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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
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For the fiscal year ended September 30, 1995
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OR,
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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For the transition period from to
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Commission file number 1-7727
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Connecticut Natural Gas Corporation
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(Exact name of registrant as specified in its charter)
Connecticut 06-0383860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Blvd.
P.O. Box 1500
Hartford, Connecticut 06144-1500
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (203) 727-3459
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Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
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Common Stock - $3.125 Par Value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
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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
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State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. (The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.)
The aggregate market value of the voting stock held by nonaffiliates
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of the Registrant on November 1, 1995 was $220,297,165.
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Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date (applicable only
to corporate registrants).
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Number of shares of Common Stock outstanding as of the close of business
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on December 11, 1995 was 9,931,279
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DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K into which the document is incorporated: (1) Any
annual report to security holders; (2) Any proxy or information statement;
and (3) Any prospectus filed pursuant to rule 424(b) or (c) under the
Securities Act of 1933. The listed documents should be clearly described
for identification purposes.
Definitive Proxy Statement for the Company's February, 1996 Annual
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Meeting (Part III)
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PART I
ITEM 1. BUSINESS
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General
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Connecticut Natural Gas Corporation (the Company) is an energy provider
headquartered in Hartford, Connecticut. The Company is a Connecticut
corporation organized in 1848. At September 30, 1995, the Company
employed 610 people. The Company is engaged primarily in the distribution
and sale of natural gas at retail in Hartford and 20 other cities and
towns in central Connecticut and in Greenwich, Connecticut. The Company
also provides nonregulated energy-related products and services, primarily
district heating and cooling. The Company considers itself to be
primarily in the energy business. The Company's common stock is traded on
the New York Stock Exchange. Previously issued preferred stock is traded
on the over-the-counter market.
Gas operating revenues were $254,006,000 for the fiscal year ended
September 30, 1995 and were derived approximately 51% from residential
customers, 20% from commercial firm customers, 2% from industrial firm
customers, 12% from interruptible customers, 10% from limited term sales
and 5% from the aggregate of transportation of customer-owned gas, sales
of gas to other utilities, sales to cogeneration facilities, and other
gas-related revenues. There were no sales to affiliated companies. The
gas distribution business contributed 92% of consolidated revenues over
the three fiscal years ending 1995. During the fiscal year ended
September 30, 1995, the peak-day sendout of gas was 258,833,000 cubic feet
which occurred on February 6, 1995.
Segment information for all relevant periods is included in the Notes to
the Financial Statements filed in Part II, Item 8 of this report.
Seasonality
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The Company's operations are seasonal. Most of the Company's gas revenues
and related operating expenses occur during the winter heating season,
October to April. Natural gas usage in the Company's service area is
greater for heating purposes in winter and less for cooling in summer.
Natural gas usage for nonheating purposes remains steady throughout the
year. Accordingly, earnings are highest during the first and second
quarters of the fiscal year, which begins October 1, and the third and
fourth quarters frequently show a net loss. The impact of seasonality on
cash flows is discussed in Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.
The Company's nonregulated district heating and cooling businesses
experience peak loads during the winter heating and summer cooling
seasons.
Regulatory Jurisdiction
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The Company's gas distribution business is subject to regulation by the
Connecticut Department of Public Utility Control (DPUC) as to franchises,
rates, standards of service, issuance of securities, safety practices and
certain other matters. Retail sales of gas by the Company and deliveries
of gas owned by others are made pursuant to rate schedules and contracts
filed with and subject to DPUC approval. In general, the firm rate
schedules provide for reductions in the unit price of gas as greater
quantities are used. The rate schedules contain purchased gas adjustment
provisions as described in Note 1 to the Financial Statements (included in
Part II, Item 8 herein).
Under Connecticut law, the Company's subsidiaries are not public service
companies, and hence they are not subject to regulation by the DPUC.
However, significant intercompany transactions between the Company and
subsidiaries are subject to review and/or approval by the DPUC.
The regulation of interstate sales of natural gas is under the
jurisdiction of the Federal Energy Regulatory Commission (FERC). The
Company is subject to the direct jurisdiction of the FERC for any sales
for resale the Company makes in interstate commerce. The FERC regulates
the Company's pipeline gas suppliers and transporters, and the Company
closely follows and participates in numerous proceedings before FERC.
Through a nonregulated subsidiary, ENI Transmission Company (ENIT), the
Company is a 2.4% equity partner in the Iroquois Gas Transmission System
Limited Partnership (Iroquois) which is subject to regulation by FERC.
Gas Supply
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The Company's current gas supply contract portfolio reflects the results
of a continuing supply diversification strategy. The purpose of such a
strategy is to hold a secure, best cost gas supply portfolio, thereby
maintaining a competitive advantage over the other energy providers.
This, in turn, will enhance growth while continuing to serve existing
customers at the lowest possible cost.
The Company purchases natural gas on a long-term basis from producers and,
when economics dictate, on a short-term basis in the spot market.
Pipeline services purchased include firm and interruptible transportation
service. Gas storage service in the northeast and in the southwest
production area is purchased from both pipelines and storage contractors.
The Company's principal and most economical source of gas is pipeline-
delivered natural gas. The Company also utilizes liquefied natural gas
(LNG) and, to a much lesser extent, propane mixed with air (LP-Air). LNG
is usually more expensive than natural gas, and LP-Air is virtually always
more expensive than natural gas. Therefore, they are used primarily
during the winter months for peak shaving when the demand for gas is
greatest and exceeds deliverable supplies of natural gas through the
pipelines.
The Company currently holds pipeline transportation contracts with
Algonquin Gas Transmission Company (AGT), CNG Transmission Corporation
(CNGT), Iroquois Gas Transmission System (IGTS), National Fuel Gas Supply
Corporation (NFGS), Tennessee Gas Pipeline Company (TGP), Texas Eastern
Gas Transmission Corporation (TETCO), and Transcontinental Gas Pipeline
Corporation (TRANSCO). Supply contracts signed directly with upstream
producers back these transportation contracts.
The Company has contracted for storage service under which gas available
during the warmer months of the year is stored underground, out of state,
for use during the colder winter months of the year and for balancing
throughout the year.
The gas supply which feeds into the Company's firm transportation rights
on the interstate pipelines has been contracted for directly with
producers of natural gas (Direct Producer Contracts). The Direct Producer
Contracts are diverse in terms of expiration date, supply location, price,
flexibility, etc. as part of the Company's gas supply diversification
strategy.
The Company continues to be very active in the area of purchasing gas
directly from producers both in the spot market and under long-term
arrangements. Currently, the Company purchases all of its gas under such
arrangements. Spot market volumes are those purchased under short-term
arrangements from producers and gas withdrawn from storage which had been
purchased directly from producers for injection to that storage. Spot
market purchases are set by negotiation with the supplier. Previously,
much of the spot market gas was transported under interstate pipelines'
interruptible transportation service, and the long-term producer contracts
were transported under pipelines' firm transportation service. Under FERC
Order 636, the Company expects to more extensively use firm transportation
service and greatly decrease its use of interruptible transportation
service.
Under FERC Order 636, a pipeline may not terminate service to a long-term
firm transportation shipper if that customer elects to exercise a "right
of first refusal" which requires the customer to match the price and
length terms of another offer to continue to purchase such service
following the initial contract term expiration. The price for such
continued firm transportation service would be capped at the maximum price
determined as a just and reasonable rate under FERC jurisdiction.
In addition to its pipeline gas supplies, the Company owns an LNG plant in
Rocky Hill, Connecticut. This plant has the design capacity to liquefy
approximately 6,000 MCF per day and store 1,206,000 MCF. The LNG plant is
not a source of additional gas, but it permits the Company to liquefy and
store gas during the summer and to deliver the stored gas during the
following winter. The plant has the design capacity to vaporize 60,000
MCF per day.
LP-Air is a source of peak shaving supply to the Company. The Company has
approximately 1,000,000 gallons of on-site propane storage which can
produce the equivalent of approximately 16,584 MCF of natural gas per day.
The following table details the Company's current gas supply contract
portfolio:
CONNECTICUT NATURAL GAS CORPORATION
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CURRENT GAS SUPPLY CONTRACT PORTFOLIO
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MAXIMUM MAXIMUM
DAILY ANNUAL
RATE QUANTITY QUANTITY EXPIRATION
SOURCE SCHEDULE TYPE (MMBTU) (MMBTU) DATE
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AGT AFT-1 Transportation 87,030 26,925,332 1996-2004
ANE ANE-1 Supply 25,000 9,125,000 2007
BGI G-1 Supply 2,014 735,110 2003
CNGT FTNN Transportation 6,340 2,314,100 2003
CNGT GSSTE Storage 11,553 1,235,603 2006
CNGT GSS Storage 607 66,755 2000
IGTS RTS-2 Transportation 25,000 9,125,000 2012
Hattiesburg N/A Storage 10,000 100,000 2005
NFGS EFT Transportation 1,915 698,975 1997
NFGS SS-1 Storage 10,909 1,200,000 1996
TETCO CDS Transportation 30,000 10,950,000 2000
TETCO CDS Transportation 1,495 545,675 2012
TETCO FT-1 Transportation 16,970 6,194,050 2000
TETCO FT-1 Transportation 10,571 3,858,415 2000
TETCO FSS-1 Storage 851 51,060 2012
TETCO SS-1 Storage 27,000 1,783,738 2004
TETCO SS-1 Storage 207 14,490 2012
TGP FT-A Transportation 32,652 11,917,980 2000
TGP FT-A Transportation 43,973 16,050,145 2000-2005
TGP SS-NE Storage/Transport 6,174 555,702 2000
TGP FS-MA Storage 13,826 610,003 2000
TGP CGT-NE Transportation 802 292,730 2003
Transco FT Transportation 1,877 685,105 2008
Regulatory Matters
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In October, 1995, the DPUC issued a final decision on the Company's April,
1995 rate request. This decision allowed the Company to increase its
rates $8,900,000 or 3.64%. The Company had requested an increase of
11.2%, or approximately $28,400,000. This decision also allowed a rate of
return on equity of 10.76% and provided for adequate recovery of all
significant items deferred on the balance sheet, pending recovery, at
September 30, 1995. In addition, the Company has been allowed to defer,
for consideration in future rate proceedings, expenses incurred above
annual levels authorized in current rates for certain areas including:
conservation expenses, economic development expenses and expenditures
related to postretirement benefits. The treatment given these items in
the rate order effectively reduces the impact of the shortfall between the
rate relief requested and the amount which was granted in the final
decision.
The DPUC separated the proceeding into two phases: Phase I addressed the
Company's revenues, operating expenses, revenue requirements and allowed
increase, and Phase II addresses the revenue allocation and rate design of
the revenues awarded in Phase I. New, interim rates, became effective on
October 13, 1995. Final rates are expected to become effective in the
second quarter of fiscal, 1996.
In August, 1995 the DPUC issued a decision requiring the Company to make
certain modifications to its cost study, principally the classification
and allocation of storage plant, distribution mains, distribution
measuring equipment and pipeline demand charges. The decision requires
Connecticut's natural gas distribution companies (LDCs) to unbundle their
gas services, over a certain timetable, in response to the FERC 636
environment, and also required the Company to file revised firm
transportation tariffs. The Company has complied with the decision and
the revised Cost of Service study and revised tariffs will be discussed in
Phase II of the Company's 1995 rate proceeding, as described above. The
DPUC, on its own motion, had initiated a Review of the LDCs Cost of
Service Study (COSS) Methodologies as a followup to its Generic Review of
Connecticut Gas Local Distribution Companies Implementation of the FERC
Order No. 636. This review was intended to address individual LDCs, cost
based COSS unbundling proposals, proposed tariffs for unbundled services,
and the implications of unbundling upon existing Department processes or
activities.
In August, 1995 the DPUC initiated a management audit of the Company. A
draft report is expected to be issued to management in the second quarter
of fiscal, 1996.
In June, 1995, the DPUC issued a decision related to a reopened docket
having to do with regulated propane service provided by LDCs in
Connecticut. The purpose of this proceeding was to end LDCs' rate
subsidies to certain propane customers. The Company has 377 customers
that are affected by this decision. These customers have been served
under the Company's Gas Roots program since the late 1960's and early
1970's, buying propane at natural gas prices pending the extension of
natural gas distribution mains to their areas. The decision outlines
several options under which these propane customers may switch to natural
gas service or switch to a third party supplier, with various financial
incentives.
In March, 1995 the DPUC on its own motion opened a docket in response to a
petition of the Attorney General to examine the issue of executive
compensation. Specifically, the DPUC wanted to determine whether the
compensation of the executives of selected utilities, including the
Company, is consistent with the needs and interests of the ratepayers and
shareholders as delineated in the Connecticut General Statutes. In a
draft decision issued on November 20, 1995, the DPUC established a policy
and specific procedures for Connecticut utilities regarding the review of
each company's executive compensation levels and process in future rate
proceedings.
Environmental Considerations
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The Company has not experienced and does not anticipate any significant
problem in complying with laws and regulations pertinent to its business
concerned with protecting the environment. Additional information
regarding environmental considerations is included in the Management's
Discussion and Analysis of Financial Condition and Results of Operations,
filed in Part II, Item 7 of this report, and the Notes to the Financial
Statements, filed in Part II, Item 8 of this report.
Subsidiary Operations (Consolidated)
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At September 30, 1995, consolidated subsidiaries of the Company included
CNG Realty Corp. (CNGR), ENI Transmission Company (ENIT) and Energy
Networks, Inc. (ENI).
CNGR, formed in 1977, is a single purpose corporation which owns the
Operating and Administrative Center located on a 7-acre site in downtown
Hartford, CT. This facility is leased to the Company. CNGR engages in no
other business activity. At September 30, 1995, CNGR had an investment in
plant of approximately $17,394,000 and no revenues from unaffiliated
businesses for the year then ended.
ENIT was formed in 1986 to own the Company's 2.4% share of Iroquois.
Iroquois operates a natural gas pipeline which transports Canadian natural
gas into the states of New York, Massachusetts and Connecticut. At
September 30, 1995, ENIT's investment in Iroquois amounted to $4,353,000.
The Company, together with all other partners in Iroquois, has entered
into a Capital Contribution Support Agreement (agreement) to support a
one-year, renewable letter of credit which was issued to Iroquois. ENIT's
support obligation under this agreement amounts to 2.4% of the outstanding
principal on the letter of credit at any time and was approximately
$832,000 at September 30, 1995. ENIT recorded income of $489,000 related
to Iroquois during fiscal 1995, excluding a one-time charge of $500,000
recorded in connection with legal matters relating to Iroquois.
ENI was incorporated in 1982 and is a nonregulated company engaged in the
operations described in the following paragraphs. ENI and its wholly-
owned subsidiary, The Hartford Steam Company (HSC), provide district
heating and cooling (DHC) services to a number of large buildings in
Hartford, CT. ENI's other nonregulated operating divisions offer energy
equipment rentals and property rentals and own a 3,000 square foot
building in Hartford, CT, and a 42,000 square foot building in Greenwich,
CT. ENI formed two additional wholly-owned, nonregulated subsidiaries in
fiscal, 1995: ENServe, Incorporated and ENI Gas Services, Inc.
HSC, incorporated in Connecticut in 1961, owns and operates a central
production plant and distribution system for the processing and
distribution of steam for heating and chilled water for cooling to a
number of offices, stores and other large buildings in downtown Hartford,
CT. HSC's investment in its plant and distribution system was
approximately $41,340,000 as of September 30, 1995. Revenues were
$14,248,000 for the fiscal year then ended, including $385,000 from
affiliated companies.
HSC produces its own chilled water supply for district cooling. Through
September 30, 1995, HSC purchased its steam supply for district heating
and for the production of chilled water from two local cogeneration
facilities. The primary steam facility was located on the Company's
premises in Hartford. This facility was owned by an unrelated third
party, the Hacogen Corporation (Hacogen). The second facility is owned by
the Downtown Cogeneration Associates Limited Partnership (DCA) and sells
steam to HSC under a twenty-year contract. ENI is a 50% partner in the
DCA with two unrelated third parties. The DCA owns and operates a
four(4)-megawatt cogeneration facility on the roof of a downtown Hartford
office complex. Electricity generated from this unit is sold to The
Connecticut Light and Power Company under a twenty-year contract.
During fiscal, 1994 Hacogen indicated a desire to negotiate a termination
of its long-term steam supply contract with HSC. During the fourth
quarter of fiscal, 1995, HSC negotiated a settlement agreement with
Hacogen. According to the terms of the negotiated settlement, Hacogen
terminated its long-term supply contract with HSC, effective September 30,
1995. In October, 1995, HSC resumed producing more costly steam from its
existing boilers which are located on the Company's premises and are
currently providing adequate steam supply for customer requirements. The
nonregulated operations are currently assessing the district heating and
cooling operations to determine future cost control and operational
options.
During fiscal 1995, ENI provided cogeneration management and consulting
services to DCA. Fees earned for these services for the fiscal year ended
September 30, 1995, were $154,000.
The Capitol Area System (CAS) is a district heating and cooling system
serving a section of the City of Hartford, CT. ENI owns the distribution
system and purchases hot and chilled water from a third party. ENI also
provides marketing services to this third party. ENI's investment in the
CAS was approximately $16,937,000 as of September 30, 1995. Revenues were
$5,624,000 for the fiscal year then ended, including $5,103,000 from sales
of hot and chilled water, $81,000 from marketing services provided and
$440,000 from affiliated companies.
The energy equipment rentals division owns natural gas water heaters and
natural gas conversion burners which it leases to customers in the
residential market. ENI's investment in such rental equipment was
approximately $1,805,000 as of September 30, 1995, and revenues were
$748,000 for the fiscal year then ended. There were no revenues from
affiliated companies. This division is gradually being phased out through
attrition. No additional capital has been invested. The units are
retired either when an equipment failure occurs or when the opportunity
for the sale of a unit exists.
The property management operation owns and manages a 42,000 square foot
building in Greenwich, CT. Approximately 50% of the building is occupied
by the Company as an operating and administrative center servicing the
Greenwich area. The remaining 50% is either currently leased or in
negotiation for lease to unaffiliated businesses. ENI's gross investment
in this building and land was approximately $3,749,000 as of September 30,
1995. This property is under contract to be sold to an unrelated party in
the first quarter of fiscal, 1996. Rental revenues were approximately
$456,000 for the fiscal year ended September 30, 1995, including $313,000
from affiliated companies.
In 1994 energy system operating and maintenance services offered by ENI to
DHC customers were gathered into a separate operating group, Energy
Services, to provide opportunity for growth in both the customer base for
such services and for the scope of services offered to DHC customers, such
as energy conservation services. In 1995 this group was organized into a
new Company, ENServe Corporation (ENServe). During fiscal, 1995 ENServe
purchased the assets of a Connecticut residential and light commercial
heating and air conditioning contractor for $280,000 and now offers
residential, commercial and industrial energy management services
throughout Connecticut. As of September 30, 1995, ENServe has incurred
approximately $300,000 for startup costs. ENServe's investment in its
plant was approximately $106,000 as of September 30, 1995. Revenues were
$499,000 for the fiscal year then ended. There were no revenues from
affiliated companies.
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint venture
partnership with Bay State Gas Company and Koch Gas Services Company. The
Company formed ENI Gas Services, Inc., as a nonregulated, wholly-owned
subsidiary of ENI, to own its interest in this partnership, and the Board
of Directors authorized capital contributions of up to $1,700,000. KBC
markets natural gas supplies, other energy sources and energy management
related services on a nonregulated basis to commercial and industrial end
users, primarily in New England. As of September 30, 1995 ENI Gas
Services had an investment in KBC of approximately $50,000.
Competition
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The Company competes with suppliers of oil, electricity, coal, propane and
other fuels for cooking, heating, air conditioning and other purposes.
Competition is greatest among the Company's large commercial and
industrial customers who have the capability to use alternative fuels.
The Company has attempted to minimize the volatile effect of this price-
sensitive load through the use of flexible rate schedules which allow gas
pricing to meet alternative-fuel competition; as oil prices fluctuate, so
do the Company's revenues from this class of customers.
The Company currently distributes and sells gas and district heating and
cooling services to its customers without substantial competition from
other gas utilities, cooperatives or other providers of natural gas.
Nonetheless, the impact of FERC Order 636 at the local level is expected
to increase competitive pressures as other providers of gas seek
opportunities to serve the Company's customers. The DPUC has issued a
decision which requires LDCs to unbundle their gas services (See
Regulatory Matters). The Company's new rate design, which is expected to
be approved and effective by the third quarter of fiscal, 1996, will, at a
minimum, result in the availability of firm transportation services for
large commercial and industrial gas end-users, giving those customers the
option to purchase natural gas directly from producers or marketers. The
Company, and all other LDCs, thus become natural gas transporters and
compete with each other, and with other gas marketers and providers, for
the sale of natural gas to such customers.
The Company's customers may also contract for the purchase of their own
supply of gas directly from a pipeline supplier. Any such customer must
also arrange for transportation services from the Company to deliver this
gas to the customer's premises. Transportation of customer-owned gas
reduces the Company's operating revenues because the commodity value of
the gas is paid by the customers directly to other suppliers. Similarly,
the cost of such gas is not included in the Company's expenses since the
gas is not purchased by the Company for resale.
For off-system sales of short-term gas supplies and transportation
services by contract the Company competes, nationwide, with other sellers
and suppliers of natural gas services.
ENI and HSC own and operate district heating and cooling systems
(collectively referred to as DHC) which distribute and sell steam, hot and
chilled water to office complexes and other large buildings in the City of
Hartford. Prior to the potential customer's selection of the heating
and/or cooling technology to be used, DHC competes with suppliers of oil,
electricity, coal, propane and natural gas. Once DHC has been selected,
the competition from alternate fuels is diminished because of the cost of
the equipment necessary to utilize an alternative fuel. However, both new
and existing DHC customers may elect to install their own equipment rather
than to be served by ENI or HSC. At such time, the Company competes with
providers of other fuels to supply the energy for the customer's DHC
operation.
Franchises
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The Company holds franchises, granted by the Legislature of the State of
Connecticut, and other consents which it considers to be valid and
adequate to enable it to carry on its operations, substantially as now
carried on, in each of the communities which it serves.
ITEM 2. PROPERTIES
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At September 30, 1995, the Company owns gas distribution mains, a natural
gas liquefaction plant, propane gas storage tanks, metering stations, gas
service connections, meters, regulators and other equipment necessary for
the operation of a gas distribution system. Substantially all of the
Company's properties are subject to the lien of the Indenture of Mortgage
and Deed of Trust securing its first mortgage bonds. The properties, in
management's opinion, are maintained in good operating condition. The gas
mains are located principally under public streets, roads and highways.
ENI owns a distribution system located in the Capitol area of Hartford, CT
for the distribution of hot water for heating and chilled water for
cooling. This property was financed with industrial revenue, variable
rate, tax exempt demand bonds secured by a letter of credit with a bank.
ENI also owns and manages a 42,000 square foot building in Greenwich,
Connecticut which is occupied by the Company and other tenants. This
facility enables both the administrative and operating functions of the
Greenwich division of the Company to be consolidated at one site. This
property is under contract to be sold to a third party during the first
quarter of fiscal, 1996. ENI also owns a small building in Hartford, CT.
The energy equipment rentals division of ENI owns water heaters and
conversion burners which it leases to its customers in the residential
market.
HSC owns a central production plant and distribution system, which
includes a chilled water storage tank, in downtown Hartford, CT for the
processing and distribution of steam for heating and chilled water for
cooling. The property is subject to a mortgage and collateral security
agreement which secures debt under HSC's revolving loan agreement.
CNGR owns the Operating and Administrative Center in Hartford which is
leased by the Company. The center is subject to the lien of the Mortgage
Deed under which the CNGR's first mortgage notes are issued.
ITEM 3. LEGAL PROCEEDINGS
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In November, 1995, two associations comprised of Connecticut plumbers and
HVAC contractors joined with two individual contractors and filed a class
action suit against the Company and the State's two other local
distribution companies (LDCs), claiming that the LDCs engaged in unfair
trade practices. The action was brought on November 8, 1995, in Middlesex
Superior Court by Connecticut Heating and Cooling Contractors Association,
Inc. et al. and alleges that the LDCs unfairly competed with licensed
plumbers and contractors by performing customer service work using
customer service employees who did not possess State trade licenses. The
plaintiffs are seeking an injunction, unspecified damages, including
treble damages, and certain related remedies.
The LDCs have asserted that such licenses are not required for this work
by virtue of a statutory exemption enacted in 1965 and amended in 1967.
However, in a separate proceeding, a Connecticut Superior Court has upheld
an administrative ruling against the LDCs' position, and the Company is
participating in an appeal of that decision. In 1995, the Connecticut
General Assembly enacted legislation that established on a going-forward
basis a separate procedure for State certification of gas service
employees.
The Company will vigorously defend this claim but, at this early stage,
cannot anticipate the outcome of this matter.
Two civil and criminal investigations related to environmental issues,
brought against Iroquois in 1992, are still pending. Although no final
agreements have been reached regarding the disposition of these matters,
at September 30, 1995 the Company recognized a charge to Other
income/(deductions) of $500,000 to reflect its proportionate share of the
estimated costs in connection with these legal proceedings. Iroquois is a
partnership of which the Company is a 2.4% owner (See Item 1., Subsidiary
Operations).
The Company is not a party to any other litigation other than ordinary
routine litigation incident to the operations of the Company or its
subsidiaries. In the opinion of management, the resolution of such
litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
There were no matters submitted to a vote of security holders during the
last quarter of the fiscal year ending September 30, 1995.
Executive Officers of the Registrant
------------------------------------
All executive officers' terms of office are one year.
Victor H. Frauenhofer Age - 62
Chairman, President, Chief Executive Officer and Director
Business experience:
1991 - Present Chairman, President and Chief Executive Officer
1987 - 1991 President and Chief Executive Officer
1983 - 1987 President and Chief Operating Officer
James P. Bolduc Age - 46
Senior Vice President - Financial Services and Chief Financial Officer
Business experience:
1993 - Present Senior Vice President - Financial Services
and Chief Financial Officer
1992 - 1993 Vice President, Consumer Services
1989 - 1991 Vice President, Distribution and Customer Service
1987 - 1989 Vice President Corporate, Regulatory
and Customer Services
1985 - 1987 Vice President Diversified Group
Harry Kraiza, Jr. Age - 46
Senior Vice President - Energy Services
Business experience:
1993 - Present Senior Vice President - Energy Services
1989 - 1993 Vice President, Energy Services
1988 - 1989 Director of Energy Services
1987 - 1988 Director of Customer Service
1984 - 1987 Manager of Customer Service
Reginald L. Babcock Age - 44
Vice President - Corporate Services and General Counsel and Secretary
Business experience:
1993 - Present Vice President - Corporate Services and General Counsel
and Secretary
1989 - 1993 Vice President, General Counsel and Secretary
1985 - 1989 Secretary and Counsel
1983 - 1985 Assistant Secretary and Counsel
Wayne T. Jones Age - 46
Vice President - Planning and Corporate Development
Business experience:
1993 - Present Vice President - Planning and Corporate Development
1992 - 1993 Assistant Vice President, Rates and Regulatory Affairs
1989 - 1992 Director, Rates, Regulatory Planning and Conservation
1988 - 1989 Director, Rates and Regulatory Planning
1987 - 1988 Director, Revenue Requirements and Economic Evaluations
1987 - 1987 Director of Administrative Services
Frank H. Livingston, Age - 59
Vice President - Office of the Chairman
Business experience:
1991 - Present Vice President - Office of the Chairman
1989 - 1991 Vice President, Chief Administrative Officer
1973 - 1989 Vice President Administration
Executive Officers of the Registrant, (continued)
------------------------------------
Donald H. Ludington Age - 59
Executive Vice President and General Manager, Energy Networks, Inc.
Business experience:
1993 - Present Executive Vice President and General Manager,
Energy Networks, Inc.
1992 - 1993 Vice President and Chief Administrative Officer,
Energy Networks, Inc.
1989 - 1992 Vice President, Energy Networks, Inc.
1986 - 1989 Assistant Vice President, General Manager -
Greenwich Division
1983 - 1986 Assistant Treasurer
Anthony C. Mirabella, Age - 55
Vice President - Operations and Chief Engineer
Business experience:
1993 - Present Vice President - Operations and Chief Engineer
1992 - 1993 Vice President, Distribution/Engineering Services
& Chief Engineer
1989 - 1991 Vice President & Chief Engineer
1988 - 1989 Vice President Nonregulated Operations
1987 - 1988 Vice President Affiliated Resources Corporation
1985 - 1987 Vice President Business Development Group
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
-------------------------------------------------------------
SECURITY HOLDER MATTERS
-----------------------
The Company's common stock is listed on the New York Stock Exchange. The
high and low sales prices for each quarterly period during the years ended
September 30, 1995 and 1994 were as presented in the table below. These
prices are based on the New York Stock Exchange Quarterly Market
Statistics report.
QUARTERLY COMMON STOCK PRICES
-----------------------------
1995 1994
-------------------- --------------------
Fiscal Year High Low High Low
--------------- ------ ------ ------ ------
First Quarter 25 1/4 21 7/8 32 1/4 28
Second Quarter 24 5/8 21 1/4 31 3/4 23 7/8
Third Quarter 25 1/4 21 3/4 28 5/8 24
Fourth Quarter 22 1/2 21 1/4 26 3/8 22 1/2
There were 10,181 record holders of the Company's common stock at November
1, 1995.
Under Connecticut law, dividends may be paid out of unreserved and
unrestricted retained earnings. Cash dividends are declared on the
Company's common stock on a quarterly basis, and the total amount of
dividends declared was $1.48 per share in 1995 and 1994. Under the most
restrictive terms of the open-end indenture securing the Company's first
mortgage bonds, as amended, retained earnings of $43,299,000 were
available for dividends at September 30, 1995. Except for certain
restrictions relating to the Company's classes of preferred stock as to
which dividends and sinking fund obligations must be paid prior to the
payment of common stock dividends, there are no other restrictions on the
Company's present or future ability to pay such dividends. The Company
expects that cash dividends will continue to be paid in the future.
ITEM 6. SELECTED FINANCIAL DATA
--------------------------------
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS
(Thousands of Dollars)
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Operating revenues $275,185 $290,662 $265,337 $236,189 $213,825
Net income applicable
to common stock:
Continuing operations $ 16,957 $ 17,637 $ 16,788 $ 15,197 $ 12,273
Discontinued operations
and gain on disposal $ - $ - $ - $ - $ 517
Accounting change $ - $ - $ - $ - $ 1,779
Earnings per share:
Continuing operations $ 1.71 $ 1.85 $ 1.76 $ 1.75 $ 1.44
Discontinued operations
and gain on disposal $ - $ - $ - $ - $ .06
Accounting change $ - $ - $ - $ - $ .21
Total assets $465,039 $458,554 $444,585 $397,570 $370,854
Long-term obligations $150,390 $154,193 $137,984 $121,621 $111,111
Cash dividends declared
per common share $ 1.48 $ 1.48 $ 1.46 $ 1.44 $ 1.40
Dividend payout ratio 86.6% 80.0% 83.0% 82.3% 81.9%
P/E ratio 13 13 18 13 12
Market price as a %
of book value -
year-end 146.8% 162.0% 225.6% 175.2% 156.4%
(Certain amounts for 1994 and prior years have been reclassified to conform
with 1995 classifications.)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995
-----------------------------------------
(Thousands of Dollars Except for Per Share Data)
Connecticut Natural Gas Corporation (the Company) is an energy provider
engaged primarily in the regulated distribution and sale of natural gas.
Nonregulated energy-related products and services, primarily district
heating and cooling, are provided through wholly-owned subsidiaries.
Net income applicable to common stock and earnings per share for the
three fiscal years ended September 30, 1995, 1994 and 1993 were $16,957
($1.71), $17,637 ($1.85) and $16,788 ($1.76), respectively. Earnings
in 1995 include two nonrecurring items: a gain of $.24 per share
relating to a negotiated settlement for the termination of a steam
supply contract; and a charge of $(.05) per share in connection with
legal matters related to the Company's 2.4% interest in the Iroquois Gas
Transmission System (Iroquois)(See Other Income/(Deductions) and Legal
Proceedings). Without the effect of these two items, net income
applicable to common stock and earnings per share would be $15,078
($1.52) for the fiscal year ended September 30, 1995.
Warmer winter heating season weather, and the resulting decline in
average use per customer, is the principal reason for the lower earnings
recorded in fiscal 1995. Higher interest expense also reduced earnings,
but the benefits of lower operating expenses and a lower overall
effective income tax rate partially offset these negative earnings
impacts. The most significant benefits to earnings in 1994 came from
higher rates, colder weather and a lower overall effective tax rate due
to additional flow- through income tax deductions. Increased charges
against earnings in 1994 included expenses for uncollectibles and
employee benefits costs for an early retirement program. Other
important contributing factors to all years include changes in the mix
of sales, customer usage, the cost of natural gas and related profit
margins.
RESULTS OF OPERATIONS
---------------------
Gas Operating Margin
Gas operating margin is equal to gas revenues less the cost of gas and
Connecticut gross revenues tax. The following table presents revenues,
gas operating margin and gas throughput for fiscal 1995, 1994 and 1993,
respectively:
1995 1994 1993
---- ---- ----
Gas Revenues $254,006 $267,752 $242,922
======== ======== ========
Gas Operating Margin $103,267 $109,949 $ 96,129
======== ======== ========
Gas Throughput (mmcf)
Firm Sales 21,361 24,260 23,492
Interruptible Sales 8,554 8,463 9,426
Off-System Sales 16,265 9,144 7,622
Transportation Services 7,695 7,325 7,912
------- ------- -------
Total System Throughput 53,875 49,192 48,452
======= ======= =======
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
Significant, sustained changes in weather dramatically impact the
proportionate contribution to operating margin by the firm and
interruptible customer classes, due to required shifts in overall
throughput mix (See table of gas revenues, operating margin and
throughput, above) and the different per unit margin contributed by each
customer class. Firm sales contribute the highest per unit operating
margin of all customer classes because they require firm delivery of
natural gas to supply their needs. Thus, changes in firm sales produce
the greatest impact to gas operating margin. Increased average new
customers partially offset the impact of warmer weather in fiscal, 1995.
Weather during fiscal 1995 was 14% warmer than 1994 and 5% warmer than
normal. Most significantly, the warmer weather occurred during the
winter heating season. The result was lower use per customer and
reduced sales, especially to the firm class of customers.
Higher firm rates, effective December, 1993 (See Rate Matters),
amplified by the impact of higher volumes of firm sales, because of
colder weather, are the principal reasons for the increase in gas
operating margins in fiscal 1994.
A portion of on-system sales is interruptible, and related margin earned
above a prescribed target level is shared with firm ratepayers, as
directed by the Connecticut Department of Public Utility Control (DPUC).
Both the October, 1995 and December, 1993 rate decisions increased the
margin sharing target. Interruptible margins exceeded the target for
the measurement period which ended in the first quarter of fiscal, 1995,
making a portion of these margins subject to refund to firm customers
during 1995. No interruptible margin earned in the measurement period
ending in fiscal, 1994 qualified for such sharing. Interruptible per
unit margins have been higher each year since 1993 because of variations
in related gas costs.
Off-System Limited Term Sales (LTS), made possible by Federal Energy
Regulatory Commission (FERC) Order No. 636, permit the Company to market
short-term gas supplies and transportation services by contract with
customers nationwide. LTS have increased significantly over the last
three years. However, LTS contribute the smallest per unit operating
margin. The significance of this sales program is that the Company acts
as an independent marketer of off-system natural gas and transportation,
enabling the Company to generate additional operating margin from a
source not restricted by the capacity of the Company's own distribution
system or curtailment limitations driven by system demand.
Off-system sales are also made to other utilities when supplies and
capacity are available. Operating results for such off-system sales did
not impact operating margin through 1995 because their recognition in
income had been deferred pending a regulatory decision on their
treatment. The October, 1995 DPUC rate decision established a sharing
mechanism for these sales, effective in fiscal 1996. Transportation
services have produced steady contributions, the result of consistent
levels of customers and per unit operating margins.
Operating and Maintenance Expenses
Lower operating and maintenance expenses were recorded in fiscal 1995.
Total labor costs are lower because of the ten percent reduction in the
nonunion workforce accomplished in 1994 through a voluntary early
retirement program (VERO). Lower uncollectibles expense was recorded
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
because of lower customer receivables, the result of fewer sales due to
the warmer weather. Costs related to computer rentals and maintenance
are lower because of renegotiated contracts. Employee benefits and
pension expenses are lower in 1995 because of the absence of additional
one-time expenses recorded in 1994 related to the VERO. Several other
expense items are lower in 1995 because of the absence of write-offs
taken in 1994 to recognize deferred expenses disallowed in the December,
1993 DPUC rate decision. The cost of outside purchased services is also
lower in 1995. These benefits to operating and maintenance expenses are
somewhat offset by higher union wages and benefits, from renegotiated
contracts, and higher corporate insurance expenses.
Slow economic recovery in the region continues to challenge the Company
in the area of uncollectibles. This was recognized by the DPUC in its
October, 1995 and December, 1993, decisions which allowed the Company to
recover a higher rate of uncollectibles expense beginning in fiscal,
1994 (See Notes 1 and 2 to the financial statements).
Operations and Maintenance expenses were significantly higher in fiscal,
1994, as compared to 1993, reflecting the recognition of several
significant items, including higher uncollectibles, an early retirement
program and pension and benefit expenses. The Company also experienced
higher costs for labor, conservation programs, environmental monitoring
services, regulatory commission expenses and outside purchased services.
Some of these increases are the result of 1994 recognition of expense
items which had been deferred pending the DPUC approval of their
recovery (See Rate Matters and Note 2 to the financial statements).
Income Taxes
The Company's overall effective tax rate has declined from year to year,
due to additional flow-through tax deductions relating to costs of
removal and capitalized information system.
In October, 1994 the Company received formal approval from the Internal
Revenue Service (IRS) to deduct, for tax purposes, current as well as
certain prior incurred cost of removal expenses associated with
retirements of plant and equipment. During fiscal 1995 and 1994 the
Company recorded income tax benefits of $1,973 and $444, respectively,
related to prior years' cost of removal expenses allowed by the IRS.
The total current period income tax benefits related to cost of removal
that were recorded by the Company were $368 in 1995 and $449 in 1994.
Overall, the 1995 and 1994 benefit to earnings from cost of removal
deductions were $.24 per share and $.09 per share, respectively.
Additional flow-through amortization deductions associated with a major
capitalized information system have provided a benefit to fiscal 1995
and 1994 earnings of $.06 and $.11 per share, respectively, from lower
income taxes.
A State of Connecticut audit of the Company's 1989 through 1992 state
sales tax returns is in progress at this time. Management does not
believe that the outcome of the audit will be significant to future
results or operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
Depreciation
The increase in depreciation reflects the Company's continued investment
in depreciable plant and higher rates allowed for the regulated
operations in the December, 1993 rate decision (See Rate Matters and
Note 2 to the financial statements). Plant costs continue to increase
year to year because of price increases for goods and services and
higher per unit internal costs associated with the installation of new
and replacement of existing distribution system mains and services.
Other Income/(Deductions)
Two nonrecurring items were recorded in fiscal 1995. During the fourth
quarter of fiscal, 1995 the Company negotiated a termination agreement
with the nonregulated operations' primary steam supplier. As a result
of this settlement the Company recorded a one-time, pretax benefit of
$4,124. After income taxes of $2,168, this is equivalent to $2,379 or
$.24 per share. The second nonrecurring item recorded in fiscal, 1995
was a charge of $500, or $(.05) per share, to reflect the Company's
proportionate share of expenses in connection with legal matters related
to Iroquois (See Steam Supply and Legal Proceedings and Note 10 to the
financial statements).
Setting aside these nonrecurring items, more other income was recorded
in fiscal 1995, principally because of lower promotional advertising
expenses associated with certain specific programs which were completed
in 1994 and more income from merchandise sales. These benefits were
partially offset by an estimated $400 of costs associated with the
termination of the Company's Gas Roots program which were recognized in
fiscal, 1995, as directed by the DPUC (See Rate Matters). Higher
promotional advertising expenses and lower income from merchandise sales
were partially offset by lower insurance costs and higher interest
income in fiscal 1994. Partially offsetting these same higher costs in
1993 is the allowance for funds used during construction (AFUDC) related
to the development of a new customer information system (CIS/DCIS).
Equity in partnership earnings primarily reflect the income contribution
from the Company's 2.4% interest in Iroquois.
Interest and Debt Expense
Long-term debt interest has increased from year to year because of
additional issues of debt for the funding of construction expenditures.
Other interest relates primarily to interest on short-term borrowings
and interest associated with pipeline refunds and deferred gas costs.
Short-term interest has fluctuated as a result of changes in interest
rates, short-term cash requirements and conversions to long-term debt.
Average borrowings were lower in 1995, offsetting higher interest rates.
However, higher interest related to pipeline refunds received and
deferred gas costs offset the benefits of short-term debt interest. In
1994, average borrowings were higher but interest rates were lower.
In 1993, the Company recorded the benefit of a higher AFUDC (debt
component) related to the development of the new CIS/DCIS system (See
Other Income/(Deductions)). There has been no similarly large project
and related AFUDC benefit in 1994 or 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
Rate Matters
In October, 1995, the DPUC issued a decision which allowed the Company
to increase its rates $8,900 or 3.64%. The Company had requested an
increase of 11.2%, or approximately $28,400. This decision allowed a
rate of return on equity of 10.76% and provided for adequate recovery of
all significant items deferred on the balance sheet, pending recovery,
at September 30, 1995. In addition, the Company has been allowed to
defer, for consideration in future rate proceedings, expenses incurred
above annual levels authorized in current rates for certain areas
including: conservation expenses, economic development expenses and
expenditures related to postretirement benefits. The treatment given
these items in the rate order effectively reduces the impact of the
shortfall between the rate relief requested and the amount which was
granted in the final decision.
The DPUC conducted this proceeding in two phases. New, interim rates,
based on a review of the Company's revenue requirements, became
effective on October 13, 1995. Final rates are expected to become
effective in the second quarter of fiscal, 1996, following a review of
the Company's cost of service study and proposed rate design.
On June 30, 1995, the DPUC issued a decision related to a reopened
docket having to do with regulated propane service provided by natural
gas utilities (LDCs) in Connecticut. The purpose of this proceeding was
to end LDCs' rate subsidies to certain propane customers. The Company
has 377 customers that are affected by this decision. These customers
have been served under the Company's Gas Roots program since the late
1960's and early 1970's, buying propane at natural gas prices pending
the extension of natural gas distribution mains to their areas.
As a result of this DPUC decision these customers have been given the
option to become natural gas customers, purchase propane from other
vendors, convert to alternate fuels or purchase propane from the Company
at natural gas rates. The DPUC ordered the Company to offer customer
incentives to encourage these customers to switch from propane to an
alternate fuel supply, including natural gas, to facilitate the
execution of this DPUC decision. An estimated $400 of costs associated
with the termination of the Gas Roots program were recognized in fiscal,
1995.
In December, 1993, the DPUC issued a final decision on the Company's
rate request, authorizing an increase to the Company's rates of $7,600
or 2.8% and allowing a return on equity of 11.2%. The Company had
requested an increase of 9.6%, or approximately $25,000. New rates
became effective for service rendered on or after December 16, 1993.
Although the rate decision did not provide the full increase requested,
the DPUC approved recovery of all significant items deferred on the
balance sheet, pending recovery, at September 30, 1993. In addition,
the Company had been allowed to defer for consideration in future rate
proceedings expenses incurred above annual levels authorized in current
rates for certain areas including: conservation expenses, economic
development expenses, expenditures related to postretirement benefits,
potential costs related to environmental remediation and the shortfall
on collection of accounts receivable from hardship customers who are
protected by statute from service termination during the winter months.
The overall effect of the treatment given these items in the rate order
was to reduce the impact of the shortfall between the rate relief
requested and the amount which was granted in the final decision.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
FERC Order No. 636
The Company began to incur FERC Order 636 transition costs from its
pipeline suppliers in June, 1993. These costs are expected to be billed
to the Company over three years.
In July, 1994 the DPUC issued a decision allowing the LDCs to recover
these costs from amounts which would otherwise have been refunded to
customers and providing the LDCs the opportunity, if necessary, for
surcharges to customers' future bills. Through September 30, 1995 the
Company has paid and recovered $10,364 of an estimated $15,000 of
transition costs.
In the opinion of management, the Company has available a sufficient
number of recovery mechanisms to provide for the full recovery of its
estimated transition cost liability. For this reason, management
believes that FERC Order 636 transition costs will not have a material
impact on the Company's financial condition or results of operations.
The estimated unpaid liability of $4,636 at September 30, 1995 is
included in Accounts Payable and Accrued Expenses.
The DPUC decision also requires the LDCs to unbundle their gas services.
This will result, at a minimum, in the availability of firm
transportation services for large commercial and industrial gas end-
users, giving those customers an option to purchase natural gas directly
from producers or marketers and relegating the LDCs to the role of
natural gas transporters. The Company has offered both firm and
interruptible transportation service for several years and, through its
LTS program, acts as a marketer of natural gas. On the basis of this
experience management believes that the Company is well positioned for
this next stage of the FERC 636 environment and the further unbundling
of its gas services. However, management cannot predict the future
effects of FERC 636 on its financial condition or results of operations.
The Company's rates for unbundled services are being reviewed as part of
the rate design related to the October, 1995 rate decision and are
expected to be effective by the third quarter of fiscal, 1996.
Nonregulated Operations
The contribution to net income from nonregulated operations is
predominantly generated from district heating and cooling operations
(DHC) and was $.49, $.35 and $.29 per share in 1995, 1994 and 1993,
respectively. The $.49 earned in 1995 includes $.24 per share from a
negotiated settlement for the termination of a steam supply contract
(See Other Income/(Deductions)) and $.25 from regular operations. The
lower contribution from regular operations in fiscal 1995 reflects the
combined impacts of lower steam and chilled water customer load, lower
steam sales, because of warmer winter weather, and lower spring chilled
water sales from cooler spring weather. These are partially offset by
higher hot water sales from additional customer load. Higher interest
rates on variable rate long-term debt, start-up expenses related to the
establishment of two new nonregulated ventures and higher expenses
related to equipment rentals also reduced nonregulated operations'
contribution to net income in 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
Higher nonregulated earnings in 1994 reflect the net benefit to income
from higher DHC rates and more steam and hot water sales during a colder
winter. The benefit of higher rates is partially offset by lower
chilled water sales because of lower customer usage and the DHC's
decision to defer the third year phase-in of higher chilled water
service rates which was scheduled for January, 1994.
Excepting the nonrecurring charge recorded in 1995, additional
contribution to earnings from nonregulated operations has been realized
each year from the Company's equity in the earnings of Iroquois (See
Other Income/(Deductions)).
Steam Supply
The nonregulated operations are party to long-term contracts for the
purchase of steam.
Through fiscal 1995 the nonregulated operations' primary supply of steam
was a cogeneration facility located on the Company's premises and owned
by an unrelated third party, the Hacogen partnership (Hacogen). During
fiscal 1994 Hacogen indicated a desire to negotiate a termination of its
long-term steam supply contract with the Company. During the fourth
quarter of fiscal, 1995, the nonregulated operations negotiated a
settlement agreement with Hacogen. According to the terms of the
negotiated settlement, Hacogen terminated its long-term supply contract
with the Company, effective September 30, 1995. The nonregulated
operations are to receive consideration of $9,519, representing the
payment of all past due amounts owed by Hacogen and certain additional
amounts as a result of the contract termination. As of September 30,
1995, $4,967 was received. The balance is due in December, 1995. The
1995 pretax, nonrecurring income related to this settlement was $4,124.
In October, 1995, the nonregulated operations resumed producing more
costly steam from the existing boilers which are located on the
Company's premises and are currently providing adequate steam supply for
customer requirements. The nonregulated operations are currently
assessing the district heating and cooling operations to determine
future cost control and operational options.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The regulated gas operations are the principal segment of the Company's
business, and a substantial portion of the Company's cash is obtained
during the winter heating season. The Company manages its seasonal cash
requirements, primarily to fund gas purchases and customer accounts
receivable, by using cash flows generated from operations and short-term
financing from lines of credit.
Cash flows from operations are generally sufficient to satisfy the
nonregulated operations' cash requirements. Existing credit lines are
used to balance seasonal variations in available cash resources.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
Cash Flows from Operating Activities
Cash flows from operations funded both investing and financing
activities in fiscal 1995. In 1994 and 1993 cash flows from operations
together with cash flows from financing activities satisfied the needs
for cash for investing activities. Cash flows from operations are
substantially higher in 1995, primarily because of the receipt and
retention of natural gas pipeline refunds. The DPUC has allowed the
Company to retain approximately $16,000 of these refunds to offset FERC
636 transition costs and certain accounts receivable amounts forgiven
for hardship customers (See Notes 1 and 2 to the financial statements).
Other refunds are ultimately returned to customers as reductions to
their bills but provide temporary working capital for the regulated gas
operations.
The proceeds from the October, 1994 issue of Common Stock were used by
the regulated operations to reduce short-term debt, to permanently
finance construction expenditures, and for working capital in fiscal
1995. These needs would otherwise have been met by cash from operations
or by additional short-term financing. Higher firm natural gas
operating margins, because of higher rates, effective December, 1993,
and higher sales volumes because of colder weather are principally
responsible for higher cash flows from operations experienced in fiscal
1994.
On an on-going basis the cost of gas and volumes of gas sold are the
principal factors which influence cash flows from operations from year
to year. The price of natural gas impacts the amount of purchased gas
costs subject to refund or recovery. The volumes of gas sold magnify
the impact of changing prices. The Company's average per unit commodity
cost of gas was highest in 1993. Margins earned from LTS, interruptible
and transportation services add some to the amount of cash available to
pay for the expenses of operations.
In 1993 the Company received its first cash distributions from its 2.4%
partnership interest in Iroquois (See Note 1 to the financial
statements). Cash distributions will vary from year to year depending
on Iroquois' cash available for reserve requirements and its decision to
retain cash to support the cost of capital projects. Distributions of
$168, $240 and $1,154 were received from Iroquois in 1995, 1994 and
1993, respectively.
Investing Activities
Construction expenditures in 1995, 1994 and 1993 were $26,839, $27,859
and $25,531, respectively. The Company estimates its consolidated
construction expenditures for fiscal, 1996 to be approximately $25,000.
The future anticipated construction programs for the gas operations
include an accelerated replacement program for certain cast iron and
bare steel pipe in the natural gas distribution system. Other
construction expenditures from 1996 to 1999 for the nonregulated
operations include $2,200 for compliance with Clean Air Act
requirements. The Company plans to fund capital expenditures and other
commitments through a combination of sources.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
During fiscal 1995 the Company positioned itself to expand its existing
energy management services activities and to build on its existing
energy marketing expertise by establishing two nonregulated
subsidiaries, ENServe Corporation and ENI Gas Services, Inc. These new
companies are wholly-owned by the Company's wholly-owned, nonregulated
subsidiary, Energy Networks, Inc. (ENI). Although the overall invested
amounts, either individually or together, are not material, these
investments make it possible for the Company to participate in expanded
geographic areas and in additional nonregulated energy markets.
ENI's energy services operating group was formed in 1994 to gather
together ENI's energy system operating and maintenance services offered
to district heating and cooling customers. In 1995 this group was
organized into a new company, ENServe Corporation (ENServe). During
fiscal, 1995 ENServe purchased the assets of a Connecticut residential
and commercial heating and air conditioning contractor and now offers
residential, commercial and industrial energy management services
throughout Connecticut. As of September 30, 1995, ENServe has incurred
approximately $300 for startup costs.
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint
venture partnership with Bay State Gas Company and Koch Gas Services
Company. The Company formed ENI Gas Services, Inc. to own its interest
in this partnership, and the Board of Directors authorized capital
contributions of up to $1,700. As of September 30, 1995, the Company's
investment in KBC was minimal. KBC markets natural gas supplies, other
energy sources and energy management related services on a nonregulated
basis to commercial and industrial end users, primarily in New England.
Financing Activities
The Company uses short-term debt to finance the seasonal build-up of gas
inventories and other working capital requirements. Capital
expenditures are also temporarily funded with short-term debt. The
Company raises short-term funds through the use of available bank lines
of credit and revolving credit agreements (See Note 8 to the financial
statements). Long-term debt and equity issues are used in a balanced
fashion to reduce outstanding short-term debt and to permanently finance
completed construction.
In October, 1994 the Company sold 392,200 shares of its $3.125 par
Common Stock at $22.75 per share. The Company received net proceeds of
approximately $8,500 which were used by the regulated operations to
retire existing short-term borrowings and for working capital.
In June, 1994, with the approval of the DPUC, the Company established
its Series B Medium Term Note (MTN) program which permits the issue of
up to $75,000 of unsecured MTNs over a four-year period at maturities
not exceeding thirty years, under varying terms. In July, 1994 the
Company issued $10,000 of MTNs at 7.82%, due 2004, with no call
provisions or sinking fund requirements. In August, 1994 the Company
issued $5,000 of MTNs at 8.12%, due 2014, with no call provisions or
sinking fund requirements and $5,000 of MTNs at 8.49%, due 2024,
callable after 2004, with no sinking fund requirements. The proceeds
were used by the regulated operations to refinance $15,000 of existing
short-term debt, and the remaining $5,000 was used for working capital.
The average interest rate of the retired short-term debt was 4.85%.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
In December, 1994 the Company replaced a $5,000 unsecured line of credit
with a bank with an unsecured commercial revolving credit agreement for
use by the nonregulated operations. Under this agreement the
nonregulated operations can borrow up to $5,000 through December 15,
1997, with a 1/5 of 1% annual facility fee on the line of credit. The
interest rate is based upon the Certificate of Deposit, Eurodollar or
Cost of Funds rate plus a variable margin and is determined at the time
of each borrowing.
In September, 1994, an expiring $9,000 secured line of credit used by
the nonregulated operations was replaced with a secured line of credit
for $5,000, through October, 1997. There is a 1/5 of 1% commitment fee
on the unused line of credit. The interest rate is based upon the
Certificate of Deposit, Libor or money market rate plus a variable
margin, determined at the time of each borrowing.
Restrictive Covenants
Under the most restrictive terms of the indenture securing the Company's
First Mortgage Bonds, retained earnings of $43,299 are available for
dividends at September 30, 1995. Dividends paid on common and preferred
stock in fiscal 1995 were $14,761. The Company is prohibited from,
among other things, paying dividends on common stock and purchasing,
redeeming or retiring common stock, if dividends on preferred stock are
in arrears.
Environmental Matters
There are three sites on which are located the Company's former gas
manufacturing facilities. The Company has not been required to
undertake any remedial activities on these sites by any state or federal
agency since 1989. The Company will continue to review the condition of
these sites. No determination has been made as to whether any
remediation will be required. The Company expects to be able to recover
in rates any environmental remediation costs that it may incur in the
future with respect to manufactured gas sites.
In 1990 the owner of property adjacent to one of these sites claimed
that contaminants similar to residues from gas manufacturing activities
were present on its property. The Company is unable to predict the
outcome of this matter.
The Company is also a potentially responsible party (PRP) in connection
with the Ellis Road Superfund site. Outside counsel has advised the
Company that it does not expect the Company's maximum liability with
respect to this site to exceed $10.
Legal proceedings
Two civil and criminal investigations related to environmental issues,
brought against Iroquois in 1992, are still pending. Although no final
agreements have been reached regarding the disposition of these matters,
at September 30, 1995, the Company has recognized a nonrecurring charge
of $500, to reflect its proportionate share of estimated costs in
connection with these legal matters (See Other Income/(Deductions)).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (continued)
----------------------------------------------------
In November, 1995, two associations comprised of Connecticut plumbers
and HVAC contractors joined with two individual contractors and filed a
class action suit against the Company and the State's two other local
distribution companies (LDCs), claiming that the LDCs engaged in unfair
trade practices. The action was brought on November 8, 1995, in
Middlesex Superior Court by Connecticut Heating and Cooling Contractors
Association, Inc. et al. and alleges that the LDCs unfairly competed
with licensed plumbers and contractors by performing customer service
work using customer service employees who did not possess State trade
licenses. The plaintiffs are seeking an injunction, unspecified
damages, including treble damages, and certain related remedies.
The LDCs have asserted that such licenses are not required for this work
by virtue of a statutory exemption enacted in 1965 and amended in 1967.
However, in a separate proceeding, a Connecticut Superior Court has
upheld an administrative ruling against the LDCs' position, and the
Company is participating in an appeal of that decision. In 1995, the
Connecticut General Assembly enacted legislation that established on a
going-forward basis a separate procedure for State certification of gas
service employees.
The Company will vigorously defend this claim but, at this early stage,
cannot anticipate the outcome of the matter.
The Company is not a party to any other litigation other than ordinary
routine litigation incident to the operations of the Company or its
subsidiaries. In the opinion of management, the resolution of such
litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
EFFECTS OF REGULATION
The Company's natural gas distribution business is subject to regulation
by the DPUC. The Company prepares its financial statements in
accordance with the provisions of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71). SFAS No. 71 requires a cost-based, rate-
regulated enterprise such as the Company to reflect the impact of
regulatory decisions in its financial statements. In certain
circumstances, SFAS No. 71 requires that certain costs and/or
obligations (such as incurred costs not currently recovered through
rates, but expected to be so recovered in the future) be reflected in a
deferred account in the balance sheet and not be reflected in the
statement of income until matching revenues and/or expenses are
recognized.
In the application of SFAS No. 71, the Company follows accounting
policies that reflect the impact of the rate treatment of certain events
or transactions that are permitted to differ from generally accepted
accounting principles. The most significant of these policies include
the recording of an unfunded deferred income tax liability, with a
corresponding unrecovered receivable, for temporary differences
previously flowed through to ratepayers, regulated assets pending future
recovery, regulated assets recovered over time as directed by the DPUC
and the method of depreciation utilized for certain property. The DPUC
permits recovery of depreciation on the operating and administrative
center, owned by the Company's wholly-owned subsidiary, CNG Realty
Corp., under a DPUC-approved sinking fund method through 2010. The
overall impact of annual depreciation expense under this method, versus
straight line depreciation recovery, is not material to the overall
statement of operations.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------------------------------------------------------------------------
RESULTS OF OPERATIONS, SEPTEMBER 30, 1995 (concluded)
----------------------------------------------------
It is the Company's policy to continually assess the recoverability of
costs recognized as regulatory assets and the Company's ability to
continue to account for its activities in accordance with SFAS No. 71,
based on each regulatory action and the criteria set forth in SFAS No.
71. Based on current regulation and recent DPUC decisions, the Company
believes that its use of regulatory accounting is appropriate and in
accordance with the provisions of SFAS No. 71.
NEW ACCOUNTING STANDARDS
In March, 1995 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
(SFAS No. 121). This statement requires that long-lived assets be
reviewed for impairment whenever events indicate that the carrying
amount of any asset may not be recoverable. The Company has the option
to adopt SFAS No. 121 in fiscal 1996 or fiscal 1997 and does not expect
that the adoption will have a material impact on its overall financial
condition or results of operations.
INFLATION AND CHANGING PRICES
Inflation impacts the prices the Company must pay for operating and
maintenance expenses and construction costs. The Company's rate
schedules for natural gas and DHC sales include provisions that permit
changes in gas costs and service costs, respectively, to be passed on to
customers. The Company attempts to minimize the effects of inflation on
other costs through cost control, productivity improvements and
regulatory actions where appropriate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Stockholders and The Board of Directors
of Connecticut Natural Gas Corporation:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Connecticut Natural Gas
Corporation (a Connecticut Corporation) and subsidiaries as of September
30, 1995 and 1994, and the related consolidated statements of income,
common stock equity and cash flows for each of the three years in the
period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Connecticut Natural Gas Corporation and subsidiaries as of September 30,
1995 and 1994, and the results of their operations and their cash flows
for each of the three years in the period ended September 30, 1995, in
conformity with generally accepted accounting principles.
As explained in the notes to the financial statements, effective October
1, 1993, the Company changed its method of accounting for income taxes
and postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the
schedule index is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
S/ Arthur Andersen LLP
-------------------------------
(ARTHUR ANDERSEN LLP)
Hartford, Connecticut
November 21, 1995
Consolidated Balance Sheets
September 30, 1995 and 1994
(Thousands of Dollars)
Assets
1995 1994
---- ----
Plant and Equipment:
Plant in service $ 451,843 $ 428,366
Construction work in progress 3,564 2,762
--------- ---------
455,407 431,128
Less-Allowance for depreciation 133,314 119,392
--------- ---------
322,093 311,736
--------- ---------
Investments, at equity 5,743 5,147
--------- ---------
Current Assets:
Cash and cash equivalents 3,042 1,126
Accounts receivable (less allowance for
doubtful accounts of $4,590 in 1995
and $4,017 in 1994) 26,914 24,376
Accrued utility revenue 5,093 3,714
Inventories 14,511 18,326
Prepaid expenses 6,095 10,107
Recoverable purchased gas costs - 3,769
--------- ---------
Total Current Assets 55,655 61,418
--------- ---------
Other Assets:
Unrecovered future taxes 51,634 46,759
Recoverable transition costs 4,636 6,925
Other assets 25,278 26,569
--------- ---------
Total Other Assets 81,548 80,253
--------- ---------
$ 465,039 $ 458,554
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Balance Sheets (Concluded)
September 30, 1995 and 1994
(Thousands of Dollars)
Capitalization and Liabilities
1995 1994
---- ----
Capitalization (see accompanying statements):
Common stock equity $ 150,111 $ 139,481
Preferred stock, not subject to
mandatory redemption 904 909
Long-term debt 150,390 154,193
--------- ---------
301,405 294,583
--------- ---------
Current Liabilities:
Current portion of long-term debt 3,921 3,791
Notes payable and commercial paper 4,200 18,500
Accounts payable and accrued expenses 46,341 37,906
Refundable purchased gas costs 2,300 -
Accrued taxes 2,021 3,543
Accrued interest 4,518 4,236
--------- ---------
Total Current Liabilities 63,301 67,976
--------- ---------
Deferred Credits:
Deferred income taxes 37,985 36,916
Unfunded deferred income taxes 51,634 46,759
Investment tax credits 3,423 3,644
Refundable taxes 3,365 3,275
Accrued transition costs - 1,925
Other 3,926 3,476
--------- ---------
Total Deferred Credits 100,333 95,995
--------- ---------
Commitments and Contingencies
--------- ---------
$ 465,039 $ 458,554
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Income
For the Years Ended September 30, 1995, 1994 and 1993
(Thousands of Dollars Except for Per Share Data)
1995 1994 1993
---- ---- ----
Operating Revenues $ 275,185 $ 290,662 $ 265,337
Less: Cost of energy 147,764 155,547 145,904
State gross revenues tax 11,296 11,863 11,095
--------- --------- ---------
Operating Margin 116,125 123,252 108,338
--------- --------- ---------
Operating Expenses:
Operations 45,311 48,361 39,709
Maintenance 7,917 7,683 7,469
Depreciation and amortization 16,977 15,507 12,649
Income taxes 9,430 13,353 13,438
Local property taxes 5,148 5,259 5,090
Other taxes 2,183 2,177 1,797
--------- --------- ---------
86,966 92,340 80,152
--------- --------- ---------
Operating Income 29,159 30,912 28,186
--------- --------- ---------
Other Income/(Deductions),
net of income taxes:
Allowance for equity funds used
during construction 106 21 607
Equity in partnership earnings 1,032 868 970
Other income/(deductions) (872) (1,007) (614)
Nonrecurring items 3,624 - -
Income taxes (1,839) (113) (552)
--------- --------- ---------
2,051 (231) 411
--------- --------- ---------
Interest and Debt Expense, net:
Interest on long-term debt 12,158 10,997 9,985
Other interest 1,650 1,573 1,782
Allowance for borrowed funds used
during construction (70) (14) (404)
Amortization of debt expense 453 422 379
--------- --------- ---------
14,191 12,978 11,742
--------- --------- ---------
Net Income 17,019 17,703 16,855
Less-Dividends on Preferred Stock 62 66 67
--------- --------- ---------
Net Income Applicable to Common Stock $ 16,957 $ 17,637 $ 16,788
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Income (Concluded)
For the Years Ended September 30, 1995, 1994 and 1993
(Thousands of Dollars Except for Per Share Data)
1995 1994 1993
---- ---- ----
Net Income Applicable to Common Stock $ 16,957 $ 17,637 $ 16,788
========= ========= =========
Average Common Shares Outstanding
During the Period 9,926,980 9,539,695 9,527,772
========= ========= =========
Income Per Average Share of
Common Stock $ 1.71 $ 1.85 $ 1.76
========= ========= =========
Dividend Per Share of Common Stock $ 1.48 $ 1.48 $ 1.46
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Cash Flows
For the Years Ended September 30, 1995, 1994 and 1993
(Thousands of Dollars)
1995 1994 1993
---- ---- ----
Cash Flows from Operations: $ 54,262 $ 24,929 $ 20,729
-------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures (26,839) (27,859) (25,531)
Other investing activities (1,242) (1,890) (9,186)
-------- -------- --------
Net cash used in investing activities (28,081) (29,749) (34,717)
-------- -------- --------
Cash Flows from Financing Activities:
Dividends paid (14,761) (14,184) (13,999)
Issuance of common stock 8,474 - 16,913
Other stock activity, net (5) (763) (16)
Issuance of long-term debt - 20,000 35,100
Principal retired on long-term debt (3,673) (4,653) (19,354)
Short-term debt (14,300) 4,000 (3,450)
-------- -------- --------
Net cash provided (used) by
financing activities (24,265) 4,400 15,194
-------- -------- --------
Increase (Decrease) in Cash and
Cash Equivalents 1,916 (420) 1,206
Cash and Cash Equivalents at
Beginning of Year 1,126 1,546 340
-------- -------- --------
Cash and Cash Equivalents at
End of Year $ 3,042 $ 1,126 $ 1,546
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Cash Flows (Concluded)
For the Years Ended September 30, 1995, 1994 and 1993
(Thousands of Dollars)
1995 1994 1993
---- ---- ----
Schedule Reconciling Earnings to
Cash Flows from Continuing Operations:
Income $ 17,019 $ 17,703 $ 16,855
-------- -------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,216 16,296 13,028
Provision for uncollectible
accounts 4,886 6,582 3,469
Deferred income taxes, net 897 8,538 915
Equity in partnership earnings (1,032) (868) (970)
Cash distributions received from
investments 168 240 1,154
Changes in assets and liabilities:
Accounts receivable (5,571) (9,047) (4,340)
Accrued utility revenue (1,379) 918 (339)
Inventories 3,815 2,087 (7,073)
Purchased gas costs 6,069 (7,527) (8,564)
Prepaid expenses 4,012 (6,728) (1,021)
Accounts payable and accrued expenses 7,671 (927) 10,011
Other assets/liabilities 491 (2,338) (2,396)
-------- -------- --------
Total adjustments 37,243 7,226 3,874
-------- -------- --------
Cash flows from
operations $ 54,262 $ 24,929 $ 20,729
======== ======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest $ 11,330 $ 10,138 $ 8,794
======== ======== ========
Income taxes $ 8,967 $ 9,972 $ 9,837
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Capitalization
September 30, 1995 and 1994
(Thousands of Dollars)
1995 1994
---- ----
Common Stock Equity:
Common stock, $3.125 par value, authorized
20,000,000 shares, issued 9,934,496 shares
in 1995 and 9,542,296 shares in 1994,
outstanding 9,931,279 shares in 1995 and
9,539,079 shares in 1994 $ 31,045 $ 29,820
Capital in excess of par value 74,018 66,657
Retained earnings 45,522 43,264
-------- --------
150,585 139,741
-------- --------
Less: Unearned compensation - restricted
stock awards (371) (157)
Treasury stock, 3,217 shares in 1995 and 1994 (103) (103)
-------- --------
150,111 139,481
-------- --------
Preferred Stock, Not Subject to Mandatory
Redemption:
$3.125 par value, 8%, noncallable, authorized
915,204 shares in 1995 and 916,952 shares
in 1994, issued and outstanding 139,732 shares
in 1995 and 141,480 shares in 1994, entitled to
preference on liquidation at $6.25 per share 437 442
$100 par value, callable, authorized 9,999,634
shares in 1995 and 9,999,635 shares in 1994
6% Series B, issued and outstanding 4,670
shares in 1995 and 4,671 shares in 1994 467 467
-------- --------
904 909
-------- --------
Long-Term Debt:
First Mortgage Bonds -
8.8%, due 2001 12,000 14,000
9.16%, due 2004 18,000 18,000
Industrial Revenue Demand Bonds -
1986 and 1988 series,
weighted average interest rate of
3.857% in 1995 and 2.677% in 1994, due 2006 12,800 13,400
First Mortgage Notes -
10.5%, due 2010 1,030 1,058
Secured Note, 6.89%, due 2010 14,075 14,495
Secured Term Note, 10.72%, due 1997 1,406 2,031
Unsecured Medium Term Notes -
6.48%, due 1997 10,000 10,000
7.61% to 7.82%, due 2002 to 2004 20,000 20,000
6.85% to 8.12%, due 2012 to 2014 30,000 30,000
8.96% to 9.1%, due 2016 to 2017 30,000 30,000
8.49%, due 2024 5,000 5,000
Less - Current Maturities (3,921) (3,791)
-------- --------
150,390 154,193
-------- --------
$301,405 $294,583
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Common Stock Equity
For the Years Ended September 30, 1995, 1994 and 1993
(Thousands of Dollars Except for Share Data)
Common Stock
------------------- Capital in
Number of Par Excess of Treasury Unearned Retained
Shares Value Par Value Stock Compensation Earnings
--------- ------- ---------- -------- ------------ ---------
Balance at September 30,
1992 8,792,056 $27,476 $52,497 $ (2) $ (308) $36,888
Public offering 750,000 2,344 14,217 - - -
Issuance through dividend
reinvestment and employee
benefit plans 136 - 4 - - -
Net income after preferred
dividends - - - - - 16,788
Issuance of treasury stock 104 - 1 2 - -
Amortization and
adjustment of restricted
shares - - 196 - 151 -
Dividends - - - - - (13,932)
--------- ------- ------- ------ ------ --------
Balance at September 30,
1993 9,542,296 29,820 66,915 - (157) 39,744
Net income after preferred
dividends - - - - - 17,637
Purchase of restricted
stock awards - - - - (728) -
Amortization and
adjustment of restricted
shares (3,217) - (258) (103) 728 -
Dividends - - - - - (14,117)
--------- ------- ------- ------ ------ --------
Balance at September 30,
1994 9,539,079 29,820 66,657 (103) (157) 43,264
Public offering 392,200 1,225 7,249 - - -
Net income after preferred
dividends - - - - - 16,957
Amortization and
adjustment of restricted
shares - - 112 - (214) -
Dividends - - - - - (14,699)
--------- ------- ------- ------ ------ --------
Balance at September 30,
1995 9,931,279 $31,045 $74,018 $ (103) $ (371) $45,522
========= ======= ======= ====== ====== ========
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
(In thousands of dollars, except per share amounts)
September 30, 1995
1. Summary of Significant Accounting Policies:
Principles of consolidation-
The consolidated financial statements represent the Connecticut Natural Gas
Corporation (the Company), including its wholly-owned nonregulated
subsidiaries: Energy Networks, Inc. (ENI), ENI Transmission Company (ENIT)
and CNG Realty Corp. (CNGR). All significant intercompany transactions and
accounts have been eliminated in consolidation. Certain prior year amounts
have been reclassified to conform with current year classifications.
Revenues-
Revenues are recorded based on the amount of product delivered to customers
through the end of the accounting period. Regulated gas operations
revenues are based on rates authorized by the Connecticut Department of
Public Utility Control (DPUC).
The Company is required to provide service to residential customers within
its defined service territory and is precluded by the DPUC from
discontinuing service to hardship residential customers during a winter
moratorium period (November - April). The Company reviews new customers'
credit worthiness and may request security deposits based on that review.
In compliance with Connecticut law, the Company has a receivable
forgiveness program for qualified hardship natural gas customers. The
total payments made by these customers and energy assistance funds received
on their behalf are matched and forgiven by the Company. Amounts forgiven
are deferred and recovered from ratepayers in a future period in accordance
with DPUC treatment as outlined in the Company's October, 1995 rate
decision (see Note 2). At September 30, 1995 and 1994, deferred balances
of $7,500 and $5,700, respectively, are included in other assets pending
future amortization and recovery from ratepayers.
Purchased gas costs-
The Company passes on to its firm customers increases or decreases in gas
costs from those reflected in its tariff charges. In accordance with this
procedure, any current under or over-recoveries of gas costs are charged or
credited to the cost of gas and included in current assets or liabilities.
Such amounts are collected or refunded in subsequent periods under
purchased gas adjustment provisions.
Allowance for funds used during construction-
In the ordinary course of business an allowance for funds used during
construction (AFUDC) is calculated on the construction of physical assets
(such as gas mains and services and certain computer systems) which exceed
a minimum cost threshold and are constructed over an extended period of
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
time. AFUDC is computed at the weighted average cost of capital allowed by
the DPUC for the regulated operations and at current borrowing rates for
the nonregulated operations. The AFUDC included in the statements of
income in fiscal 1993 is primarily related to the Company's new customer
information and distribution/construction information system which went
into operation in 1993.
Plant-
Plant is stated at original cost which includes indirect costs consisting
of payroll taxes, pension and other employee benefit costs, general and
administrative costs, and, for certain long-term construction projects,
AFUDC.
Substantially all of the plant of the regulated operations is subject to
the lien of the Indenture of Mortgage and Deed of Trust securing its First
Mortgage Bonds. Most properties of the nonregulated operations are also
subject to the liens associated with their term loans or letters of credit
(see Notes 7 and 8).
Depreciation-
The Company and its subsidiaries, except CNGR, provide depreciation on a
straight-line basis. The rates applied by the regulated operations are
approved by the DPUC. The current allowed rates were increased in the
December, 1993 rate decision (see Note 2) and include a cost of removal and
salvage factor. Such rates were equivalent to a composite rate of 4.2% in
1995 and 1994 and 3.7% in 1993, excluding the operating and administrative
center. The operating and administrative center, owned by CNGR, is being
depreciated under a DPUC approved sinking fund method through 2010. The
overall impact of annual depreciation expense under this method, versus
straight-line depreciation recovery, is not material to the overall
statement of operations.
The depreciation rates for nonregulated depreciable plant were 3.7% in 1995
and 3.3% in 1994 and 1993.
Cash and cash equivalents-
Cash in excess of daily requirements is invested in short-term interest
bearing securities with maturities of three months or less.
Investments-
Investments at September 30, 1995 include $4,922 for ENIT's 2.4% ownership
interest in the Iroquois Gas Transmission System Partnership (Iroquois).
Iroquois owns and operates a natural gas pipeline which transports Canadian
natural gas into New York State, Massachusetts and Connecticut. The
Company also has a $771 (50% ownership) investment in the Downtown
Cogeneration Associates Limited Partnership (DCA) which owns and operates a
cogeneration facility in Hartford, CT. In the last quarter of fiscal 1995,
the Company contributed $50 to become a 33 1/3% partner in KBC Energy
Services of New England (KBC), a joint venture partnership with Bay State
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
Gas Company and Koch Gas Services Company. KBC markets natural gas
supplies, other energy sources and energy management related services on an
unregulated basis to commercial and industrial end users, primarily in New
England. There was minimal activity in KBC in fiscal, 1995. The Company
has committed to a total investment of $1,700 in KBC. These investments
are being accounted for on the equity method of accounting.
Inventories-
Gas inventories are stated at their weighted average cost. Other
inventories are stated at the lower of cost or market using the first-in,
first-out or average cost method.
Accounting for the Effects of Regulation-
The Company's natural gas distribution business is subject to regulation by
the DPUC. The Company prepares its financial statements in accordance with
the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71).
SFAS No. 71 requires a cost-based, rate-regulated enterprise such as the
Company to reflect the impact of regulatory decisions in its financial
statements. In certain circumstances, SFAS No. 71 requires that certain
costs and/or obligations (such as incurred costs not currently recovered
through rates, but expected to be so recovered in the future) be reflected
in a deferred account in the balance sheet and not be reflected in the
statement of income until matching revenues and/or expenses are recognized.
The Company records regulatory assets and liabilities based on prior rate
orders issued by the DPUC, which provide a mechanism for recovery in
regulated rates, or on historical rate treatment, which provides evidence
as to the probability of future rate recovery.
In the application of SFAS No. 71, the Company follows accounting policies
that reflect the impact of the rate treatment of certain events or
transactions that are permitted to differ from generally accepted
accounting principles. The most significant of these policies include the
recording of an unfunded deferred income tax liability, with a
corresponding unrecovered receivable, for temporary differences previously
flowed through to ratepayers, regulated assets pending future recovery,
regulated assets recovered over time as directed by the DPUC and the method
of depreciation utilized for certain property. The DPUC permits recovery
of depreciation on the operating and administrative center, owned by CNGR,
under a DPUC-approved sinking fund method through 2010. The overall impact
of annual depreciation expense under this method, versus straight line
depreciation recovery, is not material to the overall statement of
operations.
It is the Company's policy to continually assess the recoverability of
costs recognized as regulatory assets and the Company's ability to continue
to account for its activities in accordance with SFAS No. 71, based on each
regulatory action and the criteria set forth in SFAS No. 71. Based on
current regulation and recent DPUC decisions, the Company believes that its
use of regulatory accounting is appropriate and in accordance with the
provisions of SFAS No. 71.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
The Company's Consolidated Balance Sheets at September 30, 1995 and 1994
contain the following amounts solely as a result of the application of SFAS
No. 71:
Assets/(Liabilities) 1995 1994
-------------------- ---- ----
Unrecovered Future Taxes $ 51,634 $ 46,759
Hardship Arrearage Forgiveness 7,536 5,733
Recoverable Transition Costs 4,636 6,925
Other Deferred Charges 3,821 2,545
Other Postretirement Benefits 2,116 985
Deferred Income Taxes 1,224 (539)
Pipeline Refunds, Surcharges and Interest (10,461) (3,545)
Refundable Taxes (3,365) (3,316)
Deferred Gas Costs (1,995) 3,884
Revenue Sharing Mechanisms (1,582) (705)
-------- --------
$ 53,564 $ 58,726
======== ========
New Accounting Standards-
In March, 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
(SFAS No. 121). This statement requires that long-lived assets be reviewed
for impairment whenever events indicate that the carrying amount of any
asset may not be recoverable. The Company expects to adopt SFAS No. 121 in
fiscal 1996 or 1997. Based upon current information, the Company does not
expect that the adoption will have a material impact on its financial
condition or results of operations.
2. Rate Proceedings:
In October, 1995 the DPUC issued a decision which allowed the Company to
increase its rates $8,900 or 3.64%. This decision allowed a rate of return
on equity of 10.76% and provided for recovery of all significant items
deferred on the balance sheet pending recovery at September 30, 1994. The
DPUC conducted this proceeding in two phases. New, interim rates, based on
a review of the Company's revenue requirements, became effective on October
13, 1995. Final rates are expected to become effective in the second
quarter of fiscal, 1996, following a review of the Company's cost of
service studies and rate design.
In June, 1995 the DPUC issued a decision which ordered the Company to
gradually end any rate subsidy to its 377 remaining Gas Roots customers.
The intent of the Gas Roots program was to provide temporary propane
service that would enable customers to install and use gas appliances and
house piping until the extension of natural gas distribution facilities to
their property became economically feasible. In fiscal, 1995 the Company
accrued approximately $400 of costs relating to the phase-in of this
decision.
In December, 1993 the DPUC issued a decision which allowed the Company to
increase its rates $7,600 or 2.8%. This decision included an allowed rate
of return on equity of 11.2% and provided for adequate recovery of all
significant items deferred on the balance sheet pending recovery at
September 30, 1993. New rates became effective for service rendered on or
after December 16, 1993.
NOTES TO FINANCIAL STATEMENTS (continued)
In thousands of dollars, except per share amounts)
3. Pension and Employee Benefit Plans:
The Company has noncontributory retirement plans (Plans) covering
substantially all employees. Pension benefits are based on years of
credited service and employees' average annual earnings, as defined in the
Plans. The Company's funding policy is to contribute, annually, an amount
at least equal to that which will satisfy the requirements of the Employee
Retirement Income Security Act.
The assumptions used in determining the pension obligations were:
1995 1994 1993
---- ---- ----
Weighted Average Discount Rate ......... 8.25% 8.25% 8.25%
Rate of Increase in Future Compensation Levels
.............................. 4.50% 5.00% 5.50%
Expected Long-term Rate of Return on Assets
.............................. 8.95% 8.95% 8.95%
The following table represents the Plans' funded status and amounts
included in the balance sheets at September 30, 1995 and 1994:
1995 1994
---- ----
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $63,321 in 1995 and of $57,164 in
1994 $ 65,888 $ 58,494
======== ========
Projected benefit obligation for service rendered
to date $ 77,371 $ 72,752
Assets at fair value, primarily publicly traded stocks
and bonds 89,740 80,518
-------- --------
Value of assets over the projected benefit obligation
12,369 7,766
Unrecognized net gain from past experience different
from that assumed (11,896) (6,929)
Prior service cost not yet recognized in net periodic
pension cost 1,097 1,110
Unrecognized net asset at January 1, 1986 being
recognized over 15 years (1,704) (2,014)
-------- --------
Accrued pension liability $ (134) $ (67)
======== ========
NOTES TO FINANCIAL STATEMENTS (continued)
In thousands of dollars, except per share amounts)
Net pension costs included in the statements of income for the years ending
September 30, include the following components:
1995 1994 1993
---- ---- ----
Service cost $ 2,059 $ 2,021 $ 2,009
Interest cost 6,056 5,469 5,068
Return on plan assets (12,474) (2,597) (6,410)
Net amortization and deferral 4,919 (4,784) (327)
-------- -------- --------
Net cost $ 560 $ 109 $ 340
======== ======== ========
The Company also provides its officers with a supplemental retirement plan.
The actuarially determined accumulated benefit obligation was approximately
$3,900 at September 30, 1995 and $3,400 at September 30, 1994. The cost of
this plan is being accrued over the service lives of the individual
officers. Net expense related to this plan was $607 for 1995, $505 for
1994 and $306 for 1993. The Company contributes to a trust to fund the
liability for these supplemental retirement plan benefits. The trust
balance included in other assets at September 30, 1995 and 1994 was $2,922
and $2,073, respectively.
In August, 1994 the Company announced an early retirement program for
nonunion employees which resulted in the reduction of approximately 3% of
the total workforce through voluntary early retirement. The cost of this
program of $1,341 included pension enhancements and other benefits and was
fully recognized by the Company in the fourth quarter of fiscal 1994.
In fiscal 1995 the Company adopted Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits"
(SFAS No. 112) on a prospective basis. This statement requires employers
to record any obligation which exists to provide certain benefits to former
or inactive employees after employment but before retirement. The effect
on the Company's financial condition and results of operations of adopting
SFAS No. 112 was not material.
4. Postretirement Benefits Other Than Pensions:
The Company provides certain health care and life insurance benefits
through a benefit plan to retired employees. These benefits are available
for employees leaving the Company who are otherwise eligible to retire and
have met specific service requirements. Through September 30, 1993 the
Company recognized the cost of these benefits as they were paid (pay-as-
you-go). In December, 1990 the FASB issued Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS No. 106). This new standard requires
that the expected cost of postretirement benefits, primarily health care
and life insurance benefits, must be charged to expense during the years
that eligible employees render service.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
Effective October 1, 1993 the Company adopted SFAS No. 106 on a prospective
basis and began amortizing its approximately $22,000 accumulated benefit
obligation over a twenty-year period. Total health care and life insurance
costs under SFAS No. 106 were $3,274 in 1995 and $2,931 in 1994 compared to
costs of $1,575 in 1993 on a pay-as-you-go basis. In its December, 1993
rate decision (see Note 2) the DPUC approved a five-year phase-in of SFAS
No. 106 expenses with an allowed annual recovery of $1,946 and deferral of
additional SFAS No. 106 expenses for future recovery through amortization
over a five-year period. In its October, 1995 rate decision (see Note 2)
the DPUC allowed the third year of the five-year phase in and an annual
recovery of $2,164 for SFAS No. 106 expenses. At September 30, 1995 and
1994 $2,116 and $985, respectively, were deferred pending future
amortization and recovery.
The following table represents the plan's funded status reconciled to the
consolidated balance sheets at September 30, 1995 and 1994:
1995 1994
---- ----
Accumulated postretirement benefit obligation of:
Retirees $ 18,163 $ 13,241
Fully eligible to retire active
employees 3,102 3,186
Active employees not eligible to retire 5,712 5,332
-------- --------
Total accumulated postretirement benefit obligation
26,977 21,759
Less: Market value of plan assets 5,910 1,803
-------- --------
Accumulated postretirement benefit obligation in
excess of plan assets 21,067 19,956
Unrecognized transition amount (17,654) (18,635)
Unrecognized net gain/(loss) (3,670) 254
-------- --------
Accrued/(prepaid) postretirement benefit
obligation $ (257) $ 1,575
======== ========
The components of SFAS No. 106 health care and life insurance costs for the
fiscal years ended September 30, 1995 and 1994 are:
1995 1994
---- ----
Service cost $ 398 $ 367
Interest cost 2,054 1,664
Return on plan assets (290) (81)
Net amortization 1,112 981
-------- --------
Net health care and life insurance costs
$ 3,274 $ 2,931
======== ========
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
For measurement purposes annual rates of increase of 13% and 11% are
assumed for nonmedicare and medicare eligible retirees, respectively, in
the per capita cost of covered health care benefits. The rate is assumed
to decrease to 6% for both groups in 2003. The effect of increasing the
assumed health care cost trend rates by one percentage point in each year
would increase the accumulated postretirement benefit obligation as of
September 30, 1995 and 1994 by $1,483 and $964, respectively, and the
aggregate of the service and interest cost for the years then ended by $134
and $130, respectively. The weighted average discount rate used in
determining the accumulated post retirement benefit obligation was 8.25% in
1995 and 1994 and was determined by analyzing the interest rates, as of
September 30, of each year, of long-term, high quality corporate debt
securities having a duration comparable to the plan. The expected long-
term rate of return on plan assets was 7.50% in 1995 and 7.00% in 1994.
The Company has established Employee Benefit Trusts (VEBA) to pay current
retiree health care and life insurance benefits and to fund the Company's
retirement benefit liability. In 1995 and 1994 the Company funded $5,105
and $1,350, respectively, for SFAS No. 106 costs. The VEBA balances at
September 30, 1995 and 1994 were $5,129 and $1,803, respectively and are
primarily invested in life insurance policies and commingled fixed income
and equity mutual funds.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
5. Income Taxes:
The following is an analysis of the provision for federal and state income
taxes:
September 30,
------------------------
1995 1994 1993
---- ---- ----
Charged to operations:
Federal:
Current $6,717 $ 3,822 $10,877
Deferred 778 6,098 (1,024)
------- ------- -------
7,495 9,920 9,853
------- ------- -------
State:
Current 1,751 1,424 4,325
Deferred 405 2,230 (519)
------- ------- -------
2,156 3,654 3,806
------- ------- -------
Deferred investment tax credits (221) (221) (221)
------- ------- -------
Total charged to operations 9,430 13,353 13,438
------- ------- -------
Charged to other income/(deductions):
Federal:
Current 1,478 198 356
Deferred (87) (118) 47
------- ------- -------
1,391 80 403
------- ------- -------
State:
Current 480 77 133
Deferred (32) (44) 16
------- ------- -------
448 33 149
------- ------- -------
Total charged to other income/(deductions)
1,839 113 552
------- ------- -------
Total $11,269 $13,466 $13,990
======= ======= =======
Depreciation for federal income tax purposes is computed using accelerated
cost recovery methods and different lives as permitted under the Internal
Revenue Code (Code). The DPUC has allowed the Company to normalize taxes
on accelerated depreciation, as required under the Code, for depreciable
property additions made by the regulated operations subsequent to 1980.
For certain other temporary differences, tax reductions are accounted for
as a reduction of federal income tax expense in accordance with the flow-
through method of accounting as required by the DPUC. Under the
established ratemaking practices followed by the DPUC, deferred income
taxes not provided for previously are collected in customer rates when such
taxes become payable.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
Deferred income taxes result from temporary differences between the
financial statement carrying amounts and the tax basis of existing assets
and liabilities. Deferred income taxes are primarily a result of normalized
plant items and temporary differences related to gas costs. For the
regulated operations, deferred investment tax credits are amortized to
income over the average life of the related property. The nonregulated
operations provide deferred taxes on all temporary differences, including
depreciation.
The tax effects of the temporary differences which result in the deferred
income taxes on the balance sheets at September 30, 1995 and 1994 are:
1995 1994
---- ----
Property, Plant and Equipment $ 40,192 $ 36,253
Other, net (2,207) 663
-------- --------
Deferred Income Taxes $ 37,985 $ 36,916
======== ========
Effective October 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109),
which supersedes Statement of Financial Accounting Standards No. 96,
adopted by the Company in 1988. In accordance with SFAS No. 109, the
regulated operations reflect refundable taxes to ratepayers for reductions
in the statutory federal income tax rate on normalized plant related,
temporary differences. The regulated operations also recognize the
cumulative deferred income taxes on temporary differences which were
previously flowed through to ratepayers. At September 30, 1995 and 1994
the Company had $51,634 and $46,759, respectively, on the balance sheets as
an unfunded deferred income tax liability, with a corresponding unrecovered
receivable, for temporary differences previously flowed through to
ratepayers. These amounts have been adjusted for the tax effect of future
revenue requirements and will be amortized over the life of the related
depreciable assets concurrent with their recovery in rates.
In October, 1994 the Company received formal approval from the Internal
Revenue Service (IRS) to deduct, for tax purposes, current as well as
certain prior incurred cost of removal expenses associated with retirements
of plant and equipment. During fiscal 1995 and 1994 the Company recorded
income tax benefits of $1,973 and $444, respectively, related to prior
years' cost of removal expenses allowed by the IRS. The total current
period income tax benefits related to cost of removal that were recorded by
the Company were $368 in 1995 and $449 in 1994.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
A reconciliation of the consolidated federal income tax expense, at the
statutory tax rate of 35% for 1995 and 1994 and a blended tax rate of
34.75% for 1993, to the consolidated federal income tax expense is as
follows:
1995 1994 1993
---- ---- ----
Consolidated statutory federal income tax expense
$ 8,989 $ 9,619 $ 9,309
Change in consolidated federal income tax expense
resulting from:
Excess book over tax depreciation 1,456 1,797 1,590
Investment tax credits (221) (221) (221)
Bad debts 175 131 (315)
Tax reserves 200 105 (618)
Computer software (499) (899) -
Cost of removal (1,951) (744) -
Nondeductible reserves 397 (125) 191
Other 119 116 99
------- ------- -------
Consolidated federal income tax expense $ 8,665 $ 9,779 $10,035
======= ======= =======
6. Capital Stock:
Common stock-
In October, 1994 the Company sold 392,200 shares of its $3.125 Par Common
Stock at $22.75 per share. The Company received net proceeds of
approximately $8,500 which were used by the regulated operations to retire
existing short-term borrowings.
Dividend reinvestment plan and employee savings plans-
The Company maintains a Dividend Reinvestment Plan (DRIP) which provides
the Company's holders of common stock and preferred stock the opportunity
to receive shares of the Company's common stock in lieu of some or all of
their cash dividends. In addition, the Company has Employee Savings Plans
(ESP), which are designed to encourage and assist employees to save and
invest for long-term financial security. All amounts paid into the ESP by
the Company are used to purchase the Company's common stock. At September
30, 1995, there were 952,953 shares of the Company's common stock reserved
for issuance under the DRIP and ESP. In the fiscal years ended September
30, 1995, 1994 and 1993 the Company's contribution to the ESP on behalf of
employees was $958, $956 and $890, respectively.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
Executive restricted stock plan-
In 1990 the Company adopted a restricted stock performance plan. The plan
terminates in the year 2000 and is authorized to issue up to 200,000
shares. On October 1, 1990 and October 1, 1993 key employees were granted
22,146 and 24,040 restricted shares of the Company's common stock under
this plan. Restrictions lapse and the shares vest over a three to five
year period beginning October 1, 1990, and 1993, respectively, as certain
performance goals are achieved. In October, 1995 and 1994, 5,770 and
5,773, respectively, of the restricted shares became fully vested and were
awarded to qualifying employees.
The market value of the shares awarded under this plan has been recorded as
unearned compensation and is a separate component of common equity. The
unearned compensation is being charged to expense over the vesting period
based on achievement of the performance criteria. Compensation charged to
expense was $0 in 1995, $166 in 1994 and $464 in 1993.
In fiscal 1995, the Company adopted the provisions of FASB Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The impact of the adoption of this standard was not
significant to the results of operations or financial condition of the
Company.
Preferred stock-
The Company is prohibited from, among other things, paying dividends on
common stock and purchasing, redeeming or retiring common stock, if
dividends on preferred stock are in arrears.
The following table sets forth the changes in the number of shares
outstanding for each class of the Company's preferred stock not subject to
mandatory redemption, for the years ended September 30, 1995, 1994 and
1993, respectively:
1995 1994 1993
---- ---- ----
$3.125 par value (1,748) (10,735) (6,052)
======= ======= =======
$100 par value (1) (9) -
======= ======= =======
7. Long-term Debt:
The Company has various issues of first mortgage bonds and first mortgage
notes outstanding with maturities from 2001 to 2010. Under the most
restrictive terms of the indenture securing the bonds, retained earnings of
$43,299 are available for dividends at September 30, 1995. Dividends paid
on common and preferred stock in fiscal 1995 were $14,761. Sinking fund
requirements for outstanding bonds were paid in cash.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
In June, 1994, with the approval of the DPUC, the Company established a
Series B Medium Term Note (MTN) program which permits the issue of up to
$75,000 of unsecured MTNs over a four-year period at maturities not
exceeding thirty years. Under this program the Company issued the
following MTNs in fiscal 1994 with no sinking fund requirements:
Date Face Value Interest Rate Maturity Call Provision
--------------- ---------- ------------- ----------- ------------------
July, 1994 $10,000 7.82% 2004 None
August, 1994 $ 5,000 8.12% 2014 None
August, 1994 $ 5,000 8.49% 2024 Callable in 2004
The proceeds were used by the regulated operations to refinance $15,000 of
existing short-term debt and for general working capital purposes. The
average interest rate of the retired short-term debt was 4.85%.
Long-term debt amounts which are due during each of the five years ending
September 30 through 2000, are as follows:
Sinking Fund Requirements and Maturities
----------------------------------------
Year Total
---- -------
1996 $ 3,921
1997 13,496
1998 5,984
1999 6,133
2000 6,183
-------
$35,717
=======
8. Short-term Borrowings and Lines of Credit:
The Company maintains a line of credit under a revolving credit agreement
with a large regional bank. Under this agreement the Company can borrow up
to $20,000 at a Eurodollar, Certificate of Deposit or Base Rate of interest
plus a variable margin. The initial expiration date is March 30, 1996,
with two optional one-year extensions. There is also a .1% facility fee
and a .075% commitment fee on the unused portion of the agreement. At
September 30, 1995, there were no borrowings outstanding under this
agreement.
The Company also maintains a one-year line of credit with a bank for
$9,000. The Company pays a 1/5 of 1% commitment fee on this line of
credit. The interest rate varies according to market conditions. The
terms of this line of credit require no compensating balance. This line of
credit expires on February 18, 1996. At September 30, 1995, there were
$4,200 of borrowings outstanding under this line of credit.
In December, 1994 ENI replaced a $5,000 unsecured line of credit with a
bank with an unsecured commercial revolving credit agreement. Under this
agreement ENI can borrow up to $5,000 through December 15, 1997, with a 1/5
of 1% annual facility fee on the line of credit. The interest rate is
based upon the Certificate of Deposit, Eurodollar or Cost of Funds rate
plus a variable margin and is determined at the time of each borrowing. At
September 30, 1995 there were no borrowings outstanding under this
arrangement.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
The Hartford Steam Company (HSC), a wholly-owned subsidiary of ENI,
maintains a secured line of credit with a bank. Under the terms of this
agreement HSC can borrow up to $5,000, through October, 1997, with a 1/5 of
1% commitment fee on the unused portion of the available credit line. The
interest rate is based upon the Certificate of Deposit, Libor or money
market rate plus a variable margin, determined at the time of each
borrowing. At September 30, 1995, there were no borrowings outstanding
under this arrangement.
The weighted average interest rate on short-term borrowings outstanding was
5.84% at September 30, 1995 and 5.27% at September 30, 1994.
9. Fair Value of Financial Instruments:
The fair value amounts disclosed below have been reported to meet the
disclosure requirements of Statement of Financial Accounting Standards No.
107, "Disclosures About Fair Values of Financial Instruments" and are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The carrying amount of cash and cash equivalents; accounts receivable;
notes payable and commercial paper; accounts payable and accrued expenses;
and unrecovered or refundable purchased gas costs approximates fair value.
At September 30, 1995 and 1994 the fair value of the Company's long-term
debt, including current maturities, is estimated to be $163,630 and
$158,962, respectively. The fair value at year-end 1995 and 1994, of
$141,511 and $144,583 of fixed-rate long-term debt, based on the market
value of similar instruments, is estimated at $150,830 in 1995 and $145,562
in 1994. The carrying amount of the variable-rate long-term debt of
$12,800 in 1995 and $13,400 in 1994 approximates fair value.
The Company has guaranteed 2.4% of a letter of credit for Iroquois,
equivalent to approximately $832 and $860 at September 30, 1995 and 1994,
respectively, which approximates fair value. The letter of credit is used
to satisfy Iroquois's cash retention requirements with respect to
agreements between Iroquois and its lenders.
10. Commitments and Contingencies:
Construction expenditures-
Construction expenditures for the fiscal year ending September 30, 1996 are
estimated at $24,322 for the regulated operations and $967 for the
nonregulated operations.
Gas supply-
The Company is party to short-term and long-term contracts for the purchase
of natural gas and transportation and storage services.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
FERC Order No. 636 transition costs-
The Company began to be billed for transition costs associated with Federal
Energy Regulatory Commission (FERC) Order No. 636 from its pipeline
suppliers in June, 1993. These costs are expected to be billed to the
Company over three years. Through September 30, 1995 the Company has paid
and recovered from ratepayers $10,364 of an estimated $15,000 of transition
costs.
In July, 1994 the DPUC issued a decision allowing companies under its
jurisdiction to recover these costs from amounts which would otherwise have
been refunded to customers and providing the companies the opportunity, if
necessary, for surcharges to customers' future bills.
In the opinion of management the DPUC has allowed the Company a sufficient
number of recovery mechanisms to provide for the full recovery of all
transition costs. For this reason, management believes that these
transition costs will not have a material impact on the Company's financial
condition or results of operations. The unpaid estimated liability of
$4,636 at September 30, 1995 is included in Accounts Payable and Accrued
Expenses.
Steam supply-
The nonregulated operations are party to long-term contracts for the
purchase of steam.
Through fiscal 1995 the nonregulated operations' primary supply of steam
was a cogeneration facility located on the Company's premises and owned by
an unrelated third party, the Hacogen partnership (Hacogen). During fiscal
1994 Hacogen indicated a desire to negotiate a termination of its long-term
steam supply contract with HSC. During the fourth quarter of fiscal, 1995,
HSC negotiated a settlement agreement with Hacogen. According to the terms
of the negotiated settlement, Hacogen terminated its long-term supply
contract with HSC, effective September 30, 1995. HSC is to receive
consideration of $9,519, representing the payment of all past due amounts
owed by Hacogen and certain additional amounts as a result of the contract
termination. As of September 30, 1995, $4,967 was received. The remaining
balance is due in December, 1995. The 1995 pretax, nonrecurring income
related to this settlement was $4,124. In October, 1995, HSC resumed
producing more costly steam from its existing boilers which are located on
the Company's premises and are currently providing adequate steam supply
for customer requirements.
Letters of credit-
The Company is contingently liable under a letter of credit amounting to
$1,500 for workers' compensation claims. As a condition of its ownership
in the DCA, ENI is contingently liable under a letter of credit amounting
to $2,000.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
Environmental matters-
There are three sites on which are located the Company's former gas
manufacturing facilities. The Company has not been required to undertake
any action on these sites by any state or federal agency since 1989. The
Company will continue to review the condition of these sites. No
determination has been made as to whether any remediation will be required.
The Company expects to be able to recover in rates any environmental
remediation costs that it may incur in the future with respect to
manufactured gas sites.
In 1990 the owner of property adjacent to one of these sites claimed that
contaminants similar to residues from gas manufacturing activities were
present on its property. The Company is unable to predict the outcome of
this matter.
Management does not anticipate any material future cash requirements
relating to these environmental issues. As a result, the above matters are
not expected to have a material adverse effect on the Company's financial
condition or results of operations. If circumstances changed and
environmental expenditures were required, the Company would seek
appropriate regulatory recovery of any amounts expended to return these
sites to their original condition.
The nonregulated operations are subject to compliance with Clean Air Act
requirements. They expect to incur approximately $2,200 of capital
expenditures over the next four fiscal years to satisfy these requirements.
Leases-
The Company has entered into operating lease agreements for the use of
computer and office equipment. For fiscal 1995, 1994 and 1993 these lease
payments were $1,561, $1,553 and $1,702, respectively. Lease payments have
declined since fiscal 1993 as a result of renegotiated agreements. Future
lease payments are not expected to change significantly from those shown
above.
Legal proceedings-
Two civil and criminal investigations related to environmental issues,
brought against Iroquois in 1992, are still pending. Although no final
agreements have been reached regarding the disposition of these matters,
during fiscal, 1995 the Company recognized a nonrecurring charge of $500 to
reflect its proportionate share of estimated costs in connection with these
legal matters. Iroquois is a partnership of which the Company is a 2.4%
owner (see Note 1).
In November, 1995, two associations comprised of Connecticut plumbers and
HVAC contractors joined with two individual contractors and filed a class
action suit against the Company and the State's two other local
distribution companies (LDCs), claiming that the LDCs engaged in unfair
trade practices. The action was brought on November 8, 1995, in Middlesex
Superior Court by Connecticut Heating and Cooling Contractors Association,
Inc. et al. and alleges that the LDCs unfairly competed with licensed
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
plumbers and contractors by performing customer service work using customer
service employees who did not possess State trade licenses. The plaintiffs
are seeking an injunction, unspecified damages, including treble damages,
and certain related remedies.
The LDCs have asserted that such licenses are not required for this work by
virtue of a statutory exemption enacted in 1965 and amended in 1967.
However, in a separate proceeding, a Connecticut Superior Court has upheld
an administrative ruling against the LDCs' position, and the Company is
participating in an appeal of that decision. In 1995, the Connecticut
General Assembly enacted legislation that established on a going-forward
basis a separate procedure for State certification of gas service
employees.
The Company will vigorously defend this claim but, at this early stage,
cannot anticipate the outcome of the matter.
The Company is not a party to any other litigation other than ordinary
routine litigation incident to the operations of the Company or its
subsidiaries. In the opinion of management, the resolution of such
litigation will not have a material adverse effect on the Company's
financial condition or results of operations.
NOTES TO FINANCIAL STATEMENTS (Continued)
(In thousands of dollars, except per share amounts)
11. Segment Information:
The Company operates in two segments: gas related activities and
nonregulated activities. Gas related activities consist primarily of
natural gas distribution to residential, commercial and industrial
customers. Nonregulated activities consist primarily of district heating
and cooling services.
Intersegment sales are priced in accordance with terms of existing tariffs
and contracts. Information about the Company's operations, by business
segment, is presented below:
1995 1994 1993
-------- -------- --------
Revenues:
Gas related activities $255,680 $269,433 $244,516
Nonregulated activities 22,306 24,298 24,284
Intersegment revenues (2,801) (3,069) (3,463)
-------- -------- --------
Total $275,185 $290,662 $265,337
======== ======== ========
Pre-Tax Operating Income:
Gas related activities $ 33,309 $ 37,636 $ 35,182
Nonregulated activities 5,280 6,629 6,442
-------- -------- --------
Total 38,589 44,265 41,624
Income taxes 9,430 13,353 13,438
-------- -------- --------
Consolidated Operating Income $ 29,159 $ 30,912 $ 28,186
======== ======== ========
Depreciation and Amortization:
Gas related activities $ 14,655 $ 13,481 $ 10,699
Nonregulated activities 2,322 2,026 1,950
-------- -------- --------
Total $ 16,977 $ 15,507 $ 12,649
======== ======== ========
Property Additions:
Gas related activities $ 25,311 $ 25,352 $ 22,696
Nonregulated activities 1,528 2,507 2,835
-------- -------- --------
Total $ 26,839 $ 27,859 $ 25,531
======== ======== ========
Identifiable Assets:
Gas related activities $400,064 $394,229 $380,745
Nonregulated activities 64,975 64,325 63,840
-------- -------- --------
Consolidated Identifiable Assets
$465,039 $458,554 $444,585
======== ======== ========
NOTES TO FINANCIAL STATEMENTS (concluded)
(In thousands of dollars, except per share amounts)
12. Quarterly Results (Unaudited):
The following table sets forth information with respect to the consolidated
quarterly results of operations for the fiscal years 1995 and 1994. The
amounts are unaudited but, in the opinion of management, include only
normal, recurring adjustments necessary to present fairly the results of
operations.
The quarterly results of operations reflect the seasonal nature of the
Company's operations. The results of any one quarter during the year are
not indicative of the results of future quarters or the results of the
Company's fiscal year.
Consolidated Results of Operations
----------------------------------
--------------------------------------------------------------------------------------------
December 31, March 31, June 30, September 30,
Quarter Ended 1994 1995 1995 1995
--------------------------------------------------------------------------------------------
Operating Revenues $ 76,531 $105,540 $ 50,147 $ 42,967
Operating Income $ 9,377 $ 16,658 $ 2,790 $ 334
Net Income (Loss) $ 6,084 $ 12,924 $ (625) $ (1,364)
Net Income (Loss) Per
Common Share $ .61 $ 1.30 $ (.06) $ (.14)
--------------------------------------------------------------------------------------------
December 31, March 31, June 30, September 30,
Quarter Ended 1993 1994 1994 1994
--------------------------------------------------------------------------------------------
Operating Revenues $ 80,140 $122,565 $ 50,003 $ 37,954
Operating Income $ 9,920 $ 18,256 $ 2,442 $ 294
Net Income (Loss) $ 6,680 $ 15,036 $ (908) $ (3,105)
Net Income (Loss) Per Common
Share $ .70 $ 1.57 $ (.10) $ (.33)
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
------------------------------------------------------------
There have been no disagreements required to be disclosed under this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
The information required by this item regarding directors of the
registrant and the disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is contained in the section entitled "Biographical
Information" in the Company's definitive proxy statement for its
February, 1996 Annual Meeting, which the Company files with the
Securities and Exchange Commission pursuant to Regulation 14A of the
Securities Exchange Act of 1934. This information is hereby
incorporated by reference. The information required by this item
regarding executive officers of the registrant is included in Part I
hereof.
ITEM 11. EXECUTIVE COMPENSATION
-------------------------------
The information required by this item is contained in the sections
entitled "Compensation of Directors","Compensation Committee Report on
Executive Compensation", "Compensation Committee Interlocks and Insider
Participation", "Summary Executive Compensation", "Change of Control",
"Long Term Incentive Plan", "Retirement Plans" and "Corporate
Performance Graph" in the Company's definitive proxy statement for its
February, 1996 Annual Meeting, which the Company files with the
Securities and Exchange Commission pursuant to Regulation 14A. This
information is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------
The information required by this item is contained in the section
entitled "Ownership of Company Stock" in the Company's definitive proxy
statement for its February, 1996 Annual Meeting, which the Company files
with the Securities and Exchange Commission pursuant to Regulation 14A.
This information is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------
There were no transactions during the year which would require
disclosure pursuant to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
-------------------------------------------------------------------------
(a) 1. Financial Statements:
--------------------
The consolidated balance sheets, statements of income, statements of
cash flows, statements of capitalization and statements of common
stock equity, together with the notes to the financial statements
and report thereon of Arthur Andersen LLP dated November 21, 1995,
are included in Part II, Item 8 herein.
2. Financial Statement Schedules:
-----------------------------
The following financial statement schedules included herein under
Item 14(d) are filed as part of this report. Schedules I, III, IV,
and V are not submitted because they are not applicable or the
information required to be included therein is contained in the
financial statements and footnotes.
II Valuation and Qualifying Accounts and Reserves for the fiscal
years ended September 30, 1995, 1994 and 1993
Individual financial statements for the Company have been omitted as
not being required since -
1. Consolidated statements of the Company and one or more of its
subsidiaries are filed; and
2. The Company's total assets, exclusive of investments in and
advances to its consolidated subsidiaries, constitute 75
percent or more of the total assets shown by the most recent
year-end consolidated balance sheet filed and the Company's
total gross revenues, exclusive of interest and dividends
received, or its equity in the income of the consolidated
subsidiaries, for the most recent period for which an income
statement is filed, constitute 75 percent or more of the
total gross revenues shown by the consolidated income
statement filed.
3. Exhibits
--------
Exhibit
Number
------------
3 Articles of Incorporation and By-Laws
(i) Charter of the Company and all Amendments thereto
(ii) By-Laws of the Company, as amended, filed as Exhibit No.
3(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994, filed with the
Commission December 27, 1994 (Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
4 Instruments Defining Rights of Security Holders, Including Indentures
(i) Indenture of Mortgage and Deed of Trust between The Hartford
Gas Company and The First National Bank of Hartford, Trustee
dated February 1, 1947, filed as Exhibit No. 2.2 to the
Company's Registration Statement on Form S-7 filed with the
Commission on December 8, 1970 (Commission File No. 2-38993)
(ii) In addition to the Indenture of Mortgage and Deed of Trust
referred to in 4(i) above, there have been sixteen
supplemental indentures thereto, all of which have been filed
with the Commission as follows:
(a) Supplemental indentures 1-9 filed as Exhibit No. 2.2 to
the Company's Registration Statement on Form S-7 filed
with the Commission on December 8, 1970 (Commission File
No. 2-38993)
(b) Tenth Supplemental Indenture filed as Exhibit No. 2.3 to
the Company's Registration Statement on Form S-7 filed
with the Commission on March 3, 1972 (Commission File
No. 2-43286)
(c) Eleventh Supplemental Indenture filed as Exhibit No. V
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1974, filed with the
Commission in March, 1975 (Commission File No. 1-7727)
(d) Twelfth Supplemental Indenture filed as Exhibit No. 4(h)
to the Company's Registration Statement on Form S-7
filed with the Commission on December 23, 1981
(Commission File No. 2-75457)
(e) Thirteenth Supplemental Indenture filed as Exhibit No. 4
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1982, filed with the Commission
in August, 1982 (Commission File No. 1-7727)
(f) Fourteenth Supplemental Indenture filed as Exhibit No.
4(iii) to the Company's Current Report on Form 8-K,
dated August 28, 1986, filed with the Commission in
September, 1986 (Commission File No. 1-7727)
(g) Fifteenth Supplemental Indenture filed as Exhibit No.
4(iii) to the Company's Current Report on Form 8-K,
dated December 8, 1987, filed with the Commission in
December, 1987 (Commission File No. 1-7727)
(h) Sixteenth Supplemental Indenture filed as Exhibit No.
4(ii)(h) to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1989, filed with the
Commission in November, 1989 (Commission File No. 1-
7727)
9 Voting Trust Agreement
Not applicable
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 Material Contracts
(i) Underground storage service agreement (rate schedule SS-1)
between the Company and PYEC, filed as Exhibit No. 10(vii) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1981, filed with the Commission on March
30, 1982 (Commission File No. 1-7727)
(ii) Storage service transportation contract (rate schedule SST-
NE) between the Company and Tennessee for firm delivery of
gas stored by PYEC, filed as Exhibit No. 10(x) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1981, filed with the Commission on March
30, 1982 (Commission File No. 1-7727)
(iii) Agreement dated November 1, 1980 between the Company and
Robert H. Willis, filed as Exhibit No. 10(j) to the Company's
Registration Statement on Form S-7 filed with the Commission
on December 23, 1981 (Commission File No. 2-75457)
(iv) Firm storage service transportation contract (rate schedule
FSST-NE) between the Company and Tennessee for delivery of
gas stored by Penn York, filed as Exhibit No. 10(xviii) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1985, filed with the Commission on March
30, 1986 (Commission File No. 1-7727)
(v) Loan Agreement and Amendments thereto, between The Hartford
Steam Company and Connecticut National Bank, filed as Exhibit
No. 10(xxii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986, filed with the
Commission on March 31, 1987 (Commission File No. 1-7727)
(vi) Canadian gas transportation contract (rate schedule CGT-NE)
between the Company and Tennessee, dated December 1, 1987,
filed as Exhibit No. 10(xxiii) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987,
filed with the Commission on March 29, 1988 (Commission File
No. 1-7727)
(vii) Gas purchase contract between the Company and TransCanada
Pipelines Limited, dated September 14, 1987, filed as Exhibit
No. 10(xxiv) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, filed with the
Commission on March 29, 1988 (Commission File No. 1-7727)
(viii) Gas sales agreement between the Company and Boundary Gas,
Inc., dated September 14, 1987, filed as Exhibit No. 10(xxv)
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, filed with the Commission on
March 29, 1988 (Commission File No. 1-7727)
(ix) Steam Supply Agreement between The Hartford Steam Company and
Independent Energy Operations, Inc., dated December 3, 1987,
filed as Exhibit No. 10(xxv) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989,
filed with the Commission on March 28, 1990 (Commission File
No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (x) Partial Release of Mortgage agreement, dated March 1, 1989,
to the Open-End Mortgage and Security Agreement between The
Hartford Steam Company and The Connecticut National Bank,
dated March 1, 1983 (filed as Exhibit No. 10(xxii) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1986, filed with the Commission on March
31, 1987 (Commission File No. 1-7727)), filed as Exhibit No.
10(xxvi) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, filed with the
Commission on March 28, 1990 (Commission File No. 1-7727)
(xi) Fourth Amendment, dated August 15, 1989, to the Open End
Mortgage and Security Agreement between The Hartford Steam
Company and The Connecticut National Bank, dated March 1,
1983 (filed as Exhibit No. 10(xxii) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1986, filed with the Commission on March 31, 1987 (Commission
File No. 1-7727)), filed as Exhibit No. 10(xxvii) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, filed with the Commission on March
28, 1990 (Commission File No. 1-7727)
(xii) Open-End Mortgage and Security Agreement between Energy
Networks, Inc. and The Connecticut National Bank, dated March
1, 1989, filed as Exhibit No. 10(xxviii) to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1989, filed with the Commission on March 28, 1990
(Commission File No. 1-7727)
(xiii) Collateral Assignment of Lease and Rentals, dated March 1,
1989, to the Open-End Mortgage and Security Agreement between
Energy Networks, Inc. and The Connecticut National Bank,
dated March 1, 1989 (filed as Exhibit 10(xxviii) herein),
filed as Exhibit No. 10(xxix) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989,
filed with the Commission on March 28, 1990 (Commission File
No. 1-7727)
(xiv) Amended and Restated Loan Agreement between The Hartford
Steam Company and The Connecticut National Bank, dated March
31, 1983, filed as Exhibit No. 10(xxx) to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1989, filed with the Commission on March 28, 1990
(Commission File No. 1-7727)
(xv) Precedent Agreement to First Amendment, dated September 14,
1988, to the Gas Sales Agreement between the Company and
Boundary Gas, Inc., dated September 14, 1987 (filed as
Exhibit No. 10(xxv) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1987, filed with
the Commission on March 29, 1988 (Commission File No. 1-
7727)), filed as Exhibit No. 10(xxxi) to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1989, filed with the Commission March 28, 1990 (Commission
File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (xvi) First Amendment, dated January 1, 1990, to the Gas Sales
Agreement between the Company and Boundary Gas, Inc., dated
September 14, 1987 (filed as Exhibit No. 10(xxv) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987, filed with the Commission on March
29, 1988 (Commission File No. 1-7727)), filed as Exhibit
10(xxxii) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989, filed with the
Commission on March 28, 1990 (Commission File No. 1-7727)
(xvii) Sixth Amendment, dated September 30, 1991, to the Loan
Agreement between The Hartford Steam Company and The
Connecticut National Bank, dated March 1, 1983 (filed as
Exhibit No. 10(xxii) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1986, filed with
the Commission on March 31, 1987 (Commission File No. 1-
7727)), filed as Exhibit No. 10(xxxviii) to the Company's
Transition Report on Form 10-K for the period October 1, 1990
to September 30, 1991, filed with the Commission on December
23, 1991, (Commission File No. 1-7727)
(xviii) Medium Term Notes, Series A, Placement Agency Agreement among
Connecticut Natural Gas Corporation, PaineWebber Incorporated
and Smith Barney, Harris Upham & Co. Incorporated, dated
November 1, 1991, filed as Exhibit No. 10(xxxix) to the
Company's Transition Report on Form 10-K for the period
October 1, 1990 to September 30, 1991, filed with the
Commission on December 23, 1991, (Commission File No. 1-7727)
(xix) Issuing and Paying Agency Agreement between The Connecticut
National Bank and Connecticut Natural Gas Corporation, for
the Medium Term Notes, Series A, dated November 1, 1991,
filed as Exhibit No. 10(xl) to the Company's Transition
Report on Form 10-K for the period October 1, 1990 to
September 30, 1991, filed with the Commission on December 23,
1991, (Commission File No. 1-7727)
(xx) Connecticut Natural Gas Corporation Executive Restricted
Stock Plan, filed as Exhibit A to the Company's definitive
proxy statement dated March 26, 1991, filed with the
Commission on March 26, 1991 (Commission File No. 1-7727)
(xxi) Gas Transportation Contract for Firm Reserved Service, dated
February 7, 1991, between the Company and the Iroquois Gas
Transmission System, L.P., filed as Exhibit No. 10(xxxvii) to
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992, filed with the Commission on
December 23, 1992, (Commission File No. 1-7727)
(xxii) Gas Sales Agreement No. 1, dated February 7, 1991, between
the Company and Alberta Northeast Gas Limited, filed as
Exhibit No. 10(xxxviii) to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1992, filed
with the Commission on December 23, 1992, (Commission File
No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (xxiii) Gas Sales Agreement No. 2, dated February 7, 1991, between
the Company and Alberta Northeast Gas Limited, filed as
Exhibit No. 10(xxxix) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1992, filed with
the Commission on December 23, 1992, (Commission File No. 1-
7727)
(xxiv) Gas Sales Agreement (ProGas), dated February 7, 1991, between
the Company and Alberta Northeast Gas Limited, filed as
Exhibit No. 10(xl) to the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1992, filed with
the Commission on December 23, 1992, (Commission File No. 1-
7727)
(xxv) Gas Sales Agreement (ATCOR), dated February 7, 1991, between
the Company and Alberta Northeast Limited, filed as Exhibit
No. 10(xli) to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1992, filed with the
Commission on December 23, 1992, (Commission File No. 1-7727)
(xvi) Gas Sales Agreement (AEC), dated February 7, 1991, between
the Company and Alberta Northeast Gas Limited, filed as
Exhibit No. 10(xlii) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1992, filed with
the Commission on December 23, 1992, (Commission File No. 1-
7727)
(xvii) Gas Transportation Contract for Firm Reserved Service, dated
October 20, 1992, between the Company and the Iroquois Gas
Transmission System, L.P., filed as Exhibit No. 10(xlvii) to
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1992, filed with the Commission on
December 23, 1992, (Commission File No. 1-7727)
(xxviii) Revolving Credit Agreement, dated March 30, 1993, between the
Company and The First National Bank of Boston, filed as
Exhibit No. 10(xlviii) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993, filed with
the Commission on May 3, 1993 (Commission File No. 1-7727)
(xxix) Secured Note Purchase Agreement, dated July 15, 1993, between
the CNG Realty Corp. and the Aid Association for Lutherans,
filed as Exhibit No. 10(xlix) to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993,
filed with the Commission on August 3, 1993 (Commission File
No. 1-7727)
(xxx) Capital Contribution Support Agreement, dated April 15, 1993,
among Connecticut Natural Gas Corporation, ENI Transmission
Company and Bank of Montreal, filed as Exhibit No. 10(l) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, filed with the Commission on August 3,
1993 (Commission File No. 1-7727)
(xxxi) Steam and Chilled Water Supply Agreement, dated May 28, 1986,
between Capitol District Energy Center Cogeneration
Associates and Energy Networks, Incorporated, filed as
Exhibit No. 10(xxxvii) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, filed with
the Commission December 28, 1993 (Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (xxxii) Service Agreement #89102 (Rate Schedule AFT-1), dated June 1,
1993, between the Company and Algonquin Gas Transmission
Company, filed as Exhibit No. 10(xxxviii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xxxiii) Service Agreement #93005 (Rate Schedule AFT-1), dated June 1,
1993, between the Company and Algonquin Gas Transmission
Company, filed as Exhibit No. 10(xxxix) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xxxiv) Service Agreement #93205 (Rate Schedule AFT-1), dated June 1,
1993, between the Company and Algonquin Gas Transmission
Company, filed as Exhibit No. 10(xl) to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30,
1993, filed with the Commission December 28, 1993 (Commission
File No. 1-7727)
(xxxv) Service Agreement #93404 (Rate Schedule AFT-1), dated June 1,
1993, between the Company and Algonquin Gas Transmission
Company, filed as Exhibit No. 10(xlii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xxxvi) Service Agreement #.6426, dated June 1, 1993, between the
Company and Transcontinental Gas Pipe Line Corporation, filed
as Exhibit No. 10(xlv) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1993, filed with
the Commission December 28, 1993 (Commission File No. 1-7727)
(xxxvii) Service Agreement #800380 (Rate Schedule CDS), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(xlvi) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xxxviii) Service Agreement #800341 (Rate Schedule FT-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(xlvii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xxxix) Service Agreement #800294 (Rate Schedule FT-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(xlviii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xl) Service Agreement #800295 (Rate Schedule FT-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(xlix) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (xli) Service Agreement #400148 (Rate Schedule SS-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(l) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xlii) Service Agreement #400149 (Rate Schedule SS-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(li) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xliii) Service Agreement #400150 (Rate Schedule SS-1), dated June 1,
1993, between the Company and Texas Eastern Transmission
Corporation, filed as Exhibit No. 10(lii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, filed with the Commission December 28,
1993 (Commission File No. 1-7727)
(xliv) Service Agreement (Rate Schedule FTNN), dated October 1,
1993, between the Company and CNG Transmission Corporation,
filed as Exhibit No. 10(liii) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1993,
filed with the Commission December 28, 1993 (Commission File
No. 1-7727)
(xlv) Service Agreement (Rate Schedule GSS), dated November 1,
1993, between the Company and CNG Transmission Corporation,
filed as Exhibit No. 10(liv) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1993,
filed with the Commission December 28, 1993 (Commission File
No. 1-7727)
(xlvi) Amended and Restated CNG Officers' Retirement Plan, dated
June 28, 1994, filed as Exhibit No. 10(liii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, filed with the Commission December 27,
1994 (Commission File No. 1-7727)
(xlvii) The Connecticut Natural Gas Corporation Officers' Retirement
Plan Trust Agreement, dated January 9, 1989, filed as Exhibit
No. 10(liv) to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1994, filed with the
Commission December 27, 1994 (Commission File No. 1-7727)
(xlviii) First Amendment to the Connecticut Natural Gas Corporation
Officers' Retirement Plan and Deferred Compensation Plan
Trust Agreement, dated August 5, 1993, filed as Exhibit No.
10(lv) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994, filed with the
Commission December 27, 1994 (Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (xlix) The Connecticut Natural Gas Corporation Deferred Compensation
Plan, as amended, dated January 1, 1993, filed as Exhibit No.
10(lvi) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994, filed with the
Commission December 27, 1994 (Commission File No. 1-7727)
(l) First Amendment to the Connecticut Natural Gas Corporation
Deferred Compensation Plan, dated December 2, 1993, filed as
Exhibit No. 10(lvii) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994, filed with
the Commission December 27, 1994 (Commission File No. 1-7727)
(li) Second Amendment to the Connecticut Natural Gas Corporation
Deferred Compensation Plan, dated June 28, 1994, filed as
Exhibit No. 10(lviii) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994, filed with
the Commission December 27, 1994 (Commission File No. 1-7727)
(lii) Agreement and Declaration of Trust, Connecticut Natural Gas
Corporation Employee Benefit Trust, dated December 28, 1987,
filed as Exhibit No. 10(lix) to the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1994,
filed with the Commission December 27, 1994 (Commission File
No. 1-7727)
(liii) First Amendment to Agreement and Declaration of Trust,
Connecticut Natural Gas Corporation Employee Benefit Trust,
Dated December 2, 1993, filed as Exhibit No. 10(lx) to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed with the Commission December
27, 1994 (Commission File No. 1-7727)
(liv) Agreement and Declaration of Trust, Connecticut Natural Gas
Corporation Union Employee Benefit Trust, dated December 2,
1993, filed as Exhibit No. 10(lxi) to the Company's Annual
Report on Form 10-K for the fiscal year ended September 30,
1994, filed with the Commission December 27, 1994 (Commission
File No. 1-7727)
(lv) CNG Annual Incentive Plan, 1994, filed as Exhibit No.
10(lxii) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994, filed with the
Commission December 27, 1994 (Commission File No. 1-7727)
(lvi) Settlement Agreement and Release of All Claims by and between
Connecticut Natural Gas Corporation and Donato P. Lauria,
dated November 29, 1993, filed as Exhibit No. 10(lxiii) to
the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed with the Commission December
27, 1994 (Commission File No. 1-7727)
(lvii) Letter of Credit and Reimbursement Agreement by and between
Energy Networks, Inc. and The Bank of Nova Scotia, dated
October 14, 1994, filed as Exhibit No. 10(lxiv) to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed with the Commission December
27, 1994 (Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (lviii) Second Amended and Restated Loan Agreement by and between The
Hartford Steam Company and Shawmut Bank Connecticut, N.A.,
dated October 28, 1994, filed as Exhibit No. 10(lxv) to the
Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994, filed with the Commission December
27, 1994 (Commission File No. 1-7727)
(lix) Medium Term Notes, Series B, Placement Agency Agreement among
Connecticut Natural Gas Corporation, Smith Barney Inc., and
A.G. Edwards & Sons, Inc., dated June 14, 1994, filed as
Exhibit No. 10(lxvi) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994, filed with
the Commission December 27, 1994 (Commission File No. 1-7727)
(lx) Issuing and Paying Agency Agreement between Shawmut Bank
Connecticut, National Association, and Connecticut Natural
Gas Corporation, for Medium Term Notes, Series B, dated June
14, 1994, filed as Exhibit No. 10(lxvii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, filed with the Commission December 27,
1994 (Commission File No. 1-7727)
(lxi) Service Agreement (EFT Service), dated July 31, 1993, between
the Company and National Fuel Gas Supply Corporation, filed
as Exhibit No. 10(lxviii) to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1994, filed
with the Commission December 27, 1994 (Commission File No. 1-
7727)
(lxii) Gas Storage Contract, dated February 16, 1990, between the
Company and ENDEVCO Industrial Gas Sales Company, filed as
Exhibit No. 10(lxix) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994, filed with
the Commission December 27, 1994 (Commission File No. 1-7727)
(lxiii) Commercial Revolving Credit Agreement by and between Fleet
Bank, National Association, and Energy Networks, Inc., dated
December 21, 1994, filed as Exhibit No. 10(lxx) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994, filed with the Commission January 31, 1995
(Commission File No. 1-7727)
(lxiv) Service Agreement #86006 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company, filed as Exhibit No. 10(lxxi) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, filed with the Commission August 2, 1995
(Commission File No. 1-7727)
(lxv) Service Agreement #93005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company, filed as Exhibit No. 10(lxxii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, filed with the Commission August 2, 1995
(Commission File No. 1-7727)
(lxvi) Service Agreement #9B103 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company, filed as Exhibit No. 10(lxxiii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, filed with the Commission August 2, 1995
(Commission File No. 1-7727)
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (lxvii) Service Agreement #9W005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company, filed as Exhibit No. 10(lxxiv) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, filed with the Commission August 2, 1995
(Commission File No. 1-7727)
(lxviii) KBC Energy Services Partnership Agreement, dated June 19,
1995, By and Among Bay State Energy Enterprises, Inc., ENI
Gas Services, Inc., and Koch Energy Alliance Company, filed
as Exhibit No. 10(lxxv) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995, filed with the
Commission August 2, 1995 (Commission File No. 1-7727)
(lxix) Gas Storage Agreement No. 1626 (Rate Schedule FS), dated
September 1, 1993, by and between the Company and Tennessee
Gas Pipeline Company
(lxx) Gas Transportation Agreement No. 2498 (Rate Schedule FT-A),
dated September 1, 1993, by and between the Company and
Tennessee Gas Pipeline Company
(lxxi) Gas Transportation Agreement No. 3900 (Rate Schedule FT-A),
dated October 1, 1993, by and between the Company and
Tennessee Gas Pipeline Company
(lxxii) Gas Transportation Agreement No. 3901 (Rate Schedule FT-A),
dated October 1, 1993, by and between the Company and
Tennessee Gas Pipeline Company
(lxxiii) Gas Transportation Agreement No. 2075 (Rate Schedule FT-A),
dated September 1, 1993, by and between the Company and
Tennessee Gas Pipeline Company
(lxxiv) Gas Storage Agreement No. 6445 (Rate Schedule FS), dated
April 1, 1994, by and between the Company and Tennessee Gas
Pipeline Company
(lxxv) Gas Transportation Agreement No. 9283 (Rate Schedule FT-A),
dated January 24, 1995, by and between the Company and
Tennessee Gas Pipeline Company
(lxxvi) Second Amendment to Connecticut Natural Gas Corporation
Employee Savings Plan, dated June 27, 1995
(lxxvii) Second Amendment to Connecticut Natural Gas Corporation Union
Employee Savings Plan, dated January 24, 1995
(lxxviii) Third Amendment to Connecticut Natural Gas Corporation Union
Employee Savings Plan, dated June 27, 1995
(lxxix) Amendment to Connecticut Natural Gas Corporation Officers'
Retirement Plan, dated June 27, 1995
(a) 3. Exhibits (continued)
--------
Exhibit
Number
------------
10 (lxxx) Third Amendment to Connecticut Natural Gas Corporation
Deferred Compensation Plan, dated June 27, 1995
(lxxxi) Third Amendment to The Connecticut Natural Gas Corporation
Officers' Retirement Plan and Deferred Compensation Plan
Trust Agreement, dated September 12, 1995
(lxxxii) Second Amendment to Restricted Stock Agreement (Under the
Connecticut Natural Gas Corporation Executive Restricted
Stock plan), dated June 27, 1995
(lxxxiii) Third Amendment to Restricted Stock Agreement (Under the
Connecticut Natural Gas Corporation Executive Restricted
Stock plan), dated June 27, 1995
(lxxxiv) Amended and Restated CNG Nonemployee Directors' Fee Plan,
dated September 29, 1995
(lxxxv) CNG Nonemployee Directors' Fee Plan Trust Agreement, by and
between the Company and Fleet Bank, N.A., dated September 28,
1995
(lxxxvi) HSC Termination Agreement, dated August 1, 1995, among The
Hartford Steam Company, Connecticut Natural Gas Corporation,
Energy Networks, Inc., and Hartford Cogeneration Limited
Partnership
11 Computation of Consolidated Primary and Fully Diluted Earnings Per
Share
12 Computation of Ratios
Not applicable
13 Annual Report to Stockholders for the Fiscal Year Ended September 30,
1995
Not applicable
16 Letter Regarding Change in Certifying Accountant
Not applicable
18 Letter Regarding Change in Accounting Principles
Not applicable
21 Subsidiaries of the Registrant
22 Published Report Regarding Matters Submitted to Vote of Security
Holders
None
23 Consent of Independent Public Accountants
24 Power of Attorney
27 Financial Data Schedule
(a) 3. Exhibits (concluded)
--------
Exhibit
Number
------------
28 Information from Reports Furnished to State Insurance Regulatory
Authorities
Not applicable
99 Additional Exhibits
(i) Exhibit Index
(ii) Information required by Form 11-K with respect to the
Connecticut Natural Gas Corporation Employee Savings Plan for
the fiscal year ending December 31, 1994, filed as Exhibit
99(ii) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994, filed with the
Commission on December 27, 1994, as amended by Form 10-K
Amendment No. 1, filed with the Commission on June 29, 1995
(Commission File No. 1-7727)
(iii) Information required by Form 11-K with respect to the
Connecticut Natural Gas Corporation Union Employee Savings
Plan for the fiscal year ending December 31, 1994, filed as
Exhibit 99(iii) to the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994, filed with the
Commission on December 27, 1994, as amended by Form 10-K
Amendment No. 1, filed with the Commission on June 29, 1995
(Commission File No. 1-7727)
Exhibits 3(ii), 4(i), 4(ii)(a), 4(ii)(b), 4(ii)(c), 4(ii)(d), 4(ii)(e),
4(ii)(f), 4(ii)(g), 4(ii)(h), 10(i), 10(ii), 10(iii), 10(iv), 10(v),
10(vi), 10(vii), 10(viii), 10(ix), 10(x), 10(xi), 10(xii), 10(xiii),
10(xiv), 10(xv), 10(xvi), 10(xvii), 10(xviii), 10(xix), 10(xx), 10(xxi),
10(xxii), 10(xxiii), 10(xxiv), 10(xxv), 10(xxvi), 10(xxvii), 10(xxviii),
10(xxix), 10(xxx), 10(xxxi), 10(xxxii), 10(xxxiii), 10(xxxiv), 10(xxxv),
10(xxxvi), 10(xxxvii), 10(xxxviii), 10(xxxix), 10(xl), 10(xli), 10(xlii),
10(xliii), 10(xliv), 10(xlv), 10(xlvi), 10(xlvii), 10(xlviii), 10(xlix),
10(l), 10(li), 10(lii), 10(liii), 10(liv), 10(lv), 10(lvi), 10(lvii),
10(lviii), 10(lix), 10(lx), 10(lxi), 10(lxii), 10(lxiii), 10(lxiv),
10(lxv), 10(lxvi), 10(lxvii), 10(lxviii), 99(ii) and 99(iii) listed above
which have been filed with the Securities and Exchange Commission pursuant
to the Securities Act of 1933 and the Securities Exchange Act of 1934, and
which were designated as noted above and have not been amended, are hereby
incorporated by reference. All other exhibits referred to above are filed
herewith.
(b) Reports on Form 8-K
-------------------
There were no current reports filed on Form 8-K during the last quarter
of fiscal 1995.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
(Registrant)
S/ Victor H. Frauenhofer
------------------------------------
(Victor H. Frauenhofer)
Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
S/ Victor H. Frauenhofer Chairman, President, December 18, 1995
------------------------------- (Principal Executive
(Victor H. Frauenhofer) Officer) and Director
S/ James P. Bolduc Senior Vice President - December 18, 1995
------------------------------- Financial Services and
(James P. Bolduc) Chief Financial Officer
S/ R. L. Babcock December 18, 1995
-------------------------------
(R. L. Babcock)
as Attorney-in-fact for:
Bessye W. Bennett, Esq. Director
James F. English, Jr. Director
Herman J. Fonteyne Director
Beverly L. Hamilton Director
Harvey S. Levenson Director
Denis F. Mullane Director
Richard J. Shima Director
Laurence A. Tanner Director
DeRoy C. Thomas Director
Angelo Tomasso, Jr. Director
CONNECTICUT NATURAL GAS CORPORATION
Annual Report on Form 10-K
Schedule Index
Fiscal Year Ended September 30, 1995
Item Description
---------- -----------
II Financial Statement Schedule II; Valuation and
Qualifying Accounts and Reserves for the fiscal years
ended September 30, 1995, 1994 and 1993
(d) Financial Statement Schedules
----------------------------- Page 1 of 1
CONNECTICUT NATURAL GAS CORPORATION AND SUBSIDIARIES
---------------------------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
--------------------------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
-----------------------------------------------------
(THOUSANDS OF DOLLARS)
Column A Column B Column C Column D Column E
Additions
------------------------
Balance At Charged Charged Deductions Balance
Beginning To Costs To Other From At End
Description of Period And Expenses Accounts Reserves (1) of Period
----------- ---------- ------------ -------- ----------- ---------
YEAR ENDED SEPTEMBER 30, 1995
-----------------------------
RESERVE DEDUCTED IN THE
BALANCE SHEET FROM THE
ASSET TO WHICH IT APPLIES:
Allowance for doubtful
accounts -
Gas $ 3,273 $ 4,653 $ - $ 3,860 $ 4,066
Other (2) 744 233 24 477 524
-------- -------- -------- -------- --------
$ 4,017 $ 4,886 $ 24 $ 4,337 $ 4,590
======== ======== ======== ======== ========
YEAR ENDED SEPTEMBER 30, 1994
-----------------------------
RESERVE DEDUCTED IN THE
BALANCE SHEET FROM THE
ASSET TO WHICH IT APPLIES:
Allowance for doubtful
accounts -
Gas $ 2,491 $ 5,990 - $ 5,208 $ 3,273
Other (3) 577 592 19 444 744
-------- -------- -------- -------- --------
$ 3,068 $ 6,582 $ 19 $ 5,652 $ 4,017
======== ======== ======== ======== ========
YEAR ENDED SEPTEMBER 30, 1993
-----------------------------
RESERVE DEDUCTED IN THE
BALANCE SHEET FROM THE
ASSET TO WHICH IT APPLIES:
Allowance for doubtful
accounts -
Gas (4) $ 2,153 $ 3,019 $ 2,200 $ 4,881 $ 2,491
Other (5) 948 450 52 873 577
-------- -------- -------- -------- --------
$ 3,101 $ 3,469 $ 2,252 $ 5,754 $ 3,068
======== ======== ======== ======== ========
Note: (1) Deductions From Reserves include the write-off of uncollectible accounts, net of
recoveries of accounts previously written off.
(2) $24 Charged to Other Accounts represents recognition of trade receivables acquired
with the purchase of certain assets by the nonregulated operations.
(3) $19 Charged to Other Accounts represents interest on receivables.
(4) $2,200 Charged to Other Accounts was recognized as a regulatory asset in other
assets on the balance sheet, pending approval in the Company's December, 1993 rate
decision (See Item 7, Management's discussion and Analysis of Financial Condition
and Results of Operations and Item 8, Notes to the Financial Statements)
(5) $52 Charged to Other Accounts represents interest on receivables.