1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
-----------------------------------------
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 1-2297
EASTERN ENTERPRISES
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1270730
---------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
---------------------------------------------------
(Address of principal executive offices)
(Zip Code)
617-647-2300
-------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------
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
----- -----
The number of shares of Common Stock outstanding of Eastern
Enterprises as of April 29, 1994 was 20,967,526.
2
Form 10-Q
Page 2.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Company or group of companies for which report is filed:
EASTERN ENTERPRISES AND SUBSIDIARIES ("Eastern")
Consolidated Statement of Earnings
- - ----------------------------------
Three months ended March 31,
(In thousands, except per share amounts) 1994 1993
- - -------------------------------------------------------------------------
REVENUES $410,759 $368,368
OPERATING COSTS AND EXPENSES:
Operating costs 300,814 269,117
Selling, general & administrative expenses 33,185 34,623
Depreciation & amortization 19,966 18,011
-------- --------
353,965 321,751
-------- --------
OPERATING EARNINGS 56,794 46,617
OTHER INCOME (EXPENSE):
Interest income 425 854
Interest expense (9,416) (9,063)
Other, net (188) (218)
-------- --------
EARNINGS BEFORE INCOME TAXES 47,615 38,190
Provision for income taxes 18,927 15,165
NET EARNINGS $ 28,688 $ 23,025
======== ========
EARNINGS PER SHARE $ 1.37 $ 1.02
======== ========
DIVIDENDS PER SHARE $ .35 $ .35
======== ========
The accompanying notes are an integral part of these financial statements.
3
Form 10-Q
Page 3.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
Consolidated Balance Sheet
- - --------------------------
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
- - -------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 58,101 $ 52,240 $ 118,845
Receivables, less allowances 214,824 145,523 188,853
Inventories 59,428 87,568 68,931
Deferred gas costs 24,421 65,802 10,392
Other current assets 5,737 11,995 5,523
---------- ---------- ----------
Total current assets 362,511 363,128 392,544
INVESTMENTS:
Equity in U.S. Filter 44,193 44,292 -
Other investments 6,041 8,279 9,198
---------- ---------- ----------
Total investments 50,234 52,571 9,198
PROPERTY AND EQUIPMENT, AT COST 1,279,838 1,275,161 1,285,103
Less--Accumulated depreciation 506,177 489,196 492,335
---------- ---------- ----------
Net property and equipment 773,661 785,965 792,768
OTHER ASSETS:
Deferred post-retirement health
care costs 100,461 101,182 100,002
Goodwill, less amortization 13,137 13,231 90,266
Deferred charges and other costs 65,183 63,600 40,558
---------- ---------- ----------
Total other assets 178,781 178,013 230,826
---------- ---------- ----------
TOTAL ASSETS $1,365,187 $1,379,677 $1,425,336
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
Form 10-Q
Page 4.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
Consolidated Balance Sheet
- - --------------------------
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
- - ------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current debt $ 68,645 $ 114,335 $ 61,388
Accounts payable 67,221 76,161 66,933
Accrued expenses 42,605 31,280 30,223
Other current liabilities 66,928 63,703 48,777
---------- ---------- ----------
Total current liabilities 245,399 285,479 207,321
GAS INVENTORY FINANCING 32,079 59,297 33,789
LONG-TERM DEBT 362,846 328,939 355,037
RESERVES AND OTHER LIABILITIES:
Deferred income taxes 91,606 90,793 107,583
Post-retirement health care 104,139 104,730 104,750
Coal miners retiree health care 61,941 63,060 -
Preferred stock of subsidiary 29,205 29,197 29,343
Other reserves 51,708 54,444 53,961
---------- ---------- ----------
Total reserves and other
liabilities 338,599 342,224 295,637
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares -- 21,651,925 at
March 31, 1994; 21,644,378 at
December 31, 1993 and 23,640,582
at March 31, 1993 21,652 21,644 23,641
Capital in excess of par value 62,006 61,778 112,266
Retained earnings 320,644 299,131 423,797
Treasury stock at cost - 684,399
shares at March 31, 1994; 714,786
shares at December 31, 1993 and
999,326 shares at March 31, 1993 (18,038) (18,815) (26,152)
---------- ---------- ----------
Total shareholders' equity 386,264 363,738 533,552
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,365,187 $1,379,677 $1,425,336
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
Form 10-Q
Page 5.
Eastern Enterprises and Subsidiaries
- - ------------------------------------
Consolidated Statement of Cash Flows
- - ------------------------------------
Three months ended March 31,
(In thousands) 1994 1993
- - --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 28,688 $ 23,025
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 19,966 18,011
Income taxes and tax credits 13,904 13,724
Other changes in assets and liabilities:
Receivables (69,301) (50,895)
Inventories 28,140 24,147
Deferred gas costs 41,381 30,476
Accounts payable (8,940) (11,956)
Other 2,844 4,927
-------- --------
Net cash provided by operating activities 56,682 51,459
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,404) (10,781)
Short-term investments 12,974 (13,013)
Other (235) (2,228)
-------- --------
Net cash provided (used) by investing
activities 5,335 (26,022)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (7,856) (7,917)
Changes in notes payable (45,800) (961)
Proceeds from issuance of long-term debt 36,000 -
Repayment of long-term debt (1,435) (1,455)
Changes in gas inventory financing (27,218) (14,842)
Other 1,037 130
-------- --------
Net cash used by financing activities (45,272) (25,045)
-------- --------
Net increase in cash and cash equivalents 16,745 392
Cash and cash equivalents at beginning of year 23,766 91,377
-------- --------
Cash and cash equivalents at end of period 40,511 91,769
Short-term investments 17,590 27,076
-------- --------
CASH AND SHORT-TERM INVESTMENTS $ 58,101 $118,845
======== ========
The accompanying notes are an integral part of these financial statements.
6
Form 10-Q
Page 6.
EASTERN ENTERPRISES AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
March 31, 1994
1. ACCOUNTING POLICIES
It is Eastern's opinion that the financial information contained in
this report reflects all adjustments necessary to present a fair
statement of results for the period reported. All of these
adjustments are of a normal recurring nature. Results for the period
are not necessarily indicative of results to be expected for the year,
due to the seasonal nature of Eastern's operations. All accounting
policies have been applied in a manner consistent with prior periods.
Such financial information is subject to year-end adjustments and
annual audit by independent public accountants.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted in this Form
10-Q. Therefore these interim financial statements should be read in
conjunction with Eastern's 1993 Annual Report filed on Form 10-K with
the Securities and Exchange Commission.
SHORT-TERM INVESTMENTS
Effective January 1, 1994, Eastern adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities," which requires investments
in debt and equity securities to be be carried at fair value.
Eastern's investment in U.S. Filter is specifically excluded from SFAS
115 because it is accounted for under the equity method of accounting.
Pursuant to SFAS 115, Eastern has classified its investments in debt
and equity securities as available for sale. Accordingly, the net
unrealized gains and losses computed in marking these securities to
market have been reported within retained earnings. At March 31,
1994, the difference between the fair value and the original cost of
these securities is immaterial.
EARNINGS PER SHARE
Per share amounts are based on the weighted average number of common
shares outstanding and common equivalent shares (20,982,000 shares in
1994 and 22,684,000 shares in 1993).
7
Form 10-Q
Page 7.
2. INVENTORIES
The components of inventories were as follows:
March 31, Dec. 31, March 31,
(In thousands) 1994 1993 1993
---------------------------------------------------------------
Supplemental gas supplies $24,421 $53,152 $17,572
Other materials, supplies and
marine fuels 17,886 17,984 24,578
Finished products 17,121 16,432 26,781
------- ------- -------
$59,428 $87,568 $68,931
======= ====== =======
3. SUPPLEMENTAL CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
Three months ended March 31,
(In thousands) 1994 1993
-------------------------------------------------------------------
Cash paid during the year for:
Interest, net of amounts capitalized $2,172 $ 1,975
Income taxes $4,743 $ 2,209
8
Form 10-Q
Page 8.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES: Three months ended March 31,
(In thousands) 1994 1993 Change
------------------------------------------------------------
Boston Gas $314,302 $258,226 22%
Midland 58,166 65,850 (12)%
Water Products Group 38,291 44,292 NM
-------- --------
Total $410,759 $368,368 12%
======== ========
OPERATING EARNINGS: Three months ended March 31,
(In thousands) 1994 1993 Change
----------------------------------------------------------
Boston Gas $53,122 $41,228 29%
Midland 5,025 9,087 (45)%
Water Products Group (332) (2,613) NM
Headquarters (1,021) (1,085) 6%
-------- --------
Total $56,794 $46,617 22%
======== ========
BOSTON GAS
A $37.7 million rate increase which took effect November 1, 1993
increased 1994 revenues by $16.3 million. Colder weather in the
Boston Gas service territory increased revenues by $24.2 million.
Weather was 14% colder than normal compared with near normal weather
in 1993. Sales to new firm customers increased revenues and operating
earnings by $12.2 million and $3.7 million, respectively.
The unusually cold first quarter weather increased operating earnings
by about $5 million, after taking into account the higher
workload-related labor and operating costs associated with the colder
weather. Partially offsetting the increase in revenues were higher
depreciation charges, property taxes and bad debt expense.
MIDLAND ENTERPRISES
Reductions in contract towing, changes in commodity mix, rate
reductions and rate de-escalations resulted in a 12% decrease in
revenues from the prior year. Reduced volume from a long-term
contract currently subject to litigation and downtime for unscheduled
plant maintenance at Midland's largest customer contributed to a 29%
reduction in utility contract coal ton miles from the 1993 level.
Volume in 1993 was positively impacted by stockpiling in anticipation
of a possible coal miners strike. Redeployment of equipment to other
commodities and tramp towing helped limit the reduction in overall ton
miles to 6%. Midland's liquid barge business, which was sold in
December 1993, generated revenues of $2.7 million in the first quarter
of 1993.
Operating earnings were significantly impacted by the reduced utility
contract coal volume and lower rates associated with non-coal tonnage.
Higher operating costs resulting from reduced tow sizes, loading
delays and other inefficiencies
9
Form 10-Q
Page 9.
due to extended ice and high water conditions were partially offset by
implementation of cost savings programs. Adverse operating conditions
are expected to continue through most of the second quarter.
Midland has negotiated an extension of its long-term contract with its
largest customer, Cincinnati Gas & Electric Co., through the year
2000. Under the terms of the extension, Midland made some rate
concessions, retroactive to January 1, 1994, in exchange for certain
renewal and efficiency improvement rights.
WATER PRODUCTS GROUP
Revenues for WaterPro Supplies increased 26%, reflecting increases for
all of WaterPro's regions except the MidAtlantic. Most of WaterPro's
$1.3 reduction in operating loss was attributable to the increased
volume, partially offset by related selling expenses and a decrease in
margin percentage.
Ionpure Technologies, which was sold in the fourth quarter of 1993,
generated revenues of $13.9 million and an operating loss of $1.0 in
the first quarter of 1993.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that projected cash flow from operations, in
combination with currently available resources, is more than
sufficient to meet Eastern's 1994 capital expenditure and working
capital requirements, normal debt repayments and anticipated dividend
payments to shareholders.
In January 1994 Boston Gas issued $36.0 million of Medium-Term Notes,
the proceeds of which were used to reduce short-term indebtedness.
Consolidated capital expenditures, principally at Boston Gas, are
budgeted at approximately $60 million for 1994.
10
Form 10-Q
Page 10.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the registrant was held
on April 28, 1994, at which the shareholders voted to elect the
following Trustees for terms of office expiring at the 1997
Annual Meeting of Shareholders:
Richard R. Clayton, with 17,776,166 shares voting for
and 106,586 shares withholding authority;
Leonard R. Jaskol, with 17,778,963 shares voting for
and 103,789 shares withholding authority;
Harold T. Miller, with 17,772,845 shares voting for
and 109,907 shares withholding authority; and
William G. Salatich, with 17,773,313 shares voting for
and 109,439 shares withholding authority.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits
Exhibit 10.1 - Eastern's Supplemental Executive Retirement
Plan, as amended.
Exhibit 10.2 - Agreement dated April 28, 1994 between
Eastern and J. Atwood Ives.
Exhibit 10.3 - Agreement dated April 28, 1994 between
Eastern and Richard R. Clayton
(b) Report on Form 8-K
There were no reports on Form 8-K filed in the first
quarter of 1994.
11
Form 10-Q
Page 11.
SIGNATURES
It is Eastern's opinion that the financial information contained
in this report reflects all adjustments necessary to present a fair
statement of results for the period reported. All of these
adjustments are of a normal recurring nature. Results for the period
are not necessarily indicative of results to be expected for the year,
due to the seasonal nature of Eastern's operations. All accounting
policies have been applied in a manner consistent with prior periods.
Such financial information is subject to year-end adjustments and
annual audit by independent public accountants.
Pursuant to the requirements of the Securities Exchange Act of
1934, Eastern has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EASTERN ENTERPRISES
By JAMES J. HARPER
--------------------------
James J. Harper
Vice President and Controller
(Chief Accounting Officer)
May 2, 1994.