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 June 30, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 1-2297
EASTERN ENTERPRISES
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1270730
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 RIVERSIDE ROAD, WESTON, MASSACHUSETTS 02193
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(Address of principal executive offices)
(Zip Code)
617-647-2300
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(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
July 29, 1994 was 20,671,785.
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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 Operations
- ------------------------------------
(In thousands, except per share Three months ended June 30, Six months ended June 30,
amounts) 1994 1993 1994 1993
- -------------------------------------------------------------------------------------------------------------
REVENUES $253,879 $259,745 $664,638 $628,113
OPERATING COSTS AND EXPENSES:
Operating costs 191,354 199,061 492,168 468,177
Selling, general & adminis-
trative expenses 31,152 33,295 64,337 67,919
Depreciation & amortization 14,236 13,629 34,202 31,640
-------- -------- -------- --------
236,742 245,985 590,707 567,736
-------- -------- -------- --------
OPERATING EARNINGS 17,137 13,760 73,931 60,377
OTHER INCOME (EXPENSE):
Interest income 454 710 879 1,564
Interest expense (9,815) (8,633) (19,231) (17,696)
Other, net 2,240 (270) 2,052 (488)
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES 10,016 5,567 57,631 43,757
Provision for income taxes 3,855 2,303 22,782 17,468
-------- -------- -------- --------
Net earnings $ 6,161 $ 3,264 $ 34,849 $ 26,289
======== ======== ======== ========
EARNINGS PER SHARE $ .29 $ .14 $ 1.66 $ 1.16
======== ======== ======== ========
DIVIDENDS PER SHARE $ .35 $ .35 $ .70 $ .70
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
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Form 10-Q
Page 3.
Eastern Enterprises and Subsidiaries
- ------------------------------------
Consolidated Balance Sheet
- --------------------------
June 30, Dec. 31, June 30,
(In thousands) 1994 1993 1993
- --------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 51,788 $ 52,240 $ 75,033
Receivables, less allowances 165,462 145,523 163,616
Inventories 71,559 87,568 89,852
Deferred gas costs 44,214 65,802 12,913
Other current assets 7,735 11,995 9,499
---------- ---------- ----------
Total current assets 340,758 363,128 350,913
INVESTMENTS:
Equity in U.S. Filter 44,441 44,292 -
Other investments 5,876 8,279 9,062
---------- ---------- ----------
Total investments 50,317 52,571 9,062
PROPERTY AND EQUIPMENT, AT COST 1,271,210 1,275,161 1,290,337
Less--Accumulated depreciation 505,345 489,196 500,089
---------- ---------- ----------
Net property and equipment 765,865 785,965 790,248
OTHER ASSETS:
Deferred post-retirement health care
costs 99,607 101,182 100,711
Deferred charges and other costs 41,244 63,600 42,662
Goodwill, less amortization 13,042 13,231 89,632
---------- ---------- ----------
Total other assets 153,893 178,013 233,005
---------- ---------- ----------
TOTAL ASSETS $1,310,833 $1,379,677 $1,383,228
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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Form 10-Q
Page 4.
Eastern Enterprises and Subsidiaries
- ------------------------------------
Consolidated Balance Sheet
- --------------------------
June 30, Dec. 31, June 30,
(In thousands) 1994 1993 1993
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current debt $ 39,425 $ 114,335 $ 59,866
Accounts payable 70,272 76,161 75,319
Accrued expenses 36,755 31,280 24,601
Other current liabilities 49,701 63,703 39,446
---------- ---------- ----------
Total current liabilities 196,153 285,479 199,232
GAS INVENTORY FINANCING 36,692 59,297 24,782
LONG-TERM DEBT 361,836 328,939 333,460
RESERVES AND OTHER LIABILITIES:
Deferred income taxes 89,615 90,793 109,321
Post-retirement health care 103,431 104,730 105,457
Coal miners retiree health care 60,628 63,060 -
Preferred stock of subsidiary 29,213 29,197 29,343
Other reserves 49,297 54,444 52,603
---------- ---------- ----------
Total reserves and other
liabilities 332,184 342,224 296,724
SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value
Authorized shares -- 50,000,000
Issued shares -- 21,651,925 at
June 30, 1994; 21,644,378 at
December 31, 1993 and 23,644,378 at
June 30, 1993 21,652 21,644 23,644
Capital in excess of par value 61,951 61,778 112,353
Retained earnings 319,913 299,131 418,978
Treasury stock at cost - 754,240
shares at June 30, 1994; 714,786
shares at December 31, 1993 and
991,407 shares at June 30, 1993 (19,548) (18,815) (25,945)
--------- ---------- ----------
Total shareholders' equity 383,968 363,738 529,030
--------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,310,833 $1,379,677 $1,383,228
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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Form 10-Q
Page 5.
Eastern Enterprises and Subsidiaries
- ------------------------------------
Consolidated Statement of Cash Flows
- ------------------------------------
Six months ended June 30,
(In thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 34,849 $ 26,289
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 34,202 31,640
Income taxes and tax credits 4,867 5,655
Other changes in assets and liabilities:
Receivables (18,400) (25,658)
Inventories 13,614 3,226
Deferred gas costs 21,588 27,955
Accounts payable (5,889) (3,570)
Other 4,048 (7,226)
-------- --------
Net cash provided by operating activities 88,879 58,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,191) (21,142)
Short-term investments 12,955 (18,460)
Proceeds from sale of barge construction business 12,695 -
Other (3,277) (2,651)
-------- --------
Net cash provided (used) by investing
activities 1,182 (42,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (15,194) (15,838)
Changes in notes payable (74,500) (2,559)
Proceeds from issuance of long-term debt 36,000 -
Repayment of long-term debt (2,898) (22,898)
Changes in gas inventory financing (22,605) (23,849)
Purchase of treasury shares (1,961) -
Other 1,057 219
-------- --------
Net cash used by financing activities (80,101) (64,925)
--------- ---------
Net increase (decrease) in cash and cash equivalents 9,960 (48,867)
Cash and cash equivalents at beginning of year 23,766 91,377
-------- --------
Cash and cash equivalents at end of period 33,726 42,510
Short-term investments 18,062 32,523
-------- --------
CASH AND SHORT-TERM INVESTMENTS $ 51,788 $ 75,033
======== ========
The accompanying notes are an integral part of these financial statements.
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Form 10-Q
Page 6.
EASTERN ENTERPRISES AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
June 30, 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 periods reported. All of these adjustments are of a normal recurring
nature. Results for the periods 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 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 June 30, 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. Quarter and year-to-date shares are
20,969,000 and 20,975,000, respectively, in 1994 and 22,702,000 and 22,693,000,
respectively, in 1993.
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Form 10-Q
Page 7.
2. INVENTORIES
The components of inventories were as follows:
June 30, Dec. 31, June 30,
(In thousands) 1994 1993 1993
- -----------------------------------------------------------------------------------------------------------
Supplemental gas supplies $ 38,233 $ 53,152 $ 37,731
Other materials, supplies and marine
fuels 14,655 17,984 24,520
Finished products 18,671 16,432 27,601
-------- -------- --------
$ 71,559 $ 87,568 $ 89,852
======== ======== ========
3. SUPPLEMENTAL CASH FLOW INFORMATION
The following are supplemental disclosures of cash flow information:
Six months ended June 30,
(In thousands) 1994 1993
- -----------------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest, net of amounts capitalized $17,393 $16,126
Income taxes $17,692 $12,780
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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 June 30,
(In thousands) 1994 1993 Change
- ----------------------------------------------------------------------------------------------------------
Boston Gas $122,806 $128,567 (4)%
Midland 68,987 66,746 3%
Water Products Group 62,086 64,432 (4)%
-------- --------
Total $253,879 $259,745 (2)%
======== ========
Six months ended June 30,
(In thousands) 1994 1993 Change
- ----------------------------------------------------------------------------------------------------------
Boston Gas $437,108 $386,793 13%
Midland 127,153 132,596 (4)%
Water Products Group 100,377 108,724 (8)%
-------- --------
Total $664,638 $628,113 6%
======== ========
BOSTON GAS
A $37.7 million annualized rate increase which took effect November 1, 1993
increased revenues by $23.1 million for the first six months of 1994. Colder
weather in the Boston Gas service territory increased year-to-date revenues by
$18.7 million. Weather for first six months of 1994 was 7% colder than normal,
as the extremely cold winter was partially offset by 13% warmer than normal
temperatures in the second quarter. Weather for both periods of 1993 was near
normal.
MIDLAND ENTERPRISES
Revenues for the second quarter of 1994 increased 3% as a result of increased
spot coal shipments and backhauls, partially offset by lower revenues
associated with long-term contract coal shipments. For the first six months of
1994, reductions in contract towing, changes in commodity mix and rate
reductions resulted in a 4% decrease in revenues from the prior year.
Midland's liquid barge business, which was sold in December 1993, generated
revenues of $3.0 million and $5.7 million in the second quarter and first six
months of 1993, respectively.
Coal tonnage increased 12% in the second quarter from the comparable period in
1993, primarily reflecting increased spot coal shipments. Despite reduced
volume from a long-term contract currently subject to litigation, utility coal
tonnage increased 3% in the second quarter as 1993 tonnage was reduced by
extended utility plant outages. For the first six months of 1994, coal tonnage
increased 2% as increased spot coal shipments more than offset reduced volume
under the contract in litigation. Redeployment of equipment to other
commodities and towing for others resulted in overall increases in ton-miles
for the second quarter and first six months of 1994 of 8% and 1%, respectively.
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Form 10-Q
Page 9.
WATER PRODUCTS GROUP
Revenues for WaterPro Supplies for the second quarter and first six months of
1994 increased 20% and 22%, respectively, reflecting increased construction
activity. Ionpure Technologies, which was sold in the fourth quarter of 1993,
generated revenues of $12.7 million and $26.6 million for the second quarter
and first six months of 1993, respectively.
OPERATING EARNINGS:
Three months ended June 30,
(In thousands) 1994 1993 Change
------------------------------------------------------------------------------------------------------
Boston Gas $ 5,353 $ 4,321 24%
Midland 9,871 9,812 1%
Water Products Group 2,881 928 NM
Headquarters (968) (1,301) 26%
------- -------
Total $17,137 $13,760 25%
======= =======
Six months ended June 30,
(In thousands) 1994 1993 Change
------------------------------------------------------------------------------------------------------
Boston Gas $58,475 $45,549 28%
Midland 14,896 18,899 (21)%
Water Products Group 2,549 (1,685) NM
Headquarters (1,989) (2,386) 17%
------- -------
Total $73,931 $60,377 22%
======= =======
BOSTON GAS
During the first six months of 1994, sales to new firm customers increased
operating earnings by $4.7 million. Meaningful expense comparisons to 1993 are
difficult to make due to the impact of the strike on last year's results.
Colder than normal weather increased operating earnings by about $1 million for
the first six months of 1994, after taking into account the higher workload-
related labor and operating costs associated with the unusually cold first
quarter weather. The benefit of the rate increase was partially offset by
higher depreciation charges, property taxes and bad debt expense.
MIDLAND ENTERPRISES
Operating earnings for the second quarter and first six months of 1994 were
negatively impacted by the reduced utility contract coal revenues, as
previously discussed, and lower rates associated with non-coal tonnage.
Earnings were also reduced by significantly higher operating costs resulting
from extended periods of winter ice, high water and flooding during the first
four months of 1994 that significantly increased operating costs. As a result,
comparative operating earnings increased by 1% for the second quarter but were
21% lower for the first six months of 1994.
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Form 10-Q
Page 10.
During the second quarter of 1994, Midland recorded a pre-tax gain of $2.3
million on the sale of its Port Allen barge construction and shipyard facility
in Louisiana. This gain is included in Other, net on the Statement of
Operations.
WATER PRODUCTS GROUP
WaterPro Supplies increased its operating earnings for the second quarter and
first six months of 1994 by $1.3 million and $2.6 million, respectively. Most
of the improvement was attributable to the increased volume, partially offset
by increases in related selling expenses and a small decrease in gross margin
percentage.
Operating results for Water Products Group also reflect the absence of Ionpure
Technologies, which generated operating losses of $0.6 million and $1.6 million
in the second quarter and first six months of 1993, respectively.
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 with a
weighted average maturity of 24 years and a coupon of 6.94%, the proceeds of
which were used to reduce short-term indebtedness.
On July 28, 1994 Eastern announced a stock repurchase program of up to 2
million shares. About 2.8 million shares have been repurchased under the 3
million share program announced in September, 1990.
Consolidated capital expenditures, principally at Boston Gas, are budgeted at
approximately $60 million for 1994.
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Form 10-Q
Page 11.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits
None
(b) Report on Form 8-K
None
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Form 10-Q
Page 12.
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)
By WALTER J. FLAHERTY
----------------------------
Walter J. Flaherty
Senior Vice President and
Chief Financial Officer
August 1, 1994