UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(203) 727-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on July 23, 1996: 10,630,480.
FINANCIAL STATEMENTS
CONNECTICUT NATURAL GAS CORPORATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K. In the opinion
of the Company, all adjustments necessary to present fairly the consolidated
financial position of the Connecticut Natural Gas Corporation as of June 30,
1996 and 1995 and the results of its operations and its cash flows for the
three months, nine months and twelve months ended June 30, 1996 and 1995
have been included. The results of operations for such interim periods are
not necessarily indicative of the results for the full year.
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
June 30, Sept. 30, June 30,
ASSETS 1996 1995 1995
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 397,070 $ 387,906 $ 380,001
Unregulated energy 64,031 63,937 63,636
Construction work in progress 3,770 3,564 2,233
--------- --------- ---------
464,871 455,407 445,870
Less-Allowance for depreciation 143,973 133,314 130,445
--------- --------- ---------
320,898 322,093 315,425
--------- --------- ---------
Investments, at equity 10,482 5,743 5,761
--------- --------- ---------
Current Assets:
Cash and cash equivalents 31,226 3,042 18,003
Accounts and notes receivable 42,844 31,504 30,203
Allowance for doubtful accounts (6,048) (4,590) (5,604)
Accrued utility revenue 4,253 5,093 2,595
Inventories 8,782 14,511 10,973
Prepaid expenses 3,814 6,095 2,209
--------- --------- ---------
84,871 55,655 58,379
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 48,641 51,634 53,018
Recoverable transition costs 3,315 4,636 5,128
Other assets 21,262 25,278 29,919
--------- --------- ---------
73,218 81,548 88,065
--------- --------- ---------
$ 489,469 $ 465,039 $ 467,630
========= ========= =========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
June 30, Sept. 30, June 30,
CAPITALIZATION AND LIABILITIES 1996 1995 1995
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 33,233 $ 31,045 $ 31,045
Capital in excess of par value 87,489 74,018 74,018
Retained Earnings 55,587 45,522 50,577
--------- --------- ---------
176,309 150,585 155,640
Unearned compensation -
Restricted stock awards (240) (371) (337)
Treasury stock (129) (103) (103)
--------- --------- ---------
Common stock equity 175,940 150,111 155,200
Preferred stock, not subject to
mandatory redemption 902 904 906
Long-term debt 149,205 150,390 153,119
--------- --------- ---------
326,047 301,405 309,225
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements - - 1,000
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,924 3,921 3,886
Notes payable and commercial paper - 4,200 -
Accounts payable and accrued expenses 35,887 46,341 37,595
Refundable purchased gas costs 16,546 2,300 8,741
Accrued liabilities 1,374 6,539 1,864
--------- --------- ---------
57,731 63,301 52,086
--------- --------- ---------
Deferred Credits:
Deferred income taxes 46,018 37,985 41,539
Unfunded deferred income taxes 48,641 51,634 53,018
Investment tax credits 3,258 3,423 3,479
Refundable taxes 3,501 3,365 3,367
Accrued transition costs - - 128
Other 4,273 3,926 3,788
--------- --------- ---------
105,691 100,333 105,319
--------- --------- ---------
$ 489,469 $ 465,039 $ 467,630
========= ========= =========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
June 30,
-----------------------------
1996 1995
---------- ----------
Operating Revenues $ 53,954 $ 50,147
Less: Cost of Energy 27,778 26,191
State Gross Receipts Tax 1,863 1,681
---------- ----------
Operating Margin 24,313 22,275
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 15,077 13,297
Depreciation 4,497 4,324
Income taxes 511 65
Other taxes 1,821 1,799
---------- ----------
21,906 19,485
---------- ----------
Operating Income 2,407 2,790
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 28 13
Equity in partnership earnings 543 298
Other income (deductions) 324 165
Income Taxes (318) (222)
---------- ----------
577 254
---------- ----------
Interest and Debt Expense 3,546 3,669
---------- ----------
Net Loss (562) (625)
Less-Dividends on Preferred Stock 16 15
---------- ----------
Net Loss Applicable to Common Stock $ (578) $ (640)
========== ==========
Loss Per Average Share of
Common Stock $ (0.06) $ (0.06)
========== ==========
Dividends Per Share of Common Stock $ 0.38 $ 0.37
========== ==========
Average Common Shares Outstanding
During the Period 10,092,017 9,931,279
========== ==========
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Nine Months Ended
June 30,
-----------------------------
1996 1995
---------- ----------
Operating Revenues $ 275,022 $ 232,218
Less: Cost of Energy 150,163 124,647
State Gross Receipts Tax 10,507 9,121
---------- ----------
Operating Margin 114,352 98,450
---------- ----------
Operating Expenses:
Operations & maintenance expenses 44,390 39,146
Depreciation 13,296 12,825
Income taxes 19,972 12,147
Other taxes 5,687 5,507
---------- ----------
83,345 69,625
---------- ----------
Operating Income 31,007 28,825
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 111 76
Equity in partnership earnings 1,227 832
Other deductions 88 (343)
Income Taxes (556) (355)
---------- ----------
870 210
---------- ----------
Interest and Debt Expense 10,377 10,652
---------- ----------
Net Income 21,500 18,383
Less-Dividends on Preferred Stock 47 46
---------- ----------
Net Income Applicable to Common Stock $ 21,453 $ 18,337
========== ==========
Income Per Average Share of
Common Stock $ 2.15 $ 1.85
========== ==========
Dividends Per Share of Common Stock $ 1.12 $ 1.11
========== ==========
Average Common Shares Outstanding
During the Period 9,984,610 9,925,531
========== ==========
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
June 30,
-----------------------------
1996 1995
---------- ----------
Operating Revenues $ 317,989 $ 270,172
Less: Cost of Energy 173,281 143,428
State Gross Receipts Tax 12,682 10,658
---------- ----------
Operating Margin 132,026 116,086
---------- ----------
Operating Expenses:
Operations & maintenance expenses 58,471 52,752
Depreciation 17,448 16,894
Income taxes 17,255 10,000
Other taxes 7,511 7,321
---------- ----------
100,685 86,967
---------- ----------
Operating Income 31,341 29,119
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 141 62
Equity in partnership earnings 1,427 1,064
Other deductions (441) (373)
Nonrecurring items 3,624 -
Income Taxes (2,040) (547)
---------- ----------
2,711 206
---------- ----------
Interest and Debt Expense 13,916 14,047
---------- ----------
Net Income 20,136 15,278
Less-Dividends on Preferred Stock 63 63
---------- ----------
Net Income Applicable to Common Stock $ 20,073 $ 15,215
========== ==========
Income Per Average Share of
Common Stock $ 2.01 $ 1.55
========== ==========
Dividends Per Share of Common Stock $ 1.49 $ 1.48
========== ==========
Average Common Shares Outstanding
During the Period 9,971,204 9,828,124
========== ==========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1996 1995
---- ----
Cash Flows from Operations $ 8,449 $ 14,412
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (4,386) (6,289)
Other investing activities (5,442) 256
-------- --------
Net cash used in investing activities (9,828) (6,033)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (4,055) (3,690)
Issuance of common stock 15,659 -
Principal retired on long-term debt (166) (163)
-------- --------
Net cash provided/(used) by
financing activities 11,438 (3,853)
-------- --------
Increase in Cash and
Cash Equivalents 10,059 4,526
Cash and Cash Equivalents at
Beginning of Period 21,167 13,477
-------- --------
Cash and Cash Equivalents at
End of Period $ 31,226 $ 18,003
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ (562) $ (625)
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,641 4,502
Deferred income taxes, net (1,085) (2,654)
Equity in partnership earnings (543) (298)
Cash distributions received from
investments 971 -
Change in assets and liabilities:
Accounts receivable 21,863 20,919
Accrued utility revenue 11,934 8,909
Inventories (6,095) (2,302)
Purchased gas costs (6,391) (3,628)
Prepaid expenses (745) 1,241
Accounts payable and accrued expenses (17,734) (9,495)
Other assets/liabilities 2,195 (2,157)
-------- --------
Total adjustments 9,011 15,037
-------- --------
Cash flows from operations $ 8,449 $ 14,412
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 3,960 $ 4,033
======== ========
Income taxes $ 7,600 $ 5,421
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1996 1995
---- ----
Cash Flows from Operations $ 46,288 $ 54,307
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (12,285) (16,216)
Other investing activities (4,659) (248)
-------- --------
Net cash used in investing activities (16,944) (16,464)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (11,435) (11,070)
Issuance of common stock 15,659 8,474
Other stock activity, net (2) 109
Principal retired on long-term debt (1,182) (979)
Short-term debt (4,200) (17,500)
-------- --------
Net cash used by
financing activities (1,160) (20,966)
-------- --------
Increase in Cash and
Cash Equivalents 28,184 16,877
Cash and Cash Equivalents at
Beginning of Period 3,042 1,126
-------- --------
Cash and Cash Equivalents at
End of Period $ 31,226 $ 18,003
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 21,500 $ 18,383
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 13,703 12,980
Deferred income taxes, net 8,004 4,510
Equity in partnership earnings (1,227) (832)
Cash distributions received from
investments 1,331 168
Change in assets and liabilities:
Accounts receivable (9,138) (223)
Accrued utility revenue 840 1,119
Inventories 5,729 7,353
Purchased gas costs 14,246 12,510
Prepaid expenses 2,281 7,898
Accounts payable and accrued expenses (14,298) (6,226)
Other assets/liabilities 3,317 (3,333)
-------- --------
Total adjustments 24,788 35,924
-------- --------
Cash flows from operations $ 46,288 $ 54,307
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 10,192 $ 10,346
======== ========
Income taxes $ 14,520 $ 7,667
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1996 1995
---- ----
Cash Flows from Operations $ 45,284 $ 56,706
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (22,908) (29,380)
Other investing activities (4,806) (1,027)
-------- --------
Net cash used in investing activities (27,714) (30,407)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (15,126) (14,617)
Issuance of common stock 15,659 8,474
Other stock activity, net (4) 52
Issuance of long-term debt - 20,000
Principal retired on long-term debt (3,876) (3,498)
Short-term debt (1,000) (19,800)
-------- --------
Net cash used by
financing activities (4,347) (9,389)
-------- --------
Increase in Cash and
Cash Equivalents 13,223 16,910
Cash and Cash Equivalents at
Beginning of Period 18,003 1,093
-------- --------
Cash and Cash Equivalents at
End of Period $ 31,226 $ 18,003
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1996 1995
---- ----
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 20,136 $ 15,278
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,939 17,386
Deferred income taxes, net 4,391 4,643
Equity in partnership earnings (1,427) (1,064)
Cash distributions received from
investments 1,499 408
Change in assets and liabilities:
Accounts receivable (9,600) 13,323
Accrued utility revenue (1,658) 73
Inventories 2,191 5,016
Purchased gas costs 7,805 (1,261)
Prepaid expenses (1,605) (108)
Accounts payable and accrued expenses (513) 666
Other assets/liabilities 6,126 2,346
-------- --------
Total adjustments 25,148 41,428
-------- --------
Cash flows from operations $ 45,284 $ 56,706
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 12,293 $ 12,108
======== ========
Income taxes $ 15,820 $ 9,316
======== ========
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Thousands of Dollars)
(1) Investment in Iroquois
In April, 1996 the Company acquired an additional 2.47% ownership
interest in the Iroquois Gas Transmission System Partnership
("Iroquois") for an investment of approximately $5,200 with funds from
working capital. The Company's total share of Iroquois, which is held
by the Company's subsidiary, ENI Transmission Company, is now 4.87%.
As a result of this increase in ownership interest, the Company's
guarantee of a letter of credit for Iroquois is also 4.87%, equivalent
to approximately $1,658 at June 30, 1996.
In May, 1996, Iroquois reached a settlement with State of New York and
Federal authorities regarding certain environmental allegations
asserted by them. The Company had previously provided for its share of
the $24,000 settlement.
(2) Common Stock
In June, 1996 the Company sold 700,000 shares of its $3.125 Par Common
Stock at $23.25 per share. The net proceeds of approximately $15,600
were added to working capital and will be used to fund the current
year's construction program of the Company's regulated operations
and for their general operations.
(3) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 1996
(Thousands of Dollars Except Per Share Amounts)
RESULTS OF OPERATIONS
The Company recorded a net loss of $.06 per share in the third quarter of
both fiscal 1996 and 1995. Nine and twelve months ended June, 1996 earnings
per share were $2.15 and $2.01, respectively as compared to $1.85 and $1.55,
respectively, for fiscal, 1995. Earnings recorded for the twelve months
ended June 30, 1996 include two nonrecurring items: a gain of $.24 per
share from 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 interest in the Iroquois Gas Transmission System
partnership ("Iroquois"). Without the effect of these two items, earnings
per share for this period would be $1.82.
A significantly colder winter and an increase in natural gas rates granted
to the Company by the Connecticut Department of Public Utility Control (the
"DPUC"), effective in October, 1995, are the primary reasons for the higher
earnings recorded in the nine and twelve months ended June 30, 1996 when
compared to the same periods of fiscal, 1995. The quarter ended June 30 is
a period of transition in the Company's operations from the end of the
winter heating season in April to the beginning of the summer cooling season
in May, and frequently shows a net loss.
Operating Margin
The following table presents the changes in revenues, gas operating margin
and gas throughput for all periods presented in the statements of income:
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1996 1995 1996 1995 1996 1995
-------- -------- -------- -------- -------- --------
Gas Revenues $ 48,860 $ 45,395 $258,716 $217,433 $295,289 $248,387
======== ======== ======== ======== ======== ========
Gas Operating Margin $ 21,111 $ 19,637 $103,498 $ 89,562 $117,203 $103,654
======== ======== ======== ======== ======== ========
Gas Throughput (mmcf)
Firm Sales 3,633 3,228 22,210 19,426 24,144 21,371
Interruptible Sales 1,694 1,734 6,548 7,020 8,083 8,311
Off-System Sales 3,376 4,598 8,564 9,523 15,306 12,190
Transportation
Services 1,063 1,923 3,210 5,888 5,018 7,882
------ ------ ------ ------ ------ ------
Total System
Throughput 9,766 11,483 40,532 41,857 52,551 49,754
====== ====== ====== ====== ====== ======
Gas operating margin is equal to gas revenues less the cost of gas and
Connecticut gross revenues tax. Gas margin is higher in all periods ended
June 30, 1996, as compared to 1995. The two principal factors behind this
increase in gas operating margin are new, higher gas rates allowed by the
DPUC beginning in the first quarter of fiscal, 1996, and the significantly
colder winter heating season weather experienced in the Company's service
area in fiscal, 1996. The higher volumes of gas sold to firm customers
during this time augmented the effect of the higher gas rates. These
benefits were somewhat offset by fewer sales to interruptible customers,
lower third quarter off-system sales and somewhat lower interruptible
margins because of higher gas costs associated with these sales.
Operations and Maintenance Expenses
The October, 1995, rate decision issued by the DPUC allowed the Company to
begin to amortize expenses that had been previously deferred pending the
outcome of the rate proceedings. Because of these additional amortizations
and increases in a few other specific items, higher operations and
maintenance expenses have been recorded in fiscal, 1996. Increases have
been in the categories of wages and salaries, pension costs, insurance-
related costs, employee benefits, regulatory commission and rate proceedings
expenses and outside purchased services. The colder fiscal, 1996 winter has
also resulted in increased bad debt accruals.
Income Taxes
Income taxes are higher in all periods of fiscal, 1996, primarily because of
the turnaround of flow-through book-tax depreciation differences of older
plant which are causing higher taxable income in these periods. These
higher taxes were included in the determination of the Company's rates from
the last rate decision. Because of these differences, and the lack of other
offsetting tax benefits, the Company's effective tax rate is higher in 1996
than the previous periods. As a result of this higher effective tax rate,
the Company will record higher tax expenses in the winter quarters and
receive a tax benefit in the summer months, thus reducing net income during
the heating season and reducing the net losses normally experienced during
the summer season. Income taxes are also higher in 1996 because of higher
taxable income and the absence of the flow through of cost of removal
benefits recognized during fiscal 1995.
Other Income (Deductions)
Overall, Other Income(Deductions) have contributed more to earnings in
fiscal, 1996 over 1995 in all reported periods. This is a result of
several offsetting factors.
In the three months ended June, 1996, the primary benefits are from higher
interest income from the investment of available cash balances and income
earned by merchandising operations. Lower promotional advertising costs
were also recorded during this time. These benefits are partially offset by
the costs related to terminating the Company's Gas Roots regulated propane
service program, as directed by the DPUC late in fiscal, 1995, and higher
insurance costs.
Other income (deductions) in the nine months ended June, 1996, as compared
to 1995, has primarily benefited from the reconfiguration of certain
insurance plans. Higher interest income and lower promotional expenses also
contributed to the increase in other income. The costs related to
terminating the Company's Gas Roots regulated propane service program
partially offset these benefits.
Two nonrecurring items were recorded in the twelve months ended June, 1996:
a one-time pretax benefit of $4,124 from the negotiated settlement of a
contract termination agreement with the unregulated operations' principal
steam supplier and a charge of $500 for the Company's share of expenses in
connection with legal matters related to its ownership interest in Iroquois.
(See "Material Changes in Financial Condition," "Investing Activities").
The principal benefit to other income came from the reconfiguration of
certain insurance plans. Earnings from merchandising operations and
lower promotional expenses also contributed to other income. These benefits
were offset by the costs related to terminating the Company's Gas Roots
regulated propane service program and by lower interest income.
Interest and Debt Expense
Interest expense between all comparable periods ended June, 1996 to June,
1995 is relatively unchanged. There have been no new issues of long-term
debt, and only limited seasonal short-term borrowings have been needed in
both years because of available cash from operations, in fiscal, 1996, as a
result of higher collections through the purchased gas adjustment, which
will ultimately be refunded to customers, and available cash on hand for
working capital from issues of Common Stock, in October, 1994 and June,
1996. In fiscal, 1996, the Company has recorded some additional interest
expense related to merchandise receivables and transition costs.
Earnings from Unregulated Operations
Earnings contributed by unregulated operations were $.07, $.21 and $.49 per
share, respectively, for the three, nine and twelve months ended June 30,
1996, compared to $.04, $.21 and $.37 per share for the same periods ended
June 30, 1995. Twelve months ended June, 1996 earnings include $.24 per
share from the settlement related to the termination agreement negotiated
with a supplier of steam in the fourth quarter of fiscal, 1995, and a charge
of $(.05) in connection with contingent legal matters related to the
Company's ownership interest in Iroquois. These legal issues were settled
in May, 1996. (See "Material Changes in Financial Condition," "Investing
Activities").
Unregulated operations recorded lower income in fiscal, 1996 as a result of
reduced chilled water sales for cooling, because of lower building occupancy
levels, higher fixed costs of produced steam, attributed to labor and
equipment maintenance expenses, and initial operating losses related to new
unregulated subsidiaries, ENServe Corporation and ENI Gas Services, Inc.
The benefit of higher sales for steam and hot water heating, generated
because of the colder winter weather, partially offset these negative
impacts to unregulated earnings in the nine and twelve-months ended periods.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash flows from operations together with the net proceeds from the June,
1996, and October, 1994, Common Stock issues funded both net investing and
all other financing activities during the three, nine and twelve months
ended June, 1996, and the nine and twelve months ended June, 1995. Cash
flows from operations were sufficient to fund both investing and financing
activities during the three months ended June, 1995.
The higher level of cash and cash equivalents on hand at June 30, 1996, as
compared to 1995, is primarily attributed to the June, 1996 Common Stock
issue. Historically, higher levels of cash and cash equivalents are
experienced in the third quarter of the fiscal year, reflecting the receipt
of customer payments from the end of the winter heating season concurrent
with the lowest point for outgoing cash requirements at the end of the
heating season, for gas inventories, and the beginning of the construction
season, for capital expenditures. Lower fiscal, 1996 levels of cash from
operations are attributed to lower quarter ended June, 1996 operating
margins. The nine and twelve months ended June, 1996 also reflect the
receipt of the balance of the settlement amount due from the termination of
the steam supply contract with the unregulated operations' principal steam
supplier.
Investing Activities
In April, 1996 the Company acquired an additional 2.47% ownership interest
in Iroquois for an investment of approximately $5,200 with funds from
working capital. The Company's total share of Iroquois, which is held by
the Company's wholly-owned subsidiary ENI Transmission Company, is now
4.87%. As a result of this increase in ownership interest, the Company's
guarantee of a letter of credit for Iroquois has also increased to 4.87%,
equivalent to approximately $1,658 at June 30, 1996.
In May, 1996, Iroquois reached a settlement with State of New York and
Federal authorities regarding certain environmental allegations asserted by
them. The Company had previously provided for its share of the $24,000
settlement.
Financing Activities
In June, 1996 the Company sold 700,000 shares of its $3.125 Par Common Stock
at $23.25 per share. The net proceeds of approximately $15,600 were added
to working capital and will be used to fund the current year's construction
program of the Company's regulated gas operations and for their general
operations.
Other Taxes
The Company has been informed that a State of Connecticut audit of the
Company's 1993 through 1996 Sales Tax returns and a State of New York audit
of the 1992 through 1994 Gross Income Tax returns of the Company's
subsidiary, ENI Transmission Corporation are scheduled to begin in August,
1996. Although the Company cannot predict the outcome of these audits,
management does not believe that the results of these audits will be
significant to its future results of operations or financial condition.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
10(lxxxviii) Gas Transportation Agreement (FT-A Rate Schedule, Service
Package No. 86) dated September 1, 1993, between the
Company and Tennessee Gas Pipeline Company
10(lxxxix) Gas Transportation Agreement (FT-A Rate Schedule, Service
Package No. 1625) dated September 1, 1993, between the
Company and Tennessee Gas Pipeline Company
10(xc) Gas Transportation Agreement (FT-A Rate Schedule, Service
Package No. 2655) dated September 1, 1993, between the
Company and Tennessee Gas Pipeline Company
10(xci) Gas Transportation Agreement (FT-A Rate Schedule, Service
Package No. 5903) dated January 13, 1994, between the
Company and Tennessee Gas Pipeline Company
10(xcii) Gas Transportation Agreement (FT-A Rate Schedule, Service
Package No. 8545) dated November 1, 1994, between the
Company and Tennessee Gas Pipeline Company
10(xciii) Gas Storage Contract (Rate Schedule FS, Service Package
No. 1626) dated December 1, 1994, between the Company and
Tennessee Gas Pipeline Company
10(xciv) Amendment No.1-A to Gas Storage Contract (Rate Schedule
FS, Service Package No. 1626) dated July 1, 1995 between
the Company and Tennessee Gas Pipeline Company
10(xcv) Service Agreement (#N01719, FST Service) dated March 28,
1996 between the Company and National Fuel Gas Supply
Corporation
10(xcvi) Amendment No. 1 to Service Agreement (#N01719, FST
Service) dated April 1, 1996, between the Company and
National Fuel Gas Supply Corporation
10(xcvii) Service Agreement (#O01718, FSS Service) dated March 28,
1996 between the Company and National Fuel Gas Supply
Corporation
10(xcviii) Amendment No. 1 to Service Agreement (#O01718, FSS
Service) dated April 1, 1996, between the Company and
National Fuel Gas Supply Corporation
27 Financial Data Schedule
99(i) Exhibit Index
(b) No reports on Form 8-K were filed during the quarter ending June 30,
1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONNECTICUT NATURAL GAS CORPORATION
Date 07/29/96 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)