1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MARCH 31, 1995
Commission file number 1-7479
_________________
BAY STATE GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-2548120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Friberg Parkway, Westborough, Massachusetts 01581-5039 (508/836-7000)
(Address and telephone number of principal executive offices)
_________________
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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1995
----- -----------------------------
Common Stock, $3.33 1/3 par value 13,346,894 Shares
2
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings - Three months, six months and
twelve months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets at March 31, 1995, 1994
and September 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Capitalization at March 31,
1995, 1994 and September 30, 1994 . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows - Six months and
twelve months ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . 8
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 13
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 13
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
BAY STATE GAS COMPANY
Consolidated Statements of Earnings
(Unaudited, in thousands, except per share amounts)
Three months ended Six months ended
March 31, March 31,
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------
Gas revenues $ 166,442 $ 202,908 $ 279,456 $ 336,724
Cost of gas sold 100,263 131,055 166,843 214,086
- --------------------------------------------------------------------------------------------------------------------
Net gas revenues 66,179 71,853 112,613 122,638
- --------------------------------------------------------------------------------------------------------------------
Transportation revenues 1,328 636 2,330 1,262
- --------------------------------------------------------------------------------------------------------------------
Net gas and transportation revenues 67,507 72,489 114,943 123,900
- --------------------------------------------------------------------------------------------------------------------
Other operating revenues 1,811 2,045 3,397 3,740
Operating expenses:
Operations 19,340 22,450 36,491 41,033
Maintenance 2,180 2,442 4,195 4,409
Depreciation and amortization 6,306 5,900 12,569 11,857
Federal and state taxes on income 13,501 14,332 20,136 22,446
Other taxes, principally property taxes 3,207 3,135 5,849 5,669
- --------------------------------------------------------------------------------------------------------------------
Total operating expenses 44,534 48,259 79,240 85,414
- --------------------------------------------------------------------------------------------------------------------
Operating income 24,784 26,275 39,100 42,226
Other income, net of taxes 934 748 971 255
- --------------------------------------------------------------------------------------------------------------------
Income before interest expense 25,718 27,023 40,071 42,481
- --------------------------------------------------------------------------------------------------------------------
Interest expense:
Long-term debt 3,804 3,691 7,565 7,306
Other 538 513 653 558
- --------------------------------------------------------------------------------------------------------------------
Total interest expense 4,342 4,204 8,218 7,864
- --------------------------------------------------------------------------------------------------------------------
Net income 21,376 22,819 31,853 34,617
Dividend requirements on preferred stock 75 78 151 155
- --------------------------------------------------------------------------------------------------------------------
Earnings applicable to common stock $ 21,301 $ 22,741 $ 31,702 $ 34,462
====================================================================================================================
Average number of shares outstanding 13,339 13,028 13,334 12,982
====================================================================================================================
Earnings per average common share $ 1.60 $ 1.75 $ 2.38 $ 2.65
====================================================================================================================
Dividends declared per common share $ 0.365 $ 0.355 $ 0.73 $ 0.71
====================================================================================================================
The accompanying notes are an integral part of these statements.
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4
BAY STATE GAS COMPANY
Consolidated Statements of Earnings
(Unaudited, in thousands, except per share amounts)
Twelve months ended
March 31,
1995 1994
- -----------------------------------------------------------------------------------------
Gas revenues $ 383,633 $ 438,462
Cost of gas sold 229,656 274,870
- -----------------------------------------------------------------------------------------
Net gas revenues 153,977 163,592
- -----------------------------------------------------------------------------------------
Transportation revenues 3,601 1,721
- -----------------------------------------------------------------------------------------
Net gas and transportation revenues 157,578 165,313
- -----------------------------------------------------------------------------------------
Other operating revenues 7,442 7,529
Operating expenses:
Operations 71,916 78,030
Maintenance 8,061 8,500
Depreciation and amortization 24,187 22,604
Federal and state taxes on income 13,354 15,783
Other taxes, principally property taxes 11,277 10,482
- -----------------------------------------------------------------------------------------
Total operating expenses 128,795 135,399
- -----------------------------------------------------------------------------------------
Operating income 36,225 37,443
Other income, net of taxes 797 295
- -----------------------------------------------------------------------------------------
Income before interest expense 37,022 37,738
- -----------------------------------------------------------------------------------------
Interest expense:
Long-term debt 14,657 13,496
Other 644 731
- -----------------------------------------------------------------------------------------
Total interest expense 15,301 14,227
- -----------------------------------------------------------------------------------------
Net income 21,721 23,511
Dividend requirements on preferred stock 306 311
- -----------------------------------------------------------------------------------------
Earnings applicable to common stock $ 21,415 $ 23,200
=========================================================================================
Average number of shares outstanding 13,262 12,900
=========================================================================================
Earnings per average common share $ 1.61 $ 1.80
=========================================================================================
Dividends declared per common share $ 1.46 $ 1.42
=========================================================================================
The accompanying notes are an integral part of these statements.
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BAY STATE GAS COMPANY
Consolidated Balance Sheets
(In thousands)
March 31, September 30,
1995 1994 1994
- --------------------------------------------------------------------------------------------
(Unaudited) (Audited)
ASSETS
Utility plant, at cost $ 649,131 $ 597,962 $ 627,131
Accumulated depreciation and amortization 170,461 151,209 163,023
- --------------------------------------------------------------------------------------------
Net utility plant 478,670 446,753 464,108
- --------------------------------------------------------------------------------------------
Other property and investments, at cost 13,443 13,029 12,721
- --------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 6,083 3,716 3,980
Accounts receivable, less allowances of
$6,248, $7,703 and $5,072 71,194 95,153 25,490
Unbilled revenues 8,901 9,407 3,661
Deferred gas costs 2,296 4,736 7,468
Prepaid and deferred income taxes 3,060 834 9,097
Inventories, at average cost 14,839 11,971 24,451
Prepaid benefit plans and other 26,196 14,853 28,202
- --------------------------------------------------------------------------------------------
Total current assets 132,569 140,670 102,349
- --------------------------------------------------------------------------------------------
Deferred debits:
Income taxes 15,755 14,643 14,751
Other 26,566 20,916 26,799
- --------------------------------------------------------------------------------------------
Total Assets $ 667,003 $ 636,011 $ 620,728
============================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization (see accompanying statements):
Common stock equity $ 238,524 $ 230,074 $ 215,389
Preferred stock equity 5,219 5,345 5,293
Long-term debt, net 193,000 185,000 191,000
- --------------------------------------------------------------------------------------------
Total capitalization 436,743 420,419 411,682
============================================================================================
Commitments and contingencies (Note 3) -- -- --
Current liabilities:
Short-term debt 17,950 38,350 37,750
Current maturities of long-term debt -- 2,000 --
Accounts payable 30,901 37,350 26,734
Fuel purchase commitments 11,530 8,132 20,820
Refunds due customers 41,291 15,752 10,509
Taxes accrued 23,179 19,995 11,588
Other 8,252 7,908 7,905
- --------------------------------------------------------------------------------------------
Total current liabilities 133,103 129,487 115,306
- --------------------------------------------------------------------------------------------
Deferred credits:
Deferred income taxes 71,216 64,042 69,198
Other 25,941 22,063 24,542
- --------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 667,003 $ 636,011 $ 620,728
============================================================================================
The accompanying notes are an integral part of these statements.
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BAY STATE GAS COMPANY
Consolidated Statements of Capitalization
(In thousands)
March 31, September 30,
1995 1994 1994
- ----------------------------------------------------------------------------------------------------------------
(Unaudited) (Audited)
Common stock equity:
Common Stock, $3.33 1/3 par value, authorized 36,000,000
shares; 13,341,294, 13,066,893 and 13,290,491 shares
outstanding $ 44,471 $ 43,556 $ 44,302
Paid-in capital 100,145 94,860 99,145
Retained earnings 93,908 91,658 71,942
- ----------------------------------------------------------------------------------------------------------------
Total common stock equity 238,524 230,074 215,389
- ----------------------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Non-redeemable cumulative preferred stock 2,572 2,572 2,572
Redeemable cumulative preferred stock 2,647 2,773 2,721
- ----------------------------------------------------------------------------------------------------------------
Total cumulative preferred stock 5,219 5,345 5,293
- ----------------------------------------------------------------------------------------------------------------
Long-term debt:
Revolving credit agreement 20,000 18,000 18,000
Notes 173,000 169,000 173,000
- ----------------------------------------------------------------------------------------------------------------
Total long-term debt 193,000 187,000 191,000
Less current maturities -- 2,000 --
- ----------------------------------------------------------------------------------------------------------------
Long-term debt, net 193,000 185,000 191,000
- ----------------------------------------------------------------------------------------------------------------
Total capitalization $ 436,743 $ 420,419 411,682
================================================================================================================
The accompanying notes are an integral part of these statements.
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BAY STATE GAS COMPANY
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six months ended Twelve months ended
March 31, March 31,
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,853 $ 34,617 $ 21,721 $ 23,511
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,569 11,857 24,187 22,604
Deferred income taxes 4,258 (2,680) 12,194 1,944
Changes in operating assets and liabilities:
Accounts receivable (45,704) (71,002) 23,959 (18,806)
Inventories 9,612 17,535 (2,868) (3,811)
Accounts payable 4,167 10,151 (6,449) 4,370
Fuel purchase commitments (9,290) (13,814) 3,398 2,670
Taxes accrued 9,970 18,630 (3,139) 1,646
Refunds due customers 30,782 12,408 25,539 7,828
Deferred gas costs 5,172 12,725 2,440 349
Prepaid benefit plans and other 2,006 2,905 (11,343) (6,535)
Prepaid and deferred income taxes 5,984 3,785 (2,323) (3,118)
Unbilled revenues (5,240) (5,637) 506 453
Other (558) 2,757 (1,348) 5,534
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 55,581 34,237 86,474 38,639
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (excluding AFUDC) (25,806) (21,281) (54,470) (45,640)
Additions to other property and investments (1,080) (731) (1,649) (5,240)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (26,886) (22,012) (56,119) (50,880)
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,169 4,736 6,200 9,245
Dividends on common stock (9,736) (9,212) (19,356) (18,308)
Dividends on preferred stock (151) (155) (306) (311)
Issuance of long-term debt 2,000 15,000 12,000 61,000
Retirements of preferred stock and long-term debt (74) (8,047) (6,126) (12,446)
Short-term debt (19,800) (12,100) (20,400) (25,750)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (26,592) (9,778) (27,988) 13,430
- --------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS 2,103 2,447 2,367 1,189
Cash and temporary cash investments at beginning of
period 3,980 1,269 3,716 2,527
- --------------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $ 6,083 $ 3,716 $ 6,083 $ 3,716
==========================================================================================================================
Supplemental cash flow information:
Cash paid during the year for:
Interest (net amount capitalized) $ 8,219 $ 7,737 $ 16,052 $ 14,106
==========================================================================================================================
Income taxes $ 1,468 $ 2,712 $ 7,781 $ 9,893
==========================================================================================================================
The accompanying notes are an integral part of these statements.
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Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
NOTE 1 - ACCOUNTING POLICY
The accompanying consolidated financial statements have been
prepared in accordance with the instructions for Form 10-Q and,
therefore, do not include all information and footnotes required
by generally accepted accounting principles. In the opinion of
management, the consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's financial position,
results of operations and cash flows for all periods shown.
Certain information in the prior period financial statements has
been reclassified to conform with the current period's
presentation. It is suggested that these financial statements
and accompanying notes be read in conjunction with the financial
statements and the notes included in the Company's annual report
to shareholders for the year ended September 30, 1994 and the
subsequent quarterly report of December 31, 1994.
Because of the seasonal nature of the Company's business, the
results of operations for the three and six months ended March
31, 1995 and 1994 are not necessarily indicative of the results
for the full fiscal year.
NOTE 2 - REGULATORY MATTERS
On April 13, 1995, Granite State Gas Transmission, Inc.
("Granite"), a wholly owned subsidiary of the Company, received
approval from the Federal Energy Regulatory Commission (the
"FERC") for a $1.1 million increase in annual revenues effective
November 1, 1994.
On April 14, 1995, the Company filed for an overall,
revenue-neutral rate redesign with the Massachusetts Department
of Public Utilities ("DPU"). The goal of the rate redesign is
to develop rates that more closely reflect the actual costs
associated with serving different customer classes in the
deregulated natural gas industry environment. Bay State expects
new gas rates to go into effect on November 1, 1995.
On February 28, 1995, Granite completed its application with the
FERC to build a liquefied natural gas storage facility . The
FERC is currently reviewing the application. It is expected
that this facility will be ready to serve customer needs by
November 1997.
NOTE 3 - COMMITMENTS AND CONTINGENCIES
In 1991, the Company initiated the formation of a consortium of
five energy companies to develop the Portland Natural Gas
Transmission system ("PNGTS"), a new 240-mile dedicated natural
gas pipeline from the U.S.-Canadian border at Jay, Vermont to
the New Hampshire-Massachusetts border at Haverhill,
Massachusetts. Approximately $2.6 million has been expended in
connection with PNGTS. Recovery of these expenditures is
dependent upon proceeding to build this project.
While the Company believes that PNGTS will be successful, its
completion is subject to a number of factors beyond the
Company's control, including receipt of necessary regulatory
approvals on terms and conditions acceptable to the PNGTS
partners, and the successful marketing of the project's
transportation capacity to gas distribution companies and other
large volume shippers. Accordingly, no assurances can be given
by the Company that PNGTS will in fact be completed or that, if
completed, the Company's investment in the project will be
profitable.
The Company, like other companies in the natural gas industry,
is a party to governmental actions associated with former gas
manufacturing sites. Management estimates that, exclusive of
insurance recoveries, if any, expenditures to remediate and
monitor known environmental sites will range from $3.0 million
to $8.0 million. Accordingly, the Company has accrued $3.0
million with an offsetting charge to a regulatory asset.
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Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
Environmental expenditures for the quarters ended March 31, 1995
and 1994 were $147,000 and $10,000 respectively. Exclusive of
amounts accrued for future expenditures, at March 31, 1995 and
1994, approximately $3.2 million and $3.0 million of environmental
expenditures had been deferred for future recovery from customers.
The Company has recorded significant regulatory assets and
liabilities associated with costs (income taxes; postretirement
and postemployment benefit plans; and environmental response
costs) and obligations (income taxes; amounts to be refunded to
customers or to be used for specific purposes) arising from the
rate making process. Based on its assessments of decisions by
applicable regulatory authorities, management believes that all
regulatory assets and liabilities will be settled at recorded
amounts through specific provisions of future rate orders.
NOTE 4 - RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the twelve months
ended March 31, 1995, and for the years ended September 30 are
set forth below.
March Year ended September 30,
-------------------------------------------------------
(In thousands) 1995 1994 1993 1992 1991 1990
------------------------------------------------------------------
Earnings:
Net income $21,721 $24,485 $22,807 $18,363 $15,817 $20,185
Adjustments:
Income taxes 13,839 15,642 13,726 11,250 8,733 11,037
Fixed charges (see below) 17,532 17,149 15,895 15,170 14,832 13,720
------------------------------------------------------------------
Total adjusted earnings $53,092 $57,276 $52,428 $44,783 $39,382 $44,942
==================================================================
Fixed charges:
Total interest expense $15,498 $15,095 $13,599 $13,073 $12,253 $11,430
Interest component of rents 2,034 2,054 2,296 2,097 2,579 2,290
------------------------------------------------------------------
Total fixed charges $17,532 $17,149 $15,895 $15,170 $14,832 $13,720
==================================================================
Ratio of earnings to fixed charges 3.03 3.34 3.30 2.95 2.66 3.28
==================================================================
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Independent Auditors' Report
----------------------------
The Board of Directors
Bay State Gas Company:
We have reviewed the consolidated balance sheets and statements
of capitalization of Bay State Gas Company and subsidiaries as
of March 31, 1995 and 1994, and the related consolidated
statements of earnings and cash flows for the three months, six
months and twelve months then ended. These consolidated
financial statements are the responsibility of the Company's
management.
We have conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of the 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 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 the consolidated
financial statements referred to above 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 and
statement of capitalization of Bay State Gas Company and
subsidiaries as of September 30, 1994, and the related
consolidated statements of earnings and cash flows for the year
then ended not presented herein; and, in our report dated
October 20, 1994, we expressed an unqualified opinion on those
consolidated financial statements.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
April 24, 1995
Page 10
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Item 2. Management's Discussion and Analysis of Financial
- ----------------------------------------------------------
Condition and Results of Operations
-----------------------------------
RESULTS OF OPERATIONS
Earnings and dividends
- ----------------------
For the three months ended March 31, 1995, operating revenues
were $169.6 million, down from $205.6 million in the prior year,
while earnings per average common share were $1.60 versus $1.75
a year earlier. Earnings per share decreased primarily due to
weather that was 16.4% warmer than the year-earlier period
partially offset by a 13.5% reduction in operating and
maintenance expenses.
For the six-month period ended March 31, 1995, earnings per
average common share were $2.38, 10.2% lower than the $2.65
earned for the same period last year. For the twelve-month
period ended March 31, 1995, earnings per average common share
were $1.61 compared to $1.80 for the same period the year
before. This decrease in earnings for both periods was
primarily the result of weather that was 14.9% and 12.4% warmer
than the previous year for the six and twelve month periods,
respectively. Partially offsetting the negative effect of the
weather were decreases in operating and maintenance expenses of
10.5% and 7.6% for the six and twelve month periods,
respectively.
Dividends declared per common share were $.365 for the
three-month period ended March 31, 1995, compared to $.355 for
the same period last year. This quarterly dividend represents
an annualized dividend rate of $1.46 per common share, up 2.8%
from the $1.42 annualized dividend last year. For the
twelve-month period ended March 31, 1995, dividends declared
were $1.46, compared to $1.42 for the same period in the prior
year. On April 27, 1995, the quarterly common stock dividend
was increased 2.7% to $.375 per share, indicating an annualized
dividend of $1.50.
Net gas and transportation revenues
- -----------------------------------
Net gas and transportation revenues decreased $9.0 and $7.7
million for the comparable six and twelve month periods ended
March 31, respectively. The following table details the sources
of changes in net gas and transportation revenues:
Six months ended Twelve months ended
March 31, March 31,
In millions: 1995 1994 1995 1994
- --------------------------------------------------------------------------
Distribution operations:
Sales volumes $2.1 $4.9 $2.9 $5.6
Weather (10.9) 1.3 (10.3) 0.3
Rate increases 0.6 0.1 0.6 3.1
Sales to other utilities (1.2) 0.9 (1.2) 0.9
Transmission operations 0.4 0.4 0.3 0.3
- --------------------------------------------------------------------------
$(9.0) $7.6 $(7.7) $10.2
==========================================================================
Primarily as the result of warmer weather, net gas and
transportation revenues for the six months are down 7.2% from
one year ago. For the six months ended March 1995, the weather
was 8.9% warmer than normal and 14.9% warmer than the
comparative six months ended March 1994. Similarly, for the
twelve-month period ended March 31, 1995, the weather was 8.6%
warmer than normal and 12.4% warmer than the prior year.
Page 11
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Operating expenses
- ------------------
Total operating expenses, excluding federal and state taxes on
income, for the six months ended March 31, 1995 were $59.1
million compared to $63.0 million for the same period last year.
These expenses for the twelve- month period ended March 31,
1995 were $115.4 million compared to $119.6 million for the
prior twelve months. The decreases in both the six- and
twelve-month periods are primarily attributable to reductions in
operating and maintenance expenses offset be increases in
depreciation and amortization expenses. The decrease in
operating and maintenance expenses for both periods is the
result of lower bad debt, labor, benefits and outside services
expenses and an increase in service revenues.
Other income, net of taxes
- --------------------------
Other income, net of taxes for the six-month period ended March
31, 1995 was $971,000 as compared to $255,000 for the same
period last year. For the comparable twelve-month period, other
income, net of taxes was $797,000 and $295,000. The increase in
both periods was primarily a result of the profits generated
from the Company's investment in MASSPOWER, a cogeneration
facility.
Interest expense and dividend requirements on preferred stock
- -------------------------------------------------------------
Interest expense for the six-month period ended March 31, 1995
was $8.2 million compared to $7.9 million for the same period
last year. For the twelve months ended March 31, 1995, interest
expense was $15.3 million compared to $14.2 million for the
previous twelve months. The increase in interest expense for
the six month period was primarily the result of an additional
$.6 million in expense accrued on overcollections of gas costs,
a result of the warmer than normal weather, and higher than
anticipated pipeline supplier refunds.
Dividend requirements on preferred stock were relatively flat
for the comparative periods.
LIQUIDITY AND CAPITAL RESOURCES
The seasonal nature of the gas distribution business creates
large short-term working capital requirements to finance
customers accounts receivable and deferred gas costs, as well as
construction expenditures. Short-term funds are obtained from
the issuance of commercial paper, traditional bank lines of
credit and demand loans under Fuel Purchase Agreements.
The strong cash flows from operations has enabled the Company to
keep new debt financing to a minimum. Total net short- and
long-term debt balance is down $14.4 million from March 31, 1994
to March 31, 1995. The Company generated $48.1 million more net
cash from operating activities for the twelve months ended March
31, 1995 than for the prior twelve month period. Collections of
accounts receivable balances and increases in refunds due
customers contributed significantly to this cash flow increase.
Refunds due customers are the result of collections of estimated
gas costs being higher than actual costs. These overcollections
of gas costs, caused by the warmer than normal weather, price
declines at the wellhead and the receipt of $12.0 million in
pipeline supplier refunds, will result in a reduction in working
capital in the future as these items are passed back to the
customers through reduced gas prices.
The warmer weather during the first six months of fiscal 1995
enabled the Company to complete more capital additions during
this period than it would have given normal weather conditions.
As a result, capital expenditures increased by $4.9 million for
the six-month period and $5.2 million for the twelve-month
period ended March 31, 1995, as compared to the year before.
Despite this increased spending in the first half of the fiscal
year, the Company is reviewing its capital expenditure policy
with the goal of keeping capital expenditures for fiscal 1995
in line with its original estimate of $54.0 million.
Page 12
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PART II. OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- --------------------------
There were no material legal proceedings instituted in the
second quarter of 1995, and there were no material developments
during the quarter in legal proceedings disclosed in previous
filings.
Item 2. Changes in Securities
- ------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
15. Consent of KPMG Peat Marwick LLP re: Registration Statement
No. 33-57702
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1995.
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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.
BAY STATE GAS COMPANY
----------------------------------
(Registrant)
By: /s/ Thomas W. Sherman
-----------------------------
Thomas W. Sherman
Executive Vice President and Chief
Financial and Accounting Officer
By: /s/ Stephen J. Curran
-----------------------------
Stephen J. Curran
Controller
Date: May 11, 1995
Page 14