1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 29, 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 0-1166 ESSEX COUNTY GAS COMPANY (Exact name of registrant as specified in its charter) Massachusetts 04-1427020 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification #) 7 North Hunt Road, Amesbury, Massachusetts 01913 (Address of principal executive offices) (Zip Code) (508) 388-4000 (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 Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the reg- istrant 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 and 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court. Yes No _____ APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares of Common Stock outstanding as of February 29, 1996: 1,623,580 2 PART I - FINANCIAL INFORMATION Item 1 FINANCIAL STATEMENTS The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the notes to consolidated financial statements included in the registrant's Annual Report on Form 10-K for the year ended August 31, 1995 (1995 10-K). In the opinion of Management, all adjustments, consisting of normal ly recurring adjustments considered necessary for a fair presentation, have been included. Because of the seasonal nature of the registrant's business, operating results for the six months ended February 29, 1996, are not necessarily indicative of the results that may be expected for the year ending August 31, 1996. 3 ESSEX COUNTY GAS COMPANY CONSOLIDATED BALANCE SHEET February 29, 1996 August (Unaudited) 31, 1995 ASSETS Utility plant $94,764,961 $91,462,732 Less: accumulated depreciation 21,483,061 20,304,386 ---------- ---------- Net utility plant 73,281,900 71,158,346 ---------- ---------- Other property and investments 615,874 570,620 ---------- ---------- Capitalized lease 680,072 699,991 ---------- ---------- Current assets: Cash and cash equivalents 680,144 136,925 Accounts receivable, net Customers 6,946,784 1,418,510 Other 1,264,605 280,889 Income tax refund receivable - 200,000 Supplemental fuel inventory 2,957,097 6,477,155 Material and supplies 524,806 594,817 Prepaid deferred income taxes 1,315,474 1,397,422 Prepayments and other 207,390 350,660 ---------- ---------- Total current assets 13,896,300 10,856,378 ---------- ---------- Deferred charges: Unamortized debt expense and other 1,250,647 1,028,319 Regulatory assets 1,996,806 2,267,954 ----------- ----------- Total deferred charges 3,247,453 3,296,273 ----------- ----------- $91,721,599 $86,581,608 =========== =========== See Noted to Consolidated Financial Statements. 4 ESSEX COUNTY GAS COMPANY CONSOLIDATED BALANCE SHEETS (Continued) February 29, 1996 August (Unaudited) 31, 1995 CAPITALIZATION AND LIABILITIES Common stock equity: Common stock, no par (authorized 5,000,000 shares, issued and outstanding 1,623,580 shares) $18,751,456 $ - Common stock, par value $2.50, (authorized 5,000,000 shares: issued and outstanding 1,607,061 shares) - 4,017,653 Additional paid-in capital - 14,311,026 Unrealized gain on investments available for sale, net 51,312 28,902 Retained earnings 14,068,662 12,576,695 ESOP shares purchased with debt (75,000) (225,000) ----------- ----------- Total common stock equity 32,796,430 30,709,276 ----------- ----------- Redeemable preferred stock (5.50% Series, $100 par value authorized 7,000 shares and outstanding 3,360 shares) 336,000 336,000 Long-term debt less current ----------- ----------- portion 19,480,000 20,689,366 Non-current obligations under ----------- ----------- capital lease 622,703 654,390 ----------- ----------- Current liabilities: Current portion of long-term debt 1,326,150 978,758 Current obligation under capital lease 57,368 45,599 Obligations under supplemental fuel inventory 4,713,137 5,131,153 Notes payable, banks 10,064,917 4,890,000 Accounts payable 3,160,394 2,986,307 Taxes payable 1,557,586 - Accrued interest 927,319 825,322 Refundable gas costs 1,056,416 2,490,178 Transition obligations 681,835 858,715 Supplier refund due customers 1,137,638 2,454,739 Other 676,799 850,404 ----------- ----------- Total current liabilities 25,359,559 21,511,175 Deferred credits: ----------- ----------- Accumulated deferred income taxes 9,082,893 9,092,349 Unamortized investment tax credit 1,245,790 1,280,680 Deferred directors' fees 920,047 879,009 Other 1,878,177 1,429,363 ------------ ------------ Total deferred credits 13,126,907 12,681,401 ------------ ------------ $91,721,599 $86,581,608 ============ ============ See Notes to Consolidated Financial Statements. 5 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED February February 29, 1996 28, 1995 (Unaudited) (Unaudited) Operating revenues $22,632,458 $20,160,226 Less: Cost of gas 11,310,328 10,299,550 ----------- ----------- Operating margin 11,322,130 9,860,676 ----------- ----------- Operating expenses: Operations and maintenance expenses 3,788,109 3,762,714 Depreciation 1,255,760 1,162,760 Taxes, other than federal income 920,737 837,345 Federal income taxes 1,655,555 1,276,474 ----------- ----------- Total operating expenses 7,620,161 7,039,293 ----------- ----------- Operating income 3,701,969 2,821,383 Other income - net 7,227 10,388 ----------- ----------- Income before interest charges 3,709,196 2,831,771 ----------- ----------- Interest charges: Interest on long-term debt 491,101 511,962 Amortization of debt expense 6,874 6,769 Other interest expense 242,286 215,067 Allowance for funds used during construction (9,521) (9,990) ----------- ----------- Total interest charges 730,740 723,808 ----------- ----------- Net income 2,978,456 2,107,963 Preferred dividend requirements (4,620) (4,812) ------------ ------------ Income available for common stock $ 2,973,836 $ 2,103,151 ============ ============ Common shares outstanding (weighted average) 1,620,911 1,587,080 Earnings per common share $ 1.83 $ 1.33 Dividends per common share $ .40 $ .39 See Notes to Consolidated Financial Statements. 6 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED February February 29, 1996 28, 1995 (Unaudited) (Unaudited) Operating revenues $29,594,472 $26,862,164 Less: Cost of gas 14,583,808 13,521,610 ------------ ------------ Operating margin 15,010,664 13,340,554 ------------ ------------ Operating expenses: Operations and maintenance expenses 6,455,345 6,429,133 Depreciation 1,673,520 1,550,520 Taxes, other than federal income 1,133,478 1,044,551 Federal income taxes 1,510,110 1,093,948 ------------ ------------ Total operating expenses 10,772,453 10,118,152 ------------ ------------ Operating income 4,238,211 3,222,402 Other expense- net (9,646) (867) ------------ ------------ Income before interest charges 4,228,565 3,221,535 ------------ ------------ Interest charges: Interest on long-term debt 988,504 1,030,132 Amortization of debt expense 13,695 13,490 Other interest expense 472,842 363,713 Allowance for funds used during construction (21,465) (19,911) ------------ ------------ Total interest charges 1,453,576 1,387,424 ------------ ------------ Net income 2,774,989 1,834,111 Preferred dividend requirements (9,240) (9,625) ------------ ----------- Income available for common stock $ 2,765,749 $ 1,824,486 ============ ============ Common shares outstanding (weighted average) 1,616,852 1,582,311 Earnings per common share $ 1.71 $ 1.15 Dividends per common share $ 0.79 $ 0.77 See Notes to Consolidated Financial Statements. 7 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED February February 29, 1996 28, 1995 (Unaudited) (Unaudited) Operating activities: Net income $ 2,774,989 $ 1,834,111 Adjustments to reconcile net income ---------- ---------- to net cash: Depreciation and amortization 1,953,850 1,833,484 Provision for uncollectible accounts 1,063,435 915,000 Deferred income taxes 61,905 (757,000) Non-cash compensation related to ESOP 150,000 225,000 Cash provided by (used in) working capital: Increase in accounts receivable (7,575,425) (5,130,417) Decrease in inventories including fuel 3,590,069 1,497,679 Decrease in prepaid expenses and other current assets 143,270 218,428 (Decrease) increase in refundable gas costs (1,433,762) 1,062,534 Increase (decrease) in accounts payable 174,087 (713,396) Increase in taxes payable 1,617,285 2,780,822 (Decrease) increase in supplier refund due customers (1,317,101) 1,210,031 Other, net 382,124 415,807 ---------- ---------- Total adjustments (1,190,263) 3,557,972 Net cash provided by operating ---------- ---------- activities 1,584,726 5,392,083 ---------- ---------- Investing activities: Capital expenditures (3,863,713) (2,947,325) Cost of property retirements, net of salvage (209,183) 84,130 Net cash used in investing ---------- ---------- activities (4,072,896) (2,863,195) ---------- ---------- Financing activities: Dividends paid (1,283,021) (1,225,054) Net proceeds from issuance of common stock 397,073 414,820 Principal retired on long-term debt (711,974) (732,941) Decrease in fuel (418,016) (771,595) Principal payment on ESOP obligation (150,000) (225,000) Increase in notes payable, banks 5,174,917 635,000 Other 22,410 - Net cash provided by financing ---------- ---------- activities 3,031,389 (1,904,770) ---------- ---------- Net increase in cash 543,219 624,118 Cash at beginning of period 136,925 130,939 ---------- ---------- Cash at end of period $ 680,144 $ 755,057 =========== =========== Supplemental disclosures: Cash paid for interest (net of amount capitalized) $1,315,579 $1,319,483 Cash paid for income taxes $ 325,000 $ 84,000 See Notes to Consolidated Financial Statements 8 Notes to Consolidated Financial Statements: A. Interim Accounting Policies The amount of natural gas sold for purposes of central and space heating, and to a lesser extent, water heating, is directly related to the ambient air temperature. Consequently, less gas is sold during the summer months than is sold during the winter months. In order to match its costs more properly with gas sales revenue each month, the Company charges to certain expenses, primarily depreciation, an amount equal to the percentage of the annual volume of firm gas sales forecasted for the month, applied to the estimated annual expenses. B. Accounts Receivable Accounts Receivable - Customers are shown net of allowance for uncollectible accounts of $1,752,500 and $595,000 as of February 29, 1996 and August 31, 1995, respectively. C. Restriction on Retained Earnings Under the terms of the Indenture of First Mortgage Bonds dated October 1, 1955, as updated by Supplemental Indentures numbered One through Thirteen, retained earnings in the amount of $6,776,981 as of February 29, 1996, were unrestricted as to the payment of cash dividends on Common Stock and the purchase, redemption, or retirement of shares of capital stock. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the Three Months Ended February 29, 1996 and February 28, 1995 The Company's gas sales are divided into two categories: firm, whereby the Company must supply gas to customers on demand; and interruptible, whereby the Company may, generally during colder months, discontinue service to high volume industrial customers. Sales of gas to interruptible customers do not materially affect the Company's operating income because, unless interruptible volumes exceed a certain threshold specified by the Massachusetts Department of Public Utilities ("MDPU"), the Company must return all gross profit on such sales directly to the Company's firm customers. Once the threshold is attained, the Company may retain 10% of gross profits. The amount retained in the three month period ended February 29, 1996 was less than $10,000. The Company's sales are responsive to colder weather as the majority of its firm customers use natural gas for space heating purposes. The Company measures weather through the use of effective degree days. An effective degree day is calculated by subtracting the average temperature for the day, adjusted for wind and cloud cover, from 65 degrees Fahrenheit. The company's service territory experienced 3,655 effective degree days during the three months ended February 29, 1996. The Company's twenty year average for the three months ended February 29, 1996 is 3,158 effective degree days. As a result the volume of firm sales increased 21.1% to 2,655,549 Thousand cubic feet ("Mcf") for the three months ended February 29, 1996 from 2,192,806 for the three months ended February 28, 1995. The Company's total operating revenues increased 12.3% to $22,632,458 for the three months ended February 29, 1996 from $20,160,226 for the three months ended February 28, 1995. This increase was primarily due to previously mentioned weather-related factors offset by a 7.0% decrease in the average unit price of gas 9 sold to firm customers. The average unit price per Mcf of firm gas sold was $8.44 for the three months ended February 29, 1996 compared to $9.08 for the three months ended February 28, 1995. The decrease in unit selling prices is related to the Company returning to its customers savings in gas costs as well as refunds received from its pipeline suppliers. Gas costs recovered increased 9.8% to $11,310,325 for the three months ended February 29, 1996 from $10,299,550 for the three months ended February 28, 1995. The increase in gas costs recovered is attributable to the previously mentioned increase in gas volumes sold offset by an 8.2% decrease in the Company's average cost of gas to $4.26 per firm Mcf for the three months ended February 29, 1996 from $4.64 per firm Mcf for the three months ended February 28, 1995. Operations and maintenance expenses totaled $3,788,109 for the three months ended February 29, 1996 compared to $3,762,714 for the three months ended February 28, 1995. The change was due to inflationary increases offset by reduced in professional outside services. Interest charges for the three months ended February 29, 1996 increased by less than $7,000 compared to the three months ended February 28, 1995. The change was primarily attributable to interest payable to customers on pipeline refunds received by the Company. Income available for common stock increased by $870,685 to $2,973,836 for the three months ended February 29, 1996 from $2,103,151 for the three months ended February 28, 1995. Income per common share increased $0.50 to $1.83 for the three months ended February 29, 1996 from $1.33 per share for the three months ended February 28, 1995. Dividends per common share were $.40 per share for the three months ended February 29, 1996 compared to $.39 per share for the three months ended February 28, 1995. In March 1996 the Company declared a dividend of $.40 per share which was paid to shareholders on April 1, 1996. For the six Months Ended February 29, 1996 and February 28, 1995 Operating revenues for the six months ended February 29, 1996 were $29,594,472 compared to $26,862,164 for the six months ended February 28, 1995. Firm gas volumes were 3,483,891 Mcf compared to 2,951,028 Mcf for the six month period ended February 28, 1995. The increase is due to significantly colder weather as degree days were 4,562 compared to 3,947 a year ago, representing a 15.6% increase. Average weather in the Company's service area for the six month period is equivalent to 4,461 effective degree days. The average selling price of firm gas was $8.19 for the six months ended February 29, 1996 compared to $8.74 for the same period last year. Interruptible revenues for the six months ended February 29, 1996 and 1995 were $591,886 and $643,088, respectively. Operations and maintenance expenses for the six months ended February 29, 1996 increased to $6,455,345 from $6,429,133 for the comparable period a year ago. The slight increase was due to the factors mentioned above for the three month period ended February 29, 1996. Interest expense increased $66,152 for the six months ended February 29, 1996 compared to the six months ended February 28, 1995. The increase was primarily related to higher outstanding balances on notes payable to banks. Income available for common stock increased by $941,262 to $2,765,749 as compared to $1,824,486 for the same period last year while earnings per share increased to $1.71 from $1.15. Dividends were $.79 and $.77 per share, respectively. 10 Liquidity and Capital Resources Net cash provided by operating activities decreased $3,807,357 to $1,584,726 for the six months ended February 29, 1996. The decrease was due primarily to $2,445,000 in higher accounts receivable, a return of nearly $2,500,000 in refundable gas costs as well as a return of approximately $2,500,000 in supplier refunds to customers. These uses of cash were offset by approximately $2,000,000 of cash provided by a reduction in inventories, including fuel. Occasionally the Company received frfunds from its pipeline supplier as a result of regulatory action by the Federal Energy Regulatory Commission. The supplier refunds are returned by the Company to customers over a twelve month period. The Company continues to invest a significant amount of capital in its distribution system to satisfy current and future customer demand. Funding has traditionally been generated from operations, short-term bank borrowings, issuance of long-term debt and the issuance of additional equity, including additional shares of common stock through a Dividend Reinvestment Plan. Management anticipates that these and other sources will remain available and continue to adequately serve the Company's need. The Company finances its gas inventory with a bank through a special purpose credit agreement which has a maximum financing commitment of $10,000,000 with a floating interest rate. This credit agreement extends from December 12, 1995 through December 31, 2000. As of February 29, 1996 the Company's obligation was $4,713,137. For the three months ended February 29, 1996, the Company's construction expenditures totaled $1,740,000. These expenditures were funded principally from short-term bank borrowings. Historically, the second quarter of the Company's fiscal year has been characterized by minimal construction expenditures, high gas sendout and high operating revenues. Cash requirements during this period have historically been satisfied through operations. Construction expenditures for the six months ended February 29, 1996 were $3,865,000 as compared to $2,947,000 for the same period a year ago. These were funded by cash flow from operations and short-term bank borrowings. The six-month period ended February 29, 1996 is characterized by higher receivables associates with peak season billing and higher gas purchases which results in increased short-term borrowings. Although the Company anticipates a reduction of short-term borrowings as winter receivables are collected, the onset of renewed construction activity in the subsequent quarter may require additional short-term borrowings under existing lines of credit. Planned construction expenditures for the remainder of fiscal 1996 are currently estimated at $3,000,000 and planned construction expenditures for fiscal 1997 are currently estimated at $6,000,000. The Company's planned construction expenditures and long-term debt repayments have been and will continue to be funded through cash generated by operations and short-term bank borrowings which the Company anticipates will be replaced from time to time with equity and long-term financings. PART II - OTHER INFORMATION Item 1 Legal Proceedings The information called for by this item is unchanged from that filed in the Company's Annual Report on Form 10-K for fiscal 1995. Item 2 Changes in Securities None. Item 3 Defaults Upon Senior Securities None. Item 4 Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Shareholders was held on January 16, 1996. For a description of the meeting and the matters voted thereat, see the Company's Notice of Annual Meeting and Proxy Statement ("Proxy Statement"), filed with the Securities and Exchange Commission on December 5, 1995, which is incorporated herein by reference. There was no solicitation in opposition to the management's nominees as listed in the Proxy Statement, and all such nominees were selected. 11 The votes cast for, against or withheld, as well as the number of abstentions and broker non-votes as to each matter voted on at the Annual Meeting, is as follows: 1. Election of Directors Number of Shares For Against C.E. Billups 1,362,937 12,594 B.C. Bixby 1,367,328 8,203 D.A. Burkhardt 1,366,316 9,214 E.J. Curtis 1,366,203 9,327 D.J. Dotson 1,366,991 8,539 R.P. Hamel 1,362,822 12,709 R.S. Jackson 1,367,091 8,539 E.H. Jostrom 1,367,213 8,318 R.L. Meade 1,367,213 8,318 K.L. Paul 1,367,213 8,318 P.H. Reardon 1,367,213 8,318 R.L. Wellman 1,367,091 8,439 Item 5 Other Information On April 1, 1996 the Company redeemed, at par, all of the outstanding shares of its Redeemable Preferred Stock, 5.50% Series, $100 par value. Item 6(a) Exhibits 3.1 Restated Articles of Organization of Essex County Gas Company.(1) 3.2 By Laws of Essex County Gas Company.(2) 27 Financial Data Schedule. Item 6(b) Reports on Form 8-K None. (1) Previously filed as an exhibit to the Registrant's 10-K for the fiscal year ended August 31, 1988 and is incorporated herein by this reference. (2) Previously filed as an exhibit to the Registrant's 10-Q filed February 28, 1991 and is incorporated herein by this reference. 12 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. ESSEX COUNTY GAS COMPANY By /S/ Philip H. Reardon Philip H. Reardon President and Chief Executive Officer By /S/ James H. Hastings James H. Hastings Vice President and Treasurer (Principal Financial Officer) Date: April 11, 1996 EX-27 2
UT This schedule contains summary financial information extracted from the balance sheet, statement of income and statement of cash flows contained in Form 10-Q of Essex County Gas Company for the six months ended February 29, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS AUG-31-1996 FEB-29-1996 PER-BOOK 73,282 616 13,896 3,247 680 91,722 18,727 0 14,069 32,796 336 0 19,480 10,065 0 0 1,326 0 0 57 27,662 91,722 29,594 1,510 9,262 10,772 4,238 (10) 4,228 1,453 2,775 9 2,766 1,274 989 1,585 1.71 1.71
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