SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended December 31, 1999 Commission File No. 0-29812
BERKSHIRE ENERGY RESOURCES
Massachusetts 04-3408946
115 Cheshire Road, Pittsfield, Massachusetts 01201-1803
Registrant's telephone number, including Area Code 413:442-1511
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
----- -----
At December 31, 1999, the Registrant had issued and outstanding 2,523,479
shares of Common Stock, no par value.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
Unaudited
---------
(In Thousands Except Per Share Amounts)
Three Months Ended
---------------------
12/31/99 12/31/98
-------- --------
Operating Revenues $14,425 $13,321
Cost of Gas Sold 6,860 5,796
--------------------
Operating Margin 7,565 7,525
--------------------
Other Operating Expenses 4,716 4,088
Depreciation 1,240 1,177
Other Taxes 617 522
--------------------
Total 6,573 5,787
--------------------
Operating Income 992 1,738
Other Income - Net 435 367
--------------------
Operating and Other Income 1,427 2,105
Interest Expense 1,100 1,157
--------------------
Income before Income Taxes 327 948
Income Taxes 281 346
--------------------
NET INCOME 46 602
Retained Earnings at Beginning
of Period 7,580 7,350
--------------------
Total 7,626 7,952
--------------------
Dividends Declared:
Preferred Stock 3 4
Common Stock 745 696
--------------------
Total Dividends 748 700
--------------------
Retained Earnings at End
of Period $ 6,878 $ 7,252
====================
Earnings Available for Common
Shares $ 43 $ 598
====================
Average Common Shares
Outstanding 2,523.4 2,397.7
--------------------
Basic and Diluted Earnings
Per Common Share $ .02 $ 0.25
====================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
Unaudited
---------
(In Thousands Except Per Share Amounts)
Six Months Ended
---------------------
12/31/99 12/31/98
-------- --------
Operating Revenues $19,200 $18,158
Cost of Gas Sold 8,743 7,617
--------------------
Operating Margin 10,457 10,541
--------------------
Other Operating Expenses 7,921 7,437
Depreciation 1,786 1,593
Other Taxes 902 737
--------------------
Total 10,609 9,767
--------------------
Operating(Loss)Income (152) 774
Other Income - Net 1,034 975
--------------------
Operating and Other Income 882 1,749
Interest Expense 2,166 2,235
--------------------
Loss Before Income Taxes (1,284) (486)
Income Tax Benefit (357) (212)
--------------------
NET LOSS (927) (274)
Retained Earnings at Beginning
of Period 9,300 8,911
--------------------
Total 8,373 8,637
--------------------
Dividends Declared:
Preferred Stock 7 7
Common Stock 1,488 1,378
--------------------
Total Dividends 1,495 1,385
--------------------
Retained Earnings at End
of Period $ 6,878 $ 7,252
====================
Loss Attributable to Common
Shares $ (934) $ (281)
====================
Average Common Shares
Outstanding 2,521.3 2,361.0
--------------------
Basic and Diluted Loss
Per Common Share $ (0.37) $ (0.12)
====================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
-----------------------------------------------------------
Unaudited
---------
(In Thousands Except Per Share Amounts)
Twelve Months Ended
---------------------
12/31/99 12/31/98
-------- --------
Operating Revenues $51,775 $51,955
Cost of Gas Sold 23,612 24,468
--------------------
Operating Margin 28,163 27,487
--------------------
Other Operating Expenses 14,784 14,671
Depreciation 4,631 4,420
Other Taxes 2,211 1,938
--------------------
Total 21,626 21,029
--------------------
Operating Income 6,537 6,458
Other Income - Net 2,171 1,525
--------------------
Operating and Other Income 8,708 7,983
Interest Expense 4,313 4,369
--------------------
Income before Income Taxes 4,395 3,614
Income Taxes 1,815 1,334
--------------------
NET INCOME 2,580 2,280
Retained Earnings at Beginning
of Period 7,252 7,688
--------------------
Total 9,832 9,968
--------------------
Dividends Declared:
Preferred Stock 15 16
Common Stock 2,939 2,700
--------------------
Total Dividends 2,954 2,716
--------------------
Retained Earnings at End
of Period $ 6,878 $ 7,252
====================
Earnings Available for Common
Shares $ 2,565 $ 2,264
====================
Average Common Shares
Outstanding 2,484.4 2,322.0
--------------------
Basic and Diluted Earnings
Per Common Share $ 1.03 $ 0.98
====================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
---------------------------
(In Thousands)
December 31, June 30,
1999 1999
------------ --------
(Unaudited) (Audited)
ASSETS:
Property, Plant and Equipment
- at original cost:
Gas-related activities $118,146 $110,405
Unregulated activities 14,625 14,007
-----------------------
132,771 124,412
Less: Accumulated Depreciation
and amortization:
Gas-related activities 35,185 34,075
Unregulated activities 7,267 6,973
-----------------------
42,452 41,048
Property, Plant and Equipment - Net:
Gas-related activities 82,961 76,330
Unregulated activities 7,358 7,034
-----------------------
90,319 83,364
Current Assets:
Cash 153 117
Accounts Receivable:
Gas-related activities (less 8,364 6,498
allowance for doubtful accounts
Dec.1999-$1,106;June 1999-$1,000)
Unregulated activities (less 1,321 654
allowance for doubtful accounts
Dec. 1999-$16;June 1999-$19)
Inventories:
Gas-related activities (at cost) 4,493 4,137
Unregulated activities (at the lower 253 164
of average cost or market)
Recoverable Gas Costs 2,772 188
Prepayments and Other 767 1,238
Prepaid Taxes 2,013 397
-----------------------
Total Current Assets 20,136 13,393
-----------------------
Deferred Debits:
Unamortized Debt Expense - Net 2,098 2,150
Capital Stock Expense - Net 209 232
Environmental Cleanup Costs 864 718
Other 3,120 2,293
-----------------------
Total Deferred Debits 6,291 5,393
-----------------------
Recoverable Environmental Cleanup
Costs 3,335 3,335
-----------------------
TOTAL ASSETS $120,081 $105,485
=======================
CAPITALIZATION AND LIABILITIES
Common Shareholders' Equity:
Common Shares $ 28,839 $ 28,596
Retained Earnings 6,878 9,300
-----------------------
Total Common Shareholders' Equity 35,717 37,896
-----------------------
Redeemable Cumulative
Preferred Stock 310 312
-----------------------
Long-Term Debt 40,000 40,000
-----------------------
Current Liabilities:
Notes Payable to Banks 22,350 7,100
Accounts Payable 2,655 2,636
Other Current Liabilities 2,648 2,628
-----------------------
Total Current Liabilities 27,653 12,364
-----------------------
Other Liabilities 2,264 1,538
-----------------------
Unamortized Investment Tax Credit 1,036 1,070
-----------------------
Deferred Income Taxes 9,766 8,970
-----------------------
Reserve for Recoverable Environmental
Cleanup Costs 3,335 3,335
-----------------------
TOTAL CAPITALIZATION AND LIABILITIES $120,081 $105,485
=======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
(In Thousands)
Six Months Ended
----------------------
12/31/99 12/31/98
-------- --------
Cash flows from Operating Activities:
Net Loss $ (927) $ (274)
Adjustments to Reconcile Net Loss
to Net Cash Used in Operating Activities:
Depreciation and Amortization 2,210 1,915
Provision for Losses on Accounts
Receivable 347 363
Recoverable Gas Costs (2,584) (2,362)
Deferred Income Taxes 796 821
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable (2,880) (5,051)
Inventories (445) (616)
Accounts Payable 19 (83)
Prepaid Taxes (1,616) (1,523)
Other 210 352
----------------------
Net Cash Used in Operating Activities (4,870) (6,458)
----------------------
Cash Flows Used in Investing Activities -
Construction Expenditures (9,090) (4,703)
----------------------
Cash Flows Provided by (Used in)
Financing Activities:
Dividends Paid (1,495) (1,385)
Proceeds from Notes Payable 15,250 10,875
Proceeds from Other Stock
Transactions - Net 241 1,753
----------------------
Net Cash Provided by
Financing Activities 13,996 11,243
----------------------
Net Increase in Cash 36 82
Cash at Beginning of Period 117 160
----------------------
Cash at End of Period $ 153 $ 242
======================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest(net of amount capitalized) $ 2,126 $ 2,141
======================
Income Taxes(net of refund) $ 280 $ 293
======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
Berkshire Energy Resources
Notes to Consolidated Financial Statements
December 31,1999
- ----------------------------------------------------------------------
(Dollars in Thousands Except Share Amounts)
NOTES:
OTHER FINANCIAL INFORMATION:
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete consolidated financial statements. The
Company has reclassified certain amounts for prior years to conform with
the fiscal year 2000 presentation. All adjustments, which in the opinion of
management are necessary for a fair presentation of the operations for the
interim periods presented, have been made. These adjustments are of a
normal recurring nature. The results of operations for such interim periods
are not necessarily indicative of results of operations for a full year.
These consolidated financial statements should be read in conjunction with
the summary of accounting policies and notes to financial statements
included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.
CONTINGENCIES:
ENVIRONMENTAL:
Like other companies in the natural gas industry, the Company is a
party to governmental actions associated with former gas manufacturing
sites. Management estimates that expenditures to remediate and monitor
known environmental sites will range from $3,335 to $12,673. In accordance
with SFAS No. 5, the Company has recorded the most likely cost of $3,335.
The Company's unamortized cost at December 31, 1999 was $864 and should be
recovered over a seven-year period through the Local Distribution
Adjustment Clause (LDAC).
SEGMENT INFORMATION
The Company operates two segments: regulated activities and
unregulated diversified businesses. Gas-related activities (regulated)
consist primarily of natural gas distribution to residential, commercial
and industrial customers, as well as the sale and leasing of gas-burning
equipment. Diversified businesses (unregulated) consist primarily of the
distribution of liquefied petroleum gas, the commodity sale of energy to
commercial and industrial customers and providing on-premise HVAC (Heating
Ventilation and Air Conditioning) and plumbing services in commercial,
industrial and residential markets. The Company's primary market is western
Massachusetts, eastern New York and southern Vermont.
Information about the Company's operations, by business segments is
presented below.
Revenues: Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Gas-Related Activities $12,085 $11,981 $16,224 $16,228
Unregulated Activities 2,340 1,340 2,976 1,930
----------------------------------------------
Total $14,425 $13,321 $19,200 $18,158
==============================================
Operating Margin: Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Gas-Related Activities $ 6,555 $ 6,761 $ 9,111 $ 9,449
Unregulated Activities 1,010 764 1,346 1,092
----------------------------------------------
Total $ 7,565 $ 7,525 $10,457 $10,541
==============================================
Operating Income(Loss): Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Gas-Related Activities $ 1,454 $ 1,557 $ 468 $ 769
Unregulated Activities (462) 181 (620) 5
----------------------------------------------
Total $ 992 $ 1,738 $ (152) $ 774
==============================================
Net Income(Loss): Three Months Ended Six Months Ended
12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- --------
Gas-Related Activities $ 565 $ 491 $ (317) $ (299)
Unregulated Activities (519) 111 (610) 25
----------------------------------------------
Total $ 46 $ 602 $ (927) $ (274)
==============================================
Property, Plant and Equipment:
Property, Plant and Equipment for Gas-Related activities include
Construction Work in Process (CWIP) of $5,384,000 on December 31, 1999 and
$534,000 on June 30,1999. Included in the December 31, 1999 CWIP is
$5,116,000 for ongoing expenditures related to the construction of a LNG
facility.
Merger with Energy East:
On November 9, 1999, the Company signed a definitive merger agreement
with Energy East Corporation under which the Company will become a wholly-
owned subsidiary of Energy East. Energy East will acquire all of the
common shares of Berkshire Energy Resources for $38.00 per share in cash.
The transaction has an equity market value of approximately $96 million,
based on approximately 2,513,905 Berkshire common shares outstanding.
Energy East will also assume approximately $40,000,000 of Berkshire
preferred stock and long-term debt. The transaction will be accounted for
using the purchase method of accounting.
The merger is subject to, among other things, the approvals of
Berkshire shareholders and the Securities and Exchange Commission (SEC).
The Company expects the transaction to close by the end of the second
quarter of calendar year 2000.
SUBSEQUENT EVENT
To provide protection from dramatic weather fluctuations, the Company
purchased a weather derivative for the winter period January 1, 2000,
through March 31, 2000. Berkshire Energy Resources will receive cash
proceeds in the event that the total heating degree days for the
aforementioned winter period are less than 95% of the twenty year average
degree days for the period. The Company would be reimbursed in the fourth
quarter of fiscal 2000, based on the number of degree days under the 95%
threshold. In the event that the heating degree days are 107.5% more than
the twenty year average, the Company will pay the broker an amount
calculated from a formula based on the number of degree days over the
average.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ---------------------------------------------------------------------------
Results of Operations - Second Quarter Ended December 31, 1999 versus
Second Quarter Ended December 31, 1998
- ---------------------------------------------------------------------------
Consolidated net income was $46,000 for the three months ended
December 31, 1999 compared to $602,000 for the same period a year earlier.
Operating Margin for both natural gas and propane increased $40,000 or 0.5%
as compared to 1998.
Operating Margin on sales of natural gas decreased $207,000 or 3.1%
as compared to 1998. The decrease was due to the migration of customers
from firm sales to transportation and interruptible rates. Operating
Margin (Operating Margin or Gross Profit = Operating Revenues net of Cost
of Gas Sold) is primarily affected by the level of firm gas sold and
transported. Interruptible gas sold and transported has minimal or no
effect on Operating Margin since those margins are primarily flowed back to
the firm customers through the Cost of Gas Adjustment Clause (CGAC) and
LDAC. The Company's sales are affected by weather as the majority of its
firm customers use natural gas for heating. Changes in the cost of natural
gas do not affect Operating Margin as these changes are recovered or
returned to customers through the CGAC.
1999 1998
---- ----
3 Month Firm MCF Sold & Transported 1,628,000 1,594,000
3 Month Consolidated Operating Margin $7,565,000 $7,525,000
Other Operating Expenses increased $628,000 or 15.4% as compared with
1998. The increase is primarily due to professional fees related to the
merger with Energy East as well as operating expenses associated with
running the plumbing and heating businesses acquired in the fall of 1999.
Depreciation Expense increased $63,000 or 5.4% due to an increase in
the amount of depreciable assets.
Other Taxes increased $95,000, primarily due to increased property
taxes reflecting growth in plant assets and higher tax rates, and to a
lesser extent, payroll taxes on increased payroll base.
Other Income - Net increased $68,000 or 18.5% due to increases in
jobbing and gas supply revenues.
Income taxes decreased $65,000 due to lower earnings, partially
offset by the tax effects of non-deductible merger costs of $438,000.
Common Share Dividends increased $49,000 due to additional shares
outstanding through the Company's Dividend and Optional Cash Purchase Plan
(DRIP) and, to a lesser extent, an increase in the quarterly dividend to
$.295 per share from $.29 per share effective the fourth quarter of fiscal
year 1999.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ---------------------------------------------------------------------------
Results of Operations - Six Months Ended December 31, 1999 versus Six
Months Ended December 31, 1998
- ---------------------------------------------------------------------------
Operating Margin decreased $84,000 or 0.8% compared to the six months
ended December 31, 1998, due to lower margins on natural gas as explained
in the Second Quarter Results.
1999 1998
---- ----
6 Month Firm MCF Sold & Transported 2,292,000 2,297,000
6 Month Consolidated Operating Margin $10,457,000 $10,541,000
Other Operating Expenses increased $484,000 or 6.5%, Depreciation
increased $193,000 or 12.1%, Other Taxes increased $165,000 or 22.4%, Other
Income increased $59,000 or 6.1%, Income Tax Benefit increased $145,000
partially offset by increased taxes due to non-deductible merger costs, and
Common Share Dividends increased $110,000, all for the same reasons
discussed in the Second Quarter Results above.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- ---------------------------------------------------------------------------
Results of Operations - Twelve Months Ended December 31, 1999 versus Twelve
Months Ended December 31, 1998
- ---------------------------------------------------------------------------
Earnings available for Common Stock were $2,565,000 for the twelve
months ended December 31, 1999 as compared to $2,264,000 for 1998.
Operating Margin increased $676,000 or 2.5% from 1998. The increase
is primarily due to growth in the propane customer base, partially due to
the acquisition of a local propane dealer.
1999 1998
---- ----
12 Month Firm MCF Sold & Transported 6,186,000 5,989,000
12 Month Consolidated Operating Margin $28,163,000 $27,487,000
Other Operating Expenses increased by $113,000 as a result of
professional fees related to the merger with Energy East as well as
operating expenses associated with running the plumbing and heating
businesses acquired during the second quarter of fiscal 2000, partially
offset by lower bad debts of the regulated utility due to a change in the
recovery mechanism for the portion of bad debt expense related to gas
costs, and a reduction of pension costs as a result of very positive
performance of the investment vehicles in which fund assets are invested.
Depreciation increased $211,000 or 4.8% due to additions to plant
assets.
Other Taxes increased $273,000 or 14.1% due to increases in the plant
property tax base and municipal tax rates and payroll taxes related to
increased payroll.
Other Income - Net increased $646,000 or 42.4% primarily representing
proceeds recognized from weather insurance. The Company purchased
insurance to protect against warmer than normal weather for the 1998-1999
winter period.
Income Taxes increased $481,000 due to an increase in earnings and
the tax effects of non-deductible merger costs of $438,000.
Common Share Dividends increased by $239,000 or 8.9% due to
additional shares outstanding through the Company's Dividend Reinvestment
and Optional Cash Purchase Plan (DRIP) over the twelve-month period, and to
a lesser extent, an increase in the quarterly dividend to $.295 per share
from $.29 per share effective the fourth quarter of fiscal year 1999.
LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 1999
Cash flows used in operating activities have decreased by $1,588,000
from the six months ended December 31, 1998, primarily due to a decrease in
accounts receivable. Capital requirements have been primarily funded by
internal sources. The issuance of long-term financing is dependent on
management's evaluation of needs, financial market conditions and other
factors. Short-term bank financing is used to meet seasonal cash
requirements. The Company has adequate resources to cover immediate cash
needs.
The Company initially finances construction expenditures and other
funding needs primarily with internal sources, short-term bank borrowings
and the reinvestment of dividends. The Company continually evaluates its
short-term borrowing position, and based on prevailing interest rates,
market conditions, and other considerations, makes determinations regarding
conversion of short-term borrowings to long-term debt or equity. The
Company added $9,090,000 to Property, Plant and Equipment during the six
months ended December 31, 1999, of which $5,116,000 relates to the ongoing
construction of a LNG facility. The remaining construction expenditures
primarily represent investments in new and replacement mains and services.
Merger with Energy East:
On November 9, 1999, the Company signed a definitive merger agreement
with Energy East Corporation under which the Company will become a wholly-
owned subsidiary of Energy East. Energy East will acquire all of the
common shares of Berkshire Energy Resources for $38.00 per share in cash.
The transaction has an equity market value of approximately $96 million,
based on approximately 2,513,905 million Berkshire common shares
outstanding. Energy East will also assume approximately $40,000,000 of
Berkshire preferred stock and long-term debt. The transaction will be
accounted for using the purchase method of accounting.
The merger is subject to, among other things, the approvals of
Berkshire shareholders and the Securities and Exchange Commission (SEC).
The Company expects the transaction to close by the end of the second
quarter of calendar 2000.
Business Acquisitions:
The Company purchased the assets of Shedd Inc. and Yankee Plumbing
and Heating Inc., based in Pittsfield, Massachusetts, in the fall of 1999.
Services provided by these companies include the sale, installation and
maintenance of boilers, furnaces, heat pumps and air conditioning equipment
and ductwork. These businesses will be operated under Berkshire Service
Solutions, an unregulated subsidiary that is engaged in the commodity sale
of energy to commercial and industrial customers and provides on-premise
HVAC and plumbing services in commercial, industrial and residential
markets.
The acquisition of these companies demonstrates the Company's
commitment to expand opportunities in the competitive energy marketplace.
The capital structure of the Company at December 31, 1999 was 47.0%
Common Equity, .4% Preferred Stock and 52.6% Long-Term Debt.
Funds for environmental clean-up costs are initially financed through
short-term borrowings and all such costs will be recovered over a seven-
year period under a ruling issued by the Massachusetts Department of
Telecommunications and Energy (DTE).
Year 2000 Compliance
The Company successfully completed the replacement of its core
business information systems including billing, customer service,
accounting, payroll and inventory. Other areas of the business not related
to its core business information systems were tested and remediated. These
areas included meter reading, dispatch, desktop PC's, administrative, and
telephone systems. The Company did not experience any Year 2000 disruptions
or system related problems during the new-year rollover.
The total cost to the Company of Year 2000 Compliance activities has
not been material to its financial position or results of operations in any
given year. Management has budgeted fifty-thousand dollars for fiscal year
2000 to address Year 2000 related expenditures.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
This Quarterly Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those contemplated by such statements.
Such statements reflect management's current views, are based on many
assumptions and are subject to risks and uncertainties.
Certain important factors which could cause such results to differ
include risks associated with the Company's maintaining contracts with
specific customers, government regulation, the increasingly competitive
nature of the markets in which the Company is engaged, and dependence on
key personnel. These factors are not intended to represent a complete list
of the general or specific risks that may affect the Company.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
No developments during the quarter.
Item 2. Changes in Securities
- ------- ---------------------
Not Applicable
Item 3. Defaults Upon Senior Securities
- ------- -------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not Applicable
Item 5. Other Information
- ------- -----------------
Not Applicable
Item 6. Exhibits and Reports on Form 8 - K
- ------- ----------------------------------
(a) List of Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
A report on Form 8-K was filed on November 10, 1999, to
report the occurrence of an event covered by Item 5 by the
Company regarding a definitive merger agreement with
Energy East Corporation on November 9, 1999.
The consolidated balance sheet as of December 31, 1999, the related
consolidated statements of operations and retained earnings for the three
month, six month and twelve month periods ended December 31, 1999 and 1998,
and the consolidated statements of cash flows for the six month periods
ended December 31, 1999 and 1998 have been reviewed, prior to filing, by
the Registrant's independent public accountants, Deloitte & Touche LLP,
whose report covering their review of the consolidated financial statements
is presented below.
Deloitte &
Touche LLP
- -------------
------------------------------------------
City Place Telephone:(860) 280-3000
185 Asylum Street Facsimile:(860) 280-3051
Hartford, Connecticut 06103-3402
INDEPENDENT ACCOUNTANTS' REPORT
Berkshire Energy Resources:
We have reviewed the accompanying balance sheet of Berkshire Energy
Resources (formerly The Berkshire Gas Company)(the "Company") as of
December 31, 1999, the related consolidated statements of operations and
retained earnings for the three month, six month and twelve month periods
ended December 31, 1999 and 1998, and the consolidated statement of cash
flows for the six month periods ended December 31, 1999 and 1998. These
consolidated financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, we do not express
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Berkshire Energy Resources as
of June 30, 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated August 12, 1999, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of June 30, 1999 is fairly stated, in all material respects, in
relation to the balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
- -------------------------------
Deloitte & Touche LLP
February 7, 2000
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.
Berkshire Energy Resources
-------------------------------
Registrant
/s/ Michael J. Marrone
-------------------------------
Michael J. Marrone
Vice President, Treasurer &
Chief Financial Officer
Dated: February 11, 2000