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 March 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 March 31, 1999 the Registrant had issued and outstanding 2,448,313
shares of Common Stock, no par value.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS - Unaudited
-------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
Three Months Ended
3/31/99 3/31/98
----------------------
Operating Revenues $23,544 $24,768
Cost of Gas Sold 10,626 12,715
----------------------
Operating Margin 12,918 12,053
----------------------
Other Operating Expenses 4,241 3,913
Depreciation 1,974 2,041
Other Taxes 857 812
----------------------
Total 7,072 6,766
----------------------
Operating Income 5,846 5,287
Other Income - Net 986 261
----------------------
Operating and Other Income 6,832 5,548
Interest Expense 1,126 1,129
----------------------
Pre-Tax Income 5,706 4,419
Income Taxes 2,192 1,680
----------------------
NET INCOME 3,514 2,739
Retained Earnings at Beginning
of Period 7,252 7,688
----------------------
Total 10,766 10,427
----------------------
Dividends Declared:
Preferred Stock 3 4
Common Stock 710 651
----------------------
Total Dividends 713 655
----------------------
Retained Earnings at End
of Period $10,053 $ 9,772
======================
Earnings Available for Common
Stock $ 3,511 $ 2,735
----------------------
Average Shares of Common Stock
Outstanding 2,448.3 2,285.7
Basic and Diluted Earnings
Per Share of Common Stock $1.43 $1.20
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS - Unaudited
-------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
Nine Months Ended
3/31/99 3/31/98
----------------------
Operating Revenues $41,677 $45,571
Cost of Gas Sold 18,242 22,887
----------------------
Operating Margin 23,435 22,684
----------------------
Other Operating Expenses 11,416 10,741
Depreciation 3,735 3,622
Other Taxes 1,594 1,481
----------------------
Total 16,745 15,844
----------------------
Operating Income 6,690 6,840
Other Income - Net 1,891 1,316
----------------------
Operating and Other Income 8,581 8,156
Interest Expense 3,361 3,387
----------------------
Pre-Tax Income 5,220 4,769
Income Taxes 1,980 1,790
----------------------
NET INCOME 3,240 2,979
Retained Earnings at Beginning
of Period 8,911 8,739
----------------------
Total 12,151 11,718
----------------------
Dividends Declared:
Preferred Stock 11 12
Common Stock 2,087 1,934
----------------------
Total Dividends 2,098 1,946
----------------------
Retained Earnings at End
of Period $10,053 $ 9,772
======================
Earnings Available for Common
Stock $ 3,229 $ 2,967
----------------------
Average Shares of Common Stock
Outstanding 2,384.8 2,255.1
----------------------
Basic and Diluted Earnings
Per Share of Common Stock $1.35 $1.32
======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS - Unaudited
-------------------------------------------------------------------
(In Thousands Except Per Share Amounts)
Twelve Months Ended
3/31/99 3/31/98
----------------------
Operating Revenues $50,707 $56,797
Cost of Gas Sold 22,378 28,547
----------------------
Operating Margin 28,329 28,250
----------------------
Other Operating Expenses 14,736 14,198
Depreciation 4,522 4,447
Other Taxes 1,983 1,841
----------------------
Total 21,241 20,486
----------------------
Operating Income 7,088 7,764
Other Income - Net 2,178 1,592
----------------------
Operating and Other Income 9,266 9,356
Interest Expense 4,365 4,425
----------------------
Pre-Tax Income 4,901 4,931
Income Taxes 1,846 1,854
----------------------
NET INCOME 3,055 3,077
Retained Earnings at Beginning
of Period 9,772 9,246
----------------------
Total 12,827 12,323
----------------------
Dividends Declared:
Preferred Stock 15 12
Common Stock 2,759 2,539
----------------------
Total Dividends 2,774 2,551
----------------------
Retained Earnings at End
of Period $10,053 $ 9,772
======================
Earnings Available for Common
Stock $ 3,040 $ 3,065
----------------------
Average Shares of Common Stock
Outstanding 2,359.0 2,239.3
----------------------
Basic and Diluted Earnings
Per Share of Common Stock $ 1.29 $ 1.37
======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
---------------------------
(In Thousands)
March 31, June 30,
1999 1998
-----------------------
(Unaudited) (Audited)
ASSETS:
Utility Plant:
Utility Plant - at original cost $110,609 $106,654
Less: Accumulated Depreciation 34,436 31,371
-----------------------
Utility Plant - Net 76,173 75,283
-----------------------
Other Property:
Other Property - at original cost 13,961 12,784
Less: Accumulated Depreciation 7,048 6,420
-----------------------
Other Property - Net 6,913 6,364
-----------------------
Current Assets:
Cash 259 160
Accounts Receivable (net of
allowance for doubtful accounts 13,141 6,096
Mar. 1999-$1,162;June 1998-$974)
Other Receivables 844 181
Inventories (at the lower of
average cost or market):
Natural Gas 1,272 2,313
Liquefied Petroleum 75 134
Materials and Supplies 1,906 1,814
Prepayments and Other 587 979
-----------------------
Total Current Assets 18,084 11,677
-----------------------
Deferred Debits:
Unamortized Debt Expense 2,156 2,200
Capital Stock Expense 242 275
Environmental Cleanup Costs 903 800
Other 1,543 1,414
-----------------------
Total Deferred Debits 4,844 4,689
-----------------------
Recoverable Environmental Cleanup
Costs 3,290 3,290
-----------------------
TOTAL ASSETS $109,304 $101,303
=======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED BALANCE SHEETS
---------------------------
(In Thousands)
March 31, June 30,
1999 1998
----------------------
(Unaudited) (Audited)
CAPITALIZATION AND LIABILITIES
Common Shareholders' Equity:
Common Stock-no par $ 27,412 $ 24,625
Retained Earnings 10,053 8,911
----------------------
Total Common Shareholders' Equity 37,465 33,536
----------------------
Redeemable Cumulative Preferred Stock 312 321
----------------------
Long-Term Debt 40,000 34,000
----------------------
Current Liabilities:
Notes Payable to Banks 10,100 7,085
Current Maturities of Long-Term Debt 0 6,000
Accounts Payable 2,010 3,024
Other Current Liabilities 2,567 3,098
Refundable(Recoverable) Gas Costs 110 (370)
Taxes Accrued (Prepaid) 2,199 (224)
----------------------
Total Current Liabilities 16,986 18,613
----------------------
Other Liabilities 1,738 1,676
----------------------
Unamortized Investment Tax Credit 1,087 1,139
----------------------
Deferred Income Taxes 8,426 8,728
----------------------
Reserve for Recoverable Environmental
Cleanup Costs 3,290 3,290
----------------------
TOTAL CAPITALIZATION AND LIABILITIES $109,304 $101,303
======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
-------------------------------------------------
(In Thousands)
Nine Months Ended
3/31/99 3/31/98
-----------------------
Cash flows from Operating Activities:
Net Income $ 3,240 $ 2,979
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 4,107 4,125
Provision for Losses on Accounts
Receivable 827 852
Refundable(Recoverable) Gas Costs 480 1,856
Deferred Income Taxes (302) (854)
Changes in Assets and Liabilities Which
Provided (Used) Cash:
Accounts Receivable (7,872) (5,359)
Other Receivables (663) 204
Inventories 1,008 878
Unamortized Debt Expense (28) 0
Accounts Payable (1,014) (1,130)
Taxes Accrued 2,423 2,621
Other (308) (1,571)
----------------------
Total Adjustments (1,342) 1,622
----------------------
Net Cash Provided by Operating Activities 1,898 4,601
----------------------
Cash Flows used in Investing Activities:
Construction Expenditures (5,493) (5,197)
----------------------
Cash Flows from Financing Activities:
Dividends Paid (2,099) (1,946)
Proceeds from Notes Payable 3,015 1,345
Redemption of Preferred Stock (9) (42)
Proceeds from Other
Stock Transactions 2,787 1,330
----------------------
Net Cash Provided by Financing Activities 3,694 687
----------------------
Net Increase in Cash 99 91
Cash at Beginning of Period 160 356
----------------------
Cash at End of Period $ 259 $ 447
======================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Interest(net of amount capitalized) $ 3,660 $ 3,253
======================
Income Taxes(net of refund) $ 38 $ 352
======================
See Independent Accountants' Review Report and Notes to
Financial Statements.
Berkshire Energy Resources
Notes to Consolidated Financial Statements
March 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 1999 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,
1998.
BERKSHIRE ENERGY RESOURCES (formerly The Berkshire Gas Company)
The Berkshire Gas Company adopted a holding company corporate
structure effective December 31, 1998, to capitalize on competitive
opportunities associated with the deregulation of the natural gas industry.
The adoption of a holding company structure effectively reorganized
and segregated the Company's regulated business activities from its non-
regulated activities, thereby offering greater flexibility to compete in
non-regulated markets without the inherent delay of regulation.
The holding company, known as Berkshire Energy Resources, has been
organized as a Massachusetts Business Trust and initially has as its
subsidiaries The Berkshire Gas Company, Berkshire Propane, Inc., and
Berkshire Energy Marketing, Inc.
The results of operations for these subsidiaries/divisions have been
reflected in the accompanying consolidated financial statements for the
period ended March 31, 1999. Effective December 31, 1998, the outstanding
shares of The Berkshire Gas Company Common Stock were automatically
exchanged on a share-for-share basis for Berkshire Energy Resources Common
Shares (no par value), and Berkshire Energy Resources became the holding
company of The Berkshire Gas Company. The Berkshire Gas Company stock
symbol, BGAS has changed to BERK, in recognition of the new corporate
identity. The stock continues to be traded on the Nasdaq Stock Market.
WEATHER INSURANCE
To provide protection from dramatic weather fluctuations, the Company
purchased weather insurance for the winter period November 1, 1998, through
March 31, 1999. Berkshire Gas will receive insurance proceeds based on the
criteria that the total degree days for the aforementioned winter period
were less than 95% of the twenty-year average degree days for the period.
The Company has recognized proceeds, based on the number of degree days
under the 95% threshold.
LONG-TERM DEBT
On April 1, 1999 the Company rolled-over the $6,000,000 Medium-Term
Note at 6.10%, for a five-year term.
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 $3,290 to $12,302. In accordance
with SFAS No. 5, the Company has recorded the most likely cost of $3,290.
The Company's unamortized cost at March 31, 1999 was $903 and should be
recovered over a seven-year period through the Cost of Gas Adjustment
Clause ("CGAC").
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------------
Results of Operations - Third Quarter Ended March 31, 1999 versus Third
Quarter Ended March 31, 1998
- --------------------------------------------------------------------------
The Company considers Operating Margin (Operating Margin or Gross
Profit Operating Revenues Net of Cost of Gas Sold) to be a more pertinent
measure of operating results than Operating Revenues. This is due
primarily to the fact that revenues include changes in the cost of natural
gas which must be recovered or returned to customers through the Cost of
Gas Adjustment Clause. Consequently, changes in the cost of gas will
effect revenue levels, but does not have a corresponding effect on income.
Additionally, margins earned on interruptible gas sold and transported are
flowed back to the customers and therefore are not included in income.
Accordingly, the discussion below pertains to Operating Margin.
Operating Margin increased $865,000 or 7.2% from the three months
ended March 31, 1998. The effects of 11% colder weather during this
quarter resulted in increased sales volumes for both natural gas and
propane. Also, growth in the propane customer base contributed to the
additional margins.
1999 1998
-----------------
3 Month Firm MCF Sold & Transported 2,691,000 2,559,000
3 Month Consolidated Operating Margin $12,918,000 $12,053,000
Other Operating Expenses increased $328,000 or 8.4%, primarily
representative of additional administrative costs incurred by the Company
to implement changes to the corporate structure as well as the development
of strategies to compete in the deregulated market. Also effecting
operating expenses were higher marketing costs, customer service expenses
and investments in new technologies. Partially offsetting the increases
was a decrease in bad debt expense as a result of a change in the recovery
mechanism for the portion of bad debt expense related to gas costs. This
portion of the bad debts will be recovered through the CGAC.
Depreciation decreased $67,000 due to reclassification of
depreciation expense related to the propane subsidiary's leasing of
property.
Other Taxes increased $45,000 primarily due to increased personal
property taxes reflecting growth in plant assets and higher tax rates.
Other Income increased $725,000 primarily representing gross proceeds
recognized from weather insurance. The Company purchased insurance to
protect against warmer than normal weather for the winter period of
November 1, 1998 through March 31, 1999.
Income Taxes increased $512,000 due to a related increase in Pre-Tax
Income.
Dividends were $59,000 higher due to an increase in the number of
shares outstanding reflecting active shareholder participation in the
Company's Dividend Reinvestment Program ("DRIP").
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
Results of Operations - Nine Months Ended March 31, 1999 versus Nine Months
Ended March 31, 1998
- -------------------------------------------------------------------------
Operating Margin increased $751,000 or 3.3% as compared with the nine
months ended March 31, 1998 for the same reasons as discussed in the Three
Months Results discussed above.
1999 1998
------------------
9 Month Firm MCF Sold & Transported 4,988,000 4,983,000
9 Month Consolidated Operating Margin $23,435,000 $22,684,000
Other Operating Expenses increased $675,000 or 6.3% due to the same
reasons as explained in the Three Months Results discussed above.
Depreciation Expense increased $113,000 due to an increase in the
amount of depreciable assets.
Other Taxes increased $113,000 or 7.6%; Other Income increased
$575,000 or 43.7%; Income Taxes increased $190,000; Dividends on Common
Stock increased $153,000 from the nine months ended March 31, 1998; all for
the same reasons previously discussed in the Results of Operations - Third
Quarter.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
- -------------------------------------------------------------------------
Results of Operations - Twelve Months Ended March 31, 1999 versus Twelve
Months Ended March 31, 1998
- -------------------------------------------------------------------------
Earnings available for Common Stock were $3,040,000 for the twelve
months ended March 31, 1999 as compared to $3,065,000 for 1998. Earnings
for both years are lower than anticipated due to the effects of consecutive
warmer winters.
Operating Margin increased $79,000 or 0.3% from the twelve months
ended March 31, 1998. Margins were similar to the prior year as both years
reflected warmer temperatures.
1999 1998
------------------
12 Month Firm MCF Sold & Transported 6,121,000 6,424,000
12 Month Consolidated Operating Margin $28,329,000 $28,250,000
Other Operating Expenses rose $538,000 or 3.8% over the twelve months
ended March 31, 1998. The increase is due to costs incurred for the
restructuring to a holding company, employee benefits, costs for the
development and implementation of new information systems companywide
and increased marketing and promotion expenses.
Depreciation Expense increased $75,000 or 1.7% due to an increase in
depreciable assets.
Other Income increased $586,000 or 36.8% from 1998 primarily due to
weather insurance proceeds previously described above.
Other Taxes increased $142,000 or 7.7% due to increases in plant
property and municipal tax rates.
Dividends declared on Common Stock increased $220,000 primarily due
to additional shares outstanding through the Company's DRIP, and to a
lesser extent, a quarterly increase in dividends to $.29 per share from
$.285 in the fourth quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1999
The Company added approximately $5,493,000 to Plant assets during the
nine months ended March 31, 1999. These construction expenditures
primarily represent investments in new and replacement mains and services.
The capital structure of the Company at March 31, 1999 was 48.2%
Common Equity, 0.4% Preferred Stock and 51.4% Long-Term Debt.
Cash flows from operating activities have decreased compared to the
nine month period ended March 31, 1998, primarily due to fluctuation in
refundable (recoverable) gas costs, customer refunds and increases in
accounts receivable.
The Company initially finances construction expenditures and other
funding needs primarily with short-term bank borrowings, and with the funds
from the DRIP.
The Company continually evaluates its short-term borrowing position
and based on prevailing interest rates, market conditions, etc., makes
determinations regarding repayments of short-term borrowings through long-
term debt or equity.
It is management's view that the Company has adequate access to
capital markets and will have sufficient capital resources, both internal
and external, to meet anticipated capital requirements.
On April 1, 1999 the Company rolled over the $6,000,000 Medium Term
Note at 6.10%, for a five-year term.
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"), formerly the Massachusetts
Department of Public Utilities ("MDPU").
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.
Year 2000 Compliance
The Company has identified all significant applications that will
require modification to ensure Year 2000 Compliance. Internal and external
resources are being used to make the required modifications and test Year
2000 Compliance.
The Company believes that the most critical risk relates to the
replacement and modification of its business application software.
During the second quarter of fiscal 1999, the Company has replaced
its core business applications which support customer service, billing,
collection, jobbing and engineering. This upgraded system is Year 2000
compliant. The installation and testing of the upgrade to the Company's
current finance, accounting, payroll and inventory system is currently in
progress. It is anticipated that this will be completed by the end of the
current fiscal year, and those systems will be Year 2000 compliant. These
upgrades were initiated in the normal course of addressing business needs.
The Company has also assessed the other areas of its business not
related to its core information systems. Presently, the Company believes
that these areas which include automated meter reading, dispatch,
administrative and distribution, can be modified or upgraded without
disruption of service or material cost. Necessary upgrades and
replacements are expected to be completed by October, 1999.
Due to the complexity of the Year 2000 problem and the reliance on
certain critical vendors and suppliers, there can be no guarantees that the
Company will achieve Year 2000 compliance or that critical vendors and
suppliers will achieve Year 2000 compliance. A vendor management program
has been undertaken as part of the Company's effort to obtain reasonable
assurances from key vendors that there will not be any interruptions in the
supply of goods and services as a result of the Year 2000 issues. The
Company is preparing strategies to address potential failures of
significant vendors in its contingency plans.
The Company is currently developing a business contingency plan
addressing Year 2000 risks to its internal systems and critical vendors.
The plan will include continuation strategies for critical business
processes and is expected to be completed by mid-1999.
The total cost to the Company of Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. Management has budgeted $50,000
for fiscal year 2000 to address Year 2000 related expenditures. These
costs and the date on which the Company plans to complete Year 2000
modification and testing processes are based on management's best
estimates, which were derived utilizing numerous assumptions of future
events including the continued availability of certain resources, third
party modification plans and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could
differ from those plans.
BERKSHIRE ENERGY RESOURCES (formerly The Berkshire Gas Company)
Berkshire Gas Company adopted a holding company corporate structure
effective December 31, 1998, to capitalize on competitive opportunities
associated with the deregulation of the natural gas industry.
The adoption of a holding company structure effectively reorganized
and segregated the Company's regulated business activities from its non-
regulated activities, thereby offering greater flexibility to compete in
non-regulated markets without the inherent delay of regulation.
The holding company, known as Berkshire Energy Resources, has been
organized as a Massachusetts Business Trust and initially has as its
subsidiaries The Berkshire Gas Company, Berkshire Propane, Inc., and
Berkshire Energy Marketing, Inc. The results of operations for these
subsidiaries have been reflected in the accompanying consolidated financial
statements for the period ended March 31, 1999. Effective December 31,
1998, the outstanding shares of Berkshire Gas Company Common Stock were
automatically exchanged on a share-for-share basis for Berkshire Energy
Resources Common Shares (no par value), and Berkshire Energy Resources
became the holding company of Berkshire Gas Company. The Berkshire Gas
Company stock symbol, BGAS has changed to BERK, in recognition of the new
corporate identity. The stock continues to be traded on the Nasdaq Stock
Market.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -----------------------------
No developments during the quarter.
Item 2. Changes in Securities
- ---------------------------------
On April 1, 1999 the Company rolled-over the
$6,000,000 Medium-Term Note at 6.10%, for a five-year
term.
Item 3. Defaults Upon Senior Securities
- -------------------------------------------
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ---------------------------------------------------------------
None
Item 5. Other Information
- -----------------------------
Not Applicable
Item 6. Exhibits and Reports on Form 8 - K
- ----------------------------------------------
(a) List of Exhibits
Exhibit 27 - Financial Data Schedule
The consolidated balance sheet as of March 31, 1999, the related
consolidated statements of income and retained earnings for the three
month, nine month and twelve month periods ended March 31, 1999 and 1998,
and the consolidated statements of cash flows for the nine month periods
ended March 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 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 consolidated balance sheet of Berkshire
Energy Resources (formerly, Berkshire Gas Company) (the "Company") as of
March 31, 1999, the related consolidated statements of income and retained
earnings for the three month, nine month and twelve month periods ended
March 31, 1999 and 1998, and the consolidated statements of cash flows for
the nine month periods ended March 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 reviews, we are not aware of any material modifications that
should be made to such 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 balance sheet of The Berkshire Gas Company as of June 30,
1998, and the related statements of income, stockholders' equity, and of
cash flows for the year then ended (not presented herein); and in our
report dated August 12, 1998, we expressed an unqualified opinion on those
financial statements. In our opinion, the information set forth in the
accompanying balance sheet as of June 30, 1998 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
/s/ Deloitte & Touche LLP
May 10, 1999
SIGNATURES
----------
Pursuant to the requirements of the Securities and 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: May 13, 1999