-----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, Kqqz9K3Jt2He8GyjEnL+1ibc00sCLZQ6nXmDsBV4bBL4z3zhr5+YYJtp5OW/TCd7 BH1bB5cY19j2yl9nm+kjow== /in/edgar/work/20000725/0000927016-00-002572/0000927016-00-002572.txt : 20000921 0000927016-00-002572.hdr.sgml : 20000921 ACCESSION NUMBER: 0000927016-00-002572 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000725 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLONIAL GAS CO CENTRAL INDEX KEY: 0000060653 STANDARD INDUSTRIAL CLASSIFICATION: [4924 ] IRS NUMBER: 041558100 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13351 FILM NUMBER: 678487 BUSINESS ADDRESS: STREET 1: C/O BOSTON GAS CO STREET 2: ONE BEACON STREET CITY: BOSTON STATE: MA ZIP: 02108 BUSINESS PHONE: 6177428400 MAIL ADDRESS: STREET 1: C/O BOSTON GAS CO STREET 2: ONE BEACON STREET CITY: BOSTON STATE: MA ZIP: 02108 FORMER COMPANY: FORMER CONFORMED NAME: LOWELL GAS CO DATE OF NAME CHANGE: 19811124 10-Q 1 0001.txt 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, 2000 -------------------------------- 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 0-10007 ------- COLONIAL GAS COMPANY -------------------------------------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-3480443 ------------------------------ -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108 ----------------------------------------------- (Address of principal executive offices) (Zip Code) 617-742-8400 -------------------------------------------------- (Registrant's telephone number, including area code) None -------------------------------------------------- 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 ___ --- Common stock of Registrant at the date of this report was 100 shares, all held by Eastern Enterprises. FORM 10-Q Page 2 PART I. FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS - ----------------------------- Company or group of companies for which report is filed: COLONIAL GAS COMPANY ("Company") Consolidated Statements of Earnings - ---------------------------------------
(In Thousands) For the For the Three Months Ended Six Months Ended ------------------ ---------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ------- -------- -------- -------- (Predecessor) (Predecessor) OPERATING REVENUES $26,718 $25,579 $113,053 $113,573 Cost of gas sold 11,663 11,361 53,316 59,904 ------- ------- -------- -------- Operating Margin 15,055 14,218 59,737 53,669 ------- ------- -------- -------- OPERATING EXPENSES: Operations 6,351 7,909 13,293 15,339 Maintenance 811 1,538 1,861 2,851 Depreciation and amortization 2,610 3,783 8,394 7,565 Amortization of goodwill 1,506 - 3,012 - Income taxes (38) (1,164) 9,773 7,477 Taxes, other than income 989 1,554 2,654 2,918 Merger related expenses - 410 - 796 ------- ------- -------- -------- Total Operating Expenses 12,229 14,030 38,987 36,946 ------- ------- -------- -------- OPERATING EARNINGS 2,826 188 20,750 16,723 OTHER EARNINGS (LOSS), NET 115 (47) 64 (109) ------- ------- -------- -------- EARNINGS BEFORE INTEREST EXPENSE 2,941 141 20,814 16,614 ------- ------- -------- -------- INTEREST EXPENSE: Long-term debt 2,133 2,133 4,266 4,266 Other, including amortization of debt expense 2,392 899 4,452 1,566 Less - Interest during construction (19) (94) (34) (137) ------- ------- -------- -------- Total Interest Expense 4,506 2,938 8,684 5,695 ------- ------- -------- -------- NET EARNINGS (LOSS) $(1,565) $(2,797) $ 12,130 $ 10,919 ======= ======= ======== ======== COMMON STOCK DIVIDENDS $ - $ 3,177 $ 6,039 $ 6,255 ======= ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements. FORM 10-Q Page 3 Colonial Gas Company - -------------------- Consolidated Balance Sheets - --------------------------- (In Thousands) June 30, June 30, December 31, 2000 1999 1999 ---------- ---------- ----------- (Predecessor) ASSETS GAS PLANT, at cost $ 390,746 $ 389,164 $ 390,447 Construction work-in-progress 9,168 16,735 2,914 Less-Accumulated depreciation (118,365) (110,341) (109,628) --------- --------- --------- Net plant 281,549 295,558 283,733 --------- --------- --------- NON-UTILITY PROPERTY-NET - 6,829 - --------- --------- --------- CURRENT ASSETS: Cash and cash equivalents 207 2,491 389 Accounts receivable, less reserves of $3,524 and $3,194 at June 30, 2000 and 1999, respectively, and $2,677 at December 31, 1999 16,876 12,327 15,987 Accounts receivable - affiliates 3,933 - - Accrued utility margin 548 560 8,074 Deferred gas costs 13,638 - 13,803 Natural gas and other inventories 8,682 9,571 11,581 Materials and supplies 2,401 2,788 2,277 Current income taxes - - 4,182 Prepaid expenses 225 6,207 330 --------- --------- --------- Total Current Assets 46,510 33,944 56,623 --------- --------- --------- OTHER ASSETS: Excess of cost over fair value of acquired net assets, less amortization 236,073 - 239,045 Deferred charges and other assets 5,777 31,212 4,646 --------- --------- --------- Total Other Assets 241,850 31,212 243,691 --------- --------- --------- TOTAL ASSETS $ 569,909 $ 367,543 $ 584,047 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements. FORM 10-Q Page 4 Colonial Gas Company - -------------------- Consolidated Balance Sheets - ---------------------------
(In Thousands) June 30, June 30, December 31, 2000 1999 1999 ------------ ------------ ------------- (Predecessor) CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stockholder's investment- Common stock, $1 par value- Authorized and outstanding-100 shares at June 30, 2000 and December 31, 1999 $ - $ - $ - Common Stock, $3.33 par value- Authorized shares-15,000,000 at June 30, 1999; Issued shares-8,951,000 at June 30, 1999 - 29,806 - Amounts in excess of par value 225,667 64,341 225,667 Retained earnings 6,321 40,838 229 -------- -------- -------- Total common stockholder's investment 231,988 134,985 225,896 Long-term obligations, less current portion 121,021 121,021 121,021 -------- -------- -------- Total Capitalization 353,009 256,006 346,917 -------- -------- -------- ADVANCES FROM PARENT COMPANY 100,000 - 100,000 -------- -------- -------- CURRENT LIABILITIES: Current portion of long-term obligations 646 661 646 Notes payable 30,300 8,500 29,000 Gas inventory financing 7,038 8,269 15,009 Accounts payable 14,486 11,370 16,578 Accounts payable-affiliates - - 17,916 Accrued income taxes 7,590 2,931 - Accrued interest 3,064 2,787 2,936 Refundable gas costs - 4,484 - Customer deposits 643 813 644 Refunds due customers 3,591 5,460 5,331 Other 671 4,613 389 -------- -------- -------- Total Current Liabilities 68,029 49,888 88,449 -------- -------- -------- RESERVES AND DEFERRED CREDITS: Unfunded deferred income taxes - 7,961 - Deferred income taxes 32,815 45,445 32,276 Unamortized investment tax credits 2,708 2,941 2,811 Postretirement benefits obligation 5,297 - 5,136 Other 8,051 5,302 8,458 -------- -------- -------- Total Reserves and Deferred Credits 48,871 61,649 48,681 -------- -------- -------- TOTAL CAPITALIZATION AND LIABILITIES $569,909 $367,543 $584,047 ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. FORM 10-Q Page 5 Colonial Gas Company - -------------------- Consolidated Statements of Cash Flows - ------------------------------------- (In Thousands) For the Six Months Ended ------------------------ June 30, June 30, 2000 1999 ---- ---- (Predecessor) Cash flows from operating activities: Net earnings $ 12,130 $ 10,919 Adjustments to reconcile net earnings to cash cash provided by operating activities: Depreciation and amortization 11,780 7,839 Deferred taxes 539 502 Other changes in assets and liabilities: Accounts receivable (889) 914 Accrued utility margin 7,526 7,316 Accounts payable-affiliates (21,849) - Inventories 2,775 3,259 Deferred gas costs 165 22,679 Accounts payable (2,092) (816) Federal and state income taxes 11,772 2,931 Refunds due customers (1,740) (5) Other (997) 7,672 -------- -------- Cash provided by operating activities 19,120 63,210 -------- -------- Cash flows from investing activities: Capital expenditures (6,592) (9,540) -------- -------- Cash flows from financing activities: Cash dividends paid on common stock (6,039) (6,255) Issuance of common stock - 1,398 Retirement of long-term debt, including premiums - (91) Change in notes payable 1,300 (43,500) Change in inventory financing (7,971) (5,856) -------- -------- Cash used for financing activities (12,710) (54,304) -------- -------- (Decrease) in cash and cash equivalents (182) (634) Cash and cash equivalents at beginning of period 389 3,125 -------- -------- Cash and cash equivalents at end of period $ 207 $ 2,491 ======== ======== Supplemental disclosure of cash flow information: Cash paid (received) during the period for: Interest, net of amounts capitalized $ 6,975 $ 5,621 ======== ======== Income taxes $ (2,537) $ 3,595 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. FORM 10-Q Page 6 COLONIAL GAS COMPANY -------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ JUNE 30, 2000 ------------- 1. ACCOUNTING POLICIES AND OTHER INFORMATION ----------------------------------------- General ------- The Company is a wholly-owned subsidiary of Eastern Enterprises ("Eastern"). The consolidated financial statements include the accounts of the Company and its affiliate, Massachusetts Fuel Inventory Trust, and, for periods prior to August 31, 1999 ("Predecessor Financial Statements"), the operations of Colonial Gas Company, its affiliate, Massachusetts Fuel Inventory Trust, and a wholly-owned subsidiary, Transgas Inc. The Predecessor Financial Statements have been prepared using the historical cost of the Company's assets and have not been adjusted to reflect the merger with Eastern. However, certain accounts for the prior periods have been reclassified to conform to the presentation as of June 30, 2000. As of the merger, Transgas ceased to be a subsidiary of Colonial Gas Company. All material intercompany balances and transactions between the Company and its subsidiary have been eliminated in consolidation. It is the Company'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 the Company'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 the Company's 1999 Annual Report filed on Form 10-K with the Securities and Exchange Commission. Mergers ------- On August 31, 1999, the Company completed a merger with Eastern in a transaction with an enterprise value of approximately $474 million. In effecting the transaction, Eastern paid $150 million in cash, net of cash acquired and including transaction costs, issued approximately 4.2 million shares of common stock valued at $186 million and assumed $138 million of debt. The Colonial merger was accounted for using the purchase method of accounting for business combinations. FORM 10-Q Page 7 In connection with the approval of the merger, the Massachusetts Department of Telecommunications and Energy (the "Department") approved a rate plan resulting in a ten year freeze of base rates at current levels. As part of the approved rate plan, the Company will be charged by Boston Gas for incremental costs incurred by Boston Gas on behalf of the Company. Due to the length of the base rate freeze, the Company was required to discontinue its application of Statement of Financial Accounting Standards No. 71 "Accounting for the Effects of Certain Types of Regulation". On November 4, 1999, Eastern Enterprises ("Eastern"), the parent company of Colonial Gas, signed a definitive agreement to be acquired by KeySpan Corporation. Subject to receipt of approval from the Securities and Exchange Commission, the transaction is expected to close in the fall of 2000. The merger was approved by Eastern's shareholders on April 26, 2000. Seasonal Aspect --------------- The amount of the Company's natural gas firm throughput for purposes of space heating is directly related to temperature conditions. Consequently, there is less gas throughput during the summer months than during the winter months. In addition, under its seasonal rate structure, the rates charged customers during November through April are higher than those charged during May through October. In order to more properly match depreciation and property tax expense with margin each month, the Company charges to depreciation and property tax expense an amount equal to the percentage of the annual volume of firm gas throughput forecasted for the month, applied to the estimated annual depreciation and property tax expense. Reclassifications ----------------- Certain prior quarter financial statement amounts have been reclassified for consistent presentation with the current year. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ---------------------------------------------------------------------- RESULTS OF OPERATIONS: ---------------------- RESULTS OF OPERATIONS Second Quarter The seasonal net loss for the second quarter was $1.6 million compared to a net loss of $2.8 million for the same period in 1999. Operating margin increased $0.8 million, or 6%, due to customer growth and recovery from customers for costs written off at acquisition due to the discontinuance of FAS No.71. Operating expenses of $12.2 million were $1.8, or 13%, lower than the second quarter of 1999. This decline was principally due to lower depreciation expense of $1.2 million, based on a change in the quarterly recognition of depreciation, and decreased operations and maintenance expense of $2.3 million due to merger related synergies. Somewhat offsetting these decreases was the amortization of goodwill of $1.5 million. FORM 10-Q Page 8 Total interest expense increased $1.6 million due principally to interest on Advances from Parent Company. Year-to-Date ------------ Net earnings for the first six months of 2000 were $12.1 million, an increase of $1.2 million, or 11% from the same period last year. Operating margin for the first six months of 2000 was $59.7 million, an increase of $6.1 million, or 11%, from the prior year. This increase was due to growth in the customer base and recovery from customers for costs written off at acquisition due to the discontinuance of FAS No.71. Operating expenses of $39.0 million were $2.0 million, or 6%, above the first six months of 1999. This increase was principally due to the amortization of goodwill ($3.0 million), higher income taxes ($2.3 million) and higher depreciation expense ($0.8 million). Somewhat offsetting the preceding was a decrease in operations and maintenance expense of $3.0 million, or 17%, due to merger related synergies. Total interest expense increased $3.0 million due primarily to interest on Advances from Parent Company. FORWARD-LOOKING INFORMATION This report and other Company reports and statements issued or made from time to time contain certain "forward-looking statements" concerning projected future financial performance, expected plans or future operations. The Company 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: the impact of any merger-related activities, the ability to successfully integrate natural gas distribution operations, temperatures above or below normal, changes in economic conditions, including interest rates, regulatory and court decisions and developments with respect to previously disclosed environmental liabilities. Most of these factors are difficult to predict accurately and are generally beyond the control of the Company. LIQUIDITY AND CAPITAL RESOURCES The Company believes that projected cash flow from operations, in combination with currently available resources, is more than sufficient to meet 2000 capital expenditures and working capital requirements, dividend payments and normal debt repayments. The Company expects capital expenditures for 2000 to be approximately $23 million. FORM 10-Q Page 9 PART II. OTHER INFORMATION -------------------------- ITEM 1. LEGAL PROCEEDINGS - -------------------------- There are no material pending legal proceedings involving the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------------------------------------------------------------ None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) List of Exhibits None (b) Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. FORM 10-Q Page 10 SIGNATURES - ---------- It is the Company's opinion that the financial information contained in this report reflects all normal, recurring adjustments necessary to present a fair statement of results for the period reported, but such results are not necessarily indicative of results to be expected for the year due to the seasonal nature of the business of the Company. Except as otherwise herein indicated, all accounting policies have been applied in a manner consistent with prior periods. Such financial information is subject to year-end adjustments and an annual audit by independent public accountants. Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Colonial Gas Company ------------------------------------------------ (Registrant) Joseph F. Bodanza ------------------------------------------------ J.F. Bodanza, Sr. Vice President and Treasurer (Principal Financial and Accounting Officer) Dated: July 25, 2000 -------------------------------- EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
UT 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 PER-BOOK 281,549 0 46,510 5,777 236,073 569,909 0 225,667 6,321 231,988 0 0 120,000 37,338 100,000 0 0 0 1,201 646 78,916 569,909 113,053 9,773 82,530 92,303 20,750 64 20,814 8,684 12,130 0 12,130 6,039 4,266 19,120 0.00 0.00
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