-----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, UTQbyE5RvKd813KwX6EmbybevlnDcd/SuNJDS22+8Wx7doqQ0351h5FLXYfOwM7C K0+Tfhl7/vOveUlENg4s9Q== 0000046189-96-000016.txt : 19960725 0000046189-96-000016.hdr.sgml : 19960725 ACCESSION NUMBER: 0000046189-96-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960710 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: 96593049 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 May 31, 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 (I.R.S.Identification #) Employer incorporation or organization) 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 registrant 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 May 31, 1996: 1,634,348 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 normally 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 nine months ended May 31, 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 SHEETS May 31, 1996 August (Unaudited) 31, 1995 ASSETS Utility plant, at cost $95,772,707 $91,462,732 Less: accumulated depreciation 22,214,334 20,304,386 ----------- ----------- Net utility plant 73,558,373 71,158,346 ----------- ----------- Other property and investments 535,307 570,620 ----------- ----------- Capitalized lease, net of amortization 666,150 699,991 ----------- ----------- Current assets: Cash and cash equivalents 151,071 136,925 Accounts receivable, net Customers 2,993,498 1,418,510 Other 258,702 280,889 Income tax refund receivable - 200,000 Supplemental fuel inventory 2,028,484 6,477,155 Material and supplies 567,416 594,817 Prepaid deferred income taxes 2,044,723 1,397,422 Prepayments and other 360,671 350,660 ------------ ----------- Total current assets 8,404,565 10,856,378 ------------ ----------- Deferred charges: Unamortized debt expense and other 1,574,785 1,028,319 Regulatory assets 2,068,237 2,267,954 ----------- ----------- Total deferred charges 3,643,022 3,296,273 ----------- ----------- $86,807,417 $86,581,608 =========== =========== See Notes to Consolidated Financial Statements 4 ESSEX COUNTY GAS COMPANY CONSOLIDATED BALANCE SHEETS (Continued) May 31, 1996 August (Unaudited) 31, 1995 CAPITALIZATION AND LIABILITIES Common stock equity: Common stock, no par (authorized 5,000,000 shares, issued and outstanding 1,634,348 shares) $19,033,860 $ - 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 56,262 28,902 Retained earnings 14,469,746 12,576,695 ESOP shares purchased with debt (75,000) (225,000) ------------ ------------ Total common stock equity 33,484,868 30,709,276 ------------ ------------ Redeemable preferred stock: 5.50% Series, $100 par value, (authorized 7,000 shares, 3,360 shares issued and outstanding at August 31, 1995) - 336,000 Long-term debt, less current ------------ ------------ portion 19,904,718 20,689,366 Non-current obligations under ------------ ------------ capital lease 617,605 654,390 ------------ ------------ Current liabilities: Current portion of long-term debt 843,654 978,758 Current obligation under capital lease 48,545 45,599 Obligations under supplemental fuel inventory 1,746,573 5,131,153 Notes payable, banks 7,515,000 4,890,000 Accounts payable 2,828,379 2,986,307 Taxes payable 1,309,544 - Accrued interest 483,585 825,322 Refundable gas costs 1,723,706 2,490,178 Accrued transition costs 681,835 858,715 Supplier refunds due customers 553,486 2,454,739 Other 654,675 850,404 ------------ ------------ Total current liabilities 18,388,982 21,511,175 Deferred credits: ------------ ------------ Accumulated deferred income taxes 10,068,018 9,092,349 Unamortized investment tax credit 1,228,345 1,280,680 Deferred directors' fees 953,121 879,009 Other 2,161,760 1,429,363 ------------ ------------ Total deferred credits 14,411,244 12,681,401 ------------ ------------ $86,807,417 $86,581,608 ============ ============ See Notes to Consolidated Financial Statements 5 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED May 31, 1996 May 31, 1995 (Unaudited) (Unaudited) Operating revenues $15,546,131 $14,100,557 Less: Cost of gas 8,298,297 7,269,605 ------------ ------------ Operating margin 7,247,834 6,830,952 ------------ ------------ Operating expenses: Operations and maintenance expenses 3,718,563 3,786,017 Depreciation 790,760 732,760 Taxes, other than federal income 516,493 489,476 Federal income taxes 488,555 197,474 ------------ ------------ Total operating expenses 5,514,371 5,205,727 ------------ ------------ Operating income 1,733,463 1,625,225 Other income (expense), net 17,448 (3,458) ------------ ------------ Income before interest charges 1,750,911 1,621,767 ------------ ------------ Interest charges: Interest on long-term debt 489,898 510,023 Amortization of debt expense 6,874 6,770 Other interest expense 201,957 142,059 Allowance for funds used during construction (4,225) (7,605) ------------ ------------ Total interest charges 694,504 651,247 ------------ ------------ Net income 1,056,407 970,520 Preferred dividend requirements (1,540) (4,813) ------------ ------------ Income available for common stock $ 1,054,867 $ 965,707 ============ ============ Common shares outstanding (weighted average) 1,631,666 1,595,746 --------- --------- Earnings per common share $ .65 $ .61 Cash dividends declared per ------ ------ common share $ .40 $ .39 ------ ------ See Notes to Consolidated Financial Statements 6 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS ENDED MAY 31, 1996 MAY 31, 1995 (Unaudited) (Unaudited) Operating revenues $45,140,603 $40,962,721 Less: Cost of gas 22,882,105 20,791,215 ------------ ------------ Operating margin 22,258,498 20,171,506 ------------ ------------ Operating expenses: Operations and maintenance expenses 10,173,908 10,215,150 Depreciation 2,464,280 2,283,280 Taxes, other than federal income 1,649,971 1,534,027 Federal income taxes 1,998,665 1,291,422 ------------ ------------ Total operating expenses 16,286,824 15,323,879 ------------ ------------ Operating income 5,971,674 4,847,627 Other income (expense), net 7,802 (4,325) ------------ ------------ Income before interest charges 5,979,476 4,843,302 ------------ ------------ Interest charges: Interest on long-term debt 1,478,402 1,540,155 Amortization of debt expense 20,569 20,260 Other interest expense 674,799 505,772 Allowance for funds used during construction (25,690) (27,516) ------------ ------------ Total interest charges 2,148,080 2,038,671 ------------ ------------ Net income 3,831,396 2,804,631 Preferred dividend requirements (10,780) (14,438) ------------ ------------ Income available for common stock $ 3,820,616 $ 2,790,193 ============ ============ Common shares outstanding (weighted average) 1,621,836 1,586,832 --------- --------- Earnings per common share $ 2.36 $ 1.76 Cash dividends declared per ------ ------ common share $ 1.19 $ 1.16 ------ ------ See Notes to Consolidated Financial Statements 7 ESSEX COUNTY GAS COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED MAY 31,1996 MAY 31,1995 (Unaudited) (Unaudited) Operating activities: Net income $ 3,831,396 $ 2,804,631 Adjustments to reconcile net income ------------- ------------- to net cash provided by operating activities Depreciation and amortization 2,875,802 2,701,162 Provision for uncollectible accounts 1,975,676 1,961,930 Deferred income taxes 317,781 (1,526,324) Non-cash compensation related to ESOP 150,000 225,000 Cash provided by (used in) working capital: Increase in accounts receivable (3,528,477) (2,364,748) Decrease in inventories including fuel 4,476,072 1,447,354 (Increase) decrease in prepayments and other (10,011) 179,399 Increase (decrease) in accounts payable (157,928) (292,360) (Decrease) increase in refundable gas costs (766,472) 3,057,363 Increase in taxes payable 1,369,241 2,637,435 (Decrease) increase in supplier refunds due customers (1,901,253) 1,012,515 Other, net (88,950) 164,818 ------------ ------------ Total adjustments 4,711,481 9,203,544 Net cash provided by operating ------------ ------------ activities 8,542,877 12,008,175 ------------ ------------ Investing activities: Capital expenditures (4,993,436) (4,201,798) Cost of property retirements, net of salvage (275,604) 9,696 ------------ ------------ Net cash used in investing activities (5,269,040) (4,192,102) ------------ ------------ Financing activities: Dividends paid (1,938,344) (1,850,556) Net proceeds from issuance of common stock 666,625 609,680 Retirement of preferred stock (336,000) - Principal retired on long-term debt (769,752) (801,058) Decrease in supplemental fuel inventory obligation (3,384,580) (2,349,645) Principal payment on ESOP obligation (150,000) (225,000) Increase (decrease) in notes payable, banks 2,625,000 (3,330,000) Other 27,360 - ------------- ------------ Net cash used in financing activities (3,259,691) (7,946,579) ------------- ------------ Net increase (decrease) in cash and cash equivalents 14,146 (130,506) Cash and cash equivalents at beginning of period 136,925 130,939 ------------- ------------ Cash and cash equivalents at end of period $ 151,071 $ 433 ============= ============ Supplemental disclosures: Cash paid for interest (net of amount capitalized) $ 2,489,817 $ 2,395,991 Cash paid for income taxes $ 876,976 $ 1,350,697 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 $2,697,500 and $595,000 as of May 31, 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 $7,086,526 as of May 31, 1996, were unrestricted as to the payment of cash dividends on Common Stock and the purchase, redemption, or retirement of shares of capital stock. D. Commitments and Contingencies For information regarding commitments and contingencies, see Notes to Consolidated Financial Statements in the Company's 1995 Annual Report on Form 10-K. E. Regulatory Filing On May 17, 1996 the Company filed with the Massachusetts Department of Public Utilities ("MDPU") a request for a rate increase of approximately $3,400,000. As part of the request, the Company is also submitting proposals relating to the transportation of third party gas to customers. The ultimate amount of the requested rate increase granted will not be known until the completion of the regulatory process which is not expected to be completed before December 1, 1996. Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the Three Months Ended May 31, 1996 and May 31, 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 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 9 10% of gross profits. The amount retained in the three month period ended May 31, 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 2,262 effective degree days during the three months ended May 31, 1996 as compared to 2,194 effective degree days during the three months ended May 31, 1995. The Company's twenty year average for the three months ended May 31, 1996 is 2,188 effective degree days. As a result, the volume of firm sales increased 9.8% to 1,747,877 thousand cubic feet ("Mcf") for the three months ended May 31, 1996 from 1,592,183 Mcf for the three months ended May 31, 1995. The Company's total operating revenues increased 10.3% to $15,546,131 for the three months ended May 31, 1996 from $14,100,557 for the three months ended May 31, 1995. This increase was primarily due to previously mentioned weather-related factors and a 0.6% increase in the average unit price of gas sold to firm customers. The average unit price per Mcf of firm gas sold was $8.33 for the three months ended May 31, 1996 compared to $8.28 for the three months ended May 31, 1995. Total gas costs, including both firm and interruptible, increased 14.2% to $8,298,297 for the three months ended May 31, 1996 from $7,269,605 for the three months ended May 31, 1995. The increase in gas costs recovered includes the previously mentioned increase in gas volumes sold and a 7.0% increase in the Company's unit cost of gas. The unit cost of gas increased to $4.12 per Mcf for the three months ended May 31, 1996 from $3.85 per Mcf for the three months ended May 31, 1995. The increase was due to slightly higher gas product costs collected from the Company's customers. Operations and maintenance expenses decreased 1.8% to $3,718,563 for the three months ended May 31, 1996 compared to $3,786,017 for the three months ended May 31, 1995. This was due primarily to lower maintenance expense. Interest charges for the three months ended May 31, 1996 increased by $43,257 compared to the three months ended May 31, 1995. The increase was primarily related to higher short term borrowings and amounts payable to customers on pipeline refunds received by the Company. During the third quarter of 1995, the Company recorded a non- recurring adjustment to its accrued income taxes which resulted in a relatively low income tax provision for the period. Income available for common stock increased 9.2% to $1,054,867 for the three months ended May 31, 1996 from $965,707 for the three months ended May 31, 1995. Income per common share increased to $0.65 for the three months ended May 31, 1996 from $0.61 per share for the three months ended May 31, 1995. Dividends per common share were $.40 per share for the three months ended May 31, 1996 compared to $.39 per share for the three months ended May 31, 1995. In June 1996, the Company declared a dividend of $.40 per share which was paid to shareholders on July 1, 1996. For the Nine Months Ended May 31, 1996 and May 31, 1995 Operating revenues for the nine months ended May 31, 1996 were $45,140,603 compared to $40,962,721 for the nine months ended May 31, 1995. Firm gas revenues amounted to $43,089,630 compared to $38,987,208 for the same period in 1995, an increase of 10.5%. Firm gas volumes were 5,231,768 Mcf compared to 4,543,705 Mcf for the nine month period ended May 31, 1995. The increase is due to significantly colder weather as degree days were 6,905 compared to 6,206 a year ago, representing a 11.3% increase. The average selling price of firm gas was $8.24 for the nine months ended May 31, 1996 compared to $8.58 for the same period last year. The reduction is primarily as a result of returning pipeline refunds to customers. Interruptible revenues for the nine months ended May 31, 1996 and 1995 were $1,332,927 and $1,321,051, respectively. 10 Operations and maintenance expenses for the nine months ended May 31, 1996 decreased to $10,173,908 from $10,215,150 for the comparable period a year ago. The slight decrease was primarily due to lower maintenance expenses. Interest charges increased $109,409 for the nine months ended May 31, 1996 compared to the nine months ended May 31, 1995. The increase was primarily related to higher outstanding balances on notes payable to banks and amounts payable to customers on pipeline refunds received by the Company. Income available for common stock increased by $1,030,423 to $3,820,616 as compared to $2,790,193 for the same period last year while earnings per share increased to $2.36 from $1.76. Dividends were $1.19 and $1.16 per common share, respectively. Liquidity and Capital Resources Net cash provided by operating activities decreased $3,465,298 to $8,542,877 for the nine months ended May 31, 1996. The decrease was due primarily to $2,900,000 in supplier refunds to customers and a return of approximately $3,800,000 in refundable gas costs which were offset by approximately $3,000,000 of cash provided by a reduction in inventories, including fuel. Occasionally the Company receives refunds 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 May 31, 1996, the Company's obligation was $1,746,573. During the quarter, the Company redeemed, at par, 100% of the outstanding Preferred stock. Net construction expenditures for the nine months ended May 31, 1996 were $4,993,436 as compared to $4,201,798 for the same period a year ago. These expenditures were funded by cash flows from operations and short-term bank borrowings. These expenditures were funded principally from the previously above-mentioned sources of financing. Historically, the third quarter of the Company's fiscal year has been characterized by rising capital expenditures, diminishing gas sendout and reduced operating revenues. Cash requirements during this period have historically been satisfied through operations and short-term borrowings. Planned construction expenditures for the remainder of fiscal 1996 are currently estimated at $1,850,000 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 the Company expects them to 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 debt financings. 11 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 None. Item 5 Other Information None. 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 exhibit 3.1 to the Registrant's 10-k filed for the fiscal year ended August 31, 1988 and is incorporated herein by this reference. (2) Previously filed as exhibit 3.2 to the Registrant's 10-Q filed February 28, 1991 and is incorporated herein by this reference. 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 ________________ Philip H. Reardon President and Chief Executive Officer By_____________________________________________ James H. Hastings Vice President and Treasurer (Principal Financial Officer) Date: July 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 nine months ended May 31, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS AUG-31-1996 MAY-31-1996 PER-BOOK 73,558 535 8,405 3,643 666 86,807 19,034 0 14,470 33,485 0 0 19,905 7,515 0 0 844 0 0 48 25,010 86,807 45,141 1,999 37,170 39,169 5,972 8 5,980 2,148 3,832 11 3,821 1,924 1,478 8,543 2.36 2.36
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