SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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
OR
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
COMMISSION FILE NUMBER 0-10007
COLONIAL GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1558100
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
40 Market Street, Lowell, Massachusetts 01852
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 458-3171
Former name, former address and former fiscal year, if
changed since last report: Not applicable
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
The number of shares of the registrant's common stock, $3.33
par value, outstanding as of July 1, 1996 was 8,435,978.
COLONIAL GAS COMPANY
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Statements of Income -
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995
Twelve Months Ended June 30, 1996 and 1995
Consolidated Condensed Balance Sheets -
June 30, 1996, December 31, 1995 and
June 30, 1995
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 1996 and 1995
Twelve Months Ended June 30, 1996 and 1995
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
June 30,
1996 1995
(In Thousands Except
Per Share Amounts)
Operating Revenues $24,237 $22,760
Cost of gas sold 13,899 13,219
Operating Margin 10,338 9,541
Operating Expenses:
Operations 7,290 7,448
Maintenance 1,148 1,021
Depreciation and Amortization 2,765 2,523
Taxes, other than income 1,444 1,396
Total Operating Expenses 12,647 12,388
Income Taxes (1,620) (1,922)
Utility Operating Loss (689) (925)
Other Operating Income (Loss):
Truck transportation revenues 2,670 866
Truck transportation expenses,
including income
taxes and interest (2,295) (1,066)
Truck transportation net income
(loss) 375 (180)
Other, net of income taxes 44 (14)
Total Other Operating Income (Loss) 419 (194)
Non-Operating Income, Net 174 145
Loss Before Interest and Debt Expense (96) (974)
Interest and Debt Expense 2,109 2,309
Net Loss $ (2,205)$(3,283)
Average Common Shares Outstanding 8,412 8,279
Loss per Average Common Share $ (0.26) $(0.40)
Dividends Paid per Common Share $ .325 $ .320
(See accompanying notes to consolidated condensed
financial statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended
June 30,
1996 1995
(In Thousands Except
Per Share Amounts)
Operating Revenues $101,815 $93,113
Cost of gas sold 51,894 48,080
Operating Margin 49,921 45,033
Operating Expenses:
Operations 16,407 15,699
Maintenance 2,266 2,237
Depreciation and Amortization 5,660 5,045
Taxes, other than income 2,839 2,752
Total Operating Expenses 27,172 25,733
Income Taxes 7,225 5,758
Utility Operating Income 15,524 13,542
Other Operating Income (Loss):
Truck transportation revenues 6,247 2,648
Truck transportation expenses,
including income
taxes and interest (4,956) (2,705)
Truck transportation net income
(loss) 1,291 (57)
Other, net of income taxes 99 (59)
Total Other Operating Income (Loss) 1,390 (116)
Non-Operating Income, Net 351 291
Income Before Interest and Debt Expense 17,265 13,717
Interest and Debt Expense 4,242 4,551
Net Income $13,023 $ 9,166
Average Common Shares Outstanding 8,395 8,260
Income per Average Common Share $ 1.55 $ 1.11
Dividends Paid per Common Share $ 0.645 $ 0.635
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Twelve Months Ended
June 30,
1996 1995
(In Thousands Except
Per Share Amounts)
Operating Revenues $173,351$154,216
Cost of gas sold 87,445 79,000
Operating Margin 85,906 75,216
Operating Expenses:
Operations 32,017 30,563
Maintenance 4,430 4,770
Depreciation and Amortization 10,840 9,713
Taxes, other than income 5,237 5,032
Restructuring charge 0 3,185
Total Operating Expenses 52,524 53,263
Income Taxes 9,826 4,801
Utility Operating Income 23,556 17,152
Other Operating Income (Loss):
Truck transportation revenues 11,175 7,436
Truck transportation expenses,
including income taxes
and interest (9,223) (7,170)
Truck transportation net income 1,952 266
Other, net of income taxes 150 (120)
Total Other Operating Income 2,102 146
Non-Operating Income, Net 924 679
Income Before Interest and Debt Expense 26,582 17,977
Interest and Debt Expense 8,961 8,863
Net Income $17,621 $9,114
Average Common Shares Outstanding 8,361 8,213
Income per Average Common Share $ 2.11 $ 1.11
Dividends Paid per Common Share $ 1.285 $1.265
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31, June30,
1996 1995 1995
(Unaudited) (Unaudited)
(In Thousands)
Utility Property:
At original cost $318,828 $308,191 $297,259
Accumulated depreciation (78,434) (72,636) (70,666)
Net utility property 240,394 235,555 226,593
Non-Utility Property - Net 5,497 5,036 4,642
Net property 245,891 240,591 231,235
Capital Leases - Net 1,886 2,253 2,948
Current Assets:
Cash and cash equivalents 8,416 7,541 7,269
Accounts receivable 15,073 19,069 11,456
Allowance for doubtful
accounts (3,079) (2,205) (2,273)
Accrued utility revenues 500 8,924 624
Unbilled gas costs - 9,688 -
Fuel and other inventories 9,447 13,648 13,485
Prepayments and other
current assets 11,937 4,337 6,826
Total current assets 42,294 61,002 37,387
Deferred Charges and Other Assets:
Unrecovered deferred income
taxes 10,174 10,562 11,083
Unrecovered environmental
expenses - incurred 3,457 4,761 3,982
Unrecovered environmental
expenses - accrued 2,116 2,300 3,222
Unrecovered transition
costs - accrued 3,600 3,600 4,700
Other 16,926 17,352 13,303
Total deferred charges
and other assets 36,274 38,575 36,290
Total Assets $326,344 $342,421 $307,860
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND CAPITALIZATION
June 30, December 31, June 30,
1996 1995 1995
(Unaudited) (Unaudited)
(In Thousands)
Capitalization:
Common equity:
Common Stock - par value $3.33 per share
Authorized - 15,000 shares
Issued and outstanding
- 8,436, 8,367 and
8,304 shares $28,092 $27,863 $27,652
Premium on common stock 52,719 51,447 50,424
Retained earnings 33,368 25,760 26,490
Total Common equity 114,179 105,070 104,566
Long-term debt 80,343 75,418 75,035
Total capitalization 194,522 180,488 179,601
Capital Lease Obligations 1,097 1,359 2,236
Current Liabilities:
Current maturities of
long-term debt 5,147 6,141 7,954
Current capital lease
obligations 789 894 711
Notes payable 41,300 61,835 32,500
Gas inventory purchase
obligations 5,133 12,340 8,451
Accounts payable 8,762 12,150 6,481
Other 10,118 8,306 9,286
Total current
liabilities 71,249 101,666 65,383
Deferred Credits and Reserves:
Deferred income taxes-funded 33,679 32,299 30,745
Deferred income taxes-
unfunded 10,174 10,562 11,083
Accrued environmental
expenses 2,116 2,300 3,222
Accrued transition costs 3,600 3,600 4,700
Other 9,907 10,147 10,890
Total deferred credits
and reserves 59,476 58,908 60,640
Total Capitalization and
Liabilities $326,344 $342,421 $307,860
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
1996 1995
(In Thousands)
Cash Flows From Operating Activities:
Net income $13,023 $ 9,166
Adjustments to reconcile net income
to net cash 11,664 5,876
Changes in current assets and
liabilities 16,512 22,293
Net cash provided by operating
activities 41,199 37,335
Cash Flows From Investing Activities:
Capital expenditures (11,324) (11,472)
Change in deferred accounts (1,052) 1,947
Net cash used in investing
activities (12,376) (9,525)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (5,415) (5,244)
Issuance of Common Stock 1,501 1,468
Issuance of long-term debt, net of
issuance costs 9,777 -
Retirement of long-term debt (6,069) (3,382)
Change in notes payable (20,535) (17,000)
Change in gas inventory purchase
obligations (7,207) (5,409)
Net cash used in financing
activities (27,948) (29,567)
Net (decrease) increase in cash and
cash equivalents 875 (1,757)
Cash and cash equivalents at
beginning of period 7,541 9,026
Cash and cash equivalents at end
of period $ 8,416 $7,269
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - net of amount
capitalized $ 4,396 $5,033
Income and franchise taxes $ 649 $3,402
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Twelve Months Ended
June 30,
1996 1995
(In Thousands)
Cash Flows From Operating Activities:
Net income $17,621 $ 9,114
Adjustments to reconcile net income
to net cash 17,968 10,842
Changes in current assets and
liabilities (2,933) (792)
Net cash provided by operating
activities 32,656 19,164
Cash Flows From Investing Activities:
Capital expenditures (25,922) (31,734)
Change in deferred accounts (2,372) 5,529
Net cash used in investing
activities (28,294) (26,205)
Cash Flows From Financing Activities:
Dividends paid on Common Stock (10,742) (10,387)
Issuance of Common Stock 2,734 3,675
Issuance of long-term debt, net of
issuance costs 26,810 741
Retirement of long-term debt (27,499) (3,434)
Change in notes payable 8,800 14,500
Change in gas inventory purchase
obligations (3,318) 728
Net cash provided by financing
activities (3,215) 5,823
Net (decrease) increase in cash and
cash equivalents 1,147 (1,218)
Cash and cash equivalents at beginning
of period 7,269 8,487
Cash and cash equivalents at end of
period $ 8,416 $ 7,269
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest - net of amount
capitalized $ 9,231 $ 9,736
Income and franchise taxes $ 690 $ 7,074
(See accompanying notes to consolidated condensed financial
statements)
COLONIAL GAS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial
position as of June 30, 1996 and 1995 and results of
operations for the three, six and twelve month periods
ended June 30, 1996 and 1995 and cash flows for the six
and twelve month periods ended June 30, 1996 and 1995.
2. Due to the significant impact of gas used for space
heating during the heating season (November-April) and
the Company's seasonal rate structure, the results of
operations for the three month and six month periods
ending June 30, 1996 and 1995 are not necessarily
indicative of the results to be expected for the full
year.
3. During the six months ended June 30, 1996, the Company
issued 68,854 shares of Common Stock, $3.33 par value,
under a Dividend Reinvestment and Common Stock Purchase
Plan and under an Employee Savings Plan. As a result,
Common Stock, $3.33 par value, increased $229,000 and
Premium on Common Stock increased $1,272,000.
4. Contingencies
Reference is made to Note J/Contingencies of the Notes to
Consolidated Financial Statements contained within the
Company's 1995 Annual Report to Stockholders.
5. Reclassifications are made periodically to previously
issued financial statements to conform to the current
year presentation.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Three Months Ended June 30, 1996 and June 30, 1995
The Company's net loss for the three months ended June 30,
1996 was $2,205,000, which is 33% or $1,078,000 less than
the $3,283,000 loss reported for the same period last year.
The principal reasons for this change are a 26% or $236,000
decrease in operating loss from utility operations and a
$554,000 increase in net income from Transgas Inc., the
Company's energy trucking subsidiary. The Company typically
incurs losses for the second and third quarters while
reporting profits for the first and fourth quarters. This is
due to significantly higher natural gas sales throughout the
colder months to meet customers' heating needs.
Approximately 90% of the Company's residential customers are
heating accounts.
The Company's operating margin increased 8.4% or $797,000
during the second quarter due to a 7.3% increase in firm gas
sales. Firm gas sold for the three months ended June 30
rose to 3,117 MMcf in 1996 from 2,906 MMcf in 1995.
Total operating expenses increased by 2.1% or $259,000 due
to a $127,000 increase in maintenance expenses and a
$242,000 increase in depreciation and amortization expense.
These increases were partially offset by a $158,000 decrease
in operations expense, primarily due to cost saving
initiatives.
Income taxes credit decreased $302,000 or 16% due to a
decrease in operating loss.
Other operating income rose $613,000 primarily due to a
$554,000 increase in the net income of Transgas. Second
quarter financial results of Transgas were driven by colder
than normal weather in the fourth quarter of 1995 and the
first quarter of 1996. As a result, Transgas had a
significant increase in the demand for the truck
transportation of liquefied natural gas (LNG). Transgas
hauls of LNG increased 188% for the second quarter of 1996
compared to the same period last year.
Six Months Ended June 30, 1996 and 1995
Net income for the six months ended June 30, 1996 was
$13,023,000 compared to $9,166,000 for the same period in
1995. This $3,857,000 or 42% increase resulted primarily
from a $1,982,000 increase in utility operating income and a
$1,347,000 increase in net income for Transgas. The
increased income results were due principally to colder weather.
The 11% or $4,888,000 increase in the Company's operating
margin during the period was due to higher firm gas sales.
Firm gas sales were 10% higher in 1996 over 1995, resulting
from weather which was 3.8% colder than the comparable
period last year and 2.6% colder than normal.
Total operating expenses increased by 5.6% or $1,439,000.
Operations and maintenance expenses increased by $737,000 or
4.1%, primarily due to increased rate case amortization
expenses and increased bad debts. Depreciation and
amortization expense increased $615,000 due to an increase
in utility property.
Income taxes increased $1,467,000 or 26% due to a higher
level of pre-tax income.
Other operating income increased $1,506,000 due to a
$1,348,000 increase in net income for Transgas. Hauls of LNG
increased 167% for the reasons described above.
Twelve Months Ended June 30, 1996 and 1995
Net income for the twelve month period ended June 30, 1996
was $17,621,000, or $2.11 per share. This was a 93%
increase over the $9,114,000 net income, or $1.11 per share,
reported for the same period in 1995, after a restructuring
charge. This increase was 59% over the $11,079,000 net
income before a restructuring charge, or $1.35 per share,
for the same period in 1995. A restructuring charge
recorded in December 1994 relating to a voluntary early
retirement program and the closing of retail appliance sales
operations amounted to $1,965,000 after-tax or $0.24 per
share. The increase in net income for the twelve month
period ended June 30, 1996 resulted from higher utility
operating income and higher net income for Transgas due to
significantly colder weather.
The 14% or $10,690,000 increase in the Company's operating
margin was due to weather that was 8.5% colder than the
comparable period last year and 5.1% colder than normal.
This colder weather resulted in a 11% increase in firm gas
sales volumes.
Total operating expenses decreased by 1.4% or $739,000.
Prior to the restructuring charge of $3,185,000 described
above, operating expenses increased $2,446,000 or 4.9%.
This was primarily because of a $1,127,000, or 12%; increase
in depreciation and amortization expense due to an increase in
utility property; and a $1,114,000 or 3.2% increase in
operations and maintenance expense due principally to
increased bad debt expense.
Income taxes increased $5,025,000 or 105% due to a higher
level of pre-tax income.
Other operating income increased $1,956,000 due to a
$1,686,000 increase in net income for Transgas. The colder
winter of 1996 beneficially affected Transgas' performance
as compared to the twelve-month period ended June 30, 1995
which included the weak 1995 first two quarters.
Proposed Joint Venture
On May 28, 1996, the Company jointly announced with
Cabot LNG Corporation ("Cabot") the intention to form a
joint venture. The joint venture is proposed to be
accomplished through (i) Cabot acquiring from the Company,
for a purchase price of seven million dollars ($7,000,000),
a fifty percent (50%) interest in Transgas, Inc., the
Company's wholly owned energy trucking subsidiary which
specializes in liquefied natural gas ("LNG") hauling; and
(ii) Cabot and the Company creating a new entity that will
lease an LNG storage tank of the Company and market LNG
storage and related services to energy providers and end-
users. Before the sale of the Transgas interest to Cabot,
Transgas will distribute to the Company its excess cash
estimated at eight million dollars ($8,000,000). The
Company will recognize a gain of approximately $.40 a share
at the time of the sale of the Transgas interest. The
Company may use the net proceeds of this transaction to pay
down short-term debt, to make investments and for other
general corporate purposes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
An 8-K was filed on May 29, 1996 reporting the proposed
joint venture between the Company and Cabot LNG Corporation
(see "Proposed Joint Venture" under Item 2).
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
COLONIAL GAS COMPANY
(Registrant)
Date: July 26, 1996 F.L. Putnam, III
President and Chief Executive Officer
Date: July 26, 1996 Nickolas Stavropoulos
Executive Vice President -
Finance, Marketing and Chief
Financial Officer
[END OF FORM 10-Q FOR PERIOD ENDING JUNE 30, 1996]